Etsy (NASDAQ:ETSY), the online marketplace, is coming under fire after sellers noticed it has been withholding 75% of takings for up to 90 days.
Hundreds of small businesses were told about a new “reserve system” which has led to entrepreneurs, who use the site as a main channel for sales, being unable to operate their businesses.
Etsy (NASDAQ:ETSY) claims the new rule is in place to “keep the marketplace safe” and reserve any funds in case of a refund request, with accounts having withdrawals frozen if there is a sudden spike in sales, a policy violation or “other risk factors”.
Sellers in the UK said they have had funds put under reserve with little warning, no explanation, and given no way to resolve the problem with Etsy.
Joanna, a vendor on the site, said: “I woke up to a communication... stating that my account has been put on a 90-day period of reserve whereby they will hold 75% of my sales. We have no cases against us, we have performed no malpractice in any way."
Some sellers claimed two “reserve” freezes were imposed consecutively.
Most sellers receive their payments straight away and the “reserve system” is commonplace among e-commerce companies, an Etsy spokesperson argued.
Liz Barclay, the small business commissioner said the “level of reserve is new to us”, with established sellers on sites like Amazon only withholding around 3% for disputes.
A small number of accounts experienced a similar issue earlier this year, after the collapse of the Silicon Valley Bank, which Etsy worked with to pay sellers, led to several vendors having pay-outs delayed.