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## Etsy Faces Criticism for Holding Sellers’ Funds

E-commerce platform Etsy has come under fire from sellers for placing 75% of their earnings on reserve for a period of 45 days. The move sparked outrage among hundreds of small business owners who received an email notification from Etsy about the implementation of its “reserve system.” Rachel Collyer, a ceramics seller, revealed that Etsy was withholding ┬ú899 of her money, resulting in her inability to purchase materials to sustain her production. The online marketplace explained that the payment reserves were meant to ensure the safety of the platform and to cover any potential refunds.

The situation has left many sellers in a difficult financial position. Collyer, who has been selling ceramics on Etsy since 2021, expressed her frustration at the lack of notice given before her funds were placed on reserve. Consequently, her business has suffered, and she is no longer able to pay her bills. Similarly, Dan, a seller of custom wood furniture, had ┬ú7,000 of his money withheld. This unexpected move has forced him to rely on credit cards and family loans to keep his business afloat. He described the situation as having “destroyed” his business.

Joanna, an Etsy seller running a bespoke underwear shop, stated that she could not find any reason for her funds being held. Her account was placed on a 90-day reserve period, during which 75% of her sales were withheld. Even after following the site’s guidelines on lifting the reserve, her account remained restricted. Joanna estimated that she would have earned ┬ú5,000 that month, but she is unable to access her funds until the reserve period is over. Frustrated and unable to secure a loan, she decided to cancel existing orders and temporarily suspend her shop on Etsy.

The sudden implementation and subsequent lifting of the reserve has left many sellers confused and distressed. Numerous complaints have been made by sellers who feel helpless in the face of the situation. Some fear having their shops removed from the platform if they challenge Etsy or express their concerns. Etsy, however, refutes allegations of retaliation and claims to take seller feedback seriously. Multiple affected sellers are now planning a “strike” and organizing through various online groups.

While the majority of sellers receive their funds promptly, according to Etsy, the reserve system is used by several online sellers. The Small Business Commissioner, Liz Barclay, expressed her surprise at the level of reserve implemented by Etsy. Although she has no jurisdiction over complaints against non-UK companies, Barclay acknowledged an increase in recent grievances against the US-based platform. The Commissioner received reports of several small businesses owed thousands of pounds, which she described as “heartbreaking” given the challenging economic climate.

Online retail expert Martyn James criticized Etsy’s decision to withhold sellers’ money, calling it concerning and highlighting a regulatory loophole that online platforms can exploit. Tina McKenzie, policy chair at the Federation of Small Businesses, emphasized the need for stability and transparency in the treatment of sellers’ funds. She argued that online platforms hold significant power over small businesses and must use that power responsibly, considering the livelihoods at stake. Etsy has acknowledged the need for improvement and pledged to enhance its payment reserves program.

The BBC has learned that a representative from Etsy has met with UK government officials in response to the situation. The outcome of the meeting is yet to be disclosed.

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