Thank you both for explaining the "nitty-gritty" of escrow. As someone without a business banking background I've only come across this sort of arrangement when buying property. My deposit was held by my solicitor in their Client Account until the mortgage was agreed and a Completion date set. The solicitor then passed the deposit to the seller's solicitor.
Ebay's compulsory Hold on private seller funds looks to me very much like the scam the utility companies use gain control of their customers money for their own use and benefit. Both companies think-up a plausible reason to get control of their customer's money.
Ebay says it's because buyers need protection. Utilities say it's to help customers budget for future bills. Both interrupt the normal flow money from buyer to seller. Ebay by delaying payment. Utilities by taking payment in advance.
The result in both cases is in effect a forced, interest free loan to the company by its customers.
Like it or not, so long as the reason for taking control of the customers money remains 'plausible', I'm sure the companies will have ensured that they're within the law and acceptable business practice.
The practice may be annoying but it works well enough while the companies are solvent. Sellers get their money, but 14 days later. Utility bills are paid from the customer's accumulated balance. The companies tot-up the interest they made on the arrangement.
I have one question. In the event of a stock market collapse or another banking crisis, who guarantees the funds being held will be used for the purpose they're held for or will be passed to to the seller on the 'agreed' date?
While both are unlikely it would be comforting to know that there is some guarantee that if such an event occurs sellers will get their money and it won't just disappear with some faceless, unknown fund that's declared itself bankrupt.
