Can legally pool user funds?

Hello, I run a website and part of the process involves us holding onto users' money for extended periods of time. As we've got a lot of other expenses, I'd like to be able to earn some interest off this money while it's sitting in a pooled account.

However, I believe there is a legal issue here. I would of course update the terms and conditions to inform our users of what has changed. But other than that, I'm not sure what else must be done, legally.

Thank you for your help

4 Answers

  • JoeyV
    Lv 7
    9 years ago
    Favorite Answer

    I don't know what these other guys were talking about. I don't see anything illegal here. Customers give you cash to credit to their accouunts and then they somehow get the cash back. You want to earn interest on their cash in the meantime. That's the basis for things like traveler's checks. AMEX is happy to hold onto your money while you keep traveler's checks in your glove compartment and they earn interest on it. You can bet that AMEX does not keep segregated accounts.

    I don't think these is a legal issue here beyond informing your clients of how you are keeping their funds. At some point, you become a despository institution and then there are an absolute boatload of legal issues. I'll bet those only become issues if you lend money or pay interest. I'd just send them an addendum to their agreement detailing what you plan to do and then do it.

  • Anonymous
    9 years ago

    Sounds like what you are doing is not quite "kosher", Greg...

    Best watch out for the tax man! By posting this question in a public forum you just TOLD the IRS who you are and where you live!

    There IS a legal way to do what you are asking, but your accountant will have to set it up correctly to avoid it becoming either a paperwork nightmare...or a crime!

  • 9 years ago

    You could charge the "users" a fee for holding their money! You could do what banks do - loan money to deadbeats, and ask the government to bail you out when you lose the money! You could notify the "users" of your policy to loan out their money at 10% interest - and in exchange for that privilege refund their "fees". Gosh, a whole bunch of things could be done.

  • 9 years ago

    This is a freaking Ponzi scheme. You would be in big trouble with the law. Suggest you stop doing this. It is quite illegal.

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