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In my app / website, there is a feature for the user to deposit money that they could then use to purchase later or get refunded 3 months later.

What is the legal implication of this feature?

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    Ah, like a whole plethora of state and federal banking and financial system regulations. Commented Jan 4, 2023 at 3:51
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    Voted up because asking a question about a really bad idea doesn’t make it a bad question.
    – gnasher729
    Commented Jan 4, 2023 at 7:00
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    What makes this different from any bank or financial service provider that it wouldn't need to adhere to banking laws?
    – Trish
    Commented Jan 4, 2023 at 15:18
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    @Trish, Does a store that issues an in-store credit or gift certificate have to comply with banking laws? If not, how is a temporary deposit like this functionally (or legally) any different? Commented Jan 4, 2023 at 16:24
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    @MichaelHall That's what you would ask a lawyer if you don't want any surprises.
    – gnasher729
    Commented Jan 5, 2023 at 17:15

1 Answer 1

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An incomplete list:

  • Getting the money.
    How did you plan to get paid? Credit card? Paypal? Integrating those into a website in compliance with their terms of service is not easy. (I wouldn't touch credit card numbers, in particular, even with a ten-foot pole. Too much liability risk for weak implementations. Too many highly skilled attackers to pounce on any mistake.)
  • Distributing the App.
    Places like the Apple App Store have their own terms of service, especially regarding payment and in-app purchases. At a guess, Apple would reject your app, but if they allowed it, how does your withdrawal policy fit with the 30% cut they want from the initial transaction?
  • Holding the money.
    So there are user accounts with a credit balance that can be withdrawn again. Would you be able to repay them if all users withdraw at the same time? Where do you keep the money?
  • Currency risks.
    Say international customers pay in currency A, which the payment provider transforms into currency B. Then they want their money back, but exchange rates have changed. What do they get?
  • Knowing your customer.
    There would be money laundering concerns. Do you have the infrastructure to identify your customers? Can customers change the (re)payment method from one account to another? Can you handle withdrawals if a user no longer has the same credit card, for instance?
  • Scammers leaving you to hold the bag.
    Say a scammer tricks a victim into making a deposit, and then finds a way to redirect the withdrawal (see above). Would you be able to deal with the legal and administrative fallout?
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    And that list is just more or less obvious problems. Since this is mixed between legal and technical problems, I wouldn't touch this without at least one good lawyer with experience in this area, and one good software developer with experience in payment processing.
    – gnasher729
    Commented Jan 4, 2023 at 15:27

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