Or is this just an inevitable result of working with money (having to be very careful to avoid scammers/criminals)? I really can't believe that's the case though.
As @dexen said, perhaps there should be some provisions put in place to disincentivise current processors at least.
Perhaps bitcoin has a role to play to avoid such situations, Or would we just have the same problems over again? Perhaps somebody more knowledgeable than I could comment.
While I agree that there is probably a market for a payment processor that doesn't punish TOS violations, I really doubt that's a market anybody would want to play in.
Google's TOS disallow the use of the word "donation" unless you are a non-profit organization. And "donation" is precisely the term used.
For every "benign" TOS violation, I'm sure there must be hundreds of malicious ones trying to scam google or consumers out of their money. Not making exceptions at least is fair and users know exactly where they stand.
Still. I think Google should maybe
a) warn users before just banning them (though even this might lead to people trying to game the system)
b) hand out the money either back to the buyers or to the just banned seller (after manual investigation which might be what Google doesn't want to do)
c) maybe provide an appeal process, though, again, this might lead to people gaming that.
I suspect that evil people ruin it for everyone, money is just too tempting for people with 'flexible morality'.
EDIT: But still, these providers should do better, regardless.
It is expected some Bitcoin users (be it private or institutional) will become quite bank-alike in some future (as per various posts on blogs and HN in discussions of Bitcoin).
In short, Bitcoin doesn't remove banks -- neither need for them, nor ability to operate them. They just haven't moved into this space yet.
EDIT:
first episode of ``The Ascent of Money'' [1], `Dreams of avarice', explains how banking, as we know it, came to be.
http://www.econtalk.org/archives/2011/04/andresen_on_bit.htm...
If there was no incentives in leaving transaction in such `limbo', the payment processors would be less hasty to lock up accounts.
You'll see two opposite complaints about payment processors:
1. They let fraud run rampant.
2. They're too hasty to lock accounts.
In order to have less of one, you have to have more of the other.
As for why customer service is so sketchy: Google's customer service is infamously bad across the board. It's not specific to Checkout.
The whole mess is an object lesson about the need to take non-development aspects of business seriously. They're trying to accept payments without reading the terms they agreed to. They're trying to run a web server while clearly not being experts on that (there's no need for a VPS or a dedicated server when their site is a perfect fit for something like Squarespace). If you can't afford to bring in an expert, you've really got to do the due diligence yourself, or it's bound to blow up in your face.
