One day my account (solely used for sending payments) got blocked because of a "potential unauthorized third-party access". After completing the verification they asked (new password, new security question and credit card confirmation), I received another message asking me to send a scanned copy of my ID Card, a proof of domicile and my BBAN.
I told them that for confidentiality reasons, it was out of question to send any of these documents. I asked them to give me more specific information about the materials that led to the account suspension and to reactivate it without delay. The next day, I received an email with vague excuses and my account got reactivated immediately.
It is true that their antifraud system can lead to number of suspended accounts and frozen funds without any solid basis. But they may also take advantage of frozen money (eg. this 600k case) for further financial activities so as big-box stores are used to: http://books.google.com/?id=UOSk0J8vYugC&pg=PA533 (source: http://preview.tinyurl.com/2vrcddc)
I wonder why they don't just do this by default? Personally I would not be offended at all if they just had a status on the payments called "waiting for payment to clear."
IMO if the money is available for you to spend then it has "cleared". Money that has cleared may be recouped, eg when you sell something fraudulently and get nabbed.
Because for the majority of their customers, not getting money for several months would cause them to look for another solution.
I think it is likely that since PayPal has become an Ebay property, they are tighter with releasing funds to reduce their losses related to "Ebay Buyer Protection" on Ebay sales. On a sale where that protection is provided, a purchaser gets his money back from Ebay (which generally means paypal) when buyers have failed to deliver what was promised and failed to work out the problem directly.
So Ebay/PayPal needs/wants to be able to snatch the cash back. If the funds are held long enough, they're covered. I seem to recall Ebay recently updating their user agreement terms related to PayPal funds.
I doubt that PayPal is trying to rip off or upset customers. They're trying to combat various types of theft/fraud and do so without using much in the way of resources. They should be more transparent with whatever is going on though.
You're missing the third possibility, which is that efficiently doing what PayPal requires requires "treating serious customers like dirt."
PayPal is in the business of efficiently detecting and not paying for fraud. One type of fraud that they need to deal with is fraudsters getting control of an established account, sticking lots of fake payments in, then withdrawing the "money" before PayPal notices that it isn't real. Their strategy for this seems to be to make people jump over a low paperwork barrier, then wait long enough that the payments have all cleared before they pay out. Given this, paying for a dedicated customer service representative for the victim on top of that strategy is an inefficiency.
The last part of that decision ignores the effect of pissing people off on their reputation, and so may be shortsighted. But the rest of their strategy makes sense to me.