UPDATED! Linden Lab Announces Some Significant Changes to Cashing Out of Second Life in Order to Comply with U.S. Regulations

Well, as they say, some of us have been waiting for the other shoe to drop, ever since Linden Lab’s announcement of increases in some fees on May 29th, 2019. And yesterday evening, the other shoe dropped. Linden Lab made the following announcement on the official Second Life blog:

We’re making some important changes to Second Life that will help us comply with U.S. laws and regulations. To do this, Linden Lab formed a new subsidiary, Tilia, to offer certain financial services to the Second Life community…

Effective August 1, in order to continue using Second Life you will have to agree to Tilia’s Terms of Service and Privacy Policy.  A Tilia Account associated with your Second Life Account will automatically be created for you and you will not need a separate username or password to access your Tilia Account.  

In order to stay in compliance with regulatory requirements, if you wish to process a credit, we will need certain personal information to verify your identity, including your name, address, date of birth, and social security number (or government-issued identification if you are not a U.S. Citizen).  You may be required to provide additional information to complete the transaction. Tilia will securely store this information so that you should only need to provide it once…

As always, Second Life remains free to access and enjoy!  However, if your Tilia Account is inactive for a period of 12 months we will charge your Tilia Account a fee to the extent permitted by applicable law.  If you have questions about the inactivity fee, please see Tilia’s Terms of Service.

I have been diligently hunting through the Tilia FAQ and the Tilia Terms of Service, and I cannot seem to find any mention of exactly how much this “inactivity fee” is. Frankly, this is a rather hamfisted announcement, which has generated no end of upset, uproar, and controversy among SL users.

After several pages of confused and angry comments posted to this very active thread on the official Second Life community forums, Linden Lab issued some additional information:

Is this an extra fee on top of the recently changed credit processing fee?

No. The credit processing fees remain unchanged for you as a Resident. You will not be charged anything extra for a credit processing fee by Tilia. The only other fee which may apply is an inactivity fee. This fee would only apply to those accounts with USD balances which have not accessed their Tilia account in any way (for example, to check balance) or had any credit processing transactions over a period of 12 months or more.

Can you clarify whether there are ID requirements and fees for basic Linden Dollar purchases?

These changes apply to USD credit processing and do not have any impact on the routine purchasing of Linden Dollars. Only Second Life Residents who Process Credit (cash out) of their USD balance to their payment method (e.g. PayPal)  are impacted by the ID verification requirements (which are necessary for compliance with U.S. laws and regulations). The inactivity fee applies only to those accounts with USD balances which have not accessed their Tilia account in any way or had any credit processing transactions over a period of 12 months or more.

One frustrated commenter spoke for many when they posted:

I’m just sad that I had to spend half an hour reading forum posts and LL’s answers to the forum posts to find out what the heck it all meant. Pointing people at a mile long TOS page full of legal jargon wasn’t ever going to go smoothly, was it?

Amen. This could have been handled much better, in my opinion.

One thing is very clear: the days of being able to cash out of Second Life (relatively) anonymously are OVER. And if you are earning an income from Second Life, it would probably be best if you were to talk to your lawyer to understand this mountain of legal jargon now being thrown at you. I feel sorry for any content creators in SL who now have to deal with all the headaches that these new regulations will cause. And I wouldn’t be surprised if some content creators finally decide that they’ve had enough, and that it’s no longer worth the hassle to do it anymore.

And the timing of this announcement is dreadful, happening AFTER Linden Lab encouraged so many Premium members to resign up for another year at the former rates, and AFTER all the Meet the Lindens events of Second Life’s 16th birthday celebrations, where they could have answered questions about all this. It’s rather clear LL waited to make this announcement so as not to cast a pall over the festivities.

Also, will other U.S.-based virtual worlds need to follow suit? Obviously, Linden Lab can’t speak to what other companies are going to do, but I wouldn’t be surprised at all if other American-based metaverse companies are going to have to draw up similar rules for their users in light of tightening U.S. financial regulations. Significant changes could be in store for a number of different platforms.

UPDATE 3:47 p.m.: Scylla Rhiadra has taken it upon herself to pull together all the information from four different official sources:

The Blog Post announcing this is couched in legalese, and not very useful, but you should probably read it anyway. It is at least short.
The FAQ is not as helpful as it could be, but does include some specific information about valid forms of ID, etc.
The FIRST comment here by Linden Lab does contain useful information, and is quite clear. It is on page 5 of this thread.
The SECOND comment by LL is on page 7, and is also quite good.
Here are the answers we’ve been provided by LL thus far, in my own words. Needless to say, check out the above yourself, and if I’ve got anything wrong here, I’ll correct it.
– Everyone will need to agree to the Tilia ToS to continue to use SL after 1 August.
– ONLY those who are cashing out L$ to USD need do anything else. You do not need to provide additional information or ID to buy L$ or spend L$
– Those who are cashing out (only) will need to provide what is, apparently, US government-mandated ID, including name, address, date of birth, and Social Security Number.
– Those who are cashing out, but are not US citizens, will be asked to use a government-issued ID such as a passport or driver’s licence, along with some form of verification for address.
– There will be an “Inactivity Fee” applied ONLY to balances of USD in your Tilia accounts, if it is not accessed or used for a 12 month period. There is no information how much this will be yet, but it will apply only so long as there is money remaining in the account, and you have not accessed it.
– The Inactivity Fee does NOT apply to your L$ balance. This can remain dormant without penalty.
– This will have NO impact on your Premium stipend. A USD balance that you are using to pay for your Premium will NOT require additional ID. (But you will need to be aware of the Inactivity Fee.)
– The processing fee for transactions charged by Tilia is NOT in addition to the one currently charged by LL. One will, I gather, essentially replace the other seamlessly.
– The Privacy Policy for Tilia is fully compliant with the GDPR (for European residents).
– According to LL’s second post here, “In general, most Residents will not need to resubmit the information if it has been previously provided.”
Why…is it necessary for everyone to agree to the Tilia ToS, and have an account, if only a small minority will actually be using it (to cash out). My suspicion is that this is about efficiencies.
What are the workarounds for non-US residents who may not have a passport or driver’s licence? It would be good for LL to provide more guidance on what they will accept from non-US citizens.

Thank you, Scylla!

Linden Lab has now set up an official Questions and Answer thread on the official Second Life community forums for people to post their questions about this upcoming change.