Extremely foolish and really shines a bad light on your decision making capabilities. Why would I put my trust in a company that is so shady?
You will change this bad decision and apologize, but you have betrayed the trust of all the people who have used you. Even if you change your policy now, we know you will change it back in the near future. No one will use your services again, because of this betrayal. You just killed your entire company in one fell swoop.
I’m shocked that someone associated with YC could make such a demonstrably poor decision.