Ask Nick: PayPal Protection - No Protection At All?

Ina · Joined: 02 Aug 2001 Posts: 452 Location: Massachusetts, USA

In Sunday's issue (10/5/03), Nick Sevino answers a question from a reader about a transaction gone wrong using PayPal. Does PayPal protect buyers from fraud? Nick says, not unless you read the fine print! There's a thread in this forum about PayPal's seller protection and chargebacks, now see it from the buyer's point of view.

(I'll post a link to the column tomorrow.)
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Ina Steiner, AuctionBytes.com

Ina · Joined: 02 Aug 2001 Posts: 452 Location: Massachusetts, USA

Here's a link to the article:
http://www.auctionbytes.com/cab/abu/y203/m10/abu0104/s05

grayhorseemp · Joined: 05 Feb 2003 Posts: 1546

I don't understand how someone can expect a company to protect them against their own stupidity.

This buyer went outside eBay and bought from a seller with zero feedback. I bet it was for a plasma tv, too

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Connie

kjp55 · Joined: 18 Aug 2001 Posts: 1972 Location: East of Rockies

Oops, Submitted to incorrect thread.

bidofthis.com · Joined: 07 Jul 2002 Posts: 13

actually this is a burning question of mine.

Alhough you are not allowed to "trade away" from eBay after your auction closes with an eBay bidder....
if you tell the bidder to trade exclusively through PAYPAL (circumventing eBay) is this against eBay's rules? Because Paypal is an eBay property!

YOUNGWILL · Joined: 08 Oct 2003 Posts: 1

Further to Nicks advice. As an Ebay buyer and seller in the UK, Paypal certainly does not offer any protection for buyers. I bought an antique from a resident of NJ and because of it's weight opted for "surface" delivery. After 2 mths had lapsed and no receipt of goods I contacted Paypal to submit a claim. I could have made a claim under Ebay's buyer protection, within 90 days, but they will only reimburse the cost of the goods less $25 and no reimbursement of postage. Paypal say that any claim had to be lodged witin 30 days and therefore not eligible. Even though I stressed the fact that surface can take upto 56 days to deliver. Infuriated, I submitted a claim with VISA, who in turn made a chargeback on Paypal. To my surprise and disbelief, Paypal wrote threatening to suspend my account. If, by leaving this message, it serves to save someone else getting their fingers burnt, I will feel a little better. Buyers please be aware.

Yisgood · Joined: 31 Jul 2001 Posts: 250 Location: New York

I keep seeing posts that state "Paypal offers no protection for buyers" and "Paypal offers no protection for sellers." I think it should be clear that Paypal itself offers little protection. Sellers have no protection against foreign scammers using credit cards - period. Buyers have no protection against scamming sellers if they don't use their credit cards. Many buyers find themselves bypassing paypal and going directly to their credit card issuer. Sellers find themselves losing their so-called "protection." The only people who seem to win most of the time are the scammers. Paypal's big mistake was ever getting into the "protection" business. If they wanted to be honest with their customers and with themselves, they should simply state "use paypal at your own risk."
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Tradguy · Joined: 15 Sep 2002 Posts: 519 Location: Florida

Youngwill -

So who is out the Money?

The seller has his money. You, the buyer, got back your money. The CC company charged back paypal.

Hmm....who do you thing actually PAID for this item that was never recieved? It was paypal.

And you are going to get ticked off at paypal for cancelling your account after you stuck them with your bad-judgement purchase.

It was bad judgement because it is stated very very clearly in all of paypals policies and buyers guides that you only have 30 days to report a problem. Therefore you should NOT USE PAYPAL for anything requiring more than 30 days to be delivered. However, you directly violated paypal's buyer protection, and did an end-run by charging back your credit card.

If paypal cannot recover the original charge from the seller, then the negative balance will remain in your account, and you will probably never get your paypal account back unless you resolve the problem with the buyer. Remember him? yeah, he's the guy that screwed you - NOT paypal.

If you expect paypal to just say - "no problem, we'll just eat it - go ahead and buy some more items from overseas so we can eat those chargebacks too" - then you are totally delusional.

Rich

bayview · Joined: 09 Nov 2004 Posts: 1

I've been reading this thread with some interest, because after four years of selling (and a bit of buying) on eBay I have been rudely awakened to PayPal's 'Protection' scheme.

Background - I have a 100% positive feedback record of nearly 2,000, and am a Powerseller. I have had minimal trouble with buyers - and any problems have always been sorted between me and the buyer to our mutual satisfaction. My feedback is proof that buyers have equally had no problems with me.

So, when I got an email from PayPal saying they had received a claim for non-delivery, I was intitally calm and confident all would be sorted out happily.

Then I realised - PayPal had assumed I was guilty immediately they got the claim! They showed this assumption by sequestering over £200 from my account.

I looked at the buyer's claim. It was about 50 words long and contained no supporting detail. It did contain one lie. As far as I can see, any buyer could make a claim that says, 'Dear PayPal, I am a pathological liar, I am high on crack cocaine and my doctors say I have a delusional paranoid personality disorder. Oh, by the way, the goods never arrived.'

Now I have to prove I sent the parcel - which - according to PayPal's rules has to have been sent via a method that provides online tracking. No tracking, no Seller Protection. They take the word of the buyer as absolutely guaranteed to be true. Whatever happened to 'innocent until proved guilty'?

To keep this short, here is the bottom line on PayPal's 'Protection'.
1) It is seriously flawed
2) It is probably illegal
3) It offers nothing from PayPal - they don't fund payments on successful claims.
4) It is not opt-in - you get to join whether you like it or not
5) You can opt-out, but PayPal won't tell me how this will affect the status of my account
6) Who adjudicates claims? What qualifications/training do they have? How can they possibly evaluate 'evidence' that is not given on oath, carries no penalty for liars, is entirely electronic data, and hence mostly totally unprovable?
7) Why is there no appeals process? Why is there no independent element? Why are PayPal judge, jury and executioner?
8) Sequestering funds immediately a claim is made is unfair - it assumes guilt, and has no precedent or model in any other financial institution. Do they really have a legal right to do this?
9) I don't need protecting by PayPal - I can look after myself.
10) My buyers don't need protecting by PayPal - my eBay status as a powerseller, my feedback, and my own 'Terms and Conditions' more than adequately takes care of them.
11) The claim within 30 days rule flies in the face of reason and encourages panic each-way-bet claims.
12) Any message to PayPal that says goods have not been delivered or are substantially not as described is registered as a 'claim'. There is no attempt to run the sender of the message through a pre-claim checklist, such as 'Did you contact your seller? 'What does your seller say?' 'Did you check that your parcel is not with a neighbour, or in the local post office waiting for you to collect?' 'Have you fully read and fully understood the Protection Scheme rules?' etc. etc. No, PayPal just go right ahead and ring-fence the seller's funds. What a bleep-bleep cheek!
13) Why does PayPal think it needs to run the 'Protection' scheme? Answer - it adds perceived value to their service. The fact is, it adds no value at all and is actually a disadvantage to me as an honest, reliable seller with a proven, public record.

I don't expect anyone to try to respond to all these points - just pick on the one that rattles your particular cage!

Roll on the day when PayPal abandons its 'Protection' racket and treats us all like responsible adults, letting us take care of our own problems. PayPal should get real and stick to acting only as a mechanism for money to be moved from person to person.

Tradguy · Joined: 15 Sep 2002 Posts: 519 Location: Florida

Hi Bayview -

I'm also a powerseller, 3K pos fb, 100% rating. I've had 1 chargeback in 5 years of using paypal.

First, I've always been aware that anything I sell using paypal that does not include some kind of tracking is done completely at my own risk. So I use tracking on ALL packages over $50.

Second, if the buyer used a credit card, then chances are that paypal has already been charged back. No matter what the reason, if paypal is charged back, the money is immediately deducted from your account. Why? Well, paypal is your just your credit card handler, and they were charged back by a credit card company, and you - the seller - are responsible for all chargebacks.

Here is the real point - this would also be true if you were handling CC's directly. The money is deducted immediately because the customer is credited immediately. CC companies will simply deduct the amount from your next check. It's up to you to prove this was done in error, and get back the money. No matter how you handle credit cards, the initial burden of proof always falls on the seller. (The best proof is actually a real card swipe).

With credit cards, the seller always takes on risk - period.

The 30 day limit is actually there to protect you. In non-CC transactions, the limit prohibits buyers from coming back at you 6 months later. (Paypal also limiits the number of chargebacks a customer is allowed to make in a year.) No such protection is afforded CC transactions - many of which allow chargebacks months later. Far as I could research, there is actually no legal time limit, though in court 1 year seems to be considered a "reasonable" limit.

In general, Paypal's seller "protection" policy is just an explicit statement of what the requirements are for a seller to mitigate their risk.

By the way, I'm not saying these requirement don't often suck for sellers, or that you shouldn't be complaining. I just had 10 years of dealing with credit card companies directly for online payments prior to paypal, and I guess in contrast, paypal's policies seem reasonable to me. We had at least 20 chargebacks - 15 for fraud, and 5 for "non-delivery" (we were selling online time - so no way to "track" that) - and we lost every appeal. Instead of Visa sympathizing with our problems, we were threatened with a $1500 non-refundable security deposit or outright cancellation of our account. If I ever sound sympathetic to paypal, I realize that they have to deal with these same CC companies every day.

Rich

hinkognito · Joined: 29 Dec 2005 Posts: 2

Paypal as an online merchant service has very little buyer/seller protection. Is this also true of other online merchant services? Is the situation the same for chargebacks with other merchants or is it Paypal specific?

I am not a powerseller just an average joe blow who sold some stuff and got scammed.

listmystore · Joined: 16 Sep 2005 Posts: 48

As a seller one has to be so careful.

I just lost $286.00 with shipping to a confirmed address with sellers protection.

What the buyer did is asked me to wait one week to ship the item, they said that they would be away and had no one to sign for the item. So I waited and then email asking if it was ok to ship after one week. They replied that they were now home and it would be ok.
The item was shipped Expresspost with full tracking and signature. So I should be cover by sellerâ€™s protection. Wrong!

They filed a Paypal claim that their account was misused and the fund where charged back from my account. So I emailed all the tracking info to Paypal thinking I should be cover. After 3 phone calls I was told I should be covered and would see the fund back into my account within a week. A week went by no money. So I called Paypal again and after 1 hour and 3 paypal people later I was told about the 7 day shipping policy. And because I wait 9 days to ship the item I was not covered, as per Paypal sellers agreement

So waiting to ship cost me $286.00

Will I keep taking Paypal as payments; one just about has no other option if you want to do online selling? I also have a merchant account but so many of my buyers want to pay by Paypal.

Good Selling
Brian

hinkognito · Joined: 29 Dec 2005 Posts: 2

Was your merchant account frozen? I cannot get my existing funds out because of further "investigation". This investigation has been carried out for over a month now.

Paypal...the biggest game in town.

listmystore · Joined: 16 Sep 2005 Posts: 48

No the account had lots of funds in it, so they just took what the needed.

Bidera · Joined: 14 Nov 2005 Posts: 34

listmystore that's just really evil what those scammers did by abusing that 7 day shipping policy. Still can't believe they can get away with that.

back when I owned a retail store I had a few chargebacks through credit cards. I did some mail-order business as well (this was before online auctions were big, and definitely before I thought of starting one).
One was particularly unpleasant, I had a chargeback made by some parents, who claimed their kid was the one who made the order and since the kid was under 18 and thus unable to consent to a CC transactions. Of course I never got the item back.

So Paypal acts as bad if not worse than CC processors, but they are the biggest so we use them, as well.

Best of luck there
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