A Word of Caution to eBay Sellers using PayPal

[Yousuf Abbasi]

I've used eBay and Paypal for quite some time, and have luckily not experienced any major problems. As a seller, I always take precautions to ensure that I am protected and "eligible" under PayPal's "Seller Protection," but only recently did I CAREFULLY read through their Terms of Service. What I found, to my horror, is that NO MATTER WHAT YOU DO AS A SELLER, YOU CAN 100% ABSOLUTELY POSITIVELY GET SCAMMED.

You see, PayPal makes you believe that if you follow certain steps as a seller (i.e. transact with Verified user, ship to Confirmed address, get signature confirmation, get insurance), you can feel good about being protected. In fact, PayPal goes so far as to write "This transaction is Eligible for Seller Protection" which further makes you confident that if things go wrong you have their protection.

The huge flaw in all of this is that Seller Protection *ONLY* applies when the buyer claims the Item was Not Recieved, or there was an Unauthorized Charge. In the event that the buyer states that the Item received was Significantly Not as Described, you (the seller) are SCREWED, period. This is precisely how sellers can get scammed using PayPal and be left helpless. Take this example to drive my point home:

-You sell an expensive lens on eBay.
-Buyer wins your auction and sends you full payment immediately.
-You note the buyer has a verified account, confirmed address, and positive feedback.
-PayPal shows the payment has cleared and that you are free to ship the item.
-You ship item, with insurance and signature confirmation to the confirmed address.
-Buyer receives item and transaction is seemingly over.
-Days later buyer initiates a chargeback and claims that the Item was Significantly not as Described, and that he received a box full of rocks.
-PayPal locks your account, takes the funds back, and notifies you that buyer will be returning the item.
-You recieve a box back from the buyer, and sure enough, there is no lens in it but just a box full of rocks.
-You fight with PayPal to release/return your funds, they say that they cannot dispute a chargeback if the claim was for Item Significantly not as Described, because that is not covered under their Seller Protection policy.
-Buyer keeps your lens, gets his money back, and you get SCAMMED big time.

I did some searching online and actually found horror stories of this exact thing happening often. There's nothing you can really do about, either. Sure you can look for signs early on that could indicate the buyer is fishy, especially if they make odd requests like "please ship overnight" or "message me on another address," but who knows sometimes the scammer may seem just as normal as anyone.

I think going forward I will be only accepting Cash, Money Orders or Cashier's Check, and transact on a safer place like Amazon or something. It may be tougher to sell something that way, but I think it's worth it.

So, if you HAVE to use PayPal to receive money for goods you sold, just be very very very careful, because PayPal has made scamming sellers as easy as taking candy from a baby. :cursing:

 

[Brent J. Craig]

All true. People need to realize that PayPal is not a bank and is not regulated as one. They can basically do whatever they want with your money, even close your account with no refund.

Also, if you think you are protected as a buyer, just try going through refund their process - it is designed to be nearly impossible. For example, they want notarized appraisals for items that are 'not as described'.

 

[Steve Sherrick]

All true. People need to realize that PayPal is not a bank and is not regulated as one. They can basically do whatever they want with your money, even close your account with no refund.

Also, if you think you are protected as a buyer, just try going through refund their process - it is designed to be nearly impossible. For example, they want notarized appraisals for items that are 'not as described'.

Interesting, so sounds like you and the original poster have opposing arguments in terms of the "not as Described" part of the equation. If the buyer has to go through notarized appraisals seems like that would be a slight deterrent. I'm just no sure how this works if they fill up the box with rocks and take that to get appraised. Seems like an awkward situation.

 

[Yousuf Abbasi]

Interesting, so sounds like you and the original poster have opposing arguments in terms of the "not as Described" part of the equation. If the buyer has to go through notarized appraisals seems like that would be a slight deterrent. I'm just no sure how this works if they fill up the box with rocks and take that to get appraised. Seems like an awkward situation.

In my example, the Buyer doesn't get refunded by PayPal, he gets refunded by his credit card company, who initiates a chargeback to PayPal. The CC company reverses the charges from PayPal Co. (chargeback), and PayPal then reverses those charges from the Seller's account. Buyer and PayPal don't really have to work together in this case. In certain cases, PayPal may dispute the CC chargeback, but as stated earlier under a "Item Significantly Not as Described" case, PayPal will not dispute this kind of chargeback as it is not covered under the Seller Protection policy. I suggest you read the Terms.

As for the notary appraisal requirement, that is most likely when it's not a chargeback issue but rather the buyer is trying to recover funds debited from his bank account by PayPal -- it's another issue. And yes, both sellers and buyers can get screwed on PayPal in different ways. My example is just one way, but a very easy way, to get scammed.

 

[Yousuf Abbasi]

Interesting, so sounds like you and the original poster have opposing arguments in terms of the "not as Described" part of the equation. If the buyer has to go through notarized appraisals seems like that would be a slight deterrent. I'm just no sure how this works if they fill up the box with rocks and take that to get appraised. Seems like an awkward situation.

Also under a chargeback case the buyer is NOT REQUIRED to get any item appraised. They are simply told by PayPal to send the "item" back and upload a delivery confirmation number. That's it.

 

[Jeff Kilgroe]

With PayPal and their buyer protection policy, all sellers are guilty until proven innocent in any dispute. I've had a few attempt to scam me and one guy successfully did it. It's always the same scam... They just claim you sent them the wrong item, or whatever and PayPal automatically sides with the buyer, regardless of circumstances.

For this reason, I don't accept PayPal from anyone outside the USA or Canada. Within US/Can, eBay auctions are considered a legally binding sales contract. So even if they managed to withdraw their PayPal payment, they still have to answer for the auction itself.

At least when I accept a credit card (not via PayPal) and someone disputes the charge, I have the opportunity to respond back or state my side of an argument before the money simply gats taken away and I get ripped off.

Some PayPal tips for those who use it.

1> Don't accept eCheck payments that take a number of days to clear. Just don't do it.

2> Never keep a balance in your PayPal account any longer than you have to.

3> If you link PayPal to a checking account (and you pretty much have to) place a security check on that account so PayPal can't withdraw money instantly on a chargeback without your authorization.

4> Don't accept PayPal payment from anyone outside your local jurisdiction or anywhere that you would have no legal recourse or other means to recover funds if the buyer withdraws them.

5> PayPal is not a bank or credit card and is not restricted by their laws. Unlike credit card fees, it is actually legal to recover PayPal transaction fees as an add-on to the purchase price to the buyer. Do it. You will thank yourself later because 3% is complete bullcrap, especially on high-dollar items where they give no concession. That's more than eBay's cut when you start talking about items selling for more than $4K or so.

5> Be very suspicious of anyone buying a high dollar item who is overly anxious to pay via PayPal and doesn't complain about the 3% overhead.

For any purchase over $2500 I pretty much tell people that I want a wire transfer or cashier's check. I ship the item once the funds are verified in my account. For a check that can take up to 10 business days, wire transfer is within 24 hours for domestic (usually the same business day).

PayPal's buyer protection policies are not so generous when not associated with an eBay auction. They don't offer the extra buyer protection for private sales agreements and in this regard, they are somewhat more secure for the seller. Although in Yousuf's example where it was a credit card via PayPal, that can still be easily charged back under any sales circumstances, ebay or not.

 

[Zakaree Sandberg]

make a new paypal account for everything you sell.. once you get the funds.. transfer those funds out of paypal.. into a checking account.. pull the cash from the checking account...
now when paypal tried to take back the money, they cant! there wont be anything in there

 

[Ben Brainerd]

make a new paypal account for everything you sell.. once you get the funds.. transfer those funds out of paypal.. into a checking account.. pull the cash from the checking account...
now when paypal tried to take back the money, they cant! there wont be anything in there

The problem there is that Paypal makes it a royal pain in the butt to link to an account. I like the idea of requiring a wire or cashiers check, but wasn't aware that eBay would actually let you do that. I was under the impression that it was PayPal or nothing these days.

 

[Yousuf Abbasi]

make a new paypal account for everything you sell.. once you get the funds.. transfer those funds out of paypal.. into a checking account.. pull the cash from the checking account...
now when paypal tried to take back the money, they cant! there wont be anything in there

Another problem with this is, PayPal can still draw from the linked checking account, whether or not there is money in there, and whether or not you are still a PayPal user. By agreeing to PayPal's terms, you allow them to do this. The last thing you want is issues with your checking account, who are coming after you for overdrawn amounts.

@Jeff: What does placing a Security Check on my checking account do?

 

[Ruairi Robinson]

I've used eBay and Paypal for quite some time, and have luckily not experienced any major problems. As a seller, I always take precautions to ensure that I am protected and "eligible" under PayPal's "Seller Protection," but only recently did I CAREFULLY read through their Terms of Service. What I found, to my horror, is that NO MATTER WHAT YOU DO AS A SELLER, YOU CAN 100% ABSOLUTELY POSITIVELY GET SCAMMED.

You see, PayPal makes you believe that if you follow certain steps as a seller (i.e. transact with Verified user, ship to Confirmed address, get signature confirmation, get insurance), you can feel good about being protected. In fact, PayPal goes so far as to write "This transaction is Eligible for Seller Protection" which further makes you confident that if things go wrong you have their protection.

The huge flaw in all of this is that Seller Protection *ONLY* applies when the buyer claims the Item was Not Recieved, or there was an Unauthorized Charge. In the event that the buyer states that the Item received was Significantly Not as Described, you (the seller) are SCREWED, period. This is precisely how sellers can get scammed using PayPal and be left helpless. Take this example to drive my point home:

-You sell an expensive lens on eBay.
-Buyer wins your auction and sends you full payment immediately.
-You note the buyer has a verified account, confirmed address, and positive feedback.
-PayPal shows the payment has cleared and that you are free to ship the item.
-You ship item, with insurance and signature confirmation to the confirmed address.
-Buyer receives item and transaction is seemingly over.
-Days later buyer initiates a chargeback and claims that the Item was Significantly not as Described, and that he received a box full of rocks.
-PayPal locks your account, takes the funds back, and notifies you that buyer will be returning the item.
-You recieve a box back from the buyer, and sure enough, there is no lens in it but just a box full of rocks.
-You fight with PayPal to release/return your funds, they say that they cannot dispute a chargeback if the claim was for Item Significantly not as Described, because that is not covered under their Seller Protection policy.
-Buyer keeps your lens, gets his money back, and you get SCAMMED big time.

I did some searching online and actually found horror stories of this exact thing happening often. There's nothing you can really do about, either. Sure you can look for signs early on that could indicate the buyer is fishy, especially if they make odd requests like "please ship overnight" or "message me on another address," but who knows sometimes the scammer may seem just as normal as anyone.

I think going forward I will be only accepting Cash, Money Orders or Cashier's Check, and transact on a safer place like Amazon or something. It may be tougher to sell something that way, but I think it's worth it.

So, if you HAVE to use PayPal to receive money for goods you sold, just be very very very careful, because PayPal has made scamming sellers as easy as taking candy from a baby. :cursing:

Great idea! I'm gonna go buy me some lenses!

 

[Yousuf Abbasi]

The problem there is that Paypal makes it a royal pain in the butt to link to an account. I like the idea of requiring a wire or cashiers check, but wasn't aware that eBay would actually let you do that. I was under the impression that it was PayPal or nothing these days.

On eBay, it's pretty much PayPal or nothing - you're right. If you write something like you accept Money Order or Wire, they will probably cancel your auction but just try it anyway. Other options are use Amazon... I'm going to be trying this service out going forward.

It's going to be harder to sell your items outside of eBay/PayPal, but atleast there won't be a 100% chance you'll get robbed.

 

[Marcus Olsen]

After getting paid for some Digibeta stuff last year, PayPal just locked my account, frozen $25K I had there, saying it had some "unusual activity". I've spent almost 2 weeks, several phone calls, email messages and documents sent, to finally be able to cash MY money.

It was enough for me, no more PayPal!!!!!!!

 

[Curran Giddens]

http://www.paypalsucks.com/

I HATE paypal. I still have an account but always recommend everyone to use Google Checkout instead. Sometimes eBay will cancel an auction if you mention google checkout so you have to be careful.

Die paypal! DIE!

 

[Yousuf Abbasi]

http://www.paypalsucks.com/

I HATE paypal. I still have an account but always recommend everyone to use Google Checkout instead. Sometimes eBay will cancel an auction if you mention google checkout so you have to be careful.

Die paypal! DIE!

What's the advantage of Google Checkout? Do they have a better chargeback policy? I tried to search their terms real quick on the web but could not find...

 

[Curran Giddens]

What's the advantage of Google Checkout?

Q: What is the advantage?

A: It isn't PayPal.

I never had a chargeback but it looks like Google will at least attempt to protect you from unwarranted chargebacks.

https://checkout.google.com/support/sell/bin/answer.py?hl=en&answer=42863
http://checkout.google.com/support/sell/bin/answer.py?hl=en&answer=134372

 

[Charles Angus]

I've heard a lot of stories about PayPal scamming people, either the company itself, or its employees.

Sometimes when they freeze for "unusual activity", it seems people don't end up getting their money back. (Maybe because they aren't willing to spend 2 weeks on the phone, as Mark Olsen did.)

 

[Matt Gottshalk]

+1 on google checkout.

 

[ScottyC]

I think going forward I will be only accepting Cash, Money Orders or Cashier's Check, and transact on a safer place like Amazon or something. It may be tougher to sell something that way, but I think it's worth it.

You should be careful with money orders and cashiers checks too. People on Craigslist have learned the hard way. There are fake cashiers checks/money orders and the scammers usually try to get you to send them money back because the cashiers check/money order is for more than what you are asking. It's kind of funny to hear when scammers get scammed by someone else... they usually throw a fit and get real mad, but it's nice to know that sometimes they get a taste of their own medicine.

Truth is, there's a lot of nasty people out there with no morals that are just looking for easy money. Shame that it's unsafe to buy or sell anything anymore.