PayPal Fraud Protection
James Scott just caught the eBay Fraud Victim tale I shared a few weeks back:
I have witnessed firsthand PayPal taking $427 from a seller’s bank (checking) account and refunding just $200 to the buyer, stating to the buyer that the $200 was all that could be recovered. I was the buyer. If the seller and I hadn’t been communicating, neither of us would have known what was going on. In this particular case, a claim was filed (by me — the seller hadn’t communicated and I was worried about not getting what I’d paid for); however, I *did* eventually get what I’d paid for, but not until after PayPal had processed the claim. I got $200 in my account; the seller told me she’d had $427 taken from her checking account.
Only through several phone calls to PayPal representatives was this situation resolved. And only because the seller/buyer were communicating were we able to figure out that we were being told two different stories and that there was $227 sitting somewhere in-between the buyer and the seller when it should not have been.
How many times does PayPal tell a buyer that they’d been able to recover “just $200″ but had actually been able to obtain/retrieve more from the seller? Not all of these scenarios are genuine fraud — in my particular instance, this was a situation caused by a non-communicative seller (who happened to be moving and in-between Internet connections). We figured it out. Even if it is genuine fraud, perhaps PayPal merely froze the seller’s account and any money in it. If there’s $800 in the account, do they still send the same message saying they’d only been able to recover $200?
Another bad PayPal scenario. If a seller mails something to a buyer that does not have a tracking # and the buyer files a claim saying they did not receive the item, then the seller is required to provide a tracking # or PayPal will automatically resolve the dispute in the buyer’s favor. Whether or not the buyer actually made the claim in good faith. In other words, PayPal’s “claims” process enables fraud. They don’t ask, they don’t require, they don’t care whether or not the buyer is making the claim in good faith. Lesson for sellers I guess is to always provide a tracking #, but still — who knows how many buyers have figured this out and make false claims. Given the volume of transactions and human nature in general, it has to happen.
My piece of advice for any transaction online that’s gone bad — the buyer and seller need to communicate with each other (assuming this is possible). They need to overcome any emotional issues related to shipping something in good faith and/or not receiving an item within a reasonable window of time. They need to both communicate to each other about how PayPal resolves that claim because there’s evidence to suggest that PayPal isn’t telling both sides the same story. I for one would be curious to know if this is a wide-spread practice. If the honest buyers and sellers can work together to see into both sides of the PayPal mess, perhaps some transparency can be achieved.
After seeing these two scenarios play out, I don’t believe PayPal is a trustworthy broker and they shouldn’t be handling anybody’s money. But that’s just me :)
Well, the good news is that at least Google and Amazon are starting to play in the world of micropayments. Not sure they’ll ever replace PayPal outright, but at least consumers have more than one option (even if those options may not be as convenient).
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14 Comments
The Chris Pirillo Show
August 23rd, 2007
at 4:48am
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Luis
August 22nd, 2007
at 7:28pm
Hey Chris,
Have you heard of PayPal’s Security Key, is a small electronic device that produces a random number to add to your password giving you an extra layer of security. Check it out at PayPal’s site, or on a review I did on my site. The key works on eBay as well and with Verisign as a partner is likely that other institutions will join the effort to secure our online shopping.
Jim
August 23rd, 2007
at 6:41am
I had a situation with Amazon in which I complained that I had not recieved an item that the seller claimed had already been delivered. Amazon settled entire $ amount in my favor. A day or two later I found the package at my front door where it had evidently been for some time. I do not go in and out my front door and previous packages had always been left at my carport or side screened in porch. Also this was in the heart of winter and it was already dark out when I returned home from work. Just never saw it there. I felt very bad for the seller and embarrassed. I contacted them to make it right but they said they were not allowed to receive any further transactions after Amazon had settled them. I always check my front door now for shipped packages. I hate that this happened.
Ronald Gerard
August 23rd, 2007
at 9:34am
well, it seems the same, in most on-line transactions. Bought something, that a web site was acting as an intermediary for. (Seems) neither of us could contact the seller directly. I’ll go with Chris; get a tracking # from the person who’s selling the item, AND TRACK IT!! Had a few things that were listed as delivered, that I never received; tracking them @ least let me know they were vanished, and I could lodge a claim.
Steve Bepko
August 23rd, 2007
at 1:40pm
Tracking is great but expensive. Even USPS Delivery Confirmation is almost useless for tracking, if you do things electrnoically the only messages you get are (paraphrased) “The USPS was advised that a package is forthcoming” – with no hint as to who the package is addressed to – and another message when it’s either delivered or the attempt was made. The Buyer (receiver) really has no protection, but I wonder if this is good enough to protect the Seller (shipper)? Anyone have any experience with this?
Papillion - Geek Life and Times » Blog Archive » We are Paypal…Screw You!!!
August 23rd, 2007
at 2:42pm
[...] Click here to read the entire post. [...]
TIM
August 24th, 2007
at 1:16pm
Paypal is a total scam just for saying that you are protected when in reality you are not.
Alan Whitcomb
August 26th, 2007
at 12:08pm
Did you ever get a “second chance” email to buy something you bid on? I did.. and I sent the money to the seller via paypal. The next day I got an advisory saying that the sale was a scam. A nice email from Ebay warning me. I looked in my paypal account, and the money had not been taken. I wrote paypal an email asking them to cancel the transaction. I got a nice form (email) letter saying that all transactions are final.
Signed..
Unhappy camper
Brian Moore
August 27th, 2007
at 9:40pm
Mac mini does not use PC standard memory, I recently installed APACER 667 sodimm memory for my mac mini
Fred
August 29th, 2007
at 10:45am
I have to agree, PayPal is dubious. I think they can go down big if Google or some such actually implements a more effective mechanism to make fraud much more difficult. I have never used Google Payments so I do not know if they have.
Robert
December 16th, 2007
at 12:33pm
PayPal’s fraud protection is an out right scam, people shop and buy as you have no protection at all, the only thing that is up and up with PayPal is the price increases.
Joe
February 6th, 2008
at 5:50pm
Paypal? What about just money orders & checks?
daniel
December 15th, 2008
at 7:23am
PayPal cover only to fraud seller not at buyers
Zeone
May 21st, 2009
at 12:08am
Amazon.co.uk is highly unscrupulous. They allow fraudulent buyers to rip sellers off with the “empty envelope scam”, Basically, we sold a buyer a £200+ games console and couriered it to them. On receipt, they claimed that a USB cable was missing and filed an A-Z guarantee claim. They then sent us an empty envelope and told Amazon.co.uk (according to them) that it was the console. Amazon.co.uk refunded the full £200+ to them AND charged us for doing so! Sellers beware.