Wednesday 21 July 2010

Starwars Episode II : The PayPal Empire’s Chargebacks

This is the second episode of my quest to get PayPal to change its policy regarding chargebacks. For the ones of you that have missed it, here is part I of the saga: StarWars: Stars vs. Paypal

A couple of things have happened in the meantime: the Commission de Surveillance du Secteur Financier, wrote to me saying that they had asked PayPal to investigate the issue. Then PayPal telephoned us and mailed us to tell us that they did nothing wrong and then again, the Commission de Surveillance du Secteur Financier, wrote to say that PayPal Europe had declared they couldn’t solve a problem related to an account in Turkey and passed the ball to PayPal Singapore.

This last is of course, a rather transparent maneuver to get the Commission de Surveillance du Secteur Financier off their backs. The problem affects to all sellers outside Ebay, worldwide.

Not being the person to give up easily, this is what I wrote to the Commission de Surveillance du Secteur Financier:

''Although PayPal Europe has apparently declared itself non competent in this matter, I have received an email , which I include, addressing this matter and signed by PayPal Europe. It seems to me that the no competence issue is only a maneuver to assure that you cease your intervention and I have no place to go with my complaint.
The matter is not geographically related, but applies to any PayPal user. Therefore, and in view of the fact that PayPal Europe has written to me, I ask you to continue your involvement in this issue.

A couple of weeks ago, I got a phone call of someone from PayPal called Andrea in this matter. I asked this lady to continue the contact by letter, but she said that she couldn’t, but she would contact me by mail, what she did, again without stating her surname, what I can not help but find very awkward.

If you allow me, I would like to review with you some of the things said in the email, but also some of the things not said.

First of all, the transaction was not done at Ebay, but on Etsy, that is part of the problem, if it was an Ebay transaction it would have been eligible for seller’s protection.

This is the standard notification of payment received:

Hello Estella S.,
You received a payment of $... USD from ….Thanks for using PayPal. You can now ship any items. To see all the transaction details, log in to your PayPal account. It may take a few moments for this transaction to appear in your account.
Seller Protection - Not Eligible

As you can see, not much of an investigation is necessary, seller protection is, according to the Users Agreement, only available for Ebay sellers. That was necessary when Ebay started to loose many sellers to Etsy due to the high fees and the fact that the use of PayPal is compulsory by Ebay.

During our telephone conversation, this lady Andrea insisted that PayPal protection was equal for all sellers, but the terms of the user’s agreement are clear, see relevant articles below. Only Ebay sellers are protected:
4.2.2 Risk of Reversals of Payments and the Seller Protection Policy ("SPP").
i. Risks of Reversals. You are responsible for all Reversals, Chargebacks, Claims, fees, fines, penalties, and other liability incurred by PayPal, a PayPal User, or a third party. In the event of any of these events, you will owe PayPal for the amount of the reversal, chargeback, Claim, plus any fees imposed on or incurred by PayPal as a result of the reversal or chargeback. PayPal will seek to recover these funds from you by debiting your PayPal balance and, if there are not sufficient funds in your PayPal balance, PayPal reserves the right to take your account negative and to collect your debt to PayPal by any other legal means.
ii. Seller Protection Policy. However, under the Seller Protection Policy, sellers on eBay websites, will not owe PayPal any amounts in connection with a Seller Protection Reversal that results from a Disputed Payment and where the relevant transaction meets the applicable eligibility requirements, set out in section 4.2.3. The policy will protect you for the full amount of the eligible payment and waive a Chargeback Fee, if applicable. There is no limit on the number of payments for which you can receive coverage.
4.2.3 Transaction Eligibility Requirements for the Seller Protection Policy.
Subject to the limitations set forth below a transaction (where the buyer makes a PayPal payment on or after June 7, 2009) will be eligible for protection under the Seller Protection Policy where the following requirements are met:
i. You sold the Merchandise via an eBay website; and
ii. You provide PayPal with valid Proof of Shipment of the Merchandise for unauthorized transactions or valid Proof of Delivery of the Merchandise for claims of an Item Not Received; and
iii. You are a PayPal customer in a country that has both receive and withdraw capabilities; and
iv. You must ship the item within 7 days of receipt of payment (unless otherwise permitted under the Authorized Use Policy); and
v. You sent the Merchandise to the address specified by the sender of the payment which is highlighted on your account Transaction Details Page or otherwise notified to you by PayPal through a PayPal application programming interface ("API").

During our telephone conversation, this lady Andrea, agreed with me that it is not very probable that a thief uses a stolen credit card on line to buy goods addressed to the credit card holder. Abuse may occur though by someone very close to the credit card holder, for instance an (ex)partner. Also through ‘phishing’, but again, not very probable, because goods are sent to the address of the credit card holder. In many cases is the buyer who is gone too far in his/her expenditures, the one that claims to be victim of theft. Nor the bank, nor PayPal, investigates the matter further because the money is recovered from the unwitting seller.

It is not possible for an on-line seller to verify the identity of the buyer. That is what we pay PayPal to do, and when PayPal notifies us of a received payment, it states: You can now ship any items. And trusting this agreement, we do.

PayPal may be legally obligated to return to the credit card issuer any payment that may be fraudulent, PayPal is in no way obligated to take that money back from the seller. Other payment services, as MoneyBookers, do not. When asked about that, Andrea told me that those other services are willing to take responsibility.

And this is exactly what is necessary to solve this issue. As ‘leading online payment service in the industry’, PayPal should protect any seller using their services that has abided by the rules. A giant company like Ebay/PayPal should be able to take responsibility when has failed to provide a secure payment online.

I ask you to strive to amend this legal oversight and exhort PayPal to expand their seller’s protection coverage to all sellers. It is simply not fair that an innocent seller should pay for fraud committed by others. Alternatively, if it is beyond your jurisdiction, I ask you to forward my question to the relevant authority.

Yours sincerely,


People, I could use some help: I don’t know if the Commission de Surveillance du Secteur Financier is going to consider the matter once more, but obviously one voice won’t be enough.

What always helps is attention from the press. If one of you has press contacts that could be interested in the issue, please let me know.

And of course, if you get a chargeback, fight it, also if the amount is little.

Ah, and if you think that Etsy can help, think again. The answer of admin is that due to their relationship with PayPal they can not get involved. Indie sellers: we are on our own!

Could the seller going by the name Quinn, who left a comment by my previous post in this issue, contact me through email?

May the force be with you !!


  1. Good luck in resolving the issue. I wish I had the stubbornness to fight it, Estella but after one letter I gave up as it was never replied to.
    Paypal is lame and I can only hope for another system that deals with payments and does have a better customer service...

  2. Its disgraceful that PayPal are allowed to behave in this way, discriminating against non-eBay sellers. Good luck with your campaign :)

  3. You are warriors, Stars! I'm sending strong fighting vibes to you!

  4. You are really a strong Women Estella,
    may everything turn to your good and
    all the energy you put in this case returns back to you for good!!!!

  5. Well done for not giving up. You got my support.

  6. goodness me! a saga indeed!
    but don't give up, good luck, may the force be with you :)

  7. Good for you, keep fighting and let us know if there's anything else we can do.

  8. May the force will be with you!...