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How PayPal Chargebacks Can Come Back to Bite You

A reporter for a television station in Las Vegas warned viewers about a “PayPal loophole” that could prove costly for people selling on eBay.

Consumer advocate Michelle Mortensen looked into the case for a local woman who sold a boat on eBay in May. After the buyer changed his mind and tried to get a refund, eBay ruled in favor of the seller. But the buyer filed a chargeback with his credit card company – and won.

“Once the chargeback was filed, PayPal came to her saying she owed them the $8500 earned in the sale,” according to the report on the “8 On Your Side” report, available for viewing on LasVegasNow.com.

But the buyer got to keep the boat – and only agreed to return it to the seller if she paid him $2,689.95!

Mortensen “worked every angle of the case for nearly 4 months, but in the end PayPal’s user agreement overruled any evidence she uncovered.”

The reporter said the takeaway for viewers was this:

“Be careful when selling items on eBay and using PayPal. PayPal’s hands are pretty much tied in chargebacks. They’re beholden to the credit card companies, and the credit card companies usually protect their customers.”

The same scenario could happen to you weeks or even months after what you thought was a successful sale, she warned – not the kind of publicity either company wants at the start of the peak shopping season.

Want more information about PayPal’s chargeback policy? Be sure to read the User Agreement, and for more background, see the EcommerceBytes Newsflash articlefrom a year ago when PayPal changed its purchase protection policy, extending it to 6 months.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.