Sellers are concerned about a dispute fee referenced in PayPal's new User Agreement that takes effect November 9, 2020. Readers asked us to find out what the new fee is and how it would impact them.
"I just got a message from PayPal regarding policy updates," one seller wrote to EcommerceBytes. "There is a bullet point that says they are "establishing" (adding) a dispute fee. That's it, just a quick mention. No description, no amount, no place to go to take a look at this new arrival." They attempted to learn more by checking their PayPal Message Center, without success.
A PayPal spokesperson referred us to a blog post on its site
where the company said it was making changes to its merchant policies, "encouraging merchants to engage with consumers in a direct and proactive manner to resolve disputes, consistent with PayPal's merchant policies and best practices."
"These updates replace chargeback fees with a dispute fee for transactions that are processed either through a buyer's PayPal account or through a PayPal guest checkout. This change will mean that for merchants who proactively resolve disputes with consumers, the typical fee on eligible incidents will drop from approximately $20 to $15*."
While that sounds like good news, the post went on to say in some circumstances, merchants will actually pay more:
"For merchants who have historically relied on PayPal to solve disputes and not engaged directly with their consumers to resolve disputes, there may be an increase in fees. Most merchants, and especially those who already take proactive actions with consumers to resolve disputes, will see a meaningful decline in the fees they are charged."
The PayPal spokesperson explained, telling us: "Essentially if a merchant does *not* communicate directly with their consumers and it is escalated to PayPal to mediate, that is when the fees are applied. If the merchant historically acted in this manner, they will see an increase in costs. If the merchant engages consumers directly to resolve disputes, they will not have this fee applied and could see a reduction in the costs."
It appears to be an attempt on PayPal's part to incentivize sellers to work with buyers and decrease the number of disputes it must deal with by charging more than the $20 fee currently in effect.
PayPal hasn't said how much the fees are going up, and sellers who miss this news may be in for a surprise in November, with the change coming at the height of holiday shopping.
Update 10/3/2020: PayPal's spokesperson provided the following additional clarification;
"The Dispute Fee will replace PayPal's existing Chargeback Fee for branded transactions for disputes that are not resolved by merchants, and in proportion to a merchant's dispute rate. This will help merchants mitigate losses and also encourage merchants with high dispute rates to improve buyer experience. These merchants will be charged a higher fee compared to merchants with a standard dispute rate. So merchants with a higher dispute rate will see an increase whereas those with a standard (or lower) rate would actually see a decrease in costs."