Millions of people who sell items on eBay each year risk becoming the victims of fraud because they wrongly assume PayPal will protect them in payment disputes.
In recent weeks Guardian Money has been contacted by several sellers of expensive items – mostly laptops – who have become victims of a fast-growing fraud.
In each case the buyer has paid through PayPal but insisted on picking up the item in person.
But later it transpires that the payment was made fraudulently by someone hacking into a legitimate account.
Sellers caught out have been wrongly assuming that PayPal would protect them in such an instance. Instead they have found that PayPal offers no comeback to sellers handing items over to buyers on their doorstep. In reality, sellers have no more protection than if the item was paid for with a cheque that then bounces.
Some victims of this fast-growing fraud have lost more than £1,000. Their stories should serve as a warning to all eBay users – and anyone using PayPal to accept payments – particularly those selling expensive items such as computers or mobiles. Either send the item using a traceable courier, or if the buyer is picking up the item in person ask for payment in cash.
PayPal told the Guardian this week that it is clear in what circumstances its seller protection terms will, and will not, cover people, but few eBay users seem aware there is a major omission. The fact that eBay requires sellers to offer PayPal as a payment option doesn't help.
Anthony Lodge from Harlow, Essex, is one victim of PayPal's policy. Back in November the self-employed chemist sold his Apple MacBook Pro on eBay for £650. The buyer made a payment via PayPal. Two days later the "buyer" picked up the laptop, and left positive feedback on Lodge's eBay account.
"I didn't get him to sign anything as I had the money in my account and assumed the deal had been completed," he says.
However, six weeks later he received an email from PayPal telling him that the account holder had disputed the transaction, and it was investigating. Ten days on, PayPal informed him it had refunded the buyer from his account because he hadn't sent the laptop by recorded delivery and therefore "had no proof of delivery".
"My PayPal account is now in negative balance of £650 and I have been told I must settle it by the end of January or they will use the debt collectors. What is really frustrating, though, is the fact that PayPal won't tell me how or why this fraudulent transaction took place. I've sold lots of things on eBay over the years and I certainly wasn't aware that there was no protection if the person picked up the item," he says. He has informed local police, but has got nowhere.
PayPal, he claims, did nothing to help him find the person(s) who defrauded him.
Another reader, Ruth Reakes, contacted Money to complain of a similar fraud, although in her case the transaction had been done via the Gumtree website.
"My 19-year-old son decided to sell his iMac and advertised it on Gumtree. A buyer texted him, agreed the price of £1,300, and arranged to pay through PayPal. As we are not experienced at this I was quite nervous, but my son was confident that once he saw the money in his PayPal account it was safe to release the iMac. When the buyer was on his way my son showed me the balance in his PayPal account that proved payment had been made. The buyer duly turned up at our door and we handed the computer over.
"The next day he received an email to say that the payment was an 'unauthorised transaction' and he should pay the money back. In our naivety we had not asked the buyer to sign to say that he had picked it up, but we have now learned that even if we had we were still not covered by PayPal's seller protection. We were only protected if it was sent by tracked courier. The police are now investigating but PayPal have washed their hands of it – within a week they told my son the dispute was resolved in the payer's favour," she says.
Another reader, Alex Village, contacted us to say he had a similar experience after selling his iPhone on eBay – and there are many others.
A spokesman for PayPal, which is owned by eBay, says the website clearly sets out in what circumstances that sellers' protection applies. He conceded that it is not always possible to send large items sold such as a fridge via a courier, in which case it is advisable to consider another payment method.
"We can certainly learn lessons from Mr Lodge's experience. As a result, we will be reviewing how we handle cases where a seller is not covered by seller protection because they arranged in-person collection, and then report the matter to the police. We'll also be reviewing how we explain what sellers need to do to ensure that their payment is covered by seller protection," he says.
As a gesture of goodwill, PayPal has said that both Lodge and Reakes will be refunded the losses they incurred as a result of these frauds. Both told Money this week they were hugely relieved.
