When PayPal refuses buyers protection against eBay fraud

Selling on eBay? Don't accept PayPal if the buyer is collecting in person – as one used-car seller found to his cost

If you are thinking of selling on eBay, don't accept PayPal if the buyer wants to collect in person. Ask Philip Ryan. He recently lost £700 when fraudsters bought his used car though a hijacked PayPal account. He thought it was safe to hand over the keys after the money had been transferred into his account – only to discover the cash had been taken back two days later, with his Toyota long gone.

Guardian Money has previously warned eBay sellers only to accept cash if a buyer is picking up an item. That's because if they turn out to be a fraudster, PayPal's seller protection scheme isn't likely to come to the rescue.

Yet a quick look at eBay listings this week found that many sellers of large items – that can only be collected – accepted PayPal. Sellers say the matter is further confused because eBay insists they have to accept PayPal when putting up listings.

Ryan (not his real name), an IT consultant from Cambridge, told Guardian Money his car buyer had insisted on making the payment via PayPal prior to picking up the vehicle. Like thousands of others, Ryan believed that once the money was in his account, he could hand over the keys and the ownership document.

A few days later, PayPal told him that the payment had been made using a hi-jacked account and that the transaction had been reversed. He had no money and no car. PayPal said seller protection – designed to protect sellers from fraudulent buyers – wouldn't cover the transaction as the car had not been delivered and tracked to the buyer's registered address.

Ready to give up, Ryan was encouraged by friends to report it to the police via Action Fraud. Only then did PayPal take another look at his case – and decided it would return his money as a "goodwill gesture".

Ryan's case is similar to two computer sellers we featured in 2012. Both had agreed to let the buyer of their Apple computers pick them up after they had received a PayPal payment. Again, these were reversed when it emerged that the buyers had hijacked legitimate PayPal accounts. They lost £1,300 and £650 respectively – later refunded by PayPal, as a gesture of goodwill, following our intervention.

Ryan, who considers himself technically savvy, says he was completely unaware a payment could be reversed in this way. "When I told friends I had been scammed, they laughed. However, when I told them that the money was initially there, and then taken back, they stopped laughing as they weren't aware it could happen, either," he says.

Fraudsters hijack accounts mostly by sending out fake emails. When the real account owner complains, PayPal reverses the transaction.

On its website PayPal states: "To be eligible for Seller Protection, we require two types of evidence … digital or physical proof that the item was sent by the seller, and proof that the item was delivered by the delivery company."

But a spokesman confirms new policies have now been introduced "to help buyers and sellers who have been the victims of fraud as a result of exchanging goods in person. Provided the customer can provide evidence that they reported the crime to the police [which can be done quickly online through Action Fraud], we will consider a goodwill refund. In [Ryan's] case, we made a refund under the process, which meant the seller didn't lose out."

Contributor

Miles Brignall

The GuardianTramp

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