Why does PayPal’s ‘seller protection’ fail to protect?

If a buyer claims an item is not as described there’s no cover for the seller

I sold four certified gold coins on eBay to a buyer in Canada for £4,300. A month later, the buyer claimed the coins were “not as advertised”.

I asked for photos of the packaging and contents but received no reply. After another two months I received five silver coins from the buyer with no accompanying message.

PayPal then told me that the £4,300 payment had been reversed by the buyer’s credit card issuer, although no dispute had been lodged with eBay or PayPal.

It appears the Canadian bank is acting as judge, jury and executioner having apparently reviewed the case and sided with the buyer, and PayPal is acting like victim in the middle and saying they have to honour the chargeback. MF, Inverurie

Chargeback is a voluntary banking scheme to protect debit card transactions in the event that a trader breaches a contract. If a bank decides that the customer has a case and reverses the payment, the trader has the chance to appeal.

In your case it’s complicated, because the appeal had to be launched by a middleman, PayPal.

The fact that the buyer did not return the coins, or raise a formal complaint via PayPal, should have been evidence against his claim, but PayPal says its appeal was overturned by the previous bank and it cannot stop the chargeback.

This is where its much-vaunted “seller protection” falls short. It covers you if a buyer claims an item is not received but not if it’s “not as described”, which can be a handy loophole for fraudsters.

It gets worse. After the Observer got involved, PayPal promised to freeze your account pending further inquiries, but you were twice threatened by debt collectors wanting that £4,300.

Then, after receiving an email from PayPal absolving you of the debt, you were casually told that this was sent in error and you had to pay up after all. The mistake turns out to be your salvation.

Following media pressure, PayPal decided to back down. “The chargeback process is governed entirely by the credit card company, and PayPal has no control over this process,” it says. “Despite our appeal on the seller’s behalf, the card company found in favour of the buyer. When informing the seller of this, we mistakenly told him that we would cover the expense. We have since honoured this mistaken promise by giving a full refund.”

Ebay, meanwhile, says that as no issues were flagged at the time of the transaction and there was no pattern of suspicious activity on the buyer’s account it could do nothing.

If you need help email Anna Tims at your.problems@observer.co.uk or write to Your Problems, The Observer, Kings Place, 90 York Way, London N1 9GU. Include an address and phone number.


Anna Tims

The GuardianTramp

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