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Consumer Complaints: PayPal Buyer Protection not all it's cracked up to be?

Tracy Coenen
Jun 5th 2008 at 5:00PM

Filed under: Consumer Complaints

Have you ever purchased something on eBay, paid with PayPal, and felt good because you're got their "buyer protection" guarantee? Unfortunately, buyers aren't as protected as they might think they are. Sure, PayPal agrees to help resolve disputes between you and the seller, but that doesn't mean that you're going to win your dispute, even when all the evidence is in your favor.

Witness this story from a WalletPop reader who was scammed by an eBay seller, and then felt victimized a second time by the lack of results from PayPal:

My consumer scam involves PAYPAL which is a ruthless, money grubbing Ebay company. They get to operate like a bank, allow consumers to think they ARE a bank, pretend to offer "Paypal Protection," when it is all a scam to get and keep consumers' money as long as they can.

Let me start out by saying that I am a small time Ebay Powerseller, with 100% positive feedback. I have been selling small vintage and antique auction items fairly regularly since 2005. I have used Paypal to receive and send payments early on so had always been a great customer and independent agent for Ebay and of Paypal.
All that changed in September 2007 when I purchased, on eBay, 100 bottles of "authentic" Chanel perfume for $1880. As soon as the shipment arrived, I had suspicions that they were fake, and ran to the nearest Macy's Chanel counter. My suspicions were confirmed. I then contacted the seller, who advertised on eBay that this was the real thing, who wanted to know absolutely nothing.

I then complained to eBay who immediately sent me to Paypal where I filed a fraudulent merchandise claim. Little did I know that Paypal would sit on this as long as they could, in the meantime telling me that they "take the claim of fraudulence merchandise very seriously." Sure they do!

Anyway, I was required to supply all the documentation I had, which I did, and a report from an independent verifier who examined the perfume and determined it was fake. I sent everything to Paypal posthaste because all I wanted was this large sum of money back and I would have been glad to ship the bad merchandise back to the unscrupulous seller. I contacted Chanel who said that the seller was not even authorized to sell their brand. I was also told that I could contact law enforcement but that they would just confiscate the merchandise and begin an investigation that may lead to criminal charges against the seller but would not compensate me for my loss.

Every time I called Paypal to find out where the case was, I received generic phrases from customer service reps who refused to ever connect me with a supervisor. In the mean time, I was in contact with the seller who told me that Paypal had frozen her account which she said has several thousand dollars in it, and now she could not pay her bills nor return my money. Of course she blamed me for all of this and verbally threatened me.

I just wanted to be done with the whole thing and was sure once Paypal stopped resting on their laurels, they would just refund my money from her account.

Guess what? Exactly two days before they were to close the case, approximately 6 weeks after the start of it, they sent me a generic email stating that they needed further documentation of inauthenticity.

I immediately called them and said I needed more time than two days as I had to ship more perfume to another independent verifier, have them examine it, and write a report. I had previously tried the department stores, such as Macy's, who confirmed the inauthenticity but were not allowed by their management to put it in writing, since it had nothing to do with Macy's and they did not want to be involved. I had also tried to get Chanel to do the same but they were not at all interested and just advised me to buy only from a reputable Chanel dealer from now on.

Anyway, Paypal refused to give me any more time. I tried my best but I could not get another verification in that short a time frame and I think they knew it.

Why they waited until then to let me know this, they only know, especially when they had 6 weeks of doing nothing and keeping my money, and hers, tied up.

I told them I would not be able to get another report within two days. They told me that the case would be closed and DECIDED IN THE SELLER'S FAVOR!

I couldn't believe it. I would be out $1880 and stuck with fake perfume! I was desperate. What I did was contact the seller, who did not know about Paypal wanting more documentation, and told her I would drop the claim and all charges if she would agree to take the perfume back and refund my money. She wanted her account unfrozen and was seemingly happy to agree.

As soon as I dropped the claim, Paypal sent me an email saying that the case was closed because I "resolved the claim with the seller to both our satisfactions." What bs!

Since the seller's account was now unfrozen, I expected a refund and attempted to arrange it and shipment back. The seller then informed me that Paypal informed her that her account would be frozen for 6 months due to suspicious activity. Of course I tried to verify this through Paypal who would tell me nothing.

[snip]

This all occurred because I did not pay with a credit card but used my Paypal account. I had transferred money from my bank account to my Paypal account to complete the purchase. I was told that if I had paid with a credit card, they would have gotten after Paypal to decide the case in my favor and credit my account. Since I did not use a credit card, Paypal basically had their way with me and used this to their advantage to keep and float money.

[snip]

I've been involved in a dispute with an eBay seller before, and can attest to the fact that the PayPal complaint process is not friendly to the person who has been scammed. Be very careful when using PayPal. They want you to believe they are on the side of the scammed consumer, but stories like this from buyers suggest they aren't quite so customer-friendly.

You may not have all the rights you think you have if you're using a PayPal balance to pay for a purchase. Let's hope that eBay doesn't go "PayPal only" as has been suggested in the media. This would likely give scammers even more opportunities, while eBay continues to collect more and more fees from those who do business with them.

Have you been cheated, scammed, or otherwise disappointed by a company? WalletPop wants your real life consumer complaints and scam stories Email us with your story...

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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