WARNING! HOW PAYPAL CAN DESTROY YOUR BUSINESS!

[montrealmaps]

Here the full story:

I sold 4 items (total - 26 USD) to a guy from US about 8 weeks ago. He paid through PayPal, the items were shipped timely, he got them and left a positive feedback to me. Two weeks ago I got the information from PayPal, that the transaction was "unauthorized" and reversed the money. I tried to contact the buyer - too late: "not a registered user" anymore - no response. I am not qualify to the PayPal Seller Protection Policy, because "I don't have any tracking number". In Canada, we can't track the small packets - the Post don't offer such a possibility. The positive feedback - as the evidence, that the buyer got the items - was not accepted.

I spoke with a representative of PayPal - he informed me, that "PayPal is a transaction service and cannot guarantee against a reversal of funds due to possible fraudulent activity". IT MEANS, THAT MONEY ON YOUR PAYPAL ACCOUNT IS NEVER YOUR MONEY. PAYPAL CAN ANYTIME REVERSE ALL YOUR MONEY FROM YOUR ACCOUNT (WITHOUT ANY WARNING!) JUST BECAUSE THE BUYER USED THE STOLEN CREDIT CARD.

What can you do to avoid the problems like this? Unfortunately, not too much. Can you check if the credit card used to pay through PayPal is stolen? If you are not David Copperfield, YOU CAN NOT!!!!!

I lost the items, I lost my money and I lost - FOREVER the confidence to PayPal. How can I accept PayPal payments if they can be reversed any time without any warning? Or maybe should I hold the shipping 60 days until the money clears..?

Do somebody had the same problem...?

Greetings to all - US and Canadian - PowerSellers

Andrew

[shoplineca]

Andrew
The same thing can happen if you had a merchant account with VISA or Mastercard and accepted his c/c payment directly instead of through PayPal. Someone could provide you with the stolen credit card information and you would accept it and ship the goods and 1 week or maybe 2 or 3 or 4 weeks later, your c/c sompany will charge the items back to you as the c/c was stolen.

You accept PayPal due to its convenience and the fact that there are fewer illegal transactions through PayPal than there would be if you accepted c/c payments directly yourself.

As an example, you did NOT ship to someone in the US with a confirmed address and I guaranty that PayPal indicated to you by way of an email or when the payment was received that the buyer was not confirmed however you assumed the risk and shipped to the customer anyway.

So PayPal went further than your bank had you established a merchant account with them for accepting c/c payments directly. PayPal told you that you were assuming risk as the buyer was unconfirmed.

Loosing to a scam artist is tough and knock on wood I havent lost anything yet however we all take risks in business and sometimes we increase our risk for the sake of convenience and for a sale but remember it is our choice and we must accept some if not all responsibility for the business decisions and choices that we make.

Malcolm

[zarzuella]

Malcolm,

The difference is that with a merchant credit card account you DO have the opportunity to check the validity of the card - indeed, if you use an online terminal it is automatically done for you and if you accept manual payments you are required to phone for authorization. Only if you DONT call are you charged back if you take a stolen card.

The unfairness of Paypal is that we must depend on Paypal to make this verification for us and are charged merchant fees which should provide some degree of protection against stolen card use.

Andrew, I feel for you.

Ann

[shoplineca]

Ann
You phone for authorizartions when the dollar amount exceeds a certain figure, seldom if ever on a $26 item.

Furthermore, for an online business where NO customer ever signs the authorization forms the risk is unbelivably high. So high in fact that when I applied for my merchant account with Visa, M/c and Amex, VISA required me to post a $10,000 security deposit due to the nature of the business being 100% online and never getting a customers signature (thats why I use PayPal).

The other card companies didnt have this requirement as VISA has over 75% of the market so for them, they assume some greater risk to increase their market share (thats what business is all about).

In July of this year, Visa introduced a security measure similar to what PayPal offered where the card holder must register and be verified. With the exception of this recent change I must disagree with you about the security of having a merchant account to process your own c/c transactions as I have seen credit card fraud from stolen credit cards in hundreds of businesses where PayPal was never a player and the customers signed the c/c transaction authorizations (forged signatures of course).

Credit Card fraud surpasses counterfeit money ten thousand fold and the merchant is ALWAYS the looser. It is the single largest expense for banks while also one of their largest revenue producers.

PayPal is not the enemy, the client is the bad guy and again PayPal would have warned the OP that payment came from an unverified buyer and no Seller protection would be available yet after those warnigs he proceeded to ship.

Furthermore, the OP chose to ship using the cheapest method without tracking, without insurance and without proof of delivery.

I am not saying what the OP did was wrong but several business decisions were made in this transaction to get the sale and please the client and each of those decisions proved to be wrong in this particular instance.

So you tighten your policies and procedures and give up some sales in return for more security and fewer losses. Its all a balancing act.

As I said in my first response, it is tough to loose money in a scam however the OP should be greatful that his loss was limited to a little over $100 as it may save him from loosing in a bigger scam later.

Malcolm

[shoplineca]

Actually I just re-read his post, the total loss was $26 for 4-items not 4-ietms at $26 each.

While no-one welcomes a loss, $26 is alot better to loose in a lesson than 4 times that or more.

Andrew, a $26 loss wont destroy your business. It hurts to loose anything but rather than placing full blame on the venue that handled the finacial side of this, take a look at what you could have done to protect yourself more.

Take a look at the warning wigns like PayPal telling you the person wasnt verified or didnt have a confirmed address. What was his FB rating before you sold him? How new an eBay member was he? What did other sellers say about their dealings with him?

In business you cant simply rely on eBay and PayPal to protect you. Their first order of the day is to protect their shareholders and return a healthy profit to them.

They are both simply venues to conduct business through, nothing more, despite what they try to sell to the public.

Keep your chin up and go sell a hundred more, albeit legitimate customers.

Malcolm

[shoplineca]

Sorry warning SIGNS not wigns.

Malcolm

[muminlaw]

You phone for authorizartions when the dollar amount exceeds a certain figure, seldom if ever on a $26 item.

Small correction there Malcolm -- if you run a mail-order business, which we have done for the past 25 years, your floor limit for authorizations is $0.00 and the way it works today, you authorize and deposit in the same phone call.

We still accept M/Card but we cancelled VISA - too few people used it to justify the cost, so I'm accepting PayPal as well.

Out of curiosity, just how do you go about getting tracking on small packets? And if an item is a small packet, you don't have the option of sending it as an expedited parcel. As far as I can see, we're in a catch-22 position with Canada Post and Paypal if we sell small, light-weight, relatively low-priced items.

Glenda

[auctiondropnship]

Glenda consider trips to America and ship through the American Postal service

Ann
Please note that an item can be orginally accepted and still be refunded back to the seller . Ever tryed finding a writen invoice from 3 months ago ...

[shoplineca]

Glenda
You can send a small packet via Expedited Parcel if you wish. The small packet rate is preferred as a savings but you can pay a premium with the minimum weight of 0.5kg being applied for Expedited (0.2kg for Express Post). Its a matter of choice if you want tracking and POD.

The online Internet business is handled differently by the credit card companies. You set your Merchant Account for your c/c companies as a Mail Order business, which later became that coupled with an online internet business.

Some people selling on eBay have a brick and mortar store and set up their Merchant account with their c/c companies different from what you did.

Essentially you and your c/c companies grew together into the online business.

Try going out as an online business and contacting your bank's c/c business group and see what the difference is when you establish yourself as an online internet only business.

Again, Master Card and American Express are a little more agressive in assuming some risk however as over 75% of all c/c transactions in North America are by VISA, they set the terms.

Glenda I am talking only abut risk here in relation to PayPal vs Merchant account.

If I walked into your store with a stolen credit card and purchased something for $8 and you ran the card through and received authorization, do you not believe that the c/c company will not charge you back if it is learned 2 weeks later that the card was stolen and I forged the signature?

I saw it happen plenty of times in the restaurant and bar industry when I was a VP of a franchsior.

Credit Card companies fight for customers (card holders), not vendors, especially VISA so the vendor is the one out of pocket 9/10 times.

I agree with your feeling about not having additional services extended to small packets such as tracking and POD.

I got out of shipping internationally as the ony way I could compete was sending things parcel post without tracking, POD and insurance.

Malcolm

[muminlaw]

Try going out as an online business and contacting your bank's c/c business group and see what the difference is when you establish yourself as an online internet only business.

Can't argue with you there Malcolm -- monetarily the bulk of our business is still mail order (and a few trade shows annually), as opposed to online. Personally I don't see much difference in risk whether it's by mail, or phone, or online, but if the CC Companies want to differentiate, who am I to dispute it??... With a $0 limit I do feel slightly more protected.

Glenda

[discountlabelsupplies]

"In Canada, we can't track the small packets - the Post don't offer such a possibility. "

There are also methods that U.S. sellers ship by that are not trackable. Both Canadian AND U.S. sellers have options to ship with tracking or without tracking.

Malcolm is right that Paypal is not the meani here. If you have a credit card merchant account , if you don't have a signature ON A SLIP you are S.O.L. if the charges are disputed.


In my regular business we shipped a $200.00 Canadian order to a buyer in Toronto (we are in Vancouver). We only ship by Expedited that has a signature. The buyer said they never got the item and proceded with a chargeback. Visa said that if there is no sig. on a visa slip there is nothing they can do and they did the reversal. Visa stated that just because it was signed for does not mean the card owner received the goods. The buyer said that the sig. did not belong to anyone who worked for him.

In a nutshell, Paypal CAN be safer for sellers than actually having a Visa terminal in your home/store.

[zarzuella]

The OP was complaining about a STOLEN card, however - a very different kettle of fish and something that the seller should be protected from by Paypal. They CAN and should verify with the issuing CC company that the card is not stolen.

[montrealmaps]

Thanks to everyone who responded to my post. I fill better now ..;-)))) I think I should take Prozac and forget about this story.

I did more than 500 transactions through PayPal and - I have to admit - it was the first time I lost the money. Somebody wrote, that the "first time hurts" - maybe just becaues of that my reaction was a little exaggerated. However, today I got more than 100 USD sent through PayPal. I am happy....BUT .... I am affraid, that the money will disappear again. I think, I lost the confidence to PayPal forever....

Greetings to all!

Andrew

PS. I am really very happy, that the Discussion Board works so well and the people still want to help and give good, thoughtful advices. Thank you! 😉

[shooger]

Andrew, most of us here that accept credit cards (through PayPal or just on their own) have had the same experience as you. Lately, PayPal calls payment reversals "unauthorized". In other words, they're saying the card was stolen or misused, when in reality in most cases, it is simply a case of the buyer filing a chargeback and saying the item did not arrive. Why they don't just call it like it is, I'll never know.

Anyway, I feel that PayPal IS partially to blame. While they do "warn" sellers by including the word "unconfirmed" in the notification of payment, that's hardly enough to really get them off the hook. I guess they feel if they include that word that they're not to blame if something goes wrong. In fact, they could be pretty sure a credit card is stolen, but I bet they'd put the payment through, "warn" the seller, and then allow the chargeback because "hey... we warned you!"

What does offering PayPal Protection do, anyway? Not a heck of a lot. At least it's free.... but then again, so should anything be that doesn't actually work.

[mirakbiz_inc]

Cost of doing business ! any business Big or Small faces issues like this, regardless if it is through Paypal or your own merchant account. Want to reduce the risk take only cash (be sure it's not fake) but be prepared to shrink your market tough....

Most business (real businesses) will set a provision (a % of their profit) aside to cover for inventory shrink and bad debt.

[lina-mallows]

This issue has been around for LONG time.
Now- with the possibility that eBay.CA/eBay.COM may move toward EXCLUSIVE payment by PayPal, is selling on eBay worth the risks?