PayPal’s Latest Scam

PayPal announced an amendment to their user agreement effective November 1st which purports (def.#1) to expand buyer protection off eBay.

“The expanded protections will cover shoppers on merchant websites if they don’t receive an item they purchased, or if they receive an item that is significantly different than described by the merchant.”

An unutterably (def.#1) perky post on the PayPal Blog offers Tips for Sellers to Avoid Buyer Claims which neatly encapsulates the eBay/PayPal philosophy in this quote:

“Unfortunately, it’s a fact in retail that some buyers can never be satisfied, and it does little good to fight them because of the risk to your reputation.  Better to accept a return and move on than to waste valuable time when you could be selling other items.”

So, (as we say on eBay) now you know.

Personally, I have a very simple and liberal return policy on both my website and Bonanza. I don’t mind taking something back, I would be very unhappy if I didn’t get my item back.

Caveat Emptor

As always with anything concerning eBay Inc., which includes PayPal, it is wise to read beyond the announcement.

Buyers from large merchants who have virtual terminals are unprotected by this change and in fact are specifically excluded.

Mass Panic & Outrage

Forums on multiple venues lit up with furious (def.# take your pick) comments from sellers who have lost both payment and merchandise to scamming buyers on eBay, crooks who are well versed in gaming PayPal Buyer Protection on that site.

Amounts are not always chicken feed! For example the case of Cornerstone Supply, their loss for an ‘unauthorized charge’ was in excess of $1200. My good friend Scott Pooler,  ex-eBay seller and ecommerce expert, was the victim of a similar but not identical scam, his was a SNAD claim. (Seller Not As Described)  There are scads of stories with the same ending.

Numerous sellers, like Cornerstone Supply, left eBay because they would not risk further losses. Some set up shop on their own website, others changed venue, many simply stopped selling online.

In any case it is important not to be confused between the two different current PayPal Buyer Protection programs. Before October 31st buyer recourse under the PayPal Buyer Complaint Policy is limited as follows:

“If PayPal makes a final decision in your favor, we will collect any available funds in the Seller’s PayPal balance at that time. However, recovery is not guaranteed and is limited only to the amounts that PayPal can recover from the Seller’s Account. Any amounts collected from the Seller will be placed in your Account.”

Risk Analysis

This latest PayPal change should not have come as a total surprise. An identical policy was implemented in the UK in May. The UK and the EU have distance selling regulations which do not exist in the USA, but the eBay policy there substantially exceeds the legal requirements.

I believe that a small website like mine, not selling particularly valuable items will probably not see any great increase in risk. On the other hand sellers on Bonanza, Etsy, eBid, iOffer etc will have a higher risk factor, how much higher will depend on the desirability to crooks of what you sell. Sellers on eCrater will be safe because eCrater is entirely Google Checkout. Amazon of course has it’s own payment system.

Now what?

The very smallest venue based sellers do not really have any viable alternative to PayPal except Google Checkout, in my opinion infinitely superior, and identical in cost. Unfortunately, when I ran a ‘GC only’ trial early last year my completions rate dropped substantially. As more sellers dump PayPal and buyers see Google Checkout as the only method of payment more frequently this may change, we can only hope. Canadian sellers are SOL, there is no alternative for them unless they are going the Merchant Processor route.

PayMate, if your venue supports them, costs more at 50c per transaction plus 3%. This is currently the only option for my Australian friends.

What do you think? Is eBay’s cash cow going to turn into it’s crash cow? What are you going to do? Got your pitchfork sharpened up?

Y’all come back!

One comment.

  1. The eBay slime spreads, slowly but surely. Large retailers and things like airlines (excepted from policy) won’t be hurt, but small site sellers will be, just as they have been on eBay.

    Get Google Checkout also, besides PayPal. GET a real merchant account and emphasize it and keep PayPal use percentages as low as possible.

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