Friday, October 9, 2009 - Ebay - Paypal - Stooging the UK Market - Times Online Article.

PayPal comes under unfriendly fire

An alarming number of customers have fallen foul of fraud when using the online payment service

“Safer. Simpler. Smarter.” That is the slogan of PayPal, the payment service used by 20 million people when buying and selling items online.

But customers who have fallen victim to fraud when using the service say that “dangerous, expensive and complicated” is a more appropriate description.

Times Money has received scores of letters from angry PayPal customers who have lost hundreds of pounds after selling items on eBay. Websites such as paypalsucks.com and paypalwarning.com detail similar “horror stories” from disgruntled customers.

Jack Gardner, 19, recently sold his Apple computer on eBay to raise £995 to pay for his university tuition fees. Mr Gardner received the money and posted the computer to the buyer. It was only then that he was told that the buyer had paid for it by hacking into someone else’s PayPal account.

PayPal is now demanding the money back with interest. This means that Mr Gardner could end up more than £1,000 worse off, with little chance of ever seeing his computer again.

He says: “The victim whose account was taken over successfully claimed a chargeback from her bank. That means the bank is now demanding the money from PayPal, which is demanding it from me. So far PayPal has charged me £85 in interest, so I currently owe £1,080. They are now threatening me with debt collectors unless I pay up.”

Anyone selling on eBay must have a PayPal account and it is offered by thousands of other retailers. It has its attractions for buyers because it is free and allows them to avoid sharing personal information, such as credit card details, with vendors. However, it charges sellers up to 3.4 per cent of a transaction for using the service. Part of the justification for this fee is PayPal’s seller protection scheme, which promises “cover against unauthorised payments, claims and chargebacks”.

But closer examination of PayPal’s terms and conditions reveals that sellers must follow a set of rigid rules to qualify if something goes wrong. You must use recorded delivery or another service that allows you to track the package online; the item must be posted to the buyer’s original address; and it must be posted within seven days of receiving payment. If the seller does not follow these and various other procedures, PayPal will not issue a refund if the seller loses money after becoming a victim of fraud.

After Times Money rang PayPal, a spokeswoman admitted that an “administrative error” had led to Mr Gardner wrongly being told that he was ineligible for seller protection. PayPal has now apologised and offered him a full refund.

However, George Galea, 54, was not so lucky after selling a personal digital assistant (PDA) on eBay. The winning bid of £146 was made by a French buyer, who asked for the item to be sent as a gift to Ukraine using Parcel Force, at an additional cost of £46. Unfortunately, the buyer proved to be a fraudster who had taken over someone else’s account.

Mr Galea says: “As soon as the money was in my account, I sent off the PDA. A day later I received an e-mail from PayPal, who took out all the money from my account, saying it was an unauthorised transaction. I now have no PDA and have lost £190. I cannot get anywhere with PayPal, as they simply say I am not covered by their seller protection scheme.”

Mr Galea’s mistake was to send the parcel to an address in Ukraine when the buyer was based in France. After Times Money spoke to PayPal, it agreed, as a “one-off gesture of goodwill”, to refund Mr Galea.

In both cases, a fraudster had paid for the items by taking over a victim’s PayPal account, which is linked to their bank account. This is often done via a phishing e-mail that invites PayPal customers to click on to a link to a bogus website and type in their log-in details. Once an account is compromised, fraudsters can change the delivery address to their own and raid the victim’s bank account.

PayPal says it uses more than 2,000 fraud prevention specialists to stop fraudsters taking over accounts and spending the account holder’s money. However, Times Money’s mailbag suggests that these procedures do not always work. While victims are usually able to recover their money, it is often the seller who loses out. Ross Anderson, an online security expert at the University of Cambridge, says: “There is a growing disquiet at PayPal’s unwillingness to investigate fraud and deal with customer’s complaints. PayPal is increasingly acting like a bank, so why aren’t they regulated by the Financial Services Authority?”

PayPal, which was regulated by the Financial Services Authority until July 2007, fell outside UK regulation when it moved to Luxembourg. It still has a voluntary arrangement with the Financial Ombudsman Service, which offers customers a way of resolving disputes. The FOS received 205 complaints about PayPal in the first six months of this year, with 64 per cent upheld.

Buyers on eBay receive more protection from PayPal, although again this is subject to strict conditions. They should get their money back if they do not receive an item, or if it arrives significantly not as described. However, this only covers “tangible, physical goods that can be posted” and does not include tickets, or very large items such as cars.

There is less protection for people who buy from other online retailers, such as Topshop, Boots and Monarch Airlines. If these customers want a refund, they must contact PayPal within 45 days of the purchase. The company can try to recover the funds from the seller’s PayPal account. But if the seller has already removed the funds, there is little hope of redress.

Harriet Homuth recently bought two tops from www.abercrombiestore.co.uk, which claims to sell Abercrombie & Fitch clothes at half their retail value. “I didn’t think there was anything to worry about, as the site uses PayPal,” she says. However, the items that Ms Homuth ordered, at a cost of £53, never arrived. By the time she contacted Times Money, her 45-day timeframe had elapsed. Eventually, five weeks after placing her order, the website refunded her money.

Garreth Griffith, head of risk management at PayPal, says: “With more people than ever shopping online, it’s really important to remain vigilant when making financial transactions. PayPal offers an added layer of protection for buyers and sellers on eBay, as long as people follow the guidelines and ensure they are eligible.”

Case study: The proof is in the postage

Robin Evans, 28, (pictured, top) has been in a dispute with PayPal since May about a digital camera that he sold for £66 on eBay. After he posted the item to the seller, PayPal withdrew the funds from his account, saying it was an unauthorised transaction.

Mr Evans found that he was ineligible for PayPal’s seller protection scheme because his proof of postage did not state the buyer’s address. The pilot, who lives in Shrewsbury, Shropshire, says: “PayPal has answered my e-mails in a vague and unsupportive manner. I cannot get two consecutive replies from the same person, so I am constantly re-explaining myself.”

PayPal told Times Money that Mr Evans should have used recorded delivery to send the camera: “All sellers must provide proof of postage showing an online tracking number and the buyer’s correct address.”

However, it agreed to give Mr Evans a refund as a gesture of goodwill.

COMMENTS:

Carl Carl wrote:
PayPal are a nightmare to get in touch with, the NEVER return messages fuly, answer their calls in a disgraceful manner and typically hire nothing but strange-accented asians in their call centre. I lost nearly £1000 in business because of a customer in France wrongly saying his item was late, although it was Christmas and horendously late delivery from the French postal system. When paypal finally looked into it they reinstated my account but by then I'd lost lots of sales. NEVER used them...or eBay for that matter if you can. eBay FORCE you to use PayPal to sell most items nowadays..pathetic
October 7, 2009 3:09 PM BST on community.timesonline.co.uk
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John Wiltshire wrote:
I have or was I should say a member of ebay for 7 years with a 100% honest feedback record.
I am no longer a member because of the fraud and ridiculous rules for the person selling and overpriced Paypal charges.
I suggest others do the same to bring ebay to their senses.
October 6, 2009 9:18 AM BST on community.timesonline.co.uk
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kim aldis wrote:
I'm sorry but no, it's not swings and roundabouts at all. Paypal sells itself as being a safe way of conducting transactions on the internet but it's not. Paypal can, and regularly do, reverse payments after items have been dispatched, when it's too late for a seller to do anything about it and in a dispute they almost always take the side of the buyer against the seller.
Furthermore, as the article states, 64% of disputes dealt with by the FSO have them ruling against Paypal. I wouldn't have difficulty imagining that many, many cases are simply too small to make the FSO worthwhile.
My feeling, and my research holds this up, is that for some reason Paypal is not protecting its customers as well as it might. I think its massive monopoly has a great deal to do with it.
October 5, 2009 6:41 PM BST on community.timesonline.co.uk
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PETER ALEXANDER wrote:
Its swings and roundabouts. I have bought many things on ebay from unknown persons at unknown addresses which I would not have done without the protection afforded by paypal. Sellers have benefited by this plus they have the advantage of at least knowing my address. Bottom line is there will always be fraudsters on both sides so if you want to sell or buy something without risk don't use the internet.
October 5, 2009 1:10 PM BST on community.timesonline.co.uk
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Mike Flanagan wrote:
I would reiterate that you have to be very very careful when using paypal to accept payments for anything. Charge backs are easy to get and that leaves you ripped off.
October 5, 2009 11:50 AM BST on community.timesonline.co.uk
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kim aldis wrote:
A quick check on Ebay last night shows that the account of the buyer who made the purchase which ended in my being defrauded is still active, he's there and I can, and have, sent him a message. This bothers me immensely.
October 4, 2009 12:45 PM BST on community.timesonline.co.uk
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sue taylor wrote:
Paypal does nothing to help sellers, there is no seller protection unless you send tracked and no idiot would for a cheap item, the lastest scam they are doing is increasing ammounts of what they call charge backs the buyer pays they recieve their item, they leave feedback then wam paypal then does a chargeback on the seller, they wont listen to buyers or sellers and they dont read emails which say i recieved my item, most buyers are unaware there has been a chargeback till the seller gets in touch, paypal always gives the buyers bank the money back there is 1000s on ebay at the moment all goods are below £10.00 when you phone paypal its premium rate
October 3, 2009 6:08 PM BST on community.timesonline.co.uk
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kim aldis wrote:
I'm pretty careful online and I like to think I'm pretty savvy. I've survived the onslaught of spam and phishing emails unscathed for many years but a month ago I took my eye off the ball and was defrauded of £2,000 selling a camera lens on Ebay. Interestingly, as with Mr. Galea above, the auction winner was French and the postal address was in the Ukraine. I wonder if these accounts are still operating? If The Times or Mr. Galea would like to compare notes I'd be very happy to oblige.

I was lucky in that I'd transferred the funds out of my Paypal account before they reversed the payment but they've been chasing me, threatening legal action even though I've told them I've registered a dispute with the FSO.

Local police (Newton Abbot) were very keen to point out that they see an awful lot of this.
October 3, 2009 1:30 PM BST on community.timesonline.co.uk
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Jon S wrote:
Beware, PayPal facilitates fraud and takes the side of fraudsters and liers, it is not safe for honest people.
I sold an item on eBay and, despite the item being exactly as described, the buyer fraudulently tried to claim a refund.
PayPay accepted his lies that the item had been supplied incomplete and used (when it was new). He even put the item for sale in his eBay account using an exact copy of my eBay listing (selling 'new').
PayPal ignored the evidence I provided and ignored my superb eBay feedback, I asked them to challenge his lies and told them exactly what to ask him, but they simply ruled in his favour, case closed!
Beware - the PayPal disputes system facilitates fraud.
October 3, 2009 1:16 PM BST on community.timesonline.co.uk
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