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PayPal is one of the most commonly accepted alternative payment methods in e-commerce. Part of that is simply because the platform has been around for a long time, but PayPal also tends to be easier for customers to use and easier for new merchants to set up than traditional payments. Many small businesses start accepting PayPal even before they can accept credit cards. Unfortunately, no payment method is perfect. Payment disputes are universal in the world of e-commerce, regardless of what payment method the customer used, and PayPal is no exception. PayPal Disputes and Claims follow a different process than typical chargebacks, as they're handled through PayPal's internal systems rather than a credit card network. In order to manage these disputes effectively, merchants should know how PayPay Disputes and Claims work, the difference between the two, and the best ways to avoid them.Table of Contents
PayPal encourages buyers to resolve any issue they have with a purchase through the PayPal Resolution Center, and most will do this, resulting in a PayPal dispute or claim. However, buyers can still dispute the charge through their bank as well, resulting in achargeback. We've already coveredPayPal chargebacksin depth, so let's take a closer look at disputes and claims.
What Is a PayPal Dispute?
A PayPal dispute is the process by which a buyer can claim that they never received their purchase, or that what they received was significantly different from the product described, as in cases of damaged, defective, or counterfeit goods.
When a buyer opens a PayPal dispute, they're essentially opening a dialogue with the merchant about a serious issue with their purchase. The seller will be given 20 days to resolve the issue with the buyer directly before the dispute can be escalated to a claim.
What Is the PayPal Dispute Fee?
PayPal buyers are charged a dispute for each dispute they receive. The standard dispute fee is $8, but merchants with a ratio of disputed transactions greater than 1.5% and more than 100 monthly transactions in total will be charged $16 instead.
When the buyer reports that a transaction was unauthorized, a claim will be initiated directly rather than needing to be escalated from an unresolved dispute. Since there's no dispute in these cases, the dispute fee will be waived.
How Do You Dispute a PayPal Transaction?
Buyers can dispute PayPal transactions through the PayPal Resolution Center, which is part of PayPal's website. The seller receives a message explaining the reason for the buyer’s dispute and is expected to promptly resolve the dispute in some fashion, often by issuing a refund.
While refunds are the most common solution, any arrangement between the buyer and seller that resolves the problem and convinces the buyer to close their dispute is acceptable. Sellers are free to respond to these issues in other ways, such as sending out a replacement product or offering store credit.
What Is a PayPal Claim?
A PayPal claim is the process by which PayPal steps in to resolve issues between buyers and sellers. These can be either disputes where the parties failed to come to an agreement or cases where the buyer says they didn't authorize the transaction.
How Do You Fight a PayPal Claim?
To successfully combat PayPal claims, merchants should thoroughly document transaction and shipping information for later recall, provide compelling evidence to counter false claims, and make sure their sales are eligible for Seller Protection if possible.
A seller can always acquiesce to the buyer’s demands and give them their money back, but false, fraudulent, and mistaken disputes are inevitable for any merchant who runs an eCommerce business.
When a transaction is disputed, the seller can still interact with the buyer to try to work out a mutually-agreeable resolution. Once the dispute has been escalated to claim status, PayPal becomes more directly involved, reviewing the buyer’s complaint and the seller’s evidence in order to reach a decision.
What Is PayPal's Dispute Process?
When a dispute is opened, the parties involved have 20 days to resolve the issue in a way that satisfies both of them. If the seller declines to respond or if the issue can't be resolved, either party can escalate the dispute to a claim.
Here are the key things to understand about the dispute phase, and what actions the seller may take during it:
- Once the buyer has filed a dispute, the seller has 20 days to resolve it.
- If the dispute is resolved, it’s the buyer’s responsibility to mark it as such within PayPal’s system.
- If the buyer is unsatisfied with the seller’s offers to resolve the dispute, they have 20 days to escalate it to a claim.
- Once the dispute has been escalated to a claim, PayPal steps in to review the matter.
What Is PayPal's Claims Process?
When a buyer opens a claim, the seller has 10 days to file a response, including any documentation they wish to upload to support their case. If the seller doesn't respond by the deadline, the case is decided in the buyer's favor.
The type of evidence sellers need to provide depends on the nature of the claim and the goods or services that were purchased.
- Physical goods:The seller must provide proof of delivery, confirmation that the shipping address and the delivery address match, and for transactions over $750, signature confirmation.
- Digital goods:The seller must provide proof that the product was downloaded or used.
- Digital services:The seller must provide the service agreement that the buyer signed which outlined the deliverables, as well as an acknowledgment agreement stating that all the deliverables were completed and received to the buyer’s satisfaction.
- Service providers:For orders under $200, it is recommended that sellers solicit a service acknowledgment receipt from the buyer that they can provide as evidence if a claim is later made. For larger transactions, the seller should ask the buyer for a signed agreement with a list of deliverables before the work begins, and a service acknowledgment receipt after the service has been rendered.
If the seller has already issued a refund for a transaction that now has a claim filed against it, proof of that refund will resolve the claim.
How Can I Prevent PayPal Chargebacks?
When a dispute is still contained to PayPal’s Resolution Center, sellers should make every effort to resolve the situation before it becomes an actual chargeback.
Remember, while many buyers will attempt to work through disputes through PayPal for the sake of convenience, they still retain their right to file achargebackwith their bank.
Once a PayPal transaction becomes a chargeback, the usualstrategies for fighting themcome into play, along with the downsides of not fighting them. For that reason, merchants should look at PayPal disputes as a good opportunity to nip a customer issue in the bud before it becomes a much bigger problem.
Our comprehensive guide,A Merchant's Guide to PayPal Chargebacks, can help you effectively handle PayPal disputes, claims and chargebacks in order to protect profits.
FAQ
Can You Win a PayPal Dispute?
Yes, provided you have the right evidence. In order to win a PayPal dispute, the merchant needs to provide documentation addressing the customer's reason for the dispute. This often means identity verification records or shipment tracking and delivery confirmation.
What Is the PayPal Chargeback Fee?
Merchants who receive PayPal chargebacks are charged a $20 fee in addition to the transaction amount. However, both these costs are waived for purchases covered by PayPal Seller Protection.
How Long Can You Chargeback on PayPal?
Buyers can open a PayPal dispute up to 180 days after the transaction date.
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FAQs
How do I beat a PayPal dispute? ›
In order to win a PayPal dispute, the merchant needs to provide documentation addressing the customer's reason for the dispute. This often means identity verification records or shipment tracking and delivery confirmation.
How do I escalate a PayPal dispute to a claim? ›- Go to your Resolution Center.
- Click View next to the dispute you want to escalate.
- Click Escalate to PayPal at the bottom of the page.
- Add any relevant information for escalating the dispute and click Submit.
In a dispute, PayPal doesn't get involved or decide the outcome. To ask PayPal to investigate the case and decide the outcome, the dispute must be escalated to a claim within 20 days. Either the buyer or seller can escalate a dispute to a claim. The time it takes us to decide the outcome of a claim can vary.
How does PayPal decide who wins a dispute? ›PayPal decides who wins a dispute by reviewing the evidence provided by both parties and determining who has the stronger case. The decision is based on the transaction details, seller protection policy, and PayPal's user agreement. If the decision is in the buyer's favor, the funds will be returned to the buyer.
Does PayPal really help with disputes? ›We'll facilitate communication between you and the seller to see if things can be worked out. Many disputes are caused by misunderstandings, and they're often easy to resolve. However, if you and the seller can't reach an agreement on your own, you can escalate your dispute to a claim.
Can you get money back from PayPal dispute? ›Disputes in the PayPal Resolution Center
The customer files a dispute directly with the seller or on PayPal's Resolution Center. The seller reviews the dispute and provides additional information. The customer is refunded if the dispute is settled in the customer's favor.
To escalate a dispute, we often require that at least 7 days have passed since it was filed. By escalating a dispute to a claim, you're asking PayPal to investigate and decide the outcome. A dispute will automatically close after 20 days unless it's been escalated.
What happens if the seller doesn't respond to PayPal claim? ›If a claim is filed, you as the seller would be asked to respond within 10 days. If you don't respond, the claim will automatically close in the customer's favor — and a full refund will be issued. If you do respond, PayPal will work to evaluate the information provided and determine the outcome.
How long does it take PayPal to resolve a dispute? ›We usually reach a decision within 14 days, but some cases can take 30 days or longer. Keep an eye on your emails and your Resolution Center for updates from us, or requests for more information. Was this article helpful?
How many disputes can you do with PayPal? ›How many disputes or chargebacks can be in a transaction? A transaction can include only one dispute or one chargeback.
What happens if I lose a dispute on PayPal? ›
What Happens if You Lose a PayPal Dispute? if you lose a PayPal dispute, you lose the cost of the product or service plus fees and overhead. If you have PayPal Seller Protection, PayPal will cover the loss of the product.
Is a claim the same as dispute? ›Claims can be managed. Disputes can be resolved.
Does PayPal ever side with the seller in a dispute? ›PayPal will investigate and if there is proof that the items were received or the buyer made the purchase, then the seller will be on the winning side when the claims come knocking.
Will PayPal cover me if I get scammed? ›Seller Protection. If you received an unauthorized payment or a buyer claims he never received his item, our Seller Protection can help you get the full amount of an eligible payment., subject of a claim, chargeback, or reversal and waive the chargeback fee, if applicable.
Does PayPal favor the buyer? ›PayPal decides based on what is best for PayPal. They will decide for the user, because they know the user may pay with another payment method, while the merchant will still need them. Unless they know the seller monitors disputes. If they do, they will try to please both by deciding 50/50 in case of multiple disputes.
How do I chargeback on PayPal and win? ›Provide evidence: Gather as much evidence as possible to support your case, such as proof of delivery or customer communication. Provide any relevant evidence to PayPal. Be concise and clear: When submitting your response, be concise and clear about why you believe the chargeback is invalid.
How much does PayPal charge for chargebacks? ›Regardless of the outcome, PayPal charges merchants a $20 nonrefundable fee for every chargeback a customer initiates. PayPal offers chargeback protection through their Seller Protection program. Merchants that qualify for the program may have their $20 fees waived.
Why would PayPal refuse a refund? ›Declined refunds
Common reasons for declines: Card account is closed. Card account is frozen due to fraud. Card account does not support refunds (e.g. some prepaid cards)
If your dispute is denied, the charge will go back to your credit card. You should receive an explanation from the credit card issuer detailing the reason the dispute was denied. If you refuse to pay, they can put your account in collections or seek legal action.
Who pays when you dispute a charge? ›Who pays when you dispute a charge? Your issuing bank will cover the cost initially by providing you with a provisional credit for the original transaction amount. After filing the dispute, though, they will immediately recover those funds (plus fees) from the merchant's account.
What do you say when disputing a claim? ›
I am writing to dispute a charge of [$______] to my [credit or debit card] account on [date of the charge]. The charge is in error because [explain the problem briefly. For example, the items weren't delivered, I was overcharged, I returned the items, I did not buy the items, etc.].
Does a PayPal dispute affect the seller? ›Having a claim filed against you doesn't necessarily mean you'll be penalized. There are no automatic fees levied against you, and your seller feedback won't automatically be affected.
Does PayPal ever side with seller? ›PayPal will investigate and if there is proof that the items were received or the buyer made the purchase, then the seller will be on the winning side when the claims come knocking.
How do I get my PayPal money off hold instantly? ›- Add tracking. Use one of PayPal's approved shipping carriers, and PayPal will release the hold on funds one day after the courier confirms delivery.
- Print a USPS or UPS shipping label via PayPal. ...
- Update the order status for services or intangible items.
What Happens if You Lose a PayPal Dispute? if you lose a PayPal dispute, you lose the cost of the product or service plus fees and overhead. If you have PayPal Seller Protection, PayPal will cover the loss of the product.
Does PayPal usually refund a buyer? ›Refunds. If an order doesn't arrive or it doesn't match the description, we'll reimburse the full cost of eligible purchases plus original shipping.
How long does it take to resolve a PayPal dispute? ›We usually reach a decision within 14 days, but some cases can take 30 days or longer. Keep an eye on your emails and your Resolution Center for updates from us, or requests for more information.
How many chargebacks are you allowed? ›The industry-wide chargeback ratio maximum
A 1% chargeback rate is the industry-standard maximum, which equates to one chargeback per 100 successful orders. And that 1% is usually the absolute maximum allowed for direct merchant accounts. Those accounts deal directly with Visa or MasterCard.
To escalate a dispute, we often require that at least seven days have passed since it was filed. By escalating to a claim, you would be asking PayPal to review the case and decide the outcome. A dispute will automatically close after 20 days unless it's been escalated.
How many PayPal disputes can you have? ›How many disputes or chargebacks can be in a transaction? A transaction can include only one dispute or one chargeback.
Does PayPal favor the buyer or seller? ›
PayPal decides based on what is best for PayPal. They will decide for the user, because they know the user may pay with another payment method, while the merchant will still need them. Unless they know the seller monitors disputes. If they do, they will try to please both by deciding 50/50 in case of multiple disputes.
Why has my PayPal money been pending for a week? ›If a payment you sent is pending or unclaimed, it means the recipient hasn't received or hasn't accepted the payment yet. The payment would be pending or unclaimed if it was sent to an email address or phone number that isn't registered to a verified PayPal account.
Why is all my money on hold PayPal? ›Why are my funds inaccessible or on hold? PayPal may place a hold or restrict your account activity if a little more information about a transaction, your business or your account activity is needed (you can read more about them in our User Agreement).
How much money can PayPal hold? ›FAQs On Paypal's Limits
While the PayPal transfer limit for normal users is $4,000, verified users can send or accept a maximum of $10,000 in a single payment. Additionally, users with a linked bank account can send a maximum of $25,000 per transaction.