Payment Clawback: True or Just a Myth?

[sdb123]

I've heard some stories about service providers having their client payments "clawed back" by PayPal many months after being paid.  I'm curious if this actually happened (or still happens) and/or if it's permitted within the PayPal merchant TOS.

An example I heard about was a web designer completing and delivering a project.  She got paid in full via PayPal, and transferred the money to the bank account linked to her PayPal account.  Many months later, her client decided he didn't like his web site.  But instead of discussing it with her, he contacted PayPal and demanded a refund.  PayPal, also without discussing it with her, issued a full refund.  But because the designer didn't have enough money to cover it in her PayPal account, they dipped into her bank account for the funds.

Is this just a myth (or perhaps a scare tactic by a PayPal competitor)?  How much can I trust PayPal to NOT claw back money I've been paid and transferred to my bank?  Because I sell digital services that cannot be retrieved after delivery, I'm concerned about disgruntled clients forcing PayPal returns without my authorization.

Can anyone shed any light on this situation?  Thanks.

[DPCreations]

If you owe PayPal funds because of a forced refund why shouldn't PayPal have a right claw it back?

You could check PayPal policies User Agreement for what PayPal is permitted to do.

You won't find any answer which addresse the issue in general.  There are various scenarios, some which may allow clawback directly and other which will not.  Others may allow clawback when the transaction is piggybacked on another approved transaction.

PayPal allows up to 180 days for a buyer to file a dispute and potentially.

These are just risks you agree to take when you use PayPal for payment processing.

[sdb123]

Thanks for your comments.  In the situation I described, PayPal protected the buyer but not the seller.  They also failed to even contact the seller to see if the buyer had a legitimate claim to a refund (which he did not).  I'm fine using PayPal as a buyer because they do seem to offer a lot of protection.  I'm just wondering how safe it really is to use as a seller.  180 days is pretty long to allow unconditional and uncontested refunds, especially for non-physical "digital" products.

[DPCreations]

PayPal protects buyers and sellers very specifically according to PayPal User Agreement.  If you have issues with a certain case the first place to look is PayPal protection policies.

PayPal, at it's sole discetion will determine the validity of a case; PayPal determines the legitimacy of a dispute, not the seller.  PayPal may request documentation, but PayPal has the final say.  PayPal did not review sale, shipping, delivery, or inspection of any item sold, so PayPal has to make a determination on other factors.

So it was a virtual item.  Well, you took the risk knowing full well that PayPal offered no protection for virtual items.  You lost and have no recourse.

[Quandary]

Buyers do have more protection than sellers - yes, agree - 180 days for the buyer great but, that's really a challenge for a seller.  I'm not aware of any credit card issuer that has a policy for that length of time - some may cover you for up to 60 days or possibly 90 at the max.

[Whac-A-Mole]

I would like to add-

designing  a website for your client is not the same as

 allowing customers to download digital goods,it is service rendered .

when you rendered service and accepted paypal payment,and your client filed item not received ,paypal has amended that it will review both sides submitting documents,yeah and nay and decide who wins.

the seller can point to the website as proof he has delivered,some would even follow up with hardcopy of the draft,instruction,finall product and send a copy to the buyer with tracking.

when it comes to item not as decribed,like the website or software does not function as promised,thats a different story,how do you return the item?

also some services,how do you prove you have performed ,like a massage,a haircut or ear piercing?

I would avoid Paypal and ask for wiretransfer,cashier check,money order,postal order and offer to pay the expenses of wiretransfer ,pstage of mailing a check or western union,money gram etc.

[Whac-A-Mole]

In the example given,some ladydesign a website and months later the client did not like it so he filed with Paypal.

Paypal should have notified her a dispute has been filed,may be she did not get the email or it was accidentally erased.

there should be a case in her resolution center/close/open/all cases,you should find the case there.unless it is a credit card chargeback ,then she would not find a case bu she would be notified by Paypal.

losing a credit card chargeback,not only does she has tor eturn the payment,she would also have to pay a $20 chargeback fee.

if she has already removed the fund and her account is negative,Paypal will ask her to add $$ to bring the balance to neutral ,if she does not,and some day when she uses her credit card via paypal to make a payment,Paypal is allowed to piggybank this payment,and add the deficit  to the amount.

Paypal is allowed to do so.

using Paypal to provide service and digital/virtual goods,real estate,vehicles,financial instruments and customs order are dicey,I would recommend seller using another form of payment.