Money removed from PayPal balance after dispute lodged

[britishfilth]

A customer of mine lodged a dispute about a transaction. In response, PayPal put the amount in question "on hold", removing it from my PayPal balance, leaving me with a negative balance. I have since put brought my account into order, and I wish to refund the customer.

Given PayPal already took the funds from my account, I was surprised to see PayPal tell me that there wasn't enough money in my account to issue a refund (balance is currently zero). What happened to the money that was already taken (on hold)? Will that be returned to me? Can't PayPal use it to issue the refund?

This isn't making much sense to me.

[kernowlass]

@britishfilth 

The held funds are used if you refuse to refund the buyer and the buyer escalates to a claim which paypal then find in their favour.

Also Paypal no longer returns the fee you were charged when your buyer paid as part of any refund that you issue.
Paypal processes your buyers original payment and then the refund for you, the fee is for providing that service so if you just had the payment from the buyer in your balance and have not added the 'fee element' then you would not have had enough to issue the buyer a full refund.