I have had the exact same experience with Paypal and this company. I'm in Australia and to send back the rubbish that they sent would be stupid, the cost would outweigh the credit. I did speak to a consultant at the stage when Paypal had told me that to get a full refund I had to send back the crap that they sent me. I told her that they were enabling these scammers and she assured me that the investigation team looks to see if anyone else had the same problem and it was found that I was the only one...Well, they don't look too hard, do they? This was before I went looking and found that there were a lot of other people in the same position as I was in. Not going down without a fight I ignored the Paypal directive to send it back at my cost and went to my credit card company whom I had used to pay Paypal. They put the amount on hold straight away even though I was charged on the 28th December and I didn't put the claim in until the 1st February. I have just checked on the claim and they have found in my favour and credited the whole amount back to my credit card. After 13 pages on this post, I am thinking that Paypal needs to have a good hard look at themselves. I also was under the assumption that it would have been credited back straight away from Paypal as it was obviously a scam, but no that wasn't the case at all, they are protecting these guys. I would think that now my credit card company has given me the money back they will take it from Paypal, I am also thinking that Paypal will take it back from the scamming company because they won't be out of pocket for it. Keep going, it's the principle of the thing, it was $55 AUD to me but it's not about the money.
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