The seller gave PayPal a phony UPS tracking number that says it was delivered, and PayPal used that as proof I received the item. PayPal is being defrauded by their seller and passing it on to us. The only reason I use PP is to have protection against fraud. If they just take the seller's word, they're not giving any protection at all. I keep a pretty close eye on my finances and still I have had my credit cards hacked a few times and they have ALWAYS protected me against fraud.
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