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Old 09-02-2009
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Arrow FAQ: Selling with Paypal How to Protect Yourself

Acronyms:
PP= PayPal
SPP = PayPal Seller Protection Policy
INR= Item not received
SNAD=Significantly not as described
CC=credit card

Contents:
I. PayPal Seller Protection Policy
II. Reversals and Chargebacks on PayPal payments
III. How to fight reversals and chargebacks
IV. Important measures to take to protect yourself
V. Important dates/Timeline
VI. FAQs


I. PayPal’s Seller Protection Policy:

The SPP is a policy that provides some protection against claims of nonreceipt and unauthorized payment. It WILL NOT protect you against SNAD claims. To qualify for the SPP, you must:

1. Live in the right country

The sellers primary residence must be in the U.S. Thus, the account must also be registered in the U.S.

2. Ship to the address on the transaction details page

PayPal no longer requires eBay sellers ship to confirmed addresses for coverage. Instead, the current requirement is to ship to the address as listed on the transaction details page in eBay.

3. Shipment requirements

PayPal requires you obtain proof of shipment and/or proof of delivery - what you need depends on what kind of dispute is filed. To cover yourself against claims of unauthorized payment, you need mere proof of shipment. For example, UPS tracking showing package pickup, or a receipt from the PO. The proof may be physical (e.e.g, paper) or digital (e.e., e/DC status). The proof must show the buyer's city and state or zip code at minimum.

If you want coverage against claims of nonreceipt, you need proof of delivery. This must be available online (e.g., e/DC showing delivery or UPS tracking showing delivery). The proof must contain the buyer's city and state or zip code at minimum.

If the total combined payment (item price + shipping + handling + insurance) is $250 or more, you MUST get a signature upon delivery. If not, you WILL lose an INR claim. For shipping via USPS, get Signature Confirmation (SC). For the other 3 carriers, request a signature.

Best bet: Get proof of delivery as that covers all SPP situations.

Note: DC is confirmation of delivery only. It is not tracking. You may get some scans along the way, but consider those a bonus.

If you allow pickups, you will not have online trackable proof of delivery. You WILL lose all INR claims. A receipt signed by the buyer in DNA-typable blood will not satisfy PayPal. Therefore, do not accept PayPal for pickups.

If you want to ship to international locations, you need to use FedEx or UPS (get tracking) or USPS Express Mail International or Priority Mail International. UPS or FedEx will tend to tick off your buyer as they get charged brokerage fees. Additionally, if the buyer does not pay the brokerage fees, FedEx will go back to the seller to get the fees. Both USPS options can be used, but EMI is the only option if you need a signature on delivery. Keep in mind PMI cannot be tracked everywhere so be sure to investigate what option is best for your particular situation.

Registered Mail (USPS) will meet the PayPal SPP online trackable proof of delivery requirement for items under $250. RM does require a signature, but it is not displayed online and as such will not meet the signature requirement for items $250+. This means that as long as all other criteria are met, you can ship items under $250 to APO/FPO addresses with RM and be covered under the SPP. Thanks to Airtommy for confirming with PayPal that RM will work.

If you plan to ship with Fedex, you have 3 options for obtaining a signature (indirect, direct, and adult). To comply with the signature requirement, you should request either direct or adult. PayPal requires that the package be signed for by someone at the delivery address. Indirect may not get a sig from the delivery address, so it may not meet the SPP requirements. It might, depending on who the Fedex driver gets to sign, but you should not count on it.

4. Ship within 7 days of payment

You must ship with 7 days of payment if you want any SPP coverage for non-receipt.. For eChecks, the clock starts the day PayPal clears the payment into your PayPal account. For all other payment types, the clock starts as soon as the payment hits your PayPal account. The 7-day rule does not apply for claims of unauthorized payment. It is, however, best practice to meet the more stringent rule to cover yourself against more problems.

5. Item must be tangible

Services do not qualify for SPP protection. Intangible goods (such as digital goods) do not qualify for SPP protection. if you're selling something that is not tangible, you get zero protection. This means WoW codes, gift codes, prepaid cell phone minutes, eBooks, or anything you might email, etc are not covered. You can help protect yourself by shipping a physical item. No shipping means you violate the requirement for online-trackable proof of delivery. If you want to sell a gift card, you can email the code to your buyer but you had better also ship that physical card. If you want to sell a Staples discount code, you will not be SPP-eligible.

6. The transaction must be marked eligible or partially eligible on the transaction details page.

In general eBay sales should be marked as eligible. This will happen if the buyer does what he is supposed to and links the payment to the listing by paying from eBay or paying for eBay items within paypal. Even if the buyer's address is unconfirmed the sale should still be eligible (assuming all other criteria are met).

In general non-eBay sales will be marked as partially eligible, allowing for coverage against non-receipt but not unauthorized payments. Non-eBay sales may be marked as eligible with coverage against both types of claims when the buyer's address is confirmed.

Confirmed addresses are those at which a buyer receives his credit card statement. Do not confuse a confirmed address with a verified account. Addresses can also be confirmed through other means (Alternate Address Confirmation - usually involves faxes in utilities statements and related stuff), but most buyers use the CC method.

If your buyer indicates a confirmed address on the transaction details, but then requests you ship to another address, and you do it, you will lose an INR complaint automatically.

How do I know if the buyer's address is confirmed? Look at the transaction details page. Below the shipping address, you should see "Confirmed" in green letters.

Some addresses in the following countries have been reported to be confirmable: United States; Canada; United Kingdom; Japan*. keep in mind that a confirmed address is necessary but not sufficient for full SPP-eligibility for non-eBay sales. In contrast, a confirmed address is no longer required for eBay sales.

*Japan addresses may or may not be confirmable. You may find that a Japanese address was listed as confirmed in an email and not confirmed in PayPal. YMMV.

II. Reversals and Chargebacks on PayPal payments

Reversal vs Chargebacks:

A reversal is done via PayPal. It may be done in response to an INR or a SNAD claim, or because the funds used in a payment were fraudulent, etc. A chargeback is done through a CC company, which yanks back the payment from PayPal, which in turns tries to yank it back from you. They are distinctly different and each has different implications for sellers.

III. How to fight reversals and chargebacks

1. Gather together your side of the story. Locate your DC/tracking number. If it's a SNAD complaint, locate all of your photos and the item description.
2. If it's a PayPal reversal, log into your PayPal Dispute Console and enter all the info requested. You must do this by the stated deadline (usually 3-10 days after the complaint is filed) or you automatically lose.
3. If the console will not allow entry of information, call PayPal and give your information over the phone.

IV. Important measures to take to protect yourself
In no particular order:

•Refuse PayPal from most international buyers unless you are willing to expose yourself to the risk of reversals for nonreceipt or are willing to pay for trackable shipments.
•Ship only to addresses provided by PayPal in the transaction details. Ship nowhere else. If a buyer needs a change of address refund and have then pay again.
•Make sure you ALWAYS have DC/tracking on EVERY package. Get sigs when necessary.
•Have clear, concise, and precise Terms of Sale.
•Clearly and accurately describe your items, and take very good, clear photos. This is your best defense against a SNAD claim.

Not sure if your transaction is SPP-eligible? Log into your PayPal account and look at the transaction details. If the transaction is SPP-eligible, you'll see about halfway down the page the line "Seller Protection Policy" followed by "Eligible" in green type.

Not sure how to block payments from countries you don't ship to? If you do not ship worldwide, blocking people registered in countries to which you do not ship will really cut down on problems. You can put this block in place by logging into My eBay. On the left menubar click on "eBay preferences" (under "My Account"). In the "Seller Preferences" section, click the second to last "change" link on the right side. That brings you to the Buyer Requirements page. Choose whatever blocks you like.

V. Important dates/Timeline
Day 0 – Payment
Day 7 – You need to have shipped by today to be covered by the SPP
Day 45 – All INR and SNAD claims must have been filed by today
Day 46 - You're safe from all PayPal claims if they haven't been filed yet. You're still potentially at risk for CC chargebacks.
Day unknown – CC chargebacks can be done for potentially months after payment, depending on the CC company

CONTINUE BELOW...............
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CONTINUED.......

VI. Frequently asked questions:

1. How do I know if I am covered by the SPP?

Once the buyer has sent payment, look at the transaction details page. It should say either “Seller Protection Policy: Eligible” “Seller Protection Policy: Partially Eligible” or “Seller Protection Policy: Ineligible”.

2. How can I tell if my payment was funded with a CC or not?

If your payment was marked an eCheck, then you know it wasn’t a CC. If your buyer does not have a verified account, then he has either paid with existing funds or a CC. If your buyer has a verified account, there is no way to tell. No, PayPal CSRs will not tell you how the buyer paid if you call and ask.

3. I have a premier/business account and don’t want to accept credit cards. What do I do?

As of August 18, 2005, you are no longer be able to block CC payments. If you accept PayPal, you must accept all forms. This also applies to personal accounts that may be forced to upgrade. See the second question above. Sellers may not block echeck payments on eBay at this time.

4. I just received an eCheck and my buyer wants me to ship ASAP. Should I?

NO. PayPal tells you to wait until the eCheck clears. This usually takes 4-5 days, but may take longer. The eCheck can bounce, just like a real check, so you must wait. If your buyer gets pissy about the wait, forward them the payment notice you got from PayPal and point out that PP is telling you to wait.

5. My buyer wants to send the item to his son at school. Am I protected?

Yes, if the son's school address is listed on the transaction details page and you meet all other SPP requirements.

6. A buyer wants me to send his item to Nigeria. Am I covered?

Possibly, assuming all SPP requirements are met, but if you want to ship a widget to Nigeria, may I first suggest you buy some oceanfront property in Tucson?

7. My item sold for $5400, but my buyer’s CC limits are $2000 and $4000 respectively. She wants to pay me in 2 separate payments so she can charge the item. Is this a good idea?

Split payments are no longer forbidden by the SPP, but they still aren't a good idea. The buyer could rather easily reverse one payment as you would have proof of delivery for just one of the two payments. Also, you lose an extra 30 cents in fees for each additional payment.

8. My item sold for $240, and my shipping/handling fee was $12. Do I need a signature at delivery?

Yes, you do, if you want to be covered by the SPP.

9. My buyer lives just 20 minutes away and wants to pay with PayPal so she can use her CC, but she wants to pick up my item since she’s so close. Should I let her?

You can let her pick it up, but DO NOT accept PP on this sale. You will lose any INR complaint.

10. But I’ll have my buyer sign a receipt. Won’t that work?

NO! PayPal doesn’t care if you have a receipt. PayPal doesn’t care if CNN broadcasts live footage of the buyer accepting her item. PayPal only cares about having online-trackable proof of delivery for coverage against claims of non-receipt.

11. Why do you say I have to do this, that, and the other thing? I sell a lot, don’t do what you say I should, and never have any problems.

Good for you. You’ve been lucky. Don’t assume you will continue to be. If you like the level of risk you are exposing yourself too, fine. If you prefer to minimize risk, follow the terms of the SPP.

12. Do you work for PayPal? You sure sound like you love them and think they can do no wrong.

No, I don’t work for PayPal or eBay. PayPal is a tool, nothing more. Used correctly, you can conduct business with minimal risk. Used incorrectly, you can lose your shirt.

13. My buyer has an APO (or FPO) address. It is not confirmed. Am I covered under the SPP?

Yes, if the APO/FPO address is listed on the transaction details page and you meet all other SPP requirements. APO/FPO addresses are tricky, however. You must use the USPS (no UPS, FedEx, DHL, etc). As of sometime in November 2006 DC is available for most APO/FPO addresses. Signature confirmation does not seem to be currently available based on information at usps.com. You can also send your item Registered Mail. If you use RM, confirmation of delivery does show online. RM requires a signature upon delivery, but it does not show online. This means that RM will work as confirmation of delivery and therefore meet the SPP requirements ONLY for items under $250.

14. I shipped a widget to my buyer confirmed address with UPS. My buyer then did an address correction with UPS that resulted in the package going somewhere else. What will PayPal do?

According to this thread, that would result in PayPal ruling delivery was made to an unconfirmed address, which means the transaction would not be SPP eligible. Buyers may similarly have products rerouted through a USPS forwarding scheme. I've seen reports from PayPal reps that if the tracking/DC shows the package was sent to the confirmed zip but was forwarded in response to a buyer's change of address forward order, that this should be covered by the SPP. You may have to talk to a rep to get them to handle this situation properly.

15. My PayPal account is in the negative. Can PayPal yank money from my bank account or CC?

PayPal used to do this, but lost a lawsuit several years ago and now will not pull funds from any source without your authorization. If your account balance is negative (through a chargeback, reversal, etc), here is what they may do (in the likely, though not guaranteed, order):

*Take any funds in your paypal account to bring the balance back to zero
*Use any incoming payments to cover the negative balance
*Ask you to add money to your account to solve the problem.
*"Piggyback" the owed amount onto any payments you might make. There is full disclosure as to the total amount you are authorizing to be pulled from your selected funding source, and you do have the option to decline to make any payments.
*Send your account to collections

Keep in mind that you will not be able to send any payments (including payment of eBay fees) until your account is brought back to zero. If you refuse, and incoming payments are not sufficient to create a positive balance, your account may eventually be locked and sent to collections. Opening a new account to get around the restrictions is forbidden by the UA, and if/when PayPal discovers the new account, they can and will lock it and use any funds in it to cover the previous negative balance.

16. My buyer filed a SNAD dispute, and I lost. What happens now?

Your buyer will be given 10 days to return the item to you. He must pay for it, and you cannot be charged for the return shipping fee. The package must be returned with DC/tracking (and a sig for items $250+), just like you have to do as a seller shipping goods. At the end of the 10 days if the DC/tracking shows delivery, PayPal coordinates the refund. If the DC/tracking shows the item is still in transit, typically a PayPal rep will allow it to go a few more days. If the buyer does not provide proof of return, and you do not otherwise acknowledge receipt, then PayPal closes the dispute with no money changing hands. That doesn't mean you're out of the woods, as the buyer may be able to file a chargeback.

17. Will I always lose when shipping to an unconfirmed address?

Confirmed addresses are no longer needed for eBay sales. For non-eBay sales, PayPal looks for online-viewable proof of delivery (and a sig when necessary) when handling INR claims. The confirmed address requirement comes into play when defending against a chargeback, or when the buyer claims the payment was unauthorized. So says this PayPal employee at Paypal's Online Merchant Network. I haven't had to defend against INR claims with unconfirmed addresses yet, so can't confirm this firsthand. IMO, given payPal's vagaries it's probably better to assume that unconfirmed will result in a loss, and be pleasantly surprised if you win.

18. Does the SPP apply to off-eBay sales?

Yes, it applies to sales made both on eBay and off eBay. However, note the special rules about confirmed addresses still exist for non-eBay sales. Also, the SPP does not apply to Direct Payment or Virtual Terminal sales (if you don't know what these are you don't use them).

19. Is there a limit on how much coverage I can get through the SPP?

The old limit of $5k per year has been lifted. Coverage is now unlimited (not to exceed the amount of the disputed payment, of course).

20. I sold 12 widgets to the same eBay buyer. Can i ship them all in one box, or do i need one tracking # per item?

The general rule of thumb is that you need at least as many tracking #s as payments. So if all 12 widgets were on one invoice, you need only one tracking #. If the buyer paid you in 12 separate payments, you need a tracking # for each and every payment. If this bothers you or the buyer, then refund and re-invoice into one payment, but be aware the buyer will probably want a shipping discount if you do this.
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Old 09-02-2009
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Good posts, BooMer.

Lot of info there that will be a shock for some people
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Old 09-02-2009
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I like the answer to Nigeria 6
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Old 09-03-2009
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Thanks GreenBean. May I suggest this be a Sticky?
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Old 09-03-2009
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^^^^^^^^^^^^^

FWIW, I second that.
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Old 09-23-2009
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My favourite part?:

"Paypal is a tool, nothing more."

Incredibly enlightening.

Thank you for the info, sincerely.
  #8  
Old 01-22-2010
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SOLID!!!!

Thanks dood.
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Old 01-22-2012
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Insightful & illuminating.
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Old 01-22-2012
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2 year old thread
  #11  
Old 01-22-2012
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Still helpful nontheless
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Old 01-23-2012
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That it is.
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Old 05-14-2012
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This is a lot of useful info.. even today
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