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Paypal Refund Clarification
 

Hey guys. Just a quick question I need clarification about in regards to paypal refunds.

1. Buyer buys item for X amount (not subject to 21 day hold)
2. Seller takes money and deposits it into bank
3. Seller removes funds when cleared from bank
4. Seller issues refund in full to buyer a few days later

Does the buyer get the money back instantly?

If so, what does paypal do when they see that there are no funds to cover the refund? Do they reverse the refund or do they just negative balance the seller’s account and pester them for the funds?

I know in years past that a buyer was out of luck when the seller had no funds to recover, but I’m not sure if that is still the case or applies in this situation.

Thanks for the information everyone.

If you don't have the funds in your Paypal balance to cover the refund then Paypal will attempt to get the funds from whatever funding source you have set for the account. If they have to get the funds from your bank account then Paypal will not process the refund to the buyer until Paypal has the money from your funding source to do it.

Ok, that's what I figured.

Now if it were a dispute/claim that was awarded in the buyer's favor, what then?

Do they just give the money back to the buyer and make the seller's account negative?

Yes in the case of a dispute your account will go negative when they refund the buyer

Thank you. I like to stay on top of these things. Thank you for the help!

Your welcome

What if when they are taking out the money from the funding source you have on file(bank) and there's no money in there? Do they make your bank go overdraft or what happens?

It depends on what your bank policy is. Some banks won't let your account go severly overdraft but some banks will just keep paying out and charging you with the fees. It also depends on what method Paypal is attempting to get the money. If it is with a debit card or just a funds transfer. Every bank is different so it is best to know there overdraft policy because even though you may have a stealth Paypal account your bank account is attached to your real info and if you owe the bank money and don't pay it back then it can go to a collection agency or even worse report you to Chek Systems which will make it very hard to get another bank account.

Actually, the account will go negative, but it does not necessarily mean the buyer will get thier money back. Unless they paid with a credit card, paypal will send them a message that they found in their favor, but there are no funds in the seller account at this time to cover the refund.
I was on the winning end of a dispute in the old days and never got my money. It was only like $20 so I let it go, but it was just one more reason to hate Paypal/Ebay.

I tihnk if he were to open the dispute through eBay then he would have a better chance to get his money back. ;)

Yeah Ebay just hands out money to buyers for free. It seems like a buyer can open a case against a seller thru the Ebay buyer protection program and it doesn't matter what the case is Ebay will rule in favor of the buyer and give them their money back

Yes, this is what I am curious about. Does the buyer actually get their money and then paypal is left holding the bag with a negative balance?

Think it depends on how the buyer paid. If by CC, then they would probably refund and eat the negative balance, because once the customer files chargeback with their CC company Paypal will lose anyway. If paid by balance or echeck, I guess the have algorithm to see if it will refund automatically. How good the buyer account, chances of getting their money from the seller, etc. Then it is spit to a live person to see if they will "eat it" and refund, or will screw them with, "we found in your favor but their are no funds in the sellers account" message.
I am sure paypal tries to minimize their loses as much as possible and will do everything illegal to avoid paying out, if they do not have to,

I think Paypal fits the bill if the buyer wins a dispute and you have a $0 balance. Then your paypal balance goes to negative.

Long ago I was on the receiving end of winning a dispute for item not received and then paypal emails me saying, we found in your favor, but there is no money in the sellers account to cover the refund. So basically the told me I was SOL.

If you dispute through ebay now, they wil refund the the buyer and then try every way in hell to get their money back.

So I stand corrected, ebay is fitting the bill and paypal is leaving people SOL lol.

For a little while ebay did not go the seller. Was rather fair but that's changing.