Need to know
- PayPal is convenient for online shopping, but its Buyer Protection policy won't always get you your money back.
- Your credit card's chargeback system may offer more protection.
- If you do run into trouble shopping online, try to resolve it directly with the seller first.
If you've done much online shopping you may have had the unfortunate experience of a purchase not going to plan. Perhaps the product you ordered never arrived; or it did, but it wasn't as the seller described. And when you tried to resolve it with the seller, you received no response.
PayPal's Buyer Protection scheme, which offers to cover eligible purchases plus shipping costs up to the value of $20,000, sells itself as a way to "shop with confidence", with statements such as "if your eligible PayPal purchase doesn't go as planned, we'll help make it right with Buyer Protection."
On the surface, it may sound like PayPal is offering you the kind of risk-free online shopping you've dreamt of. But be aware of the scheme's limits. The protection isn't necessarily any better than that offered through a credit card chargeback.
What protections does PayPal's Buyer Protection policy offer?
PayPal gives two scenarios in which you may be covered by its Buyer Protection policy:
- An 'item not received' claim, when you didn't receive what you bought.
- An 'item significantly not as described' claim, when the item you received was not what you ordered, such as a defective, damaged or counterfeit item, or not all of the items you ordered were received.
This covers physical items you bought online as well as what they call "intangible items" such as e-tickets where the event you bought a ticket for was cancelled, or the software you bought doesn't download.
While it may sound like an insurance policy for your online purchases, it's not, and PayPal states this in their T&Cs. As always, it pays to read the fine print.
Credit card chargebacks vs PayPal Buyer Protection
If you pay with your credit card through PayPal, you may well be covered by the chargeback protections offered by your credit card provider.
Credit card chargeback rights may be broader than the PayPal Buyer Protection policy. For example, chargeback rights may not be limited to specific amounts per transaction (such as the $20,000 limit with PayPal), and may cover a wider range of items.
Both MasterCard and Visa's chargeback schemes let consumers seek a refund should goods not be received or if they're faulty, not as described, or counterfeit. But each bank will have their own process for seeking a chargeback, so it's best to check with them directly.
Depending on the goods you bought and your bank's conditions for chargeback, you might be better off seeking Buyer Protection through PayPal before seeking a remedy with your bank
But there's an argument for trying to get your refund through PayPal's Buyer Protection first. PayPal states that if they don't decide in your favour, "you can seek to pursue the dispute with your card issuer" later. And that if "PayPal does not make a final decision on your claim until after your card issuer's deadline for filing a dispute, and because of our delay you recover less than the full amount you would have been entitled to recover from the card issuer, we will reimburse you for the remainder of your loss (minus any amount you have already recovered from the seller or your card issuer)".
So, depending on the goods you bought and your bank's conditions for chargeback, you might be better off seeking Buyer Protection through PayPal before seeking a remedy with your bank.
It's important to note that you can't have a dispute running through both schemes simultaneously, and PayPal will close the dispute at their end if you do.
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Proving your case
With the pitch "we're here to help", you could be forgiven for thinking that one of the benefits of PayPal's Buyer Protection is that the dispute process is easier than pursuing a chargeback, but that may not be the case.
We spoke to Luisa T back in 2014 after she tried to use PayPal's Buyer Protection to get a refund for a Christian Dior perfume she'd bought online (and paid for through PayPal), which turned out to be an obvious fake.
Even though she lodged the dispute within the required timeframe (currently 180 days), PayPal required her to prove the perfume was fake – at her own expense – before they would begin to pursue the case.
PayPal required her to prove the perfume was fake – at her own expense – before they would begin to pursue the case
Luisa had to support her claim with documents from an unbiased third party, such as a dealer or appraiser, or an organisation qualified in the area of the item in question, which could clearly identify that the item was not authentic.
The document also needed to be on the company's letterhead with the full name, address and phone number so that PayPal could contact them. To be fair, a similar requirement may be imposed if seeking a credit card chargeback and the seller disputes your claims.
"I could not achieve this," Luisa told CHOICE. While PayPal did eventually refund Luisa's money, it was only after intervention from CHOICE.
Goods not delivered
PayPal's fine print says that it may not find in your favour if the seller can present a proof of shipment, even if you didn't receive the item. However, if a purchase just doesn't show up, it's pretty hard to actually prove that. If you pursue a chargeback, card schemes tend to put the onus on the seller to prove you received the item by asking them to provide compelling evidence such as a signature on delivery (unless you've waived that right).
Credit card chargeback rights may be broader than the PayPal Buyer Protection policy.
How do you make a claim for Buyer Protection?
If you have an eligible purchase you can make a claim using PayPal's resolution centre within 180 days of making the payment. You must also have an existing PayPal account that is in good standing and have used this account to pay for the item.
However, before making a claim you must first attempt to resolve the issue with the seller. You can do this from your PayPal account. After logging in, find the transaction in question in your activity and contact the seller. If you're unable to agree on a resolution you need to escalate it to a claim within 20 days of filing it, otherwise PayPal states "your dispute will automatically close".
Once escalated, you may be required to provide documentation to PayPal and return the disputed item to the seller.
It's up to PayPal to determine if your claim qualifies for Buyer Protection. If you're unhappy with the outcome, you may be able to appeal this decision, place a complaint, or seek a remedy using chargeback through your credit or debit card.
Does Buyer Protection have fees?
No. This process is fee-free, however PayPal may require you to return the disputed item to the seller at your own cost.
What's not covered by PayPal Buyer Protection?
There are many things not covered by PayPal Buyer Protection:
- Real estate, financial products, custom-made items, gift cards, motor vehicles and industrial machinery aren't covered.
- In the case of 'item not received' claims, there is no cover for items that you collect in person or arrange to be collected on your behalf, including items bought in the seller's physical store.
- Transactions sent using PayPal's friends and family option and guest checkout payments are also not eligible for Buyer Protection.
- Purchases over $20,000, claims not made within 180 days of payment, and where a resolution was received elsewhere (such as through your credit card) are not covered.
- PayPal won't cover return shipping costs if they require you to return the item to the seller as part of your claim.
For their full list of exclusions read PayPal's terms and conditions.
Will PayPal Buyer Protection cover purchases on Gumtree or Facebook Marketplace?
Yes, but only in certain circumstances. The item must be shipped by the seller to you. There is no cover for purchases of used or secondhand goods you pick up in person or have personally delivered. You also need to make sure you select the goods/services option when sending money through PayPal; if you send using PayPal's friends and family functionality there is no cover.