I want my money back
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. These are just some of the pitfalls of shopping online that you'd rather not have to worry about.
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". Adding to this sense of security are statements such as "if your eligible PayPal purchase doesn't go as planned, we'll help make it right with Buyer Protection".
It may (on the surface) sound like PayPal is offering you the risk-free kind of online shopping you've dreamt of. But be aware of the scheme's limits. The protection offered through PayPal's scheme isn't necessarily any better than that offered through a credit card chargeback, and it doesn't exactly offer you the ability to shop online with complete confidence. So what protections does it actually offer?
PayPal gives a range of scenarios in which you're covered by its Buyer Protection policy:
- the event you bought a ticket for was cancelled,
- you didn't receive everything you bought,
- the item was defective, damaged or counterfeit.
While it may sound like an insurance policy for your online purchases, it's not. And, as always, it pays to read the fine print.
The main catch is that even if PayPal decides a dispute in your favour, it makes no guarantees you'll get your money back.
The main catch is that even if PayPal decides a dispute in your favour, it makes no guarantees you'll get your money back. It will "attempt to recover your payment from the seller", but if it can't get the money from the seller – perhaps because they've closed their account, or they just don't have any money in it – PayPal may (or may not) reimburse you.
"Where we are unable to recover the whole or part of your payment from the seller we may, in our absolute and sole discretion, decide to make a payment as a gesture of goodwill," reads part of PayPal's Buyer Protection Policy.
Chargebacks vs PayPal Buyer Protection
If you pay with your credit card through PayPal, you may well be better off relying on the chargeback protections offered by your credit card provider than on PayPal's Buyer Protection (you can't have a dispute running through both dispute schemes simultaneously). Even PayPal says chargebacks may offer superior protection: "Credit Card Chargeback rights, if applicable, may be broader than the PayPal Buyer Protection Policy. Chargeback rights are not limited to specific amounts per transaction [such as the $20,000 limit with PayPal], and may cover intangible items".
Both MasterCard and Visa's chargeback schemes allow consumers to seek a refund should goods not be received or if they are faulty, not as described or counterfeit. So what's the difference between chargebacks and PayPal's Buyer Protection? PayPal's terms and conditions rule out liability should it be unable to get the money back from the seller, however, if you request a chargeback and your card scheme finds in your favour, it can force your payment to be reversed.
If you pay with your credit card through PayPal, you may well be better off relying on the chargeback protections offered by your credit card provider.
Back in 2014 when we first looked at this issue, a PayPal spokesperson told CHOICE that, "if the payment is reversed [through a chargeback, for example], the seller will owe PayPal for the amount of the transaction and if the seller does not have funds available in their PayPal account, PayPal will commence recovery of payment". That's a little more definitive than an "attempt" to recover your money through its Buyer Protection scheme.
While chargebacks may provide a better chance of recovering your money should you have a legitimate case, they certainly aren't a get-out-of-jail-free card. You're still better off trying to avoid dodgy sellers in the first place and trying to sort it out directly with the seller if something goes wrong.
Proving your case
With its pitches such as "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 it 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 had bought online (and paid for through PayPal), which turned out to be an obvious fake. While she lodged the dispute within the required timeframe [the dispute lodgement timeframe is 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 that the counterfeit dispute be supported with documents from an unbiased, third party, like 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 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).
While PayPal offers advantages in terms of ease of use when shopping online, its Buyer Protection policy isn't really the drawcard. It's better than nothing, but if something goes wrong you've probably got more protections through your credit card's chargeback system. If you do run into trouble shopping online, try and resolve it directly with the seller. In addition, it never hurts to do some research on the person or company selling the goods before handing over your money, particularly if it's a large amount.