2020's Official Guide to Fighting PayPal Chargebacks

PayPal can insulate you from some of the hassle of handling card payments, but they can’t prevent chargebacks from happening. PayPal Seller Protection is a policy that can protect your transactions from chargebacks, reversals, and their associated fees. This means that if you sell something to a buyer, and they dispute or reverse the transaction, you may be eligible to retain the full purchase amount and avoid any related chargeback fees paid (for debit and credit card-funded transactions). It does not however, prevent consumers from disputing a transaction with their bank directly. 

Sellers do not incur chargeback fees from PayPal on transactions that are protected under the PayPal Seller Protection Program or are funded with a credit or debit card. Transactions that do not meet this criteria are charged a fee regardless of the outcome of the case.

The fee is to cover PayPal’s involvement in the chargeback process and is $20 for all transactions in U.S. dollars, with varying rates for international transactions.

If a purchase isn't covered under PayPal Seller protection there is a $20 chargeback fee from PayPal. There can also be a host of other fees if the consumer's bank becomes involved or if the consumer opts to circumvent the Resolution Center

When a buyer has a dispute with a seller over a PayPal transaction, they are encouraged to deal with it through the PayPal Resolution Center, where they can hash out an agreement directly or refer the matter to PayPal for adjudication. However, buyers still have the right to dispute a charge with their bank, even if it went through PayPal. If buyers find PayPal’s process unsatisfactory or decide to bypass them entirely, disputes can easily turn into chargebacks.

While card networks can allow up to 14 days to dispute a chargeback, PayPal requires a response from the seller within 10 days. This allows their in-house team time to review the evidence and pass it along to the issuing bank.

While the chargeback process for a PayPal transaction can be slightly different, the essential components of a successful chargeback dispute—a timely response, compelling evidence, and a solid cover letter—are universal.

Merchants are advised to adapt their chargeback fighting strategies to account for the unique aspects of the PayPal chargeback process. The optimal approach for fighting PayPal chargebacks depends on the type of products or services being sold.

Here are the best compelling evidences to provide for each dispute scenario.

Physical Good Chargebacks

• Original item or auction description, including photos
• Transaction receipt with shipping and billing information
• Seller Protection verified information (if the transaction is eligible)
• Shipment tracking number, with time stamp
• Delivery receipt with a delivery address that matches the shipping address provided by the buyer (signature confirmation may be required for transactions over $750)
• Copies of any correspondence between the buyer and seller
• Proof of any refunds issued prior to the chargeback filing
• Proof of any replacement products shipped
• One-page cover letter explaining the seller’s reason for disputing the chargeback

Digital Good Chargebacks

• Original item or auction description, including photos
• Transaction receipt with billing information
• Copy of the seller’s return policy and terms & conditions
• Reports that prove that the product was downloaded or used by the buyer (this needs to include identifying information such as the buyer’s name, email, or IP address)
• For digital goods that are physically shipped, the delivery receipt with a delivery address that matches the shipping address provided by the buyer
• Copies of any correspondence between the buyer and seller
• Copies of previous completed transactions that were not disputed (in cases where the chargeback is for a recurring billing transaction)
• Proof of any refunds issued prior to the chargeback filing
• One-page cover letter explaining the seller’s reason for disputing the chargeback

Digital Services Chargebacks

• Copy of the service agreement signed by the buyer and seller, outlining all the deliverables and timeline of the service to be provided
• Transaction receipt with billing information
• Copies of the service cancellation policy and terms of service
• Copies of any correspondence between the buyer and seller
• Service delivery acknowledgement signed by the buyer
• Copies of previous completed transactions that were not disputed (in cases where the chargeback is for a recurring billing transaction)
• Proof of services rendered to the buyer (for digital marketing services and similar businesses)
• Proof of any refunds issued prior to the chargeback filing
• One-page cover letter explaining the seller’s reason for disputing the chargeback

Service Providers Chargebacks

• Copy of the service agreement signed by the buyer and seller, outlining all the deliverables and timeline of the service to be provided
• Transaction receipt with billing information
• Copies of any correspondence between the buyer and seller
• Service delivery acknowledgement signed by the buyer
• Copies of previous completed transactions that were not disputed (in cases where the chargeback is for a recurring billing transaction)
• Proof of any refunds issued prior to the chargeback filing
• Proof of any replacement services or products provided to the buyer
• One-page cover letter explaining the seller’s reason for disputing the chargeback