PayPal Disputes & Claims

Table of Contents

  1. What Is a PayPal Dispute?
  2. What Is the PayPal Dispute Fee?
  3. How Do You Dispute a PayPal Transaction?
  4. What Is a PayPal Claim?
  5. How Do You Fight a PayPal Claim?
  6. What Is PayPal's Dispute Process?
  7. What Is PayPal's Claims Process?
  8. How Can I Prevent PayPal Chargebacks?
  9. Can You Win a PayPal Dispute?
  10. What Is the PayPal Chargeback Fee?
  11. How Long Can You Chargeback on PayPal?

PayPal is one of the most commonly accepted alternative payment methods in e-commerce. Part of that is simply because the platform has been around for a long time, but PayPal also tends to be easier for customers to use and easier for new merchants to set up than traditional payments. Many small businesses start accepting PayPal even before they can accept credit cards.

Unfortunately, no payment method is perfect. Payment disputes are universal in the world of e-commerce, regardless of what payment method the customer used, and PayPal is no exception. PayPal Disputes and Claims follow a different process than typical chargebacks, as they're handled through PayPal's internal systems rather than a credit card network. In order to manage these disputes effectively, merchants should know how PayPay Disputes and Claims work, the difference between the two, and the best ways to avoid them.

New call-to-actionPayPal encourages buyers to resolve any issue they have with a purchase through the PayPal Resolution Center, and most will do this, resulting in a PayPal dispute or claim. However, buyers can still dispute the charge through their bank as well, resulting in a chargeback. We've already covered PayPal chargebacks in depth, so let's take a closer look at disputes and claims.

What Is a PayPal Dispute?

A PayPal dispute is the process by which a buyer can claim that they never received their purchase, or that what they received was significantly different from the product described, as in cases of damaged, defective, or counterfeit goods.

When a buyer opens a PayPal dispute, they're essentially opening a dialogue with the merchant about a serious issue with their purchase. The seller will be given 20 days to resolve the issue with the buyer directly before the dispute can be escalated to a claim.

What Is the PayPal Dispute Fee?

PayPal buyers are charged a dispute for each dispute they receive. The standard dispute fee is $8, but merchants with a ratio of disputed transactions greater than 1.5% and more than 100 monthly transactions in total will be charged $16 instead.

When the buyer reports that a transaction was unauthorized, a claim will be initiated directly rather than needing to be escalated from an unresolved dispute. Since there's no dispute in these cases, the dispute fee will be waived.

How Do You Dispute a PayPal Transaction?

Buyers can dispute PayPal transactions through the PayPal Resolution Center, which is part of PayPal's website. The seller receives a message explaining the reason for the buyer’s dispute and is expected to promptly resolve the dispute in some fashion, often by issuing a refund.

While refunds are the most common solution, any arrangement between the buyer and seller that resolves the problem and convinces the buyer to close their dispute is acceptable. Sellers are free to respond to these issues in other ways, such as sending out a replacement product or offering store credit.

What Is a PayPal Claim?

A PayPal claim is the process by which PayPal steps in to resolve issues between buyers and sellers. These can be either disputes where the parties failed to come to an agreement or cases where the buyer says they didn't authorize the transaction.

How Do You Fight a PayPal Claim?

To successfully combat PayPal claims, merchants should thoroughly document transaction and shipping information for later recall, provide compelling evidence to counter false claims, and make sure their sales are eligible for Seller Protection if possible.

fraud Prevention- Proven Strategies to prevent e-commerce fraud A seller can always acquiesce to the buyer’s demands and give them their money back, but false, fraudulent, and mistaken disputes are inevitable for any merchant who runs an eCommerce business.

When a transaction is disputed, the seller can still interact with the buyer to try to work out a mutually-agreeable resolution. Once the dispute has been escalated to claim status, PayPal becomes more directly involved, reviewing the buyer’s complaint and the seller’s evidence in order to reach a decision.

What Is PayPal's Dispute Process?

When a dispute is opened, the parties involved have 20 days to resolve the issue in a way that satisfies both of them. If the seller declines to respond or if the issue can't be resolved, either party can escalate the dispute to a claim.

Here are the key things to understand about the dispute phase, and what actions the seller may take during it:

  • Once the buyer has filed a dispute, the seller has 20 days to resolve it.
  • If the dispute is resolved, it’s the buyer’s responsibility to mark it as such within PayPal’s system.
  • If the buyer is unsatisfied with the seller’s offers to resolve the dispute, they have 20 days to escalate it to a claim.
  • Once the dispute has been escalated to a claim, PayPal steps in to review the matter.

What Is PayPal's Claims Process?

When a buyer opens a claim, the seller has 10 days to file a response, including any documentation they wish to upload to support their case. If the seller doesn't respond by the deadline, the case is decided in the buyer's favor.

The type of evidence sellers need to provide depends on the nature of the claim and the goods or services that were purchased.

  • Physical goods: The seller must provide proof of delivery, confirmation that the shipping address and the delivery address match, and for transactions over $750, signature confirmation.
  • Digital goods: The seller must provide proof that the product was downloaded or used.
  • Digital services: The seller must provide the service agreement that the buyer signed which outlined the deliverables, as well as an acknowledgment agreement stating that all the deliverables were completed and received to the buyer’s satisfaction.
  • Service providers: For orders under $200, it is recommended that sellers solicit a service acknowledgment receipt from the buyer that they can provide as evidence if a claim is later made. For larger transactions, the seller should ask the buyer for a signed agreement with a list of deliverables before the work begins, and a service acknowledgment receipt after the service has been rendered.

If the seller has already issued a refund for a transaction that now has a claim filed against it, proof of that refund will resolve the claim.

How Can I Prevent PayPal Chargebacks?

When a dispute is still contained to PayPal’s Resolution Center, sellers should make every effort to resolve the situation before it becomes an actual chargeback.

Remember, while many buyers will attempt to work through disputes through PayPal for the sake of convenience, they still retain their right to file a chargeback with their bank.

Once a PayPal transaction becomes a chargeback, the usual strategies for fighting them come into play, along with the downsides of not fighting them. For that reason, merchants should look at PayPal disputes as a good opportunity to nip a customer issue in the bud before it becomes a much bigger problem.

Our comprehensive guide, A Merchant's Guide to PayPal Chargebacks, can help you effectively handle PayPal disputes, claims and chargebacks in order to protect profits.


Can You Win a PayPal Dispute?

Yes, provided you have the right evidence. In order to win a PayPal dispute, the merchant needs to provide documentation addressing the customer's reason for the dispute. This often means identity verification records or shipment tracking and delivery confirmation.

What Is the PayPal Chargeback Fee?

Merchants who receive PayPal chargebacks are charged a $20 fee in addition to the transaction amount. However, both these costs are waived for purchases covered by PayPal Seller Protection.

How Long Can You Chargeback on PayPal?

Buyers can open a PayPal dispute up to 180 days after the transaction date.

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