Chargeback Recovery

Transaction Issues: How to Handle PayPal Disputes & Claims

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PayPal is the payment processing service of choice for many businesses online. It’s easy and affordable to use, it’s secure, and practically everyone is familiar with it.

New call-to-actionHowever, payment issues and conflicts can still arise over PayPal transactions, and these often have to be dealt with within the PayPal ecosystem. The process for resolving PayPal “issues” and other problems is unique and proprietary, and it is important for merchants who use PayPal to know how to navigate this process to protect their revenue.

While PayPal buyers can always dispute a transaction with their bank or credit card issuer, PayPal encourages its users to attempt to resolve problems through the PayPal Resolution Center and many of them do so. Most issues between buyers and sellers in PayPal tend to fall under two categories: disputes and claims.

How to dispute a PayPal transaction?

Disputes are opened by the buyer from within the PayPal resolution center.
The seller receives a message explaining the reason for the buyer’s dispute, and is expected to promptly issue a refund or resolve the dispute in some other fashion.
If the seller declines to respond, or does not offer a resolution that satisfies the buyer, the dispute can be escalated to become a claim.

How to fight a PayPal claim?

To successfully combat PayPal disputes and claims, it is important for merchants to be aware of where the transaction is in the PayPal dispute process, what options they have for resolving it, and what evidence they would need to provide in order to prove to PayPal that the transaction should be upheld.
When a buyer rejects the seller’s attempt to resolve their dispute, they have 20 days to decide whether to escalate the dispute and make a claim. If they do so, PayPal will request information from both the buyer and the seller, investigate the claim, and make a final decision.
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 e-commerce business.
The actions a seller is required to take in response to a dispute or claim are different. 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?

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

Handling PayPal Claims

What is PayPal's Claims process?

When a dispute escalates to claim status, the seller is required to provide evidence to PayPal to prove their argument that the transaction should be upheld.
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. If the seller has already issued a refund, they must provide proof of that as well.
  • Digital goods: the seller must provide proof that the product was downloaded or used, along with proof of a refund if one has been issued already.
  • Digital services: the seller must provide the service agreement that the buyer signed, outlining the deliverables, and an acknowledgement 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 acknowledgement 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 acknowledgement receipt after the service has been rendered.

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.


Businesses that process e-commerce and other card-not-present transactions—including the over 17 million who use PayPal for payments—are quickly learning about the risks and realities of chargebacks. 

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

Discover how to effectively handle PayPal disputes, claims & chargebacks.  Get the Guide.