Ask HN: purchases not eligible for paypal seller protection? | Hacker News Reader

Ask HN: purchases not eligible for paypal seller protection?

2 pointsgraeme4 comments

I work at a small startup, 7Sage. We sell an LSAT course, a wholly virtual good.

A customer recently won a chargeback case against us, despite blatant fraud on their part. They claimed their identity had been stolen, despite ample usage of our product and a few other proofs.

Paypal ruled against us, saying that the transaction was not eligible for seller protection. From what I've read, that's true of all virtual purchases.

  1. Is this correct, or is there a way to get seller protection?
  2. Is there a good solution we're ignoring? Our site is built on Wordpress, and uses S2member for membership. Right now they don't handle any alternative processors such as Stripe.

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There is no seller protection, nor buyer protection for intangibles with PayPal. Typically if you write "non-tangible/service" in the shipping info boxes in a dispute it'll be closed in your favor -- the only reason you get to that point is that the buyer claimed the product was a tangible when it wasn't. Sometimes, through deliberate miscategorization by the customer and unlucky assignment of customer service reps to your case, you'll lose anyway.

You'll take some losses no matter how you take payment, unless you get people to start mailing in cash. It's a cost of doing business, factor it into your pricing. Your situation would have been no better had you been paid with Stripe or anyone else.

The S2Member website says they support Google Checkout and Authorize.net. You should set up at least one of those as a backup. It won't prevent you from losing money to lying customers, but you shouldn't let PayPal be a single point of failure for your business anyway.

Thanks, that's really good advice about using an alternate service as a backup.

I'm not quite clear on one point: 'non-tangible/service' is something we enter in the shipping info box pre-dispute, right?

I meant in the dispute, after it's escalated to a claim. If someone disputes one of your payments, they're asked whether it was for an eBay good, a non-eBay good, a service or a gift, IIRC. If they tell PayPal it's for a good even though it's actually your LSAT prep service, PayPal asks you to either provide a tracking number of a shipment, other evidence of shipment, or to accept liability and refund. Since there's no good place to write that the dispute was miscategorized, I click on the option to provide a tracking number for the shipment, and write "SERVICE/NON-TANGIBLE" in the box. Sometimes it works, the PayPal rep that reviews the case recategorizes it and the buyer doesn't win because there's no Buyer Protection Policy for services.

Excellent, thanks, we'll do that for all future chargebacks.

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