PayPal Seller Protection Does Not Cover Claims Filed with eBay

Posted on July 25, 2009. Filed under: eBay, Paypal | Tags: , , , |

On August 19th, there will be some changes in the way the eBay dispute resolution process works for buyers who pay with PayPal.  These changes will also affect eBay sellers although it is not certain just how much difference sellers will experience.  For your convenience, I have copied and pasted the new policy update below at the bottom of this blog post.

One particular sentence in the new PayPal policy update really troubled me.  The last sentence in section 2b states “Seller Protection does not cover claims filed with eBay.”  The implied implications were so alarming that I picked up the phone to get clarification from PayPal.

The PayPal customer service specialist that I spoke with explained things to me as follows: eBay buyers who pay with PayPal can currently file two different types of disputes or claims directly with PayPal —

(1) complaints relating to the item which fall under either the INR (Item Not Received) or SNAD (Significantly Not as Described) dispute processes


(2) complaints relating to the payment which include a buyer claiming that the payment was not authorized, such as occurs when a PayPal account is taken over and used to purchase merchandise.

After August 19th, eBay buyers who pay with PayPal can file a dispute relating to the item (INR or SNAD claim) either with PayPal or with eBay and, according to the PayPal representative I spoke with, the resolution outcome will be the same.  In other words, eBay will follow the same guidelines in deciding outcomes so that a seller is still protected in the same way they are today.  For example, a seller who ships to an unconfirmed address supplied by PayPal will still be covered as long as the delivery confirmation shows the item was delivered and the value is not greater than $250.  That is how the new process is supposed to work in theory but as all eBay sellers know, we’ll just have to wait and see how the new eBay dispute resolution process actually works in reality.

When there is a question about the payment itself, such as when an account owner claims their account was used without their permission, the dispute will be filed directly with PayPal.  eBay will not be involved in disputes where unathorized use is claimed.  In those instances, eBay sellers are covered under the PayPal seller protection policies.  The policy update effective August 19, 2009 does not change the process when unauthorized use of the payment is claimed and does not change the seller protection guarantees. 

The complete August 19th PayPal policy updates are as follows. 


Amendment to the PayPal User Agreement as appears on the PayPal website:

Effective Date: August 19, 2009

Beginning August 19, 2009 PayPal user agreement is being amended as follows:

  1. We are revising Section 8 of the User Agreement for two reasons:
    1. To show the fees in a clearer manner without a substantial change, and
    2. To insert the following:

    “In some instances, personal transaction pricing may not be available, the transaction will be considered a commercial transaction and the commercial transaction fees shall apply. This may occur on non-PayPal websites that offer you the ability to send a payment from your PayPal account.

    Personal transactions are always available when you go to our website, log in to your Account, click the “Send Money” tab, and select “Personal” when you send the money.”

  2. We are revising Sections 10.1 and 10.2 of the User Agreement. The revised section will read as follows:
    1. “10.1 Your Liability. You are responsible for all Reversals, Chargebacks, Claims, fees, fines, penalties and other liability incurred by PayPal, a PayPal User, or a third party caused by or arising out of your breach of this Agreement, and/or your use of the Services.
      1. Liability for PayPal Buyer Protection Claims, and Buyer Complaint Policy Claims. If PayPal makes a final decision that you lose a Claim filed directly with PayPal, you will be required to reimburse PayPal for your liability. Your liability will include the full purchase price of the item and original shipping cost (and in some cases, you may not receive the item back). PayPal Seller Protection may cover your liability, see section 11 below.
      2. Liability for claims filed directly with eBay under eBay’s resolution process.If you are an eBay seller, eBay requires that you comply with their resolution process. As such, you have provided eBay with permission to make a final decision on a claim that a buyer files against you directly with eBay. If eBay makes a final decision that you lose a claim, you agree to allow PayPal to remove funds from your PayPal Account in order to reimburse eBay for your liability. Seller Protection does not cover claims filed with eBay.
      3. Opt-Out. If you do not want to allow PayPal to reimburse eBay for your liability, you may opt-out by calling eBay at 1-866-643-3727. Your opt-out will be effective within 3 Business Days. If you opt-out then eBay will not use your PayPal Account to recover amounts that you owe due to an eBay claim that you lost. This opt-out will not affect other amounts that you pay to eBay using your PayPal Account (such as your eBay fees).

      10.2 Reimbursement for Your Liability. In the event that you are liable for any amounts owed to PayPal, PayPal may immediately remove such amounts from your Balance. If you do not have a Balance that is sufficient to cover your liability, your Account will have a negative Balance and you will be required to immediately add funds to your Balance to eliminate the negative Balance. If you do not do so, PayPal may engage in collection efforts to recover such amounts from you.”

  3. We are revising Section 10.5 of the User Agreement to allow PayPal to place reserves on Personal Accounts that are receiving Commercial Transactions.
  4. The PayPal Credit definition in section 15 will be expanded to include Bill Me Later.

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4 Responses to “PayPal Seller Protection Does Not Cover Claims Filed with eBay”

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I have a question for you Brews….
My Paypal account was frozen as I have not used it in over a year.
I get a message stating I have to call a 888 number to verify my account etc…?
If I do this, will I be agreeing to all the ridiculous changes in Paypal?
I am terrified to call as my business went bankrupt and I do not know if my balance is positive or negative.
Any help would be appreciated.
As always, I love reading your blogs.
Keep it up!

Brad, thanks for the kind words about my blog 🙂

This is not to be considered legal advice but I would assume that you would have to agree to all the PayPal changes if you want to reactivate your PayPal account again. Set aside a time to call PayPal when you are calm — get yourself a glass of water and close the door — and make the call. Just see what PayPal will require from you in order to use your account again.

What I am worried about is a negative balance and if my bankruptcy protects me from that. It should – I just don’t want to listen to Paypal tell me anything different.
It’s been a very hard 18 months because of eBay and Paypal.
I guess I should have my Trustee look into it for me?
Would Paypal share my account information with my Lawyer?
Or do I find out myself and forward the info to my Trustee?
I’m a mess about this….
Thanks for your ear and support!

hello, i recently purchased an item from ebay, seller sent me the item and took like 50 days to arrive, not the item that i payed for, can i open a case and get my money back now that its been like 52 days passed??

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