PayPal’s New Policy Changes March 2010 Will Cause eBay Sellers to Bear the Costs of Another Type of Buyer Fraud

Posted on February 20, 2010. Filed under: eBay, Paypal, Tips - for the eBay Seller | Tags: , , , , , , , |

PayPal has announced changes to their user agreement that will take effect on March 10, 2010: (the following has been copied directly from PayPal)

BEGIN QUOTE:

“Amendment to the PayPal User Agreement, Acceptable Use Policy, and Student Account Agreement Effective Date: Mar 10, 2010

  • Amendment to the PayPal User Agreement

Section 8 (Fees) of the User Agreement is amended to state that you may not send a Personal Payment to a recipient in India. Any payment sent to India must be for a Purchase Payment and will be charged the Purchase Payment fees.

  • Amendment to the PayPal User Agreement

The following will be added to section 11.7 (newly numbered 11.5) as an additional example of transactions not eligible for seller protection:

“Items that are not shipped to the recipient’s shipping address on the Transaction Details Page. If you originally ship the item to the shipping address on the Transaction Details Page but the item is later redirected to a different address, you will not be eligible for seller protection. We therefore recommend not using a shipping service that is controlled by the buyer.”

  • Amendment to Section 13 (Protection for Buyers) of the PayPal User Agreement

Section 13.3 (Eligibility of Item Purchased on eBay) has been amended. Eligibility for PayPal Buyer Protection is now based on whether the PayPal or eBay buyer protection message is included in the eBay listing. Previously eligibility had been based only on whether a PayPal Buyer Protection message was shown.

  • Amendment to the PayPal Student Account Agreement
  1. The following language is added to section 3.c (Parent Control):x.: “Marketing Promotions. If the Parent Account has opted-in to receiving marketing notifications in its Account Profile, then we may send such notifications to the Child as well.”
  2. The following language is added to section 3.d (Child Control):x.: “Marketing Promotions. The Student may participate in marketing promotions or campaigns offered from time to time.”
  3. The last paragraph of section 4 (Liability) will read:“Any online agreements that are accepted by the Child, including terms and conditions of any promotion the Child participates in, are accepted by the Parent as if the Parent had taken the action. The Parent is responsible for educating the Child on internet safety.”
  • Amendment to the PayPal Acceptable Use Policy

Beginning March 10, 2010 the PayPal Acceptable Use Policy is being amended under the Activities Requiring Approval section to add airlines and scheduled or non-scheduled charters/jets/air taxi operators as services that require pre-approval.”

END QUOTE

My comments: There is one change above that baffles me.  PayPal states beginning March 10th “If you originally ship the item to the shipping address on the Transaction Details Page but the item is later redirected to a different address, you will not be eligible for seller protection. We therefore recommend not using a shipping service that is controlled by the buyer.” 

Given that:

1. The U.S. post office will forward shipments to a different address if the recipient (buyer) submits a change of address form

and

2. FedEx will forward shipments to a different address if the recipient (buyer) calls in to FedEx and, to add insult to injury, the shipper gets the privilege of paying for the change

and

3. UPS will forward shipments to a different address if the recipient (buyer)  requests a change and pays for the forwarding cost

what shipping service is PayPal actually recommending that sellers use to ship items in order to receive seller protection?  It’s painfully obvious that there is no reasonable way that most sellers can mitigate this particular risk of fraud.  Therefore, it’s clear that PayPal’s intent is simply to shift the cost of this particular fraudulent activity to sellers.

Given that PayPal is making this policy change there must be a signficant number of eBay buyers who are perpetrating this type of fraud.  So, as an eBay seller what steps can you take to try and reduce the possibility of becoming a victim after March 10th?

First, recognize that while you are covered under the PayPal seller protection for shipments to both confirmed and nonconfirmed addresses, you are obviously more at risk for shipments to nonconfirmed addresses.  If you have a “new” eBay user purchase a very expensive item and include an unconfirmed shipping address in their PayPal payment then you have to decide if you are willing to accept the risk that you could lose your item and your money.  The more “red flags” there are, like the user being newly registered on eBay and having an unconfirmed address, the more risk that is involved in the transaction. 

Some things you can do to lessen your risk is to sell your expensive item on another venue where you have more control over the payment methods you will accept or where the buyers are a less risky group.  Alternatively, if you still want to sell the item on eBay you could always list the item at a slightly inflated price with a Best Offer option.  That way, you could manually decide whether or not to accept someone’s Best Offer based not only on the amount of money they offer you but also on their eBay reputation.  I know I would be willing to take a lesser amount from a long-time eBay user with good feedback because there is less risk of being a victim of fraud.  Slightly less reward but potentially significantly less risk.

Shipping through the post office is less risky than shipping by FedEx or UPS.  A recipient could put in a change of address and have packages forwarded with the intent to defraud the seller but it is not as likely for postal shipments for several reasons.  First, a postal mail fraud crime carries much more severe penalties and most, but certainly not all, items shipped through the post office are smaller packages that are usually less valuable than packages shipped through Fedex or UPS.  Therefore, most buyers would not go to such trouble of commiting fraud by forwarding the package through the post office when the items sent through the post office are not very valuable.

For heavier and more valuable packages, sellers most often use UPS or FedEx so there is more risk using these carriers.  So the question is which carrier is now the less risky carrier for shipping items purchased on eBay using PayPal.  UPS will reroute packages to a different address if the buyer requests it and pays for the address change but UPS will only do so after they have first attempted delivery to the original location.  On the other hand, FedEx Ground (and Home Delivery) services will change the address as requested by the buyer even while the package is still enroute and no delivery attempt has been paid.  Therefore, FedEx shipments are very risky to eBay sellers.  However, there is one exception.  If a seller wants to prevent FedEx from rerouting the package then the seller needs to choose and pay for “Adult Signature Required“.  When this particular signature option is chosen, no address change will be honored.  Not even the shipper can request an address change once a package  has been shipped via FedEx Ground (or FedEx Home Delivery) with “Adult Signature Required.”

Being an ecommerce seller involves managing all sorts of risks.  And the rewards of being an entrepreneur can be great.  However, it seems to me that the financial rewards of being an eBay seller keep decreasing while the risks just keep on increasing.

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5 Responses to “PayPal’s New Policy Changes March 2010 Will Cause eBay Sellers to Bear the Costs of Another Type of Buyer Fraud”

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Hi,
I’d be interested in your take on “Amendment to Section 13 (Protection for Buyers) ” not clear to me at all what this might mean..
help?

Vince, I believe Amendment to Section 13 change is much ado about nothing. PayPal / eBay is simply moving away from PayPal handling the buyer protection claims to eBay handling all buyer protection claims. Where previously auctions would state that the item was covered with PayPal buyer protection, it will now say the item is covered by eBay buyer protection. Nothing really changes for buyers and sellers who are conducting an eBay transaction using PayPal since eBay is going to use the same PayPal guidelines and seller requirements (like online trackable shipping methods required) for solving buyer/seller disputes.

Section 8 indirectly addresses PayPal’s lack of a Reserve Bank of India license to operate in India for specific transaction types. Please keep in mind some India businesses remain impacted, where they are allowed to receive PayPal payments but cannot withdraw the funds.

The Section 13.3 change provides another indication that John Donahoe will sell/IPO PayPal within the next 2 years.

> Some things you can do to lessen your risk

Best means would be to use the (PayFlow, etal) Merchant Account option eBay provides to sellers. Any business in for the long haul needs a Merchant Account.

Additionally sellers should insure EVERYTHING.

//

” I try to make you miserable, to make you leave; you deny that it’s making you miserable and try to make me miserable, so I’ll stop making you miserable, and eventually you will leave, citing reasons that had nothing to do with misery.”
Dr. Gregory House, House

Having just begun to negotiate the FedEx shipping thing, thank you for a very useful piece of information. I would hate to have an expensive quilt ripped off by a PayPal buyer.

I am so glad I no longer sell on eBay.

How much you wanna bet that after that date, when you print out the listing after it has ended, the buyer protection notice disappears? Or something crazy like that.

Whenever I watch the Ally bank commmercial where the first girl gets the toy horse and the second girl gets the real horse, ebay instantly comes to mind.

“Even kids know it’s wrong to keep the refund and the item”

We’re different. We’re better…


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