Wednesday, April 30, 2008

Are ebaY and PayPal making sellers more susceptible to scams?

It was not even one day after reading this article from the Consumerist, which exposes the vulnerabilities of ebaY sellers, that I was confronted with a similar issue.

ebaY/PayPal allowed the buyer’s funds to be drawn back out of the seller’s PayPal account after the seller had shipped! I had no idea that was possible. And yes, I am a very trusting individual that is obviously na├»ve to such shenanigans.

It seems to me ebaY/PayPal let the seller down. I hold both accountable, after all they are one and the same company after ebaY’s recent purchase of Paypal.

Evidently, many ebaY scammers use fake addresses such as unattended homes to hide their identity. Of course, they probably don’t even need to do that for small transactions. Given that most ebaY sales are for less than a couple hundred bucks, it would be nearly impossible to re-coup that loss without incurring more costs in time and lawyer fees with no guarantee that you will ever get anything out of the jerk.

Even if the scammer is identified and PayPal freezes their account, they can just open another one.

The scam is simple. Once you ship to the bogus address, the buyer disputes the sale to PayPal, PayPal reimburses them from your account and then the scammer simply watches for the item to show up at the abandoned home address. He gets a freebie.

I took the article to heart and vowed to never ship to any buyer that does not meet PayPal’s verification requirements and fall under their Seller Protection Policy. This policy protects the seller from being held liable if the buyer files a claim or chargeback indicating that they didn’t receive the item or the payment was not authorized. PayPal claims to cover the costs associated with these types of claims or chargebacks.

Not one day later, I get tested. I had an item sell on ebaY and received a notice of payment from PayPal. PayPal informs me that the buyer has an unconfirmed address and anything shipped to an unconfirmed address is not covered under the Seller Protection Policy.

I contact the buyer directly via e-mail requesting a confirmed address. The buyer replies stating that his ship-to-address is a PO box in the US, but he lives in Canada. He pleads his case by pointing out all of his good ebaY ratings, over 100 stars, that he has accumulated. This does still mean something, but it won’t be long when ebaY’s new policies take effect and no one will be able to leave negative feedback.

I contemplate taking a hard line and cancelling the transaction. A couple of other mischievous thoughts cross my mind.

  1. Sweep my funds from the PayPal account to another bank. However, I suspect PayPal will not allow this when a transaction is pending, but I don’t know.

  2. Rely on shippers insurance. I have shippers insurance for $100 that covers the cost of the item. If I ship and the buyer pulls his funds, I can file a lost/stolen item complaint with the shipping company and get reimbursed. But is that right? It doesn’t seem ethical. The shipper has done no wrong; they may have even delivered to the correct address. Besides, theft from a PO Box would be difficult to believe.

Meanwhile the buyer presses me for a ship date. I give him one. But, I am still undecided and will most likely let the date slip by without shipping. Why not test him? My only risk is negative feedback on ebaY and with all of the new, upcoming non-seller friendly ebaY rules, I am less inclined to use their service in the future, anyway. What would you do?


  1. Just make "shipping to PayPal confirmed shipping address only, no exceptions" part of your terms and conditions for your listings. Many sellers do that. Buyers are used to it. If the buyer is in Canada, they can buy from a Canadian seller.

  2. yes, that's a good plan for any future ebaY listings.

    I thought of another idea regarding my current non-verified buyer. I could ask him to cancel his paypal payment and mail a cashiers check or money order and then ship when I have the cash in hand! Might be worth a try?

  3. Hmmm, taking everything in, what does his feedback say? Since he has done so many transactions and it's still possible now to place negative feedback, if he doesn't have any then that's a pretty good sign he's legit.
    Since it's just for $100, the risk is also relatively low.
    I'd feel comfortable sending it to him. I'd consider charging him for the cost of shippers insurance since it's to a PO box. Don't feel bad if you have to use insurance in case of loss...that's what insurance is for. The onus is on the person who causes the loss.
    Scary thought about not being allowed negative feedback in the future...if they do that I think my use of their services would drop as well.