Personal Blog of Carl Pei

After reading about a scammer rampage on the DP forums, I thought I should share a trick that I use when doing larger ($100+ USD) transactions on PayPal.

Background

PayPal has a system where, if the buyer is not happy, he/she can file a dispute against the seller, and have PayPal review it. If the buyer acts professional, uses good rhetoric and provides some kind of evidence, the PayPal staff will deduct the money from the seller’s account and transfer it into the buyer’s. The typical PayPal employee isn’t the world’s most educated and will often favor the buyer, even if the evidence is sketchy.

This opens an avenue for scammers. People might buy a website or services from you, and then chargeback, losing you time and money. To counter this, one must look at how the PayPal dispute system works. For each transaction, the buyer can file one dispute, and can choose whether or not to escalate it (let PayPal staff review it).

How to Prevent PayPal Fraud

To counter this, here is what I do: Remember that a buyer can only file a dispute once. After receiving payment from someone, I do not immediately hand over the goods. Instead, I explain to the buyer the PayPal situation and use examples (important) of times I and other people have been scammed. I tell the customer to file a dispute for the money he just paid me, and close it immediately. Now, they can’t ever open it again, even if unhappy with the product. My money is safe.

This is not only against scammers, but also inexperienced buyers who for instance after buying a site, runs it down the drain and regrets the purchase.

This entry was posted on Sunday, June 3rd, 2007 at 9:02 am and is filed under Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.