PayPal Seller Protection policy was made to protect your business from fraudulent disputes and chargebacks, but there are significant limits to how far it can go.

As we explained in an earlier post, three issues can cause a PayPal chargeback; buyer requesting a refund:

  • Item Not Received - A buyer pays for an item but never receives it.
  • Item Significantly Not As Described - A buyer receives an item that is considerably different from what he or she expected when placing the order.
  • Unauthorized Transaction - A purchase was made without the consent of the cardholder.

These issues result from simple human errors in most instances. But some PayPal chargeback claims are fraudulent. And we’ve hacked out useful tips that can help you win the case in this article.

For this post, we shall analyze the PayPal Seller Protection Policy for merchants. You'll learn about the buyer complaints they cover, transactions protected, how to ensure your transactions are safe and covered, and much more.

 Are you stoked? Let’s dig in!

Types of buyer complaints covered by PayPal Seller Protection Policy

The PayPal Seller Protection policy covers two specific types of Chargeback complaints.

These are a) Unauthorized Transaction and b) Item Not Received.

An “Unauthorized transaction” dispute means that a transaction took place, but the account holder states that he or she didn’t authorize payment.

And as the name implies, customers file an “Item Not Received” dispute when they pay for an item but states they didn’t receive it.

Both scenarios can affect your merchant PayPal balance. But if the item meets PayPal Seller Protection requirements, they will keep your credit intact, and there’s no charge for the service.

person holding black android smartphone
PayPal seller protection doesn't cover digital goods

Transactions that are eligible for PayPal Seller Protection Policy

As stated by PayPal, below are the established criteria you must meet to be eligible for the Seller Protection program:

  1. The primary address for your PayPal account must be in the United States.
  2. The item must be a physical, tangible good that can be shipped, except for items subject to the Intangible Goods Additional Requirements. Transactions involving items that you deliver in person in connection with a payment made in your physical store may also be eligible for PayPal Seller Protection so long as the buyer paid for the transaction in person by using PayPal goods and services QR code.
  3. You must ship the item to the shipping address on the transaction details page in your PayPal account for the transaction. Suppose you initially ship the item to the recipient’s shipping address on the transaction details page, but the item is later redirected to a different address. In that case, you will not be eligible for PayPal Seller Protection. 
  4. The shipping requirement does not apply to eligible transactions involving items you deliver in person; however, you agree to provide them with alternative evidence of delivery or such additional documentation or information relating to the transaction they may request.
  5. You must respond to PayPal’s requests for documentation and other information on time as requested in their email correspondence with you or their correspondence with you through the Resolution Center.
  6. If the sale involves pre-ordered or made-to-order goods, you must ship within the timeframe you specified in the listing. Otherwise, make sure you ship all items within seven days after receipt of payment.
  7. You must provide proof of shipment or delivery of the item.
  8. The payment must be marked “eligible” or “partially eligible” with Unauthorized Transaction claims or “eligible” with Item Not Received claims for PayPal Seller Protection on the Transaction Details page.
  9. When a buyer files a chargeback with the issuer for a card-funded transaction, the payment must be marked “eligible” for PayPal Seller Protection on the Transaction Details page.
  10. Where you have integrated a PayPal checkout product, you must use the current version of that product if you are accepting payments directly via a website or mobile-optimized website; or ensure you are passing session information to PayPal at checkout if you integrated PayPal via a third party or if you have a native app integration.
  11. You must provide paid standard transaction fees on the sale in dispute.
  12. You must have delivered the item and should have proof of shipment or delivery for Intangible Goods.
  13. Provide signature confirmation when the full payment (including shipping and taxes) exceeds the amount listed in the signature confirmation threshold table (based on the payment currency). Suppose the full payment (including shipping and taxes) is in a currency not listed in the table. In that case, they require a signature confirmation when the payment exceeds the equivalent of $750 at the PayPal exchange rate that applies at the time they process the transaction.

Transactions that are NOT eligible for PayPal Seller Protection policy

PayPal Seller Protection does not apply to any transaction that has to do with the following scenarios:

  1. Claims, chargebacks, or reversals filed because the item differs significantly from how the seller described it (e.g. you described an item as “new,” but sent a used one).
  2. Intangible purchases like services, digital goods, etc.
  3. Items picked up locally or in person.
  4. Transactions made through PayPal Direct, Virtual Terminal, PayPal Business, or PayPal Here.
  5. Receiving multiple payments for one item.
  6. Claims are filed directly through a third-party platform such as an eBay account.
  7. Prohibited items such as drug paraphernalia, ammunition/firearms, or counterfeit goods.
  8. First Class Mail International, since the receipt only shows the address the order was delivered to – not the customer’s address.
  9. All forms of donation.
Always check for seller protection on your transactions

Two substantial ancillary evidence you need for PayPal Seller Protection

When you have determined the transaction is eligible for PayPal Seller Protection, there are two vital documents you need to keep handy at all times.

These documents include:

Proof of Merchandise Delivery

Proof of delivery is online documentation from a shipping company that includes:

  1. The item’s status of delivery.
  2. The exact date when you delivered the item.
  3. The recipient’s address, showing at least the city and state, or city and country, or zip/postal code (or international equivalent). The address information on your shipping receipt must match the address on the Transaction Details page.
  4. Signature Confirmation, if the full payment (including shipping and taxes) is $750 or more.

Proof of Order Shipment

Order shipment proof is online or physical documentation from a shipping company that includes:

  1. The shipping company’s details.
  2. The date you shipped the item.
  3. The recipient’s address, showing at least the city and state, or city and country, or zip/postal code (or international equivalent). The address information on your shipping receipt must match the address on the Transaction Details page.

To provide the above documents, visit the PayPal Resolution Center, and follow the guide. The process is straightforward.

How to ensure your business qualifies for PayPal Seller Protection Policy before a chargeback

If your house has a leakage, it’s always a good idea to prepare for rain before the rainy day.

Likewise, before you ship your customer’s order, do your due diligence. Check to see if your transaction is eligible for PayPal Seller Protection.

If the order is eligible for protection, any chargeback arising from the sale won’t offset your revenue goals. There’s no registration or extra work required for the coverage.

But don’t stop there. Get your sales documents together. Keep a record of the date you shipped the item. And make sure you have the recipient’s address, showing at least the city and state, or city and country, or zip/postal code (or international equivalent). The address information on your shipping receipt must match the address on the Transaction Details page.

Be aware. If your transaction isn’t eligible or is only partially eligible, you bear responsibility for any problems or losses. Don’t jump the gun. Review your orders carefully for any sign of fraud.

How to ensure your sales are secure with PayPal

First, for payments over $750 (including shipping and tax), make sure you received signature confirmation of delivery besides proof of shipment as highlighted earlier.

Second, if a buyer files a claim, do well to respond to requests for information from PayPal promptly. Delay can cause revenue loss and result in more charges.

Third, be sure to ship the item to the shipping address listed on the PayPal Transaction Details page. That will be part of your weapons of war, as we’ve already stated.

In the final analysis, even if your transaction does not meet PayPal Seller Protection, you don’t have to fret. Chargeflow is here for you! We have created the world’s first PayPal dispute and chargebacks automation system to help you recover more money hassle-free. We leverage AI and Machine Learning to help merchants fight PayPal disputes professionally.

To learn more about ourplatform and how we support merchants like yourself, click here.

Tom-Chris Emewulu
Chief Disputes Analyst

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