

Ask HN: purchases not eligible for paypal seller protection? - graeme

I work at a small startup, 7Sage. We sell an LSAT course, a wholly virtual good.<p>A customer recently won a chargeback case against us, despite blatant fraud on their part. They claimed their identity had been stolen, despite ample usage of our product and a few other proofs.<p>Paypal ruled against us, saying that the transaction was not eligible for seller protection. From what I've read, that's true of all virtual purchases.<p><pre><code>  1. Is this correct, or is there a way to get seller protection?
  2. Is there a good solution we're ignoring? Our site is built on Wordpress, and uses S2member for membership. Right now they don't handle any alternative processors such as Stripe.</code></pre>
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dangrossman
There is no seller protection, nor buyer protection for intangibles with
PayPal. Typically if you write "non-tangible/service" in the shipping info
boxes in a dispute it'll be closed in your favor -- the only reason you get to
that point is that the buyer claimed the product was a tangible when it
wasn't. Sometimes, through deliberate miscategorization by the customer and
unlucky assignment of customer service reps to your case, you'll lose anyway.

You'll take some losses no matter how you take payment, unless you get people
to start mailing in cash. It's a cost of doing business, factor it into your
pricing. Your situation would have been no better had you been paid with
Stripe or anyone else.

The S2Member website says they support Google Checkout and Authorize.net. You
should set up at least one of those as a backup. It won't prevent you from
losing money to lying customers, but you shouldn't let PayPal be a single
point of failure for your business anyway.

~~~
graeme
Thanks, that's really good advice about using an alternate service as a
backup.

I'm not quite clear on one point: 'non-tangible/service' is something we enter
in the shipping info box pre-dispute, right?

~~~
dangrossman
I meant in the dispute, after it's escalated to a claim. If someone disputes
one of your payments, they're asked whether it was for an eBay good, a non-
eBay good, a service or a gift, IIRC. If they tell PayPal it's for a good even
though it's actually your LSAT prep service, PayPal asks you to either provide
a tracking number of a shipment, other evidence of shipment, or to accept
liability and refund. Since there's no good place to write that the dispute
was miscategorized, I click on the option to provide a tracking number for the
shipment, and write "SERVICE/NON-TANGIBLE" in the box. Sometimes it works, the
PayPal rep that reviews the case recategorizes it and the buyer doesn't win
because there's no Buyer Protection Policy for services.

~~~
graeme
Excellent, thanks, we'll do that for all future chargebacks.

