2 PayPal Issues

[svista08]

What is the name of your state (only U.S. law)? NY

ISSUE #1 - lost $450 from unauthorized claims from buyers

I recently lost $450 from using PayPal. I would like a legal perspective (or at least some recommendations on what to do) on this, such as what they can be sued for. I live in NY.

I sold several amazon.com gift certificates through Ebay.com auctions and sent out the items immediately upon receiving the payment.
These were Amazon.Com Gift Cards purchased directly from my amazon.com account and sent to the buyer.

Right after I sent out many of these certificates, I got flooded with claims across a period of 5 days. Why there are so many claims in such a short period of time baffles me.
I can provide proof of purchase of these gift certificates, and the claim amount.

I have already sent out $450 worth of these certificates (fortunately, there was one $200 gift certificate auction that I did not get a chance to send out yet, otherwise I would have lost $650).

I called my credit card company and amazon.com - they cannot do anything because I did actually make the purchases, so it's not an "unauthorized" purchase of the gift certificate.
(Also they didn't do anything wrong so they should not hold the burden for this)

I called PayPal - they said they cannot do anything because I was selling a virtual item and it would be impossible to prove delivery (even though it's just as good as any paper gift certificate, with the same terms, conditions, etc. and it can actually be proved that the item was delivered.). They said the buyers did not authorize the charge. I don't know why there would be so many charges in a period of 5 days, it doesn't make sense that this is just a coincidence. All they have is the buyer's word - but I can prove that I delivered the item. Fortunately, I had used my own amazon.com gift certificate so I know it was an original gift certificate (I didn't buy the certificate second hand and then resell it). And it shows up on my amazon.com account, and I'm sure amazon.com can testify that it was delivered to the buyer's email address. It seems unfair that PayPal just doesn't want to lose any money from this so they gave the money back to the buyer, and they are just making me cover their losses. They can then just walk away as if nothing happened. The people I talked to on the phone didn't seem to care too much that I had lost so much money in the process, and they kept re-stating they had to return the funds to the buyer because a claim was filed, etc. and that they cannot cover my loss. One guy I talked to even said that he did not think I did anything wrong, but they cannot return my money. I lose money because either of a dishonest buyer or a scammer and PayPal makes me pay for it because they do not want to pay for it themselves.

That doesn't seem fair because I did nothing wrong - I lost this money only because I used PayPal, supposedly a safe way of receiving payment. I could have asked the buyer to pay by money order (which I've done several times before) - and this would not have happened. Now PayPal says that I owe them money I have had my eBay account since February 2002 and have perfect feedback (over 100 transactions), and a long time user of PayPal as well, but they did not seem to value me as a customer. Can anyone help me?




ISSUE #2 - unauthorized bank transaction and re-presentment
lost $500 + overdraft fees

This is the other major issue I've had with PayPal (can I sue for this and the other incident together?)

Basically I did two things:
1. I did "Add Funds" to add $500 to my PayPal account
2. I clicked the Refund link to try to refund someone $500

I thought that the refund would try to use the funds I'd added when they were available (or otherwise give me an error that it cannot proceed). Instead, without any warning or asking for my authorization, clicking the Refund link caused PayPal to attempt to transfer $500 from my bank account through an ACH process (they call it an e-check). I researched this and found that a merchant must inform the customer that they are about to undertake a ACH transaction right before they do it - but PayPal did not ask for nor get my authorization. I only had about $500 in my bank account and certainly did not want another $500 transferred.

When I called them to find out why they withdrew from my bank account, they said it was because I had insufficient funds in my bank account. Does this give them the right to initiate an ACH transaction from my bank account without my authorization?

I incurred an overdraft fee because I did not have another $500, but the craziness didn't stop there. Without authorization, they continued to try to take money from my bank account repeatedly through a process called a re-presentment process. I had no idea and did not find out about this until later. In fact, I didn't even know what a re-presentment was until I called them up and had the term thrown at me as if it's some secret policy. Again, I researched this and found that a customer needs to give their consent right before the re-presentment process takes place (please correct me if I am mistaken).

By this time, I had already resolve the refund issue with the original intended recipient of this refund, so this refund was no longer necessary. I requested that they cancel the Refund, but they could not because they said it is tied to the e-check which is still in the re-presentment process and they have no control over it to cancel it. They told me the expected clearing date was September 3rd.

I had figured after the first overdraft fee, it would be over, so I had transferred some money into the account to use for other purchases (not related to PayPal). However, through their re-prsentment process which I was unaware of, PayPal immediately seized this money and send an eCheck for a transaction I no longer needed. So I have lost this $500 and no longer have access to it. I incurred some more overdraft fees because I could no longer fund some purchases that I had intended.

I'm afraid disputing this ACH transaction will make my account negative (which it probably will), and as much as I hate PayPal I need to use it still my account and I can't use it with a negative balance.

I want to know - does anyone know the exact law reguarding an ACH/re-presentment process in the context of PayPal?
What can I sue for in this case?

Thanks

 

[You Are Guilty]

What can I sue for in this case?

Not much. Read your paypal TOS.

14.1 Contact PayPal First. If a dispute arises between you and PayPal, our goal is to learn about and address your concerns and, if we are unable to do so to your satisfaction, to provide you with a neutral and cost effective means of resolving the dispute quickly. Disputes between you and PayPal regarding our Services may be reported to Customer Service online through the PayPal Help Center at any time, or by calling (402) 935-2050 from 6 AM to midnight Central Time.

14.2 Arbitration. For any claim (excluding claims for injunctive or other equitable relief) where the total amount of the award sought is less than $10,000.00 USD, the party requesting relief may elect to resolve the dispute in a cost effective manner through binding non-appearance-based arbitration. If a party elects arbitration, that party will initiate such arbitration through an established alternative dispute resolution (ADR) provider mutually agreed upon by the parties. The ADR provider and the parties must comply with the following rules: a) the arbitration shall be conducted by telephone, online and/or be solely based on written submissions, the specific manner shall be chosen by the party initiating the arbitration; b) the arbitration shall not involve any personal appearance by the parties or witnesses unless otherwise mutually agreed by the parties; and c) any judgment on the award rendered by the arbitrator may be entered in any court of competent jurisdiction.

14.3 Law and Forum for Disputes. Except as otherwise agreed by the parties or as described in section 14.3 above, you agree that any claim or dispute you may have against PayPal [highlight]must be resolved by a court located in either Santa Clara County, California, or Omaha, Nebraska[/highlight]. You agree to submit to the personal jurisdiction of the courts located within Santa Clara County, California, or Omaha, Nebraska for the purpose of litigating all such claims or disputes. This Agreement shall be governed in all respects by the laws of the State of California, without regard to conflict of law provisions.

14.4 Improperly Filed Litigation. All claims you bring against PayPal must be resolved in accordance with section 14 of this Agreement. All claims filed or brought contrary to section 14 shall be considered improperly filed a breach of this Agreement. Should you file a claim contrary to section 14, PayPal may recover attorneys fees and costs (including in-house attorneys and paralegals) up to $1,000.00 USD, provided that PayPal has notified you in writing of the improperly filed claim, and you have failed to promptly withdraw the claim.

https://www.paypal.com/us/cgi-bin/webscr?cmd=xpt/UserAgreement/ua/USUA-outside#dispute-policy

 

[FlyingRon]

Uo

Right after I sent out many of these certificates, I got flooded with claims across a period of 5 days. Why there are so many claims in such a short period of time baffles me.

amazon.com - they cannot do anything because I did actually make the purchase.

Perhaps the complaints were due to the fact that Amazon refused to honor them because it is against your contract with them to resell them.

Gift Cards/Certificates cannot be reloaded, resold, transferred for value, redeemed for cash or applied to any other account, except to the extent required by law. Unused Gift Card/Certificate balances in an Amazon account may not be transferred.

I thought that the refund would try to use the funds I'd added when they were available (or otherwise give me an error that it cannot proceed). Instead, without any warning or asking for my authorization

This is the way paypal works. It is not their fault you do not read.

 

[svista08]

I talked to PayPal already, the complaints were due to unauthorized charges - the gift certificates have already been used so I know they were delivered. 2 users also left me positive feedback (but it could have been posted by the unauthorized user).

Yes I know now that PayPal only accepts physical tracking and that unless I can provide this, they will return the funds to the buyer. And since my item was not ship ped physically, PayPal's seller protection does not cover this. I also now know that according to their Seller Protection in their Terms of Service which I "agreed" to, my item is not covered, despite how unobvious this may be.

Should PayPal be responsible for every user who gets scammed? No, but in this case, I think PayPal is liable for the damages from forcing me to accept PayPal with the illusion of a safe environment, without any warning that the fraud rates for these items are so high. Over 75% of my items that I posted that week had an authorized charge report, I think they should be putting a very visible warning if this is the case, since they encourage us (actually, force us) to use PayPal to accept payments. If I had known these items were susceptible to fraud and in which case the buyer always wins the claim (since these items are designed to be emailed as the method of shipment), I would never have listed so many items around the same time period, and I would have been more cautious and alert. Forcing the seller to accept PayPal for payment is basically setting them up to lose money, and I don't think THAT's fair.

This is the way paypal works. It is not their fault you do not read.

And where exactly does it say this? I read online that for ACH transactions, you need to warn the user that you are about to initiate an ACH transaction right before it happens. Same with a re-presentment. How can they put me through a re-presentment without any warning at all?

 

[svista08]

Not much. Read your paypal TOS.

https://www.paypal.com/us/cgi-bin/webscr?cmd=xpt/UserAgreement/ua/USUA-outside#dispute-policy

There was a case in NY where the judge held the forum selection clause unenforceable. There have been lawsuits in other states.

 

[You Are Guilty]

There was a case in NY where the judge held the forum selection clause unenforceable. There have been lawsuits in other states.

There are a zillion cases brought everywhere. Just because one small claims judge issues a bad decision (which I'm sure was appealed - what's the cite to your case?) doesn't make the clause unenforceable. (Quite the opposite - the NY Appellate courts have a strong preference for upholding forum selection clauses).

 

[FlyingRon]

[QUOTE}

And where exactly does it say this? I read online that for ACH transactions, you need to warn the user that you are about to initiate an ACH transaction right before it happens. Same with a re-presentment. How can they put me through a re-presentment without any warning at all?[/QUOTE]

You have already agreed to this with paypal. PAYPAL always preferentially uses your bank account for ANY payment. If you had paid attention to the transaction while you were doing it, it plainly tells you what the funding source is (sometimes it's not too obvious how to change it to something else), but it does tell you.

Yep, you ignore the Seller Protection Policy (tangible goods, online tracking, signature confirmation over $250, confirmed address) at your own peril.

Perhaps ebay is not for you.

 

[svista08]

If you had paid attention to the transaction while you were doing it, it plainly tells you what the funding source is (sometimes it's not too obvious how to change it to something else), but it does tell you.

That's not true, when I clicked "refund", it did not give me the warning that it would try to withdraw funds from my bank account. When it began re-presentment, it did NOT warn me or give me a choice. When I called them, the lady wasn't even sure if they had to warn me or not, and said that their system does not warn the users.

I am the one who got scammed here, let's say that someone knows the rules about seller protection. How is having 7/9 auctions get unauthorized charges expected? Users use PayPal and eBay thinking that fraud will rarely occur. If the rate is over 75%, they need to warn the users because you can't expect people to know this. Saying that this is the seller's fault is like saying it's a rape victim's own fault for getting raped.

 

[svista08]

PAYPAL always preferentially uses your bank account for ANY payment.

A customer service representative told me they used my bank account because I didn't have a working credit card on file.

Perhaps ebay is not for you.

If the fraud rate for these items is so high, they should give the sellers a warning, and obviously PayPal is NOT the best payment option for these items so they should not force you to sell it. How is it fair if the seller has to find out the fraud rates are so high only when they get scammed out of hundreds of dollars?

And from your tone you must think you're smarter than the rest of the world, but you don't have to be stupid to not realize that the fraud rate is so high. Amazon is a well known company and ordinary people aren't even aware of the scams, and how can you expect them to be? Even if they are alert for these scams how can they ever expect the rates to be so high??

 

[FlyingRon]

A customer service representative told me they used my bank account because I didn't have a working credit card on file.

Even if you had a credit card on file, it wouldn't have come out of the balance.

And from your tone you must think you're smarter than the rest of the world, but you don't have to be stupid to not realize that the fraud rate is so high.

And your tone indicates that you have a chip on your shoulder.

But lets see you:

1. Sold cards in violation of the terms with Amazon
2. Failed to follow the standard Paypal procedures for sellers.
3. Failed to understand the Payapl default funding source rules
4. Failed to read the transaction details before confirming

Sorry, you lost out, but there's really nothing we can do for you on a legal basis.

 

[svista08]

1. Sold cards in violation of the terms with Amazon
2. Failed to follow the standard Paypal procedures for sellers.
3. Failed to understand the Payapl default funding source rules
4. Failed to read the transaction details before confirming

There were no transaction details - there was no confirmation. Confirming what? What transaction details? I never got any notice about the re-presentment process until after it had already started.

How am I supposed to know if I post 9 items 7 of them will come back with unauthorized claims? People don't know that these items are susceptible to fraud.

For any kind of ACH transaction, the merchant needs to give the customer notice immediately before they undergo the ACH transaction. Is this not right?

I always followed PayPal seller procedures, I didn't know what PayPal seller protection covered before, but that doesn't mean I didn't follow the procedures. I know what PayPal seller protection covers now, but that's not the issue.

 

[svista08]

https://www.paypal.com/en_US/vhelp/paypalmanager_help/summary_of_rck_requirements.htm


The RCK (Re-Presentation Check Entry) format is used to represent a returned check, through the generation of a single entry ACH debit. The RCK SEC allows for a single entry ACH debit transaction to re-present a paper check after the paper check has been returned for either insufficient or uncollected funds.


RCK Notice Requirement

The merchant must provide notice to the check writer prior to resubmitting through ACH, of the intention to submit electronically. The notice must clearly state the terms of the Re-presented Check Entry policy.



I didn't even know what a re-presented check was until I called them up and found out my check was going through the process.

 

[svista08]

Just because something is in a company's terms of service doesn't mean it's fair, reasonable, or legal. You can still sue for it.

There was case similar to mine:
Hayden Barnes vs. EBAY

Barnes had already shipped the item to Russia, leaving him no recourse. Barnes claims he had no warning he would not qualify for PayPal's Seller Protection Policy. He claims that as users list their items for sale, eBay actively encourages them to make their item available for sale, internationally and to list their item with "gift services", one of which is shippi ng to an address other than the shippi ng address on the buyers credit card.

Source: justsaynotopaypal.com

He didn't qualify technically for seller protection because he shipp ed internationally even though he could prove he sent it and PayPal did not warn him that it would not be covered.
In my case, I didn't quality for seller protection because I sent an emailed gift certificate. PayPal forced me to accept PayPal, not warning me that it is not covered.

 

[svista08]

Scarcella vs AOL
Civil Court Judge Debra R. Samuels ruled invalid the forum-selection clause in the company's online service contract.
http://www.law.com/jsp/article.jsp?id=1096473909534

PayPal has been sued in NY before and there are courts that will hold the forum selection clause unenforceable.

 

[mmmagique]

I think you're out of luck with the ACH thing. You did not do your homework.

Homework is also a bit of an issue with gift cards, as there is a lot of fraud on paybay these days...

However, I don't think you did anything wrong (except by violating Amazon's tos, but, that has no relevance in this instance.)

You should go to the discussion boards on ebay and go to seller central. It's ugly now, and just going to get uglier.

At least you'll know what to look for. (like another auction site!!!)

Good luck,

~Christina