Shipping service scam
The buyer asks you to use a specific shipping service. They may claim they can get a discount, or that they have a preferred vendor that is more reliable. In reality, they can easily contact the shipping company and reroute the order to another address.
How to avoid a shipping service scam: Use only your shipping account, review the order for other fraudulent red flags, and ship to the address on the Transaction Details page in your PayPal Business account.
Prepaid label scam
The buyer asks you to use a pre-paid shipping label provided by them, but the shipping labels could’ve been purchased with a stolen credit card. Or, they may be attempting to send the package to another country, PO Box, or untraceable location.
How to avoid a prepaid label scam: Don’t accept shipping labels and only ship to the address on the Transaction Details page. This also helps ensure that you remain covered under the PayPal Seller Protection policy on eligible transactions.
Package rerouting scam
The buyer provides an incorrect or fake shipping address and, when the package cannot be delivered, contacts the shipping company directly to reroute the package to a new location. Then, they file a complaint saying they never received the package and because it was rerouted, and the seller can’t prove the item was delivered.
How to avoid a package rerouting scam: Work with your shipping company to block buyers from rerouting, and also validate a buyer’s address before shipping.
A customer attempts to overpay for an item or an order and asks you to wire them the difference. They may be using a stolen credit card or account to pay you, and if the legitimate account holder reports unauthorized activity, that money can be withdrawn from your account.
How to avoid an overpayment scam: Never wire money to someone you don’t know and if a customer overpays, consider canceling the order, as it’s likely to be fraudulent.
This happens when someone contacts you to be their employee or partner. They ask you to sell products on eBay or a website, pay their supplier, and update your PayPal account address to their address. They can then conduct fraudulent transactions and you may be liable.
How to avoid an employment scam: Never list someone else’s address and never send money to someone you don’t know. You should also verify all of your suppliers.
Employee theft from a PayPal account
In some cases, you might give your employees access to your PayPal Business account so they can do their job. Unfortunately, this opens you up to fraud risk. An employee might transfer money to their account, their friend's accounts, or to an offshore account. When you ask where the money went, they may tell you it was for a customer refund, used to pay a supplier or used for payroll.
How to avoid an employee theft scam:
- Always conduct background checks on potential employees and review current employees’ account activity on your PayPal Business account regularly.
- If you need an employee to manage your finances, make sure no one person has control over your account. When it comes to your finances, you should have checks and balances in place.
- Only give employees access to the information they need to do their job.
- Use PayPal's
manage users functionality to set up employee privileges.
- You can decide how much access to give each of your employees.
Return policy abuse
You sold something and the buyer files a complaint with PayPal stating the product was damaged, you sent the wrong order, or the product was broken. When this happens, PayPal will ask the buyer to send the product back to you. The buyer may be telling the truth — packages get damaged in shipment from time to time. But if you notice that an item the buyer said was broken is in perfect condition or the buyer used the item before sending it back, they might be trying to take advantage of you. Maybe they found it for less somewhere else or they’re trying to avoid your return policy.
How to avoid return abuse:
- Always pack items securely to prevent damage.
- Communicate with your customers. Inform them of any flaws up front and provide product pictures so customers know exactly what they're buying. If you’re selling a technical product, send installation instructions so the buyer can use the product.
- Provide a customer-friendly return policy so the buyer doesn't feel like they need to make up a reason for returning the order.
- If you sold something on eBay and feel your buyer is misusing the returns process,
report it. If you sold something on your own website and feel the buyer is misusing the return process, you can appeal your claim by contacting your payments company.
- Create a list of customers you don't want to do business with again. The list should include information such as name, address, email and phone.
- If you have your own website, the list could also include IP addresses, computer or device IDs and credit card information.
- Monitor new orders against your negative list.
- If you're a smaller business, you can create a negative list using Excel or a Macro.
- If you're a larger business, you can use a third-party rules system or develop your own in-house solution.
If you use affiliate marketers to help increase your sales, there are some additional things to be aware of. As a refresher, here’s how it works:
- Affiliate marketers are paid based on their performance.
- Each time the affiliate refers a customer to your website, and it results in a sale for your business, the affiliate gets a commission.
- You may notice that one affiliate is generating higher sales than your other affiliates.
Fraudulent affiliates take advantage of your revenue-share program by placing orders using stolen credit cards, then:
- Since you didn't realize the orders were fraudulent, you paid the affiliate.
- Months later you realize the affiliate was a fraudster because your customers filed complaints that their credit or debit cards were stolen.
- As a result of this scam, you may incur losses like affiliate fees, cost of your product, shipping fees, transaction fees, chargeback fees, and your time.
How to avoid affiliate scams:
- If you offer an affiliate program, make sure you know who your partners are.
- If you're partnering with a third party that refers affiliates, understand how the third party verifies and approves their affiliates.
- Pay affiliates 60 or 90 days after the order date so that if there is a chargeback or customer complaint, you notice it before the affiliate has gotten away with that money.
- Watch for spikes in sales on products that come with higher affiliate payouts.