The 8 common e-commerce scams to avoid.

Jan 03 2019 | Alice Wong, Small business - North Americas, PayPal

Criminals are persistent, but you can avoid falling for scams by taking some proactive steps and knowing what to watch out for. Be aware of these most common e-commerce scams.
1. 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.

2. 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.

3. 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.

4. Overpayment scam.
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card or account to pay you, and if the legitimate account holder reports unauthorized activity, that money can be withdrawn from your account.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.

5. Employment scam.
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.

6. 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.

7. 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.

8. Affiliate scams.
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.
You can also access additional information about fraud and online security by reviewing our FAQs at the bottom of this page.

The contents of this site are provided for informational purposes only. You should always obtain independent, professional accounting, financial, and legal advice before making any business decision.

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Frequently asked questions.

Fraud Protection is an integrated risk management solution that uses PayPal intelligence and advanced machine learning to help you fight fraud. It allows you to customize fraud filters based on your unique tolerance for risk and business needs, helping you to better balance chargebacks and declines.

To launch Fraud Protection, go to your App Center, then All Apps on the left.

The tool includes:
  • Dashboard: visually displays high-level information about payments, revenue, and chargebacks for a selected time period.
  • Filters: displays a list of filters along with their conditions that can be used to help approve or reject incoming payments. Changes made to filters can be tested on your historical transaction data to help you understand the impact of those changes before activating them.
What are Fraud Protection filters?

Filters are used to automatically stop fraudulent purchases and approve genuine ones. Transactions are evaluated against filters and get declined if any of the filter conditions are satisfied. A set of customized filters are provided to you out-of-the-box and are tailored for your business by considering various attributes, such as business category, average payment volume, and past chargebacks. 

What filters do I get with Fraud Protection?

How do I enable/disable Fraud Protection filters?
  1. Click Filters.
  2. In the Enable column, click the toggle against the filter you want to enable or disable.
  3. Click Test to test the performance after updating the selected filter.
  4. Click Save if you want to keep the changes.
How do I edit Fraud Protection filters?
  1. Click Filters.
  2. Click Edit next to the filter you want to update.
  3. Enter values into the available boxes.
  4. Click Test to test the performance after updating the selected filter.
  5. Click Save if you want to keep the changes.
What are filter recommendations and how do I apply them?

Behind the scenes, Fraud Protection constantly learns from payments across the PayPal network and provides recommendations to filters aiming to maximize your revenue. The initial set of recommendations will take at least 45 days after you’re onboarded to appear. 
  1. In the Recommendations panel, click View.
  2. Select the checkboxes for the filters you wish to update.
  3. Click Apply.
  4. Click Test to view your simulated Approvals/Rejections.
  5. Click Save to update your filters for future payments.
When reviewing the recommendations and selecting the checkboxes, you can click the dropdown arrow to view the Performance Forecast. This gives you an idea of how it will improve your fraud decisioning performance. 

You can also click Recommended Filter Update next to each Individual filter if you want to review each one separately. 
How does the filter testing feature work?

Your historical transactions are used to test filters based on the time period you select in the Time Filter. This is available on the Filters page in the upper right-hand corner. 
The filter testing feature helps to simulate filter changes over your past transactions. This doesn’t guarantee future performance of your transactions. However, because these changes apply to live transactions within 5 minutes of saving, you are required to test any changes before saving. 
Can I add my own filters?

The filter set provided is based on your business metrics. They’re best suited to your transactions and we don’t provide the option to create new filters as that might lead to more declines. 
What if I have a genuine transaction declined by Fraud Protection?

You are unable to approve a transaction that has already been declined. If you think that a similar transaction could be rejected by Fraud Protection, you may change the filter settings or even switch off the filter that you believe resulted in the rejection of that transaction. Remember to switch the filter back on once the transaction is complete.
What happens if I receive a dispute or chargeback that was approved by Fraud Protection?

Fraud Protection serves as an added layer of security to decline transactions that can result in potential chargebacks. If you receive a chargeback on an approved transaction, it will fall under your PayPal Terms and Conditions. PayPal is not liable for any chargebacks even after Fraud Protection is enabled. 
How do I disable Fraud Protection if I no longer want to use it?
  1. Click the Gear icon within Fraud Protection.
  2. Click Disable Fraud Protection.

It’s extremely important to report any suspected instances of fraud. If you think your account has been compromised change your password and update your security questions right away to protect your account (we may limit what you can do on your account until you do so).

Here are some types of fraudulent activity. Please follow the steps we’ve included below to report them:

  • Unauthorized activity on your PayPal account
  • Unauthorized transactions on your PayPal Debit Mastercard®
  • Fake PayPal emails or spoof websites
  • Items not received or a potential fraudulent seller

Unauthorized activity on your PayPal account

If you've received an email notification that something has been changed on your account, but you don't remember changing it, please change your password and security questions. Next, you can update any changed information, such as your email address, address, phone number, or other profile information.

If you notice a transaction that you didn’t authorize on your PayPal, bank or credit card statement, let us know right away through our Resolution Center. Some charges may appear unfamiliar but are legitimate and authorized, learn more.

  1. Go to the Resolution Center at the bottom of the page.
  2. Click Report a Problem.
  3. Select the transaction you want to dispute, and click Continue.
  4. Select “I want to report unauthorized activity.”
  5. Click Continue.
  6. Follow the instructions to finish opening your dispute.

If you can't log in to your PayPal account, follow the steps to reset your password.

Unauthorized transactions on your PayPal Debit Mastercard

If the unauthorized transaction involves your PayPal Debit Mastercard:

  1. Go to the Resolution Center at the bottom of the page.
  2. Click Report a Problem.
  3. Select the transaction you want to dispute, and click Continue.
  4. Select “I want to report unauthorized activity.”
  5. Click Continue.
  6. Follow the instructions to finish opening your dispute.

Remember, you’re 100% protected against unauthorized transactions sent from your account.

Here's how to report your PayPal Business Debit Card lost or stolen.

  1. Click PayPal debit card under your PayPal balance.
  2. Click the card you want to report lost or stolen under "Manage my cards."
  3. Click Report this card lost or stolen card.
  4. Click Deactivate Now.

Fake PayPal emails or spoof websites

If your account is limited, we'll send you an email with the reason for the limitation. For your convenience, we always list the steps to remove the limitation in the Resolution Center under Steps to Remove Limitation.

If you received an email stating that your account is limited but don't see any steps in the Resolution Center, you may have received a fake email. Forward it to and we’ll investigate it for you. After you send us the email, delete it from your inbox. If you clicked on any links or downloaded any attachments within the suspicious email or website, log in to your account and view your transactions. It’s also a good idea to change your password..

Here's more information on how to spot and report suspicious communication, and keep your account safe.

Items not received or a potential fraudulent seller

If you sent a payment but haven’t received what you paid for, or believe the seller to be fraudulent, you should visit our Resolution Center. We’ve developed several programs to help protect you, and opening a dispute is the first step to help get your problem resolved. Here’s how:

  1. Go to the Resolution Center.
  2. Click Report a Problem.
  3. Select the transaction you want to dispute.
  4. Click Continue.
  5. Select either I didn't receive an item I purchased or the item I received was significantly not as described or I want to report unauthorized activity, depending on the nature of your dispute.
  6. Click Continue.
  7. Follow the instructions to file your dispute.

Here are some popular scams you should avoid.

PayPal lets you quickly and securely send and receive money for goods, services and more.

With PayPal you can:

  • Shop online in more than 200 countries and regions.
  • Send money securely to friends and family around the world.
  • Checkout quickly at hundreds of your favorite online stores.
  • Accept credit cards on your website.
  • Make donations to your favorite charity.
  • Set up an online shop and receive payments.
  • Use your credit card and earn rewards.

At PayPal, your financial security is our highest priority. We use the latest anti-fraud technology to help make sure your transactions are safer and you’re 100% protected against unauthorized payments sent from your account.

Here's how you can help prevent fraud when shipping an order:

Verify shipping address
Go online and verify the shipping address. Look for red flags such as shipment to a freight forwarder, shipping company, P.O. Box, hotel or a vacant property. Fraudsters often ship orders to addresses that can't be traced back to them.
  • Freight forwarder: Third party shipping service that reships merchandise to another location (typically abroad) for a fee. To see where your package is being sent to, simply enter the shipping address into a search engine. If the search results show the name of shipping company, be more cautious.
  • Shipping companies or P.O. boxes: Fraudsters like the anonymity that shipping companies and P.O. boxes provide. However, there are also a lot of legitimate reasons for using a shipping company or a P.O. box. You just need to be more cautious, since shipping to P.O. boxes and shipping companies are typically more risky than shipping to residential addresses.
  • Money mule: Fraudsters pay people (known as money mules) to have orders shipped to their address. The money mule receives the package, then reships it to the fraudster’s address. Be careful if you have a lot of orders from different customers that are shipped to the same address.
  • Vacant property: To identify vacant properties, enter the shipping address into a search engine. If the property is currently listed as for rent or for sale, it could be vacant.
Ship with online tracking
Use a shipping service that provides online tracking to help confirm the item was delivered. Standard shipping receipts only show that an item was shipped. Online tracking services prove the item was delivered.
  • If the total sale is for $750 or more, obtain signature confirmation to confirm your customer received their order – the nominal expense is well worth it.
  • Use your discretion when shipping internationally using First Class Mail International since this shipping service is not accepted under PayPal's Seller Protection Policy.
Order shipping insurance
Too many things can go wrong in transit. That's why it's important to purchase shipping insurance for items that are fragile or expensive. Shipping insurance serves two purposes:
  • Insures the item in the event it is lost or damaged.
  • Includes tracking and delivery information so the customer can see that the order is en route, and you will know when the package was delivered.
In case of a shipping problem, file an insurance claim with the shipping company.
  • You, your customer or the shipping company can report claims. Contact your shipping company for detailed instructions on how you should proceed with a claim.
  • Be aware of insurance exceptions.
    • Liability for loss or damage may be limited depending on the type of package, the declared value, and/or the shipping company. Talk to the shipping company to ensure proper coverage.
Delay shipping high-risk orders
  • Delay shipment for new orders that are expensive and in demand for 24 to 48 hours, especially when shipping internationally.
  • Use caution when shipping overnight. Fraudsters will often ask for overnight shipping so that they can resell expensive merchandise as quickly as possible.
Use your own shipping service
  • Do not use your customer's shipping company when mailing orders. Packages can be rerouted by the customer to other addresses after shipment, and won't be covered by Seller Protection.
Use care when choosing or acting as a drop shipper
  • Since you're responsible for delivering what the customer orders, it's critical to choose a reputable drop shipper to help avoid losses.
  • Be wary of drop-shipping companies located in high-risk countries.
  • If you're a drop shipper, have a vetting process in place for all suppliers. This should include inventory management and product guarantees (to ensure that items are in stock and you're delivering high-quality merchandise).
Issue returns quickly and let customers know when you are out of stock/inventory
If an item is out of stock, remove the listing or update it to reflect the out-of-stock status. Provide an estimated in-stock date or clearly indicate that customers who choose an out-of-stock product are placing an advance order.

Example: A new customer orders a $10,000 chandelier. Here is what you can do:
  • Search an online map to see who and where the order is being shipped. Is the order being shipped to an expensive home, motel or to a freight forwarder?
  • Use a search engine or social networking site to verify the name and shipping address. Does the name, shipping address and billing address match?

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