Understanding disputes

Jul 19 2022 | PayPal editorial staff

Every once in a while something goes wrong with an order. This is a normal, expected part of doing business that’s often the result of a simple misunderstanding or human error. When this happens, buyers may take action by opening a dispute.
Disputes generally fall under three categories:
  • Item Not Received. A buyer pays for an item but never receives it
  • Significantly Not As Described. A buyer receives an item that’s significantly different than what they ordered.
  • Unauthorized Transactions. A buyer claims a purchase was made without their consent.
In most cases, the easiest way to settle a dispute is for buyers and sellers to work together to figure out what happened and to settle their differences. This can help prevent holds from being placed on your account and can go a long way in keeping your customers happy.

Get tips on successfully communicating with customers.
  • Presume good faith. ​Begin the conversation with an open mind and listen to what the buyer has to say before making any assumptions. Many problems result from miscommunication and simple human error.
  • Be constructive. Make it clear to your buyer that you want to find a resolution, and your customer will usually reciprocate. This early show of mutual respect should make the rest of the conversation more productive.
  • Stay focused on solutions. If your patience is wearing thin, resist the temptation to give your customer a piece of your mind – it will only make it harder for you to come to an agreement.
  • Think long term. Not every battle is worth fighting. If you give the buyer a break today, you may open the door to more business opportunities tomorrow.
  • Preempt disputes. The Resolution Center allows you to enter messages that all your buyers will see before they can open a dispute. For example, if you post a message that says, “All shipments out of Buffalo are currently delayed due to the blizzard,” you give your buyer an opportunity to understand the situation before filing a dispute.

PayPal Dispute Resolution Process.
When buyers and sellers can’t come to an agreement, PayPal Dispute Resolution can help them arrive at a solution both sides can agree on. Once a buyer initiates the dispute resolution process, PayPal holds the money for that transaction until the dispute is resolved. If the dispute cannot be resolved between the buyer and seller, the dispute can be escalated to a claim, and PayPal will determine the outcome of the issue.
Here’s how it works:
Step 1: Dispute notification.
PayPal will notify you by email when a buyer opens a dispute. PayPal will place a temporary hold on all funds involved in this transaction until the dispute has been resolved or closed. Once a decision is final, these funds will either be released to you or refunded to the buyer.
Step 2: Your response.
Review the dispute and post a reply with an explanation of what happened. Respond quickly and include suggestions on how to resolve the dispute.
  • If the buyer claims a purchase was made without their consent, review the claim and provide a response within seven days.
  • If you haven’t shipped the order, you can simply refund the payment and show PayPal proof of the refund.
  • If you have shipped the order, provide us with a copy of your shipping receipt of online tracking number – make sure the address on the shipping receipt matches the customer’s address listed on the PayPal Transaction Details page.
Step 3: Working it out.
Once a dispute has been opened, you and your buyer have 20 days to decide on a resolution. In most cases, sellers can work with their customers to find a solution you can both agree on. Once you’ve worked things out, the buyer closes the dispute. When disputes can’t be resolved, either party can escalate the dispute to a claim.

Escalating a dispute to a claim.
Claims give PayPal the authority to review the case and determine the outcome. Buyers have 20 days to file a claim from the time they open a dispute.

If your buyer files a claim against you, PayPal may ask you to provide some of the following information:
  • A third-party shipping receipt, a tracking number, or a signature confirmation to prove that an item was delivered.
  • Proof that you delivered a replacement or issued a refund if the buyer received their order but there was a problem with it.
  • A signed contract or other proof to show that services were provided.
  • Evidence to show that the buyer downloaded your product if you sold a digital good.
The delivery of this information is time sensitive, so don’t wait until the last minute, or you might lose the claim.
Resolving chargebacks.
A chargeback is when a buyer asks their credit card company to refund a charge. PayPal doesn’t decide the validity of the chargeback – that’s the job of the card issuer. PayPal’s role is simply to collect information about the transaction and help you work with the card company to resolve the chargeback.
  • Buyers can file chargebacks up to 120 days or more after they placed an order.
  • If you receive a chargeback, you’ll have 10 days to answer it.
  • Chargebacks are usually resolved in a few weeks but can take up to 75 days or more.
PayPal may ask you to provide the information needed to help you resolve the chargeback. As long as you are eligible for PayPal Seller Protection, PayPal will cover your loss even if you lose the chargeback.
PayPal Seller Protection.
While most buyers file claims and chargebacks for reasons they believe are legitimate, there are those who try to take advantage of the system. PayPal covers U.S. PayPal account holders in the event of a claim or chargeback when your transaction meets the following criteria:
  • Your transaction is marked either eligible or partially eligible. (You can check the status on the Transaction Details Page.)
  • Your primary residence listed in your PayPal account is in the U.S.
  • The item is a physical, tangible good that can be shipped.
  • You ship the item to the shipping address listed on the PayPal Transaction Details page.
  • Keep proof of shipment and delivery in the form of a third-party shipping receipt or tracking number; for payments more than $750 USD, you also need a signature confirmation of delivery.
Please note: Intangible items, such as digital goods and services; PayPal Direct and Virtual Terminal payments; and items prohibited by the PayPal User Agreement are not covered by PayPal Seller Protection. Learn more about PayPal Seller Protection.

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.

PayPal charges a Dispute Fee to manage the dispute resolution process on transactions that were completed by a buyer with a PayPal account or a buyer using PayPal Checkout as a Guest.  This Dispute Fee applies to such transactions both when the buyer files a claim directly with PayPal and when they file through a chargeback with their card issuer or a reversal with their bank.  The Dispute Fee does not apply to transactions processed through PayPal Pro or Advanced credit and debit card processing, sometimes called “unbranded” transactions.

The amount of the Dispute Fee depends on the percentage of claims filed against your total sales in the previous 3 months. The Standard Dispute Fee will apply unless your disputes rate is 1.5% or more and you had more than 100 sales transactions in the previous three full months. If you fall into that category, the High Volume Dispute Fee would apply for each dispute. 

The Standard Dispute Fee will be waived for Inquiries in the PayPal Resolution Center that aren’t escalated to a claim, those that are resolved amicably between the buyer and the seller, or those filed to PayPal directly as an Unauthorized transaction.

To learn more about disputes and claims and how to handle them, see our Help Guide.

Need more help?

How is the dispute rate calculated and how can I avoid being charged a dispute fee?  
Your Venmo payments are handled in the same way as other PayPal transactions, and will be placed in your PayPal account. They are also subject to the same rules as other PayPal transactions, including the rules on holds. Please note that at launch, Venmo-funded payments will not be specially designated in your account activity or reporting - they will look like regular PayPal transactions. We may add a special designation to your transaction activity or reporting in the future.  
How do I track Venmo disputes and chargebacks? 
You can track all of your disputes, including Venmo disputes, through the PayPal Resolution Center. The chargeback and dispute process for Venmo payments is generally the same as the process for PayPal payments, except for that the Venmo Authorized Merchant Payment Protection policy applies, rather than the PayPal Purchase Protection Policy.
How can I process a return from a Venmo payment? 
Returns for Venmo payments can be handled the same way they are for PayPal payments. 
​For more information on Venmo, please visit the Venmo Help Center.
We calculate the dispute rate for a seller by considering the seller’s total value of claims and sales over the previous three months. Total claims include the transaction value of all claims filed directly with and escalated to PayPal, except claims for unauthorized transactions, as well as all chargebacks from card issuers or bank reversals.

A merchant’s dispute rate can change between the Standard rate and the High Volume rate over time. For any given transaction dispute, the applicable dispute fee will be based on the seller’s dispute rate when the case is created.

What is defined as a High Volume Dispute Fee & a Standard Dispute Fee?

If a seller had more than 100 sales transactions in the previous three full months and their dispute rate over that time was 1.5% or more, they will be charged the High Volume Dispute Fee for each dispute. Otherwise, the Standard Dispute Fee will be applicable for each dispute.

How can sellers in the Standard Dispute Fee scenario avoid being charged the fee for a dispute?

Sellers won’t be charged a Standard Dispute Fee for disputes that are:
  • Inquiries in PayPal’s Resolution Center that are not escalated to a claim with PayPal
  • Resolved directly between seller and the buyer and not escalated to a claim with PayPal
  • Filed by the buyer directly with PayPal as an Unauthorized Transaction
  • Eligible for PayPal’s Seller Protection program
  • Claims with a transaction value that is less than twice the amount of the Standard Dispute fee
  • Decided in seller’s favor by PayPal or by the issuer

How can sellers in the High Volume Dispute Fee scenario avoid being charged the fee for a dispute?

Sellers won’t be charged a High Volume Dispute fee for disputes that are:
  • Inquiries in PayPal’s Resolution Center and not escalated to a claim with PayPal
  • Resolved directly between seller and the buyer and not escalated to a claim with PayPal
  • Filed by the buyer directly with PayPal as an Unauthorized Transaction.

How will High Volume Dispute Fee merchants be treated differently than other merchants?

High Volume Dispute Fee merchants will be charged a higher fee for disputes filed by their customers, compared to Standard dispute rate merchants in their market. Merchants in this tier won’t be able to take advantage of certain exclusions and will be charged a Dispute Fee for all claims and chargebacks which are not amicably resolved, regardless of the dispute outcome.

How will PayPal notify merchants of their dispute rate?

PayPal will notify merchants of their Dispute rate periodically.This may include emails to the merchants’ account email address, merchant reports, and in the Resolution center.

Where can I see the dispute rate for my PayPal account?

You will find your Dispute Rate & Dispute Fee Tier in the Resolution Center. 

Where can I see the fee amount charged to my account and my case?

Go to the dispute details on your Case Summary Page to see if you were charged the Dispute Fee. 

Will High Dispute Fee merchants be provided any notice prior to the implementation of the Dispute Fee?

Merchants who would fall into the High Dispute Fee tier will be given a 90-day grace period after User Agreement changes related to the Dispute Fee become effective for their region. They can use this time to bring down their dispute rate to avoid being charged higher fees associated with their claims.

Will fees be reimbursed if the merchant appeals and wins a case?

Yes, if a merchant appeals and wins the case, both the disputed amount and the Standard Dispute Fee may be reimbursed.  The High Volume Dispute Fee, if applicable, will not be reimbursed because it does not depend on the case outcome.

Does the Dispute Fee impact Chargeback fees on unbranded (DCC) PayPal transactions?

Disputes on unbranded transactions will not be charged a Dispute Fee, but will continue to be charged the Chargeback fee, according to the existing Chargeback fee policies and Seller Protection eligibility.
Offers that sound too good to be true, probably are
Most of us are careful if a stranger approaches on the street and offers a deal that's just too good to be true. But we're much less cautious online, putting us at risk.

Advance fee fraud
If you get an offer for free money, there's probably a catch. Typically, fraudsters will ask you to send some smaller amount (for taxes, for legal documents, etc.) before they can send you the millions you’re promised, but which they never intend to send you.

How to avoid this scam: Don't wire money to someone you don't know.

Overpayment scam
  • A customer sends a PayPal payment that is more than the purchase price of the order and then asks you to wire them the difference.
    • They may tell you that they accidentally overpaid you, the extra money is for the shipping costs, they're giving you a bonus for your great service or the money is for the stress they've caused you.
    • They may even ask you to wire the shipping fees to their shipper.
  • This scammer may have paid with a stolen credit card, bank account number, or checking account.
    • Just because a payment has been deposited into your account, doesn't mean the money is yours to keep. If the legitimate account holder reports unauthorized activity, the money can be withdrawn from your account.
    • If that happens, you'll lose the money you wired to the fraudster, the product you shipped, shipping costs, and your payment.
How to avoid this scam:
  • Don't wire money to someone you don't know. A legitimate buyer won't overpay you for an order.
  • If a customer overpays you and asks you to wire them the difference, consider canceling the order—it's very likely to be fraudulent.
  • Don't wire money to the bogus shipping company—it's part of their scam to get your money.

Prize winnings
Messages asking you to pay a small handling fee to collect some fabulous prizes are usually a scam. You send the handling fee and get nothing in return.

How to avoid this scam: Don't send money to someone you don't know. A legitimate prize won’t require you to pay in order to receive it.

High profit – no-risk investments
These types of investments are usually scams and include messages insisting that you “Act Now!” for a great deal.

How to avoid this scam: Discontinue communication with this person/company.

Fake charities
Scammers use disasters to trick kind-hearted people into donating to fake charities. This usually happens when there is a refugee crisis, a terrorist attack, or a natural disaster (like an earthquake, flooding, or famine).

How to avoid this scam:
Thoroughly check the background of any charity to make sure your donation goes to real victims. Use resources to check out charities, like the ones below:


If a charity does not have a website, be cautious.

To learn more about common scams and how to avoid them, search online for advance fee fraud. You can also read the FBI's material on common types of scams. Most importantly: be as cautious online as you would be in the real world.

Shipping Scams
There are several ways fraudsters incorporate shipping into their schemes. Be sure you’re familiar with the following:
  • My shipping service scam
    • The buyer asks you to use their shipping account because they can get a discount, they have a preferred vendor they’ve worked with for years, or their shipping service is cheaper or more reliable. In another variation of the scam, the buyer may also ask you to wire the shipping fees to their preferred shipper.
    • If you use the buyer's shipping account, they can easily contact the shipping company and reroute the order to another address.
      • The buyer can then open up a complaint asking for a refund because they didn't receive their order.
      • You aren't able to prove that the buyer received their order and you are out your product, the shipping costs, and your money.
    • If they ask you to wire the money to a bogus shipping company, they can steal your money.
      • After you have wired the money you’ll find out that the order was made with a stolen card or bank account. You may be held liable for returning the funds to the legitimate customer whose account was stolen.
How to avoid this scam:
  • Only use your shipping account.
  • Never wire money to someone you don't know – you can't get it back easily.
  • If a customer asks you to use their shipping service, review their order for fraud carefully. They may have used a stolen card or bank account to fund the purchase.
  • Ship to the address on the Transaction Details page.
Pre-paid shipping label scam
  • You receive an order from a customer who asks you to use their pre-paid label to cover the shipping charges. (They may tell you that they can get their labels at a discounted price.)
  • By providing the label, the customer controls the destination of the package. They may send it to another country, a PO box, or some other untraceable location.
    • To be covered under PayPal's Seller Protection policy, you are required to ship to the address on the Transaction Details page.
    • The shipping label may also have been purchased with a stolen credit card.
How to avoid this scam:
  • If the customer asks you to use their pre-paid label, review their order for fraud carefully. They may have used a stolen card to make the purchase.
  • Do not accept shipping labels from your customers.
  • Ship to the address on the Transaction Details page.
Package rerouting scam
The buyer reroutes the package so they can file a complaint that they never received it.
  • A buyer places an order and provides an incorrect or fake shipping address.
  • The shipping company tries to deliver the package but isn't able to.
  • The buyer monitors the online tracking information and notices that the shipper couldn't deliver the package.
  • The buyer contacts your shipping company and asks them to send the package to their correct address. The shipping company delivers the package to the new location.
  • The buyer then files a complaint about not receiving the item.
    • Because the shipment was rerouted, you can't prove the item was delivered to the address on the Transaction Details page.
    • The buyer gets to keep the item and money.
    • Because the package wasn't delivered to the address on the Transaction Details page, you aren't covered by Seller Protection.
    • Unfortunately, you lost the product, shipping fees, and the money.
    • To make it worse, you might also have to pay your shipper an additional rerouting fee.
How to avoid this scam:
  • Contact your shipping company and block buyers from rerouting packages.
  • Validate the buyer's address before shipping.
  • Only ship to the address on the Transaction Details page.

Business/job opportunities
Fraudsters will post fake job opportunities on job-posting sites, dating sites, and via spam email.

Reshipping packages scam
  • One of the more popular work-from-home scams is reshipping electronics, clothing, and other items out of the United States.
  • You receive items (electronics, jewelry, clothing, etc.) in the mail and are asked to ship them out of the country.
    • Packages may be addressed to someone else's name (the stolen credit card victim).
    • Your "employer" provides you with a shipping label (also paid for with a stolen credit card).
    • Your "employer" asks you for personal information, such as your Social Security Number and bank account details, so they can "direct deposit" your check.
    • Generally, you’ll never get paid and have just exposed yourself to fraud.
  • Most merchants will not ship items out of the country.
    • Fraudsters need you to act as an intermediary to help get the goods out of the country. It also helps them avoid getting caught.
    • They use your personal information to steal your identity or take over your account.
How to avoid this scam:
  • If it's too good to be true, it probably is. Know who you are dealing with and don't reship packages.
  • If you didn't realize you were involved in a scam until the packages started arriving, refuse delivery or return to sender. Report scams to the Internet Crime Complaint Center or contact your Postmaster.
  • Never give your private personal or financial information to anyone you don't know.

Employment scam
  • Someone contacts you about a great new business opportunity. They need an employee or partner to sell cameras (or some other expensive product) for them.
  • Scammers trick innocent and trustworthy people into sending them money and merchandise.
  • Use the money from the orders to pay their supplier. They’ll contact the supplier in advance to let them know you’ll be sending them money.
  • Update your PayPal account address to their address. They’ll usually give you an address that looks like a regular address but it's a P.O. box.
  • After you pay the supplier, you’ll start receiving complaints from your buyers stating that they didn't receive their merchandise. Instead, they received an empty box (from the scammer).
  • You contact the supplier. They inform you that your partner said you would be sending money for gold bullion, so they shipped the gold bullion (not cameras) to your PayPal account address. You remember that your partner asked you to change your PayPal account address to their address, so they could pick up the gold.
    • You paid the supplier for the cameras, so you file a complaint against the supplier. Unfortunately, you learn that you may be liable for the money since the supplier delivered the merchandise to your PayPal account address.
How to avoid this scam:
  • If it's too good to be true, it probably is. Know who you are dealing with.
  • Don't list someone else's address on your PayPal account.
  • Verify your suppliers and don't send money to someone you don't know.
  • Only ship items to the address on the Transaction Details page.
  • Be on alert if you’re asked to ship a lot of packages overseas or to the same post office box.
If you think you’ve received a suspicious email or have been directed to a fake website, forward it to phishing@paypal.com 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 into your account and view your transactions. It’s also a good idea to change your password.
To report SPAM SMS messages, forward them to ‘7726’ (which is the key for SPAM on most phones). Check with your service provider to find if this service is supported or read more here: http://www.gsma.com/aboutus/.  
To view all transactions and activity, log in to your PayPal account and check your recent activity. If you see any unauthorized transactions, go to the Resolution Center to report them.

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