Business Resource Center

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Understanding disputes

Key Facts

  • Always respond to disputes and claims.
  • Make it clear you want to help find a resolution to the problem, your customer will usually reciprocate.
  • Understanding the rules will help you respond effectively.

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 7 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 US 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 United States.
  • 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 over $750 USD, you’ll also need a signature confirmation of delivery.

Please note: Digital goods, services, intangible items, DCC/VT payments are not covered by PayPal Seller Protection and items prohibited by the PayPal User Agreement.