There are a few scams happening to sellers using PayPal where there protection doesn't cover you. I know that if a buyer says the the item description doesn't match the item received, then you aren't covered. Also, if the buyer says they weren't actually authorized to make the purchase, then they're off the hook too (which doesn't make sense considering you need to know passwords and addresses before actually using PayPal). Here is one horror story that seems to pertain to you (I didn't write it):
My horror story with selling items on Ebay goes as follows:
Wop44 won an Ebay auction for an XBOX system with several games for a price of $91.61 on Sept 8, 2007. Mr. Naffziger paid for the item on Sept 10, 2007 using Paypal.
I shipped wop44 the XBOX system on Sept 11, 2007 via USPS (with delivery confirmation) and it was delivered to wop44 on Sept. 12, 2007 in Lindale,TX. On Sept. 18, 2007, I received an email from Paypal saying that the transaction was reversed thereby removing the Paypal funds from my Paypal account in the amount of $91.61 (the original amount paid).
I contacted Paypal and was told that wop44's transaction was reversed by wop44's bank but would not tell me why. The Paypal rep went on to say that when Paypal alerted me that wop44 had paid for the item on Sept. 10th, wop44 had not sent any money to Paypal but rather that Paypal works by showing a credit to the recipient's account and this credit is essentially a loan from Paypal to the recipient until payment is received by Paypal from the sender's account.
Therefore, if the sender has insufficient funds or simply calls his bank to decline the transaction, the Ebay seller will not know this until after the item(s) have been shipped. In my case the transaction wasn't reversed until 8 days after Paypal said wop44 had sent payment.
At this time [JOEWOAH NOTE: NOV. 2007!], wop44 had my XBOX system with games in his possession as well as the original money he paid (ironically, I also paid for the shipping to send it to him). Contacting wop44 via email has proved difficult as when he seldom responds to my emails he simply prolongs paying and has now completely broken contact with his last reply to my inquiries being on Sept. 23, 2007. I obtained wop44's phone number from Ebay and called several times leaving messages and my contact information. After a few days of this, wop44's wife answered the phone (I guess she forgot to screen the call), she was very apologetic and assured me that she would overnight a money order right away. On a side-note, she claimed to be one of Paypal's first 50 original customers which shows the level and absurdity of these people's BS. Of course nothing ever came, so I called four days later and miraculously spoke with wop44 himself. He said this was all a big misunderstanding and that his wife wasn't reliable. He swore he would overnight me a money order the following Monday as it was a Saturday (Oct. 20th) when we spoke. You can probably guess that nothing ever arrived.
It seems quite clear that wop44 never intended on paying for this item and is relying on the fact that Ebay does not care about its customers and that Paypal does not stand behind their Guarantees. I had the fine print explained to me by the Paypal rep - only transactions between "verified" customers are guaranteed. Of course, the reason you people think they use Paypal for is for protection - boy are they wrong! As a Paypal seller, their is not an option to only sell to "verified" customers. As an Ebay seller you have no way of learning this until you get scammed and are left holding the bag.
In addition, I have come to find that no law enforcement agency cares about internet theft including the Lindale,TX police dept. (wop44's hometown police), FBI internet fraud bureau or Postal Inspector. So if you are a thief and want to make some easy money all you have to do is what wop44 does. Interestingly, wop44 has recently tried (Oct. 1st) the same scam with dylanursula (view wop44's latest transaction). The comments left by dylanursula read " No payment; no comms. Ebay issued Final Fee Credit To Me & Payment Strike To WOP." It would seem dylanursula narrowly avoided having a $141 iPod stolen from them. My last recourse now is to simply reverse my original positive feedback for wop44 - not much of a consolation. Thanks Ebay and Paypal.
