Many of you know that sending paypal GIFT payments offer little to no buyer protection.
HOWEVER, there is a loophole where paypal gift can be used to defraud THE SELLER.
I hesitate to share this info, but I think people should know and protect themselves.
Here's the scenario:
- The seller asks for the funds to be paid as GIFT, thinking this offers protection for the seller.
- The buyer sends a paypal gift using a credit card by clicking on the pay the associated paypal fees option. (I am paraphrasing the exact option here.)
- The recipient of the payment (seller) receives the GIFT payment and the full amount shows up in their account as a gift.
- Everything looks okay so the seller ships the watch.
- Days or weeks later, the fraudster buyer will issue a chargeback with their credit card company by claiming that their credit card was stolen, etc. The lies are easy.
- Credit card company will issue a chargeback, and in response, Paypal will hold the associated funds--which are now in the seller's account.
- Because this was a GIFT transaction, as far as Paypal is concerned, there was no sale or exchange of goods.
- Because there was no sale, the seller cannot use shipment confirmation to argue a legitimate transaction. Evidence of shipment means nothing when there was no official exchange of goods.*
- Seller's funds are held/retracted and buyer gets a free watch.
LESSON: DO NOT ACCEPT PAYPAL "GIFT" PAYMENTS IF YOU ARE A SELLER.
*NOTE: If the PayPal transaction occurred using the "item or service" option, then the seller can at least try to fight chargeback fraud by submitting proof of shipping and/or delivery.