PayPal Removes Seller Protections For Item Not Received Chargebacks

PayPal's Seller Protection policy will no longer protect sellers from Item Not Received cases filed as credit card chargebacks, effective January 16, 2024 according to their latest policy updates announcement.

Policy Updates

Policy Updates

PayPal

Amendments to PayPal’s Seller Protection Program
Effective January 16, 2024:

We are revising PayPal’s Seller Protection Program to exclude from eligibility Item Not Received claims filed by buyers as chargeback claims with their card issuers for card-funded transactions.

The previous policy provided seller protection for Item Not Received in case of credit chargebacks, as long as the transaction was marked as "eligible" and met all other criteria.

Current policy:

PayPal’s Seller Protection program may apply when a buyer claims that:

They did not authorize, or benefit from, funds sent from their PayPal account (referred to as an “Unauthorized Transaction” claim), and the Unauthorized Transaction occurs in an environment hosted by PayPal; or

They didn’t receive the item from you (referred to as an “Item Not Received” claim)...

...Item Not Received Additional Requirements
To be eligible for PayPal’s Seller Protection program for a buyer’s Item Not Received claim, you must meet both the basic requirements and the additional requirements listed below:

• Where a buyer files a chargeback with the issuer for a card-funded transaction, the payment must be marked “eligible” for PayPal’s Seller Protection on the Transaction Details page.

Policy effective January 16, 2024:

PayPal’s Seller Protection program may apply when buyer(s) claim that:

They did not authorize, or benefit from, funds sent from their PayPal
account (referred to as an “Unauthorized Transaction Unauthorized Transaction” claim), and the Unauthorized Transaction(s) occur in an environment hosted by Paypal; or

They didn’t receive the item from you (referred to as an “Item Not Item Not
Received Received” claim); provided, however, that Item Not Received claims that result from buyers filing chargeback claims with their issuers for cardfunded transactions are not eligible for PayPal’s Seller Protection.

That's a major change in policy that could leave unsuspecting sellers on the hook for chargebacks they would have previously been protected from paying.

This move is the latest in changing policies or services for both buyers and sellers in an apparent effort to cut down on costs and/or limit liability for PayPal.

Last year, buyers were dismayed when PayPal discontinued the Return Shipping On Us program just before Black Friday.

PayPal Ending Return Shipping On Us Program

PayPal announces Return Shipping On Us program will end November 27, 2022.

Value Added ResourceLiz Morton

And earlier this year, sellers were left in the lurch when PayPal decided to end back up funding from a bank account for the PayPal Business Debit Mastercard.

PayPal Ends Bank Backup Funding For Business Debit Mastercard

Bank backup funding for PayPal Business Debit Mastercard ends September 12, leaving small businesses in the lurch.

Value Added ResourceLiz Morton

Will this change in seller protections cause you to rethink using PayPal for your ecommerce business? Let us know in the comments below!