A common eBay/PayPal scam and what to do if you’re the victim

Posted on August 7, 2013

Another case of the volatility of the eBay/PayPal environment:

The scenario: A relatively inexperienced seller lists an iPhone 5 on eBay. About 25 minutes before the auction is due to end, the seller receives a phone call from a bidder, who asks if he can come and collect the item in person in the event of winning the auction.

The seller then contacts eBay by phone, (having been slightly worried at the fact that the bidder could get his contact number), asks whether it will be safe to have the item collected in person or whether this will cause an issue with the transaction, and is told there would be no problems.

So the seller receives the payment, arranges to meet the buyer in person to hand over the item sold and the deal is completed; the funds (hundreds of dollars) are in the seller’s PayPal account and they duly transfer it into their bank account.  The next morning however the seller receives an email from PayPal saying there is a payment reversal under investigation involving their transaction.  On logging into their PayPal account they see that the funds are several hundred dollars into the negative; the payment has been charged back out of their account.

It ultimately transpires that the seller has been the victim of a fairly common fraudulent practice employed through eBay/PayPal.  On looking at the buyer’s details, the seller finds that their eBay/PayPal account details are conflicting; either the eBay or PayPal account was fraudulently hacked and used to buy the item, the scammer arranged to collect in person having paid with someone else’s money, and the seller ends up without the item and with a negative balance on their PayPal account once the costs have been charged back from them.  So after PayPal’s final resolution of the issue, the seller is being compelled to pay the cost to restore their account to zero.  On top of this, fairly soon the seller has PayPal calling them up and ordering them to restore the balance, threatening to set a debt collection agency onto them.

Shared on: http://www.consumeractiongroup.co.uk/forum/forum.php

The problem here is that with the eBay/PayPal platform, you as the seller are effectively ‘on your own’ if you become the victim of fraud in this way, there is no real protection from a scam like this, and it seems to be a fairly common occurrence.

Additional problem you may face in this situation: PayPal may try to restore the balance using another payment method, so if you have any other bank accounts associated with your PayPal account, ideally you would want to remove them.  PayPal, however, will probably not let you do this if your account balance is negative.

What you can do in this situation:

The seller should contact the police and tell them they have been the victim of fraud, obtaining a crime reference number in the process.  The seller should then send an email to PayPal explaining the situation, citing the crime reference number.  All correspondence with PayPal should be retained against the possibility of a court action in future.

When PayPal are continually calling up to harass the seller over the negative balance, they should tell the person at the other end that they want only to deal with this issue in writing, so via email.  This is because again they need that paper trail to demonstrate that they are the victim of fraud and they have proved as much to PayPal, who continue to harass them to get them, the individual seller or small business owner, to take the brunt of it.


The FizzPay solution: Receive payments by direct transfer with complete security.  We check out the buyer and their finances, we refund the buyer if anything goes wrong, so the seller has no reason to worry about sudden chargebacks or associated risks.