Three Major Dangers You Face When Taking Payments Through PayPal/Merchant Services:

Posted on August 21, 2013
Frozen Accounts:
An internet search brings up any number of dissatisfied PayPal users and their problems. In fact judging from the volume of disasters experienced, it’s surprising that many online sellers are still effectively risking their income through taking their payments through PayPal.
Here’s one account showing the dangers of the randomly frozen PayPal account, from PayPal
An online seller’s account is suddenly closed for 180 days, believe it or not due to high volume of sales passing into the account.  PayPal follow their usual practice of demanding large amounts of business documentation, and the seller supplies them; this results in the account being frozen anyway.
It gets worse still.
The seller then attempts to refund the money to their latest buyer, given that the transaction can no longer take place due to the frozen PayPal account.  This results in PayPal taking the money from the seller’s personal account rather than their PayPal account, meaning they have been charged twice for the amount they originally wanted to refund, and they can’t even access the money still frozen in their frozen PayPal account and have effectively have lost the money twice!
Limited Accounts:
Another example of how PayPal’s policies, ostensibly designed to ensure security against fraud but weighted extremely heavily against online sellers – can lead to disaster for anyone engaging in eCommerce enterprises.
A seller upgrades their PayPal account to a business account, providing all the required information to the company in order to verify their request.  PayPal placed a hold on the account for 24 hours, after which all payments were cleared and judged legitimate following a PayPal review.
48 hours later however, the seller finds the transactions have been moved to the PayPal resolution centre and calls the company repeatedly, day-in, day-out for a week.  All staff the seller speaks to at PayPal tell them that there is no problem with the account and the problem will go away.  They wake up one morning however to an email telling them that their account has been permanently limited and they cannot appeal the decision.  The end of that online business then…
Perhaps the most feared of payment disasters for the online businessperson, the fraudulent chargeback scenario resulting in loss of an entire sale including goods and payment, and another PayPal speciality:
A person sells -on behalf of their friend- a expensive merchandise credit worth more than $5000.  They send the item and retain evidence that is has been posted.  Soon they are notified that a chargeback been initiated.
The seller then provides all the evidence that the item had in fact been sent, having retained the evidence and filed a police report of fraudulent activity.   PayPal however demand that funds are restores to the seller’s account sufficiently to cover the refund, which has been issued to the fraudulent buyer.  The seller is effectively harassed by PayPal, even while the chargeback claim is supposedly under investigation.
When the chargeback claim is eventually settled in favour of the fraudulent buyer, the seller is not even informed officially, they are just repeatedly harassed over the demand for them to submit funds to their account to cover the chargeback cost.  The seller is left facing debt collection agencies, having had an exemplary selling record prior to falling victim to this scam which PayPal don’t seem to have even investigated.