Yesterday I got a $10 charge from PayPal when someone who had donated $1 to me ($.67 after PayPal fees) disputed the payment.
Besides being obviously frustrating, this is also quite interesting. The e-mail I received from PayPal stated:
After careful consideration of the evidence provided by you and the buyer in the case referenced above, we have determined that you are liable for the chargeback amount. The amount of the above-referenced transaction has been debited from your PayPal account.
PayPal has been charged a fee from the buyer’s card issuer, and a result we have had to assess your PayPal account a chargeback settlement fee of $10.00 USD.
If you have not already received your merchandise from the buyer and would like the merchandise returned to you, we encourage you to contact the buyer directly to arrange for the return of the merchandise.
I was never able to issue a refund to avoid this charge – the refund link was unavailable as the payment was listed as in dispute. I also had no request for information from PayPal, just a notification that the payment was in dispute. Of course, there was no merchandise to ship, etc.
This seems like a potential problem for Open Source developers that accept donations, should someone or group decide to try to game the system. Seems like you could go around making $1 donations, then disputing the charges to cause chargebacks and $10 fees to happen against developers.
Also, don’t forget that this person decided to dispute a $1 (one dollar!) charge in the first place, and that the bank/PayPal went ahead with the process to do so – which is quite remarkable.
Perhaps I’m naive in all this, feel free to educate me in the comments.
From what I remember when I ran a webhosting business awhile back (webhosting is infamous for clients doing chargebacks), it was up to the vendor to prove that it was a valid charge. But it doesn’t make sense that PayPal didn’t ask you to provide your side of the story.
I still can’t get over the fact a $1 charge from a donator was being disputed. It’s just crazy. It makes me wonder if there’s something else going on here that you haven’t been made aware of, like the persons account was closed out and the creditor stopped letting charges be assessed or issued blanket chargebacks on it, or something like that (which would sound fishy as well). Was the donation recent or is this a chargeback from months back? (more or less rhetorical to assess whether my possible explanation has merit or not)
PayPal has a bad history of not deciding in favor of vendors though from what I remember, which sucks since it works well as a donation system otherwise.
Hopefully, Paypal’s marketing/PR people are getting a daily feed of blog posts on their company and issue an apology and refund. That is really unbelievable, but hopefully some auto-generated button error rather than a human representative honestly assessing you a $10 fee. Twitter it. Good luck.
A $10 chargeback for a donation seems huge, it’s a donation. It should be non-refundable.
I actually think paypal should have a different to make the deposit for a “donation” since it’s freely given.
And they charge 1/3 of a dollar as fees!?!
Could just send to your account if they know your address and ask for a refund?
This is just more evidence that PayPal needs to die.
Unfortunately the banking industry is full of retarded fees like this. For example, my Bank of America account charges a $30 fee if I make more than 2 over-the-counter deposits per month. I bumped into this a few times in college when my mom tried to be nice and deposit money for me. The crazy thing is $1 deposited $0.01 at a time would cost me $3,000 in fees.
Interesting. I had someone dispute a donation in exactly the same way a few months ago, but PayPal did not find me liable so I didn’t have to pay anything.
It was still very dodgy though and it sucks that they made you pay in this case.
Dear Alex,
Really enjoying your WP Mobile Plugin, here’s a buck as a token of our appreciation.
Sincerely,
AIG
It is possible that this person lost its credit card the very next day they donated to you. In this case the credit card company will refute everything in the last 24 hours (to set an example of the time) and that would have included your donation. I find this very irresponsible from PayPal, I hope this gets resolved.
Alex, you are naive! Bankers need their millions in bonuses …… they gotta eat with all this financial turmoil in the world …… which they created!
I’ve lost a lot of money through PayPal chargebacks and refunds without caring two hoots about the vendor.
But this $1 being refunded and charged back at $10 is ridiculous!
Actually, I think PayPal is just too scared of a legal tangle and know you “need” them to receive payments.
How’s Google Checkout
Some time went into the investigation on the charge-back and so you are being made to pay for it.
PayPal is notorious for these types of interactions with it’s merchants. I personally had over $2800 held by PayPal for 120 days before I was able to get it back and their dispute process is a joke!
Hi, Alex.
Obviously there are persons out here that simply are a@(&¤holes and querulants. When thinking of all the help I have got from you developer, various plugins to my website, your story anger me. It is an interesting aspect you mention, that someone actually can “bad” your business by donating $1 and then dispute it, leving you to pay $10 each dispute.
Hopefully you won’t get much of this in the future, man! Most of us out here are decent persons, I guess. But then…, you know.
Take care, mate.
Mr. Eivind Trana (Norwegian) currently living in Lapu-Lapu, The Philippines
Hi guys, Actually ive expirience chargeback on donations
and its really $hit.
donor send me almost $250 but not 1 time donating. after few months donor filed chargedback
due of item not completed or item not recieve. halow its donate. and also credit card issuer said credit card are not authorized to send money. so theyd filed chargeback.
absolutely i was shock. any suggestion how to figure it out?
thanks
—
Matt
This is unbeliveable fee from PayPal. They must be joking…
A few years ago I got check from GO.com for… 25 cents. The mail envelope costs 1,10 USD…
And if I wanted to CASH IN my 25 cents, I had to pay 16 US dollars fo the bank fee…
That’s why there is a “Finance Crisis” out there – morons everywhere…
Wow, do you have any follow-up on this matter?
It looks like you’ve run afoul of PayPal’s “solution” to its micropayments chargeback implementation. Rather than adjust the default chargeback below its minimum threshold in the case of micropayments, it just charged you the full default amount. Ironic for supposedly a “modern” credit processor.
Wonder what the card issuer’s fee was?
PayPal’s $10 chargeback fee is lower than merchant accounts. Most merchant accounts have chargeback fees of $20 or more. And even if you win chargebacks, you still can’t get the fee back. And the banks usually keep the chargebacks secret from merchants for two months just to encourage the cardholder to do more fraud until they find out.
For the paypal bashing here, paypal is bad for many reasons, but chargeback fraud comes from credit card payments. If you take credit cards, you are guaranteed to get frauded a ton.
Oops typo fix.
“They find out” should be “they’re found out”
Making “micro donations” on credit cards is a technique commonly used by fraudsters to test compromised cards to see whether they are still active before moving on to try bigger hits against consumer electronics, jewelry, ticketing, travel and other “big ticket” e-commerce sites. If a cyberthief has compromised Paypal account info, it’s not surprising that they’d do the same thing there before moving on to rip off people at eBay or any other site accepting Paypal.
But you should know that it isn’t just Paypal that hits charities with chargebacks on donations. All the card companies do the same thing, and their fees are bigger. It’s precisely because charities will accept small donations that won’t alert the card issuer’s fraud systems that they are used as unwitting accomplices by fraudsters.
Just thought I’d belatedly share… I’ve had a few of these recently, but the one I got today was for $50. ie. the punitive chargeback fee was $50. Insanity. That’s 10 $5 donations wiped out!
Having dealt with consumers and consumer fraud I am never surprised by anything. A card used buy offspring or a stolen card usually generates an immediate charge back. Why not a ill gotten Paypal login or a login use by a child? The fact that Paypal take 1/3rd of a $1 donation is more concerning.
I had a customer buy one of my speaker boxes last December then in March he ordered a second one. A week after he received the second one he filed a charge back on both! PayPal deducted $180 x 2= $360 + $40 for two charge back fees for a $400 total from my account. The customer claimed that both items were defective. I sent FedEx ground out to pick both items up AT MY COST and sent the CPU# to PayPal. After 2 weeks nothing was tracking so I contacted FedEx and they said that a attempt to pickup was made and they were turned away by the customer saying he had nothing to return. American express ended up siding with the customer and PayPal said there policy requires them to go with whatever the CC company says. I argued that the customer still had the merchandise and they said that I’m responsible for recovering my own merchandise and its not there problem. I said that I tried and that he won’t return it.
I also told them that when you check out on my website you have to check off that you agree to the terms of sale an told them about the return policy. They told me that none of that matters and if they can’t sign in person that a checked box on my website means nothing.
My argument then is that PayPal’s user agreement must have not be binding wither since I didn’t sign it in person. So give me the $20 fees back.
This is why paypal should be avoided if possible. The also have a history of freezing accounts etc. Have you heard about “Bitcoins”? Maybe that could be used to collect donations.
[…] Alex King is an open source software developer who stopped accepting donations when some of them started costing him money. In 2009, after an anonymous user donated $1 ($0.67 after Paypal’s fees), they charged back their donation. Paypal then passed a $10 chargeback fee onto King, without any prior warning. He says, “I was never able to issue a refund to avoid this charge – the refund link was unavailable as the payment was listed as in dispute.” […]
I have had a similar problem, i have a donate button on my website that allows users to donate to the free to play minecraft server i run.
I received a huge donation of €450 which i then instantly used to pay for the server for 8 months, now my account has a negative balance of -450, and i cannot afford to pay that back? what am i supposed to do? its a donation to me how can something like a donation be refundable.
I run a gaming community and frequently receive donations, I had received a donation of $5 a month ago, and now the buyer is disputing.. over $5
So I just let him take it back, I accepted liability. Whatever, $5 is small.
Then paypal issues me a $20 charge. That’s insane, I really agree donations should be indisputable.
I own part of a direct credit card processor.
Pay Pal seems to work well for low volume merchants.
All fees are really quite high though.
In your situation if show a low charge-back history then the charge-back fee could be negotiated to 1 or 2 dollars.