The Basics of PayPal Scams
The simple truth is that there are a lot of people in this world that wish to steal your money. The Internet, with all of its great benefits, also allowed these people to gain a much greater audience and opened up a wider range of targets.
Paypal has proven to be particularly brutal for scams. Those that know the system well can often manipulate it to earn a quick buck from an unsuspecting victim. A number of scammers flocked to eBay and similar websites to try and take advantage of unsuspecting shoppers and trusting sellers. If you want to stay safe and avoid these scams, you’ll need to recognize the common ones and be ready to handle them when they happen.
There are two different types of scams that generally target PayPal users. There’s a number of different phishing scams that exist, and there are scams that target online marketplaces and try to defraud buyers and sellers. Phishing scams are a major problem. It’s a big enough problem that we already have several articles on the subject. I have an article about avoiding PayPal phishing, which should answer most of your questions. It’s a big field, so it’s worth reading. The field of online marketplace fraud, specifically eBay fraud, will be looked at below.
Image Credit: Wikipedia Commons/Steven Arnold
This is probably the most standard scam that you can suffer. You buy something online, and they just don’t send it. It gets “lost in the mail” or the seller just drops off the face of the Earth. This one isn’t exactly a complicated scam. They’re just pocketing your money and making a run for it before you can get it back.
If you want to avoid this, you can take a few simple steps when shopping. The first is to check the reputation of the seller. Be wary of new sellers or any unknown websites. Just about everyone should have some reputation online. Note, and this is important, that you shouldn’t blindly trust well regarded sellers. There are ways to boost reputation with shell sales, or a simple hack of an old account. You can trust established sellers, especially power sellers, more, but you can’t trust them blindly. You also shouldn’t just write off new sellers. Everyone has to start out somewhere, and new sellers can be smaller and more personal, but you have to be a little more careful.
Examine the auction listing or sale page to evaluate them properly. Are they just using stock images? What does their description say? Does it seem like they have the item in their hand as they’re describing it? If the answer is no, then this should set off some alarm bells. While professionals or power sellers might not be specific due to their high volume, most sellers will post some personal details in the natural course of the listing.
Also watch for signs in the emails. Are they trying to stall you? A common tactic, at least in the older days of the site, was to try and stall the buyer until the time for a chargeback ran out. Keep track of it and make sure that you file the challenge in time for either your credit card or PayPal account.
If you don’t receive your item, go into PayPal and put a chargeback onto the payment. Describe what happened in the note, and cite it as a non-receipt conflict. PayPal has fairly good buyer protection, so you have a decent chance of getting your money back. Especially since new sellers are often forced to keep enough money on hand to handle any chargebacks. Unfortunately, if it’s a new account and they managed to withdraw the money, it’s probably gone. It’s always worth your time to file though.
The sale of “knockoff” items is quite prevalent online. Note that this isn’t necessarily a scam. Some people outright state their intentions, or at least give a wink and a nod. I’m obviously not talking about them.
Everything from hardware to clothing can suffer from this problem. If you buy an item that is supposed to be real, and end up with a cheap version of it, you need to be ready to defend yourself.
This actually might be the hardest to proactively defend against. A number of these sellers have high reputation. Some people can’t tell the difference, and assume that it was a fine sale. Others may have agreed to give positive reputation for a fast refund, which I’ll get to in a second. The best option is to, once again, look at the pictures. Are they taking pictures of their actual stock or items? Are they describing it well? And of course, is it selling at far too cheap of a price?
If you receive a fake item, you have a few options. You can pursue similar tactics as those described above, and issue a chargeback. PayPal and eBay require accurate descriptions. If you receive an incorrect or damaged item, you can pursue a chargeback if they refuse to issue a refund. As long as you’re willing to send it back, you should be assured a refund, if nothing else. You may have a little luck with a little hard negotiation. As I said, major dealers rely on their reputation. While it would be wrong to promise good reputation for a refund, the threat of negative reputation in a private message will often have them offering full refunds quite quickly. You can obviously still report them after that too, if you wish.
eBay Gift Card Fraud
I’m just going to lead with the fact that it’s a horrible idea to buy or sell gift cards on eBay. There is a lot of danger involved, to the point where you’re practically gambling. While you may get a good deal on a card someone doesn’t want, you’re taking a big risk. And, on the other side, note that a number of people will pay above face value for the card. Between value cards, eBay gift cards, credit card points, etc., they may actually have a good discount at their disposal. Keep this in mind before you commit to a bidding war, and note that any good looking deal may be priced low for a reason.
Some sellers go with the deceptive route. They may mention in the description that it’s a $50 gift card, which “used” to have $50 on it. This occasionally happens with real items (I’m selling a PlayStation 3…box), but gift cards are particularly open to it. One word changes the entire auction. Read it carefully if you really want to buy. People often sell used cards, because they know it will usually take several days for the average buyer to use the card, which gives them extra wiggle room. It may even be late for a chargeback, in the worst cases.
There’s a similar trick in which they can just send an unactivated card.
There’s also a tremendous risk of fencing. While this is always a danger, again, it’s a big risk for gift cards. Many thieves have taken to stealing credit cards and buying a large number of gift cards quickly. They can then just flip the cards online and get their money out, while you’re stuck with a dead card and a call from the police, usually long after the scammer has cashed out their account and left.
In these cases, you actually don’t have a lot of recourse. You may be able to successfully launch a chargeback, but that all depends on the seller having money left in their account. In the case of tricky wording, it’s a bit of a coin flip on whether they’ll decide in your favor. It’s a scam, but not technically incorrect. Fraud with eBay gift cards is a huge danger on PayPal.
Image Credit: Sxc.hu/7rains
This is a quick one, and it applies to both buyers and sellers. Do not use a non-accredited escrow service that the other person suggests. An absolutely brutal trick that some scammers adopted was to double dip the scam. They not only try to get free money or items, but your information. “For both of your safety”, they may suggest using an escrow service. This will probably be fake, with a few stickers on it claiming that it’s approved. Do independent research on any suggested service, and stick to well known operators.
False Chargebacks - Fraud for Sellers
This is something you must always be ready for as a seller on eBay. This is really the main eBay payal scam too. Buyers can easily claim that an item was damaged in shipping, or that it never arrived. They’ll then walk away with a free item, while you’re stuck with shipping fees and a refund.
For the prevention side, make sure that you enable eBay’s filtering. It just makes sense to filter out buyers without verification or with negative reputation. Even if you know better than to send an item to a scammer, they can still run up the bid (since they don’t plan to pay for it anyway) and force you to relist the item at your own cost.
Make sure that you get delivery confirmation for all purchases. A tracking number may not mean much, but it helps and it’s usually cheap (or even free if you’re buying your postage online). Anything remotely expensive needs insurance. This is just a good idea, since damage does sometimes occur and packages are legitimately lost. Only turn down insurance if you’re okay with writing the item off as lost. Also, being able to rebuff claims of “damages” with, “fine, please file a report” is surprisingly effective.
You will also have to make judgement calls at times. Cheap items may not be worth the hassle. More expensive items that were “damaged” are certainly worth some pressure though. Pushing for a return of the damaged goods could be worth it.
Note that the worst option is that you’ll be paid with a hacked account. If it’s a legitimate hack, then there’s just nothing that can be done. You’ll have to pay a refund and that’s that. False claims of unauthorized purchases also happen, and again, there’s not much that can be done.
Overall, your best bet is to try and stick to eBay’s seller protection plan. This is the one thing that all sellers using PayPal need to know. If you send a physical item to a verified address within 7 days of the purchase, and the item matches the description, then you will be protected against chargebacks. Delivery confirmation will work for items worth less than $250. You’ll need signature confirmation for anything higher than that.
Sticking to a confirmed address is probably the most important step. This will protect you against unauthorized charges. They can’t exactly claim that it was a hacker, if the item went to their billing address. They can verify their address by adding a credit card with that address to the account, or by following the alternative address verification that PayPal offers.
Online Sale of Gift Cards Raises Fraud Alarms, https://www.usatoday.com/tech/news/computersecurity/infotheft/2007-07-22-gift-cards_N.htm
PayPal Buyer Protection, https://cms.paypal.com/us/cgi-bin/?cmd=_render-content&content_ID=security/buyer_protection