Customer disputes, claims, chargebacks, & bank reversals overview (2024)

Small BusinessOperationsRisk and Dispute Management

There are three ways that a buyer can initiate a complaint. And that process, including time frames, refund authorizations, and who is in charge of settling the dispute, will vary depending on how the purchase was funded.

• Dispute/claim: Buyer contacts the seller directly through PayPal’s Resolution Center site to file adispute, and the two parties work together to find a solution. If buyer and seller can't agree to a solution, buyer can escalate the dispute to aclaimin order to request a refund/reversal where PayPal steps in to determine how the situation should be resolved.
• Chargeback: Buyer contacts their card issuer and requests a refund.
• Bank reversal: Buyer contacts their bank to request a refund.

If a buyer initiates a complaint, the seller will receive an email about it and will also see it in the Resolution Center. Additionally, the money the seller received for the transaction may be unavailable during the case investigation. If the case is settled in the seller’s favor, the money will be released back to their PayPal account.

Read on for an in-depth look at the various types of complaints, how to resolve them, and how to help avoid them.

Disputes: When buyers file a complaint through PayPal.

If buyers have a problem with a transaction, they can bring it to the seller’s attention by opening a dispute in our Resolution Center. The dispute process is an opportunity to resolve issues before they become escalated to a claim. It’s in a seller’s best interest to work with the customer to resolve the dispute. This is a seller’s chance to use great customer service to solve an issue and help prevent it from growing into something larger.

Why do disputes occur?

A buyer may file a dispute for two different reasons:

• Item Not Received (INR). In this case, the buyer is claiming they ordered and paid for an item but didn’t receive it.
• Significantly Not As Described (SNAD). In this type of claim, the buyer is stating the item they received is significantly different than they expected, based on the seller’s description. For instance, maybe the buyer ordered a red sweater but received a blue one instead.

How will I know if a dispute is filed against me?

If a dispute is filed against you, you’ll receive an email about it and a case will be created in the Resolution Center. The Resolution Center is a secure communication channel in the My Account section where buyers and sellers can work together to resolve disputes.

How can I respond to a dispute?

To respond to a dispute:

1. Log in to your PayPal account.
2. Go to theResolution Center.
3. ClickViewunder Action next to your case.
4. Respond to the buyer, making sure to include any relevant information (such as package tracking information), and then clickPost Message.

The message will be sent directly to the buyer. Remember that this is an opportunity to resolve the dispute without intervention, so it’s best to be courteous and helpful.

How can I help prevent a dispute?

Good communication is important to help prevent disputes.

• Start by providing detailed, accurate descriptions of items for sale and include pictures from multiple angles.
• When a purchase is made, ship items promptly, and provide tracking information.
• Post customer service contact information, including working hours and response time frames. A toll-free phone number is preferred over an email address.
• Offer a refund and post your return policy where customers can see it.
• If a customer contacts you, be professional, helpful, and courteous.

Set up a customer service message within your account.

What if I can’t come to an agreement with the buyer?

Once a dispute is opened, you have 20 days to work with the buyer to resolve it. (PayPal won’t be involved at this point.) If neither you nor the buyer escalates the dispute during the 20-day window, it will be closed automatically. If you can’t work out a resolution, either party can elevate the dispute to a claim, which we’ll cover in the next section.

Please note: Your funds may be temporarily unavailable when a dispute is filed. This hold will stay in place while you work with the buyer to resolve the dispute and will be released if the dispute is settled in your favor.

Claims: When a buyer complaint is escalated to PayPal, or the buyer filed an unauthorized transaction.

If a buyer dispute can’t be resolved, either party can escalate it to a claim during the 20-day period. At this point, PayPal becomes directly involved and will make a decision using the information that’s provided. A buyer can also file a claim (without first initiating a dispute) if they feel their account has been used fraudulently. During the resolution process, we may ask either or both parties for more information via email.

Why do claims occur?

Claims are based on three factors:

• Item Not Received (INR). In this case, the buyer is claiming they ordered and paid for an item but didn’t receive it.
• Significantly Not As Described (SNAD). In this type of claim, the buyer is stating the item they received is significantly different than they expected, based on the seller’s description. For instance, the buyer ordered a red sweater but received a blue one instead.
• Unauthorized Transaction. If a complaint is filed for this reason, it means the buyer’s account may have been compromised or hacked and someone made a purchase from the account without their permission.

How do I escalate a dispute to a claim?

If you can’t resolve a dispute with a buyer, you may feel the need to escalate it to a claim. To do so:

1. Log in to your PayPal account.
2. Go to the Resolution Center
3. ClickViewnext to the dispute you want to escalate.
4. ClickEscalate this dispute to a PayPal claim near the bottom of the page.
5. Follow the instructions.
6. ClickEscalate to a claim.

How will I know if a claim has been filed against me?

If a claim has been logged, you’ll be notified via email. You’ll also see that a case is created in the Resolution Center.

How can I respond to a claim?

To respond to a claim:

Log in to your PayPal account.

Go to the Resolution Center.

Click Respond in the Action column next to your claim.

Select how you would like to respond and click Continue.

After you make a selection, follow the instructions. Keep in mind that once you upload the files, you won’t be able to view them again – you’ll just see a summary of the information you’ve submitted.

How can I help prevent a claim?

You can work to help prevent claims by following the same customer service tips we gave to help prevent disputes.

How will the claim be processed?

If a claim is filed, the seller is asked to respond within 10 days. If the seller doesn’t respond, the claim will automatically close in the buyer’s favor, and a full refund will be issued. If the seller does respond, PayPal will work to evaluate the information provided and determine the outcome of the claim. This process usually takes about 30 days, but more complex cases could take longer than 30 days.

Will I be penalized?

Having a claim filed against you doesn’t necessarily mean you’ll be penalized. There are no automatic fees levied against you, and your seller feedback won’t automatically be affected. However, if a claim rate is too high or other indicators are trending negatively, your account could be reviewed, and reserves or limitations could be put in place. A temporary hold may automatically be placed on money when a claim is opened. This hold will stay in place while you work with the buyer to resolve the claim and will be released back to you if the claim is settled in your favor. For Item Not Received (INR) claims, if you provide the relevant information as outlined in the Seller Protection Policy, and the claim is decided in your favor, the money will be released to you. Once a claim has been filed, the best thing to do is promptly provide any requested information.

Chargebacks: When buyers file a complaint with their credit/debit card issuer.

Rather than filing a complaint with PayPal, a buyer could contact their credit card or debit card provider. In this case, they may file a chargeback.

What is a chargeback?

A chargeback is when a buyer asks their credit or debit card issuer to reverse a transaction after it’s been completed. They are available only to buyers who make a payment with their credit or debit card. Because they are initiated with and decided by the debit/credit card issuer (not PayPal), the process is bound by the card issuer’s regulations and time frame.

Why might a chargeback occur?

Buyers usually request a chargeback for the following reasons:

• Their credit card was used without their permission to purchase an item fraudulently.
• The buyer does not recognize the charge.
• The item that was purchased didn’t arrive.
• The item received was significantly different than described.
• The buyer was charged twice for the same item.

How will I know that a chargeback has been filed against me?

When PayPal is notified of the chargeback, we’ll send you an email to let you know about it. A case will also be generated in the Resolution Center at this time.

How can I respond to a chargeback?

To respond to a notice or check the status of a chargeback:

1. Log in to your PayPal account.
2. Go to theResolution Center.
3. ClickRespondin theActioncolumn next to your claim.
4. Select how you would like to respond and clickContinue.

How can I help prevent a chargeback?

Providing good customer service and communicating with buyers will go a long way toward helping to prevent chargebacks. For instance, making it easy for buyers to contact you could keep a small problem from growing into a chargeback. It’s also wise to take steps to prevent fraud, such as by becoming a Verified Seller.

How can I avoid chargeback losses and increase my chances of winning a chargeback?

First, you should follow seller protection guidelines, provide relevant information when asked, and review orders for fraud. If a chargeback is filed against you, be sure to provide information to help resolve it and be careful to follow any guidelines outlined by the credit or debit card issuer.

How will a chargeback be processed?

Once a chargeback has been filed, you’ll have 10 days to respond to it. The chargeback process could take 75 or more days to be resolved. Because the debit/credit card issuer determines this process, allowable time frames are determined by the credit card industry. During this review process, a temporary hold may automatically be placed on the transaction funds. This hold will stay in place while the chargeback is resolved with the debit/credit card issuer and will be released back to you if the chargeback is settled in your favor.

Though the debit/credit card issuer determines the outcome, PayPal is here to help you through the process. For instance, PayPal will compile internal information and combine that with information you provide to dispute a chargeback, per credit/debit card guidelines. Simply having a chargeback filed against you will not automatically affect your seller feedback.

To help avoid chargeback losses, follow the guidelines outlined in our Seller Protection Policy for Unauthorized Transaction or Item Not Received chargebacks.

Bank Reversals: When buyers file a complaint with their bank.

A bank reversal, sometimes called an ACH return, is when PayPal receives a request to return funds for a transaction that was funded by a bank account. This request might come from the buyer or the bank itself. Usually this request is filed because of suspected unauthorized use of a bank account.

Why might a bank reversal occur?

A reversal may occur if a buyer or their bank suspects or discovers that someone has accessed the buyer’s account or financial information without their permission. The following events may trigger a reversal:

• The buyer's bank account was used without their permission to purchase an item fraudulently.
• The buyer does not recognize the transaction.
• The item that was purchased didn’t arrive.
• The buyer was charged twice for the same item.

How will I know if a bank reversal has been filed against me?

As soon as PayPal is notified of the reversal, we’ll send you an email to alert you about it. A reversal case will also be filed in the Resolution Center.

How do I respond to a bank reversal?

To respond to a reversal:

1. Log in to your PayPal account.
2. Go to theResolution Center.
3. ClickResolveunderActionnext to your case.
4. Select how you would like to respond and clickContinue.

The next steps will depend on how you choose to respond. You’ll be instructed about any additional information you need to provide that can help PayPal resolve your case, such as entering a transaction ID to prove that a refund has been issued or adding context for accepting the liability. In some instances, you may not be liable for the reversal.

Note that once a reversal has been filed, please refer to the email on the number of days you have to respond. Based on the situation, the response time frame is between 7 and 10 days.

How can I help prevent a bank reversal?

The best way to help prevent a bank reversal is to follow security guidelines and review orders for fraud.

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