eBay & PayPal, how two bullies screw you and how to screw them back

Today I am going to tell you how I made $3,200+ by sending three old shoes to a Nigerian scammer, and how PayPal footed the bill.

eBay's purchase of PayPal was one of the greatest moves in the history of monopoly management. By acquiring the company most people were using to pay for the purchases they ensured eBay would come full circle and retain full control of the most important aspects of all transactions: money collection.

Initially this was not a bad thing. Full integration with the eBay system was a great way to ensure that I did not waste my time with people that simply could not afford to buy some of my items. All of my expensive listings have a "Immediate PayPal Payment Required" which allows me to not even look at a sale that has not been paid for.

At the beginning this represented a problem; some of the articles that I sold such as high end watches did cost more than the $2K limit imposed on this feature, but I adapted. I dropped some of my more expensive inventory and it was actually good for business.

The trick is to not allow greed to blind you and not even bother with those people whose credit card cannot take a $2,000 hit. If you are selling a $5,000 Cartier for $2,000 the right customers already know all the right questions and will not bother you with layaway proposals, bounced checks, or "sorry I did not mean to buy it" excuses.

This worked great for a while, that is until eBay became the cesspool it is now.

Around 2 years ago I started noticing a serious decline in the quality of the sales in eBay. Two things were happening: scammers were getting really smart and legitimate customers were beginning to back out a lot more out of deals after the purchase had been made.

My ads are very clear: all questions can be asked beforehand, and if needed I can arrange for an on-site check: people are welcome to come to our location and examine the merchandise, but once you walk out the door all sales are final. When customers pay with a credit card the policy is printed in the receipt. We have had people try to dispute a sale after the fact, but all I have to do is point out the receipt and that is the end of the story.

With PayPal? Not so much.

PayPal is the worst enemy of a legitimate merchant. PayPal does not care for its real customers, the ones that are actually generating their income (small businesses that generate all the sales commissions). Instead, upon a dispute being arisen, any kind of dispute, no matter how baseless or frivolous, the very first step is to take the money out of the merchant's account. They do not give it back to the customer either, they just keep it. This can go on for as long as 12 weeks depending on the credit card company and the efficiency of the PayPal rep in charge of the dispute, which I must say tends to be pretty low. If the dispute is settled in your favor (99% of the time this is the case for us) you get your money back. However, you get it months after the sale. You get paid no interest, and no provisions are made to ensure this money appears as an accounts receivable line item with your bank. Basically PayPal gets an interest-free loan. In our case, the amounts of these loans are in the tens of thousands of dollars each year. I can only imagine that when you combine all the merchants we are talking about an amount that gets easily into seven and eight figures.

After we lost $1,800 in a valid sale I decided to stick to the "Confirmed addresses only" policy. As many powersellers know PayPal does cover fraudulent sales when:

- The item was purchased from a valid PayPal account
- The item was shipped to the address that shows up as "confirmed" in the PayPal account
- The item was signed for

The process of confirming an account involves having a credit card, receiving a charge, and reporting what that charge was. Other than that there is nothing else going on in terms of actual verification and/or confirmation. Your local cable company runs a more significant credit and identity check than PayPal does, but somehow they assume that although you may easily be able to hijack an email account getting your hands on the actual plastic and having the nerve to call and change addresses while answering all the security questions may be a little more difficult.

Well, it is, which does not mean it doesn't happen.

So, we began to notice these orders coming in. They appear legitimate on the surface, but the recipients were West African names, and they simply did not smell good. The address was confirmed though, so we shipped them out.

A few weeks later, these orders (they did follow a pattern) began to be disputed. As soon as this happened I would claim seller protection policy and that would be the end of that. The money was placed back in our account and PayPal had to eat it (and they ate it a lot).

One day, I saw an incoming order for 3 expensive collector watches. They were all going to the same address, each one of them was under the Buy it Now limit, but combined they summed over $3,200. I knew something was up, so I waited.

That afternoon, I got an email from PayPal telling me that there was a problem with the transaction and asking me to provide all sorts of details, advising me not to ship the goods.

I then proceeded to pack three old shoes in three different boxes, placed a label in each one of them, and took them to my local UPS store. Once I had the tracking number I wrote PayPal back and said "Sorry, already shipped, here are the tracking numbers, good luck trying to stop them."

I was counting on the stupidity of PayPal as an organization. I was sure that even with the tracking numbers and complete address of the recipient they would be unable to stop the shipment, which by the way just takes a phone call to UPS. I had seen this before; the same lack of customer service and agility they exhibit with their customers actually does extrapolate into their own internal affairs. In that sense you have to give it to them: they are not just mean with you, they really are plain stupid.

So, the three boxes with three old shoes started their journey towards Detroit. They reached their destination (a mail forwarding service) and from there I am guessing they went somewhere in ... gosh.. Romania? Nigeria? Who knows... All I know is that I really wish I had been there when the avid scammer opened the box and instead of a Longines he found one smelly shoe: "What is this? What happened? Wait! Open the other box!" and another one, and another one.

Meanwhile, PayPal took the money out of my account. This was unusual. In the past they have simply left it when the account was confirmed, but I guess $3,200 was too much too swallow without a fight. I raised a little bit of hell (not too much) and the next day the money was back into my account.

That night I took my friends out for drinks. I was ecstatic: a scammer had three shoes, PayPal ate some of their own medicine, and I recovered in a single day the equivalent to three months worth of fees.

So, remember: when the address is confirmed always ship. When in doubt do not ship a shoe, maybe a lesser value item. If the sale turns out to be legit you can always claim it to be a shipping mistake and fix it, but if it is not, if you get that email from PayPal, count your lucky stars and hope it was an expensive item.