How to Deal with PayPal Payment Reversals

8 Apr

PayPal ReversalsOne of my business goals is to always over deliver. This means, if someone buys something from me for $37, I try to make sure they get at least twice that much in value. Either the product is worth twice as much, or the extra bonuses I throw in are worth at least as much as the product itself.

Now of course, how do you put a price-tag on a digital product? It’s hard to do and unless you have a huge reputation preceding you, you sort of have to set the price at what is standard in the industry and at what potential customers would expect to pay for something like that.

In either case, it is important that your customers never feel “jipped” or suckered into buying something. The value has to be there – always. If it’s not, you won’t be in business for long and will have a hard time keeping up with the refund requests.

It is common sense, I know, but it is exactly why I try to always over deliver.

So when I get a refund request, I am confident that it was not because it lacked in value, but rather because of some other issue. Getting a refund is just way too easy online and low-lifers tend to get addicted to it. Which is exactly why I permanently ban customer PayPal IDs if I have issued 2 or more refunds to them before.

Serial-refunders are not worth your time. If you have them, be sure to black-list them in your merchant accounts (where possible) to prevent them buying from you again. JVZoo and WarriorPlus (two of my main processors) make this very easy.

Serial-refunders ruin your reputation. Not just to your merchants, but to your affiliates as well. If you have a high refund rate, affiliates seeing it become more and more hesitant to promote you.

But what if it is a payment reversal and not a typical refund request?

I have been subject to some fraudulent payment reversals these last few months and though I take complete responsibility for opening myself up to it, it is not at all pleasant to deal with.

Let me explain:
Being a friendly Canadian, I would always set me affiliate buttons to “auto-approve” and “instant commission”. It has always worked in my favor – especially since I am on the road a lot and don’t have a lot of time to check for affiliate requests and then manually approving them.

Well, these last few months I started getting dozens of “unauthorized account activity” payment reversals. After getting one, or two, it’s not a big deal. Stuff like that happens. Example: Husband bought something without the wife’s knowledge and she makes the claim (or the other way around), etc. It happens.

Once you start getting one or two reversals a day though, you have bright red flags go up in your mind. At least that is what happened to me. So… naturally I started to investigate these claims and noticed that all of these “sales” originally came from one or two affiliates.

Of course these were affiliates I was unfamiliar with, so the first thing I did was discourage them from promoting me by either blocking them where possible, or delaying their commission payout for as long as possible.

Of course PayPal will favor the victims in their reversal investigation, so there was nothing I could have done from my end to get PayPal to not issue the refund. If they had favored me, they would have been left hanging with the bill in the end and – well – things just don’t work that way 😀

I took it upon myself to call PayPal and talk to them about these reversals and just explained I had never had that happen before and asked if there was anything I could do to prevent that and they basically told me it does not affect my account or my reputation with them, but rather the reputation of those doing the “dirty” business.

One affiliate I just terminated brought in a handful of sales for which he got instant commission. Basically, the customers he brought in paid money into my account, and then the system would send him commission money directly from my account into his account.

After a handful of sales, every one of the customers he brought in had their payments reversed. Which is all fine – except when I try to properly process the refund, the affiliate’s account does not refund me a penny. Meaning I am stuck with the bill in the end.

It has been an expensive lesson so far!

A few months back some kid was selling a guide on the warriorforum in which he “showed” how to make a killing with HostGator’s affiliate program by using fraudulent means of generating the sale and I suspect it is the same game these scammers are now playing on affiliate networks like JVZoo and warriorplus.

Basically, he taught how to get people to give you their real information (name, address, social security, etc) via a craigslist add. Victims would respond thinking they were applying for a legitimate job and would end up giving their personal information, which he would then take to create a real PayPal account (without the victims knowing) and would order a hosting package through his own affiliate link.

His theory was: by the time anyone finds out it’s fake, he would already have his money.

Needless to say that product was taken down in a matter of hours. Whether it is the same guy working this scam or not, I don’t know, but it does look an awful lot like the exact same scam just on different networks.

I am not sure yet if there is any hope of me recovering the money I sent this scammer, but I will keep you posted if I do. I thought I should share this nightmare in case someone else is going through the same thing and this could be a bit of help for them.

Have you ever had to deal with something like this? If so, what did you do and how did it work out for you in the end?

Konrad Braun

I'm an entrepreneur at heart & have been a full-time internet marketer since 2009. I specialize in SEO & affiliate marketing. I married the most amazing woman I ever met & travel the world with her. I love my life!

One thought on “How to Deal with PayPal Payment Reversals

  1. When a buyer requests for a refund, the seller would have to check if the payment was made to his PayPal account, or to the affiliate’s PayPal account. If he did not receive the payment, he would have to ask the buyer to contact the affiliate directly (or contact the affiliate on the seller’s behalf) to get a refund.

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