Like many people, I was naive in my belief that PayPal was a secure service for transacting money. It IS incredibly convenient, but I was the recently the victim of a scam that involves despicable business practices of PayPal itself! And now I have learned that I am not alone. It would appear that tens of thousands of people have, like myself, essentially had our money stolen from us while PayPal turns a blind eye.
Here's how it happened with me. I received a PayPal paymet for a service I had performed. After the service was complete, the buyer apparently reported to PayPal that the payment was an unauthorized transaction on their account. After ten days, after I had responded carefully and clearly to PayPal's questions, PayPal reversed the transaction! Apparently, there is NO PROTECTION TO THE SELLER WHATSOEVER for services and non-tangible goods. And apparently the problems only start there.
In the aftermath, I googled "paypal problems" and learned that I am not alone. Spend ten minutes reading the PayPal Horror Stories on the site that appears at the top of the search results, and I guarantee you'll forever think twice about receiving money via PayPal again from someone you don't know.
My only consolation is that I lost a relatively small amount of money, just over $100, compared to others who've lost thousands to PayPal. Given the large numbers of people who have been defrauded of money because of PayPal and never recovered it, I'm no longer hopeful that I'll ever see my $100 again, but I am fully informed now and am seeking an alternative to PayPal that involves a real merchant account that is subject to the regulations designed to protect consumers and merchants from exactly the fraudulent behavior that PayPal's structure is supporting. The bottom line apparently is that PayPal is not considered a bank and as such is not subject to the laws and regulations that govern banking in this country. Imagine if your bank had the authority to suddenly return money to a payer just because they complained about it! Fraud would be rampant, and so it is with PayPal.
And, before you can say "class action lawsuit", it's already been done. Apparently PayPal avoided the issue by settling for around $10M before it went to trial, and now they happily continue their despicable practices knowing that they've already beat the rap once and could probably do it again by dangling some more dollar signs. It's so obvious when communicating with PayPal that they really have a "could care less" attitude. And why should they care? I mean, they've got their money after all. If a few customers have to suffer, big deal, right? As long as they can turn a profit. Hey---it's the American way!
UPDATE
I've been researching alternatives to PayPal because, frankly, there's just no way that I can trust them for payment processing now. Knowing that a payer can cause the reversal of a transaction up to six months after making the payment just scares the hell out of me now.
I've found about a half-dozen alternatives, but BidPay looks the best. I found it amusing that BidPay's number-one bullet point is protection from chargebacks. Seems I'm not the only soon-to-be-ex-PayPal customer looking for a better company!
If you currently have success with a payment system other than PayPal, that, like PayPal does not require you to maintain your own merchant account, post a comment and let us know what it is.