Savvy consumers shouldn’t rely on the Paypal’s Protection for Buyers, which includes the Buyer Complaint Policy and Paypal Buyer Protection for eligible ebay purchases. 

Paypal  have a tendency to frustrate both buyers and sellers by closing disputes for reasons only known to them.  Additionally, their Protection for Buyers imposes over-restrictive time limits, has significant exclusions and has some major limitations:   

Inadequate Time Limits
To be eligible for Paypal Protection for Buyers you must start the dispute process within 45 days of payment being sent and if you are going to escalate this, you must do so within 20 days of raising the dispute.  This is not adequate.  For example, you might not discover that the item you bought is counterfeit until it develops a fault after many months, or you may be advised that the item will not be delivered until back in stock, which may take several weeks.

Significant Exclusions
It is wrong to think that all products are automatically covered under Paypal’s Protection for Buyers.  There are exclusions and it isn’t always apparent where this is the case and depends on the particular ebay site being used and the item being purchased.  Two notable exclusions are motor vehicles and airline tickets.

Major Paypal Buyer Complaint Policy Limitations
The Buyer Complaint Policy which provides protection for transactions outside ebay also has two significant limitations. 

First, Paypal will not make a decision on whether an item is “not as described”.  For example, if you buy a new book and it turns out to be used or is damaged, you can use the process to make a dispute, but you are on your own. Paypal will not get involved nor make a decision either way.   

Second, for items that are not delivered Paypal will only refund your money if they can recover this from the seller.  Fraudsters know this and are likely to withdraw your money as soon as they get it. 

What Consumer Recommendation
What Consumer recommends that online shoppers use a Credit Card for items over £100. This is to ensure the transaction is protected by Section 75 of the Consumer Credit Act which makes the credit card company equally liable for transactions which go wrong.  For transactions less than £100 it is recommended that  you use a Visa debit card to benefit from the protection offered by the Visa Debit Chargeback Scheme.   However, if a trader only accepts Paypal, all is not lost:

Use a Visa Debit Card to make Paypal Payments
When you make a purchase through Paypal using your credit card, you are not covered by the Consumer Credit Act.  However, if you use your Visa debit card, you can benefit from the ability to make a claim under the Visa Debit Chargeback scheme.  An existing balance in your Paypal account can complicate this, so it is always best to withraw your money as soon as you receive a payment.  This makes it easy to demonstrate that a Visa debit card was used for a particular transaction.   

It is important to remember that you have 120 days to make a claim to the bank that issued the card.   

Buy from UK Sellers when using Paypal
By making your purchases from UK traders you benefit from the protection of certain statutory consumer rights. These rights do extend across the whole of the EU, but it is fair to say it is easier to enforce these rights and resolve disputes with sellers within your own country.  However, it is not always immediately apparent which country a company is trading from and pricing in pounds does not necessarily mean they are UK based.   For example, Pixmania and CDwow.com  show their prices in pounds but are not based in the UK.

I didn’t do any of these things, what now?“I bought a fake Nintendo DS from Hong Kong.  I paid with Paypal topping up my account with my credit card.  I have been totally ripped off and Paypal have now closed my dispute.“

The only option open to you now is to take your complaint to the Financial Ombudsman (FOS).  Although Paypal is out of their jurisdiction, since July 2007 Paypal has had a contractual agreement to  be part of the FOS voluntary jurisdiction.