PlanetJune Craft Blog

Latest news and updates from June

PayPal: a warning

After using PayPal to accept payment for all my sales for years without incident, I feel utterly let down by their service today. I’ve discovered that mine is not an isolated incident, but arose from a decision on their part to exclude virtual products from their Seller Protection policy. So if you sell patterns, eBooks, or any other information product, please read on and spread the word about how you may end up out of pocket when PayPal decide to return your customers’ money to them – after they have already downloaded your products!

Here’s the scenario:

  1. Customer orders lots of patterns and pays with her husband’s PayPal account. (Note: she is a repeat customer and has ordered 4 times before this, always paying with her husband’s account.)
  2. Customer downloads her patterns and everyone is happy.
  3. PayPal get suspicious of a potential fraud because she’s paid with an account that is not her own.
  4. PayPal dispute the transaction and put a hold on the funds so I can’t access them while they investigate. PayPal contacts me and customer.
  5. I send PayPal proof that customer has downloaded patterns.
  6. Customer, for whatever reason, does not respond to PayPal’s email.
  7. PayPal decides this is proof that customer is a fraud, and returns my money to her.
  8. Customer has patterns AND money. I have nothing except for a bad taste in my mouth.
  9. I phone PayPal, sure that this silly mistake will be sorted out if I can speak to a real person, right? PayPal rep informs me that virtual items (e.g. patterns) are not covered under their Seller Protection, and that all I can do at this stage is contact my customer and ask her nicely if she’d like to pay again for the goods she’s already received.

So apparently, all you need to do if you’d like some free stuff is to order it online, pay with a friend or relative’s account, and then get your co-conspirator to ignore any emails from PayPal enquiring if they really did place that order. PayPal will reverse your payment, but by that time you’ll have your merchandise already – and you’ll get your money back too! Sweet! Oh, except for the poor seller, who is left with nothing.

Nice going, PayPal.

I am so upset about this, but the part I really don’t understand is that PayPal decided that not getting a response from my customer’s husband was proof that my customer had taken the money from him without permission, and made them decide to return the money to him.

There are many legitimate reasons why my customer’s husband could have not responded, for example:

  • He was out of town or sick and didn’t check his email
  • He only uses that email account for PayPal payments and doesn’t check it at all
  • The email from PayPal was filtered as Spam and he never saw it
  • He did see it, but assumed it was a phishing scam and didn’t respond

Any of these are perfectly legitimate (and likely) reasons for his non-response, and do nothing to prove that his wife stole the money from him and thus it should be returned to him. Surely the only way PayPal could really have obtained proof of this so-called theft is if the husband responded to PayPal saying “yes, this money was taken from me without my permission” – and PayPal confirmed to me that this did not happen!

I am appalled that PayPal would take such a stance. This entire scenario was based solely on a “review of recent transactions” that PayPal took it upon themselves to conduct. There was never any complaint for PayPal to respond to! They just decided to “protect” the buyer (my customer’s husband) even though he had not complained about the transaction, and didn’t even respond to PayPal to confirm that any fraud had occurred.

So the buyer got his money back, even though he didn’t ask for it, and a trustworthy small business owner lost out on a sizeable transaction, even though no theft/crime/fraud/error has occured. The only error is on PayPal’s part, for taking this scenario to such an absurd conclusion.

Considering that I conduct all my business online, through PayPal, that means that PayPal basically get to keep 3% of my gross income! You would think that would make them eager to look after reliable customers like myself who keep them in business.

But, apparently, PayPal do not deem sellers of virtual products worthy of protection. And in this age of so many digital products – patterns, eBooks, etc – this is a decision that affects many of us! I think we should all be aware of it, even though we’re pretty much stuck with using PayPal because there sadly isn’t much competition for their service. Let’s hope that changes, or that PayPal will take notice and change their policies to allow some kind of protection for those of us that make our living selling virtual products.

Luckily in my case, after hours of worry on my part, I heard back from my lovely (and honest) customer, who has paid me (again) for the patterns. Let’s hope that PayPal don’t decide she’s still “a fraud” and give the money back to her husband again!


  1. sue bowers said

    I always thought that sellers were covered based on the fees they charge for each transaction. If PayPal don’t cover virtual products are they going to reduce our fees to take this into account? I think not! I agree with the buyer protection but where is seller protection? Afterall its the sellers that Paypal makes their money from.

  2. Heather Duffin said

    June, I’m so sorry to read this! UGH. what a bummer 🙁
    Well, all I can say, is “what goes around, comes around”. Even though it sucks.
    I agree, “Shame on you, Paypal”

  3. Shushonet said

    Actually it really is not the first time I’ve heard about it, but never knew the seller is not protected at all as pay-pal won’t cover the virtual products.

  4. Lis said

    Have you thought about offering Google Checkout? They have the same basic fees as PayPal and so many people have a google account that is is not very limiting.

    • June said

      I’d love to offer Google Checkout, but it’s (still!) only available to US and UK sellers – and I live in Canada…

  5. Smeddley said

    This is actually a pretty common occurrence with PayPal – there are whole websites dedicated to exposing the problems with them and tons and tons of horror stories from users. I’m glad yours turned out okay, but until there’s a really simple, viable alternative (other than a true credit-card accepting system), PayPal is going to continue to treat people however they want.

    I refuse to get a PayPal account just because of some of the stuff I know they’ve done to people – I can’t see supporting that kind of business practice.

  6. Amy said

    This is horrible. At least when this comes up with credit card companies, they have already paid for the item and they absorb the cost… Pay pal should do the same. In the meantime, maybe only offering actual physical patterns, printed out and sent through the mail. I know it’s not ideal, but it’s the only thing I can think of to protect yourself. Otherwise not allowing the download until paypal has completely cleared the payment and it’s in your hands. Sucks either way. So sorry this is an issue. I’m glad your customer paid in the end… i like those kind of people.

    • June said

      The problem is that PayPal had fully cleared the payment, and then they decided to review it and take it back well after the fact. It seems like they have the power to do that at any point, so there’s no guarantee that once you’ve received money they won’t then take it back again, days or weeks later.

      The only consolation that I can see (and the only reason that I’m not quitting PayPal) is that it’s not a common occurence – this has happened to me only once out of the thousands and thousands of payments I’ve received since I started my shop in January 2007. But that in no way excuses PayPal’s ridiculous policy! Digital and virtual product sales must make up a large (and ever-increasing) percentage of business conducted through PayPal. They need to update their policies to reflect that and offer real protection for all sellers.

  7. Paypal is not on my good side right now for a sort of reverse reason. I hav had orders not arrive for a few months,(not all, just every once in a while) & when I tried to find out why I realized paypal has been using an 8 year old address. When I talked to someone I was told I had that due to a glitch I still had it on my account, but not where I could find/correct it,(when it came up as a shipping option as I paid for something, I would go to account trying to edit address info) & I was choosing it for the address to use & they were not liable for any money losses on my end. Since paypal is pretty much the only game around I’m stuck, bleh.

  8. I haven’t been a fan for PayPal for years. I once sold a large lot of items to someone in the US. I shipped the items with tracking and they were received and feedback left by the purchaser on eBay. Shortly thereafter, PayPal told me that the person had fraudulently used an account and the money was being returned to the account owner. It didn’t matter that I had proof of the item being shipped and received. So while PayPal claims to offer Seller Project, I think there is none at all.

    On the other hand, when I bought a DS cartridge that was never shipped to me, PayPal quickly refunded my money. I was happy about that, but over all I prefer not to use them. My account sits empty and I only pay by PayPal when there is no other directly credit card method.

    I’m so glad that ultimately this turned out okay for you. I do wish we had Google Checkout here so that there was another option.

    • June said

      That’s exactly it! PayPal are very keen to protect buyers, but for some reason only pretend to extend the same courtesy to sellers.

      This fraudulent funds thing is insane – that’s exactly what happened to me too. They told me they couldn’t help because the order was for virtual goods (which is bad enough!), but if, as you say, they do the same thing for physical goods too, then I agree – their so-called Seller Protection is worth exactly nothing.

      Shame on you, PayPal.

  9. Julie said

    I feel your pain, June. A similar thing happened to me. I had someone buy a bunch of patterns from me and then open a paypal dispute. Paypal doesn’t offer any sort of protection to sellers of digital goods. Forwarding them the email as proof that the patterns were sent means nothing to them. They just want a tracking number. I was tempted to rant about it on my blog when it happened but I didn’t want to put any ideas in anyone’s head. It’s sad that people do things like this to us and then Paypal isn’t even there to help us out.

    • June said

      I did wonder the same thing, but I’m trusting that people are basically honest and won’t abuse this knowledge. (Don’t steal from me, people! I’m a hard-working designer trying to make a living doing what I love!)

      I think the more important thing is raising awareness (using my power for good, as Lisa said above!) – I hope that with enough attention, PayPal will take notice and change their policies that currently seem to be designed to let them arbitrarily cancel payment for any order of virtual goods, even after they have been delivered.

      I’m amused that, as follow-up from my phone call to them this morning, PayPal sent me a stock email explaining how wonderful their Seller Protection policy is! Thanks, PayPal, for rubbing salt into the wound there…

  10. Rebekah said

    sigh, simply terrible! So frustrating that you cant switch to someone else. If paypal had some competition it might keep them in line.

    I’m sorry you had to deal with this mess. Thank goodness for an honest customer.

  11. Cora Shaw said

    I am concerned about this as I purposely signed up with Artfire, not as many hassles as Etsy and they deal with copyright issues right away. I have issues with copyright in the past with some of my dishcloth designs.


  12. Carina said

    This is a total bummer for you and really, really worrying for all of us who sell patterns etc.

    Was this order through your own shop? I wonder if there is less risk of this happening when we sell through Artfire etc..

    Or maybe we need to start adding to our item descritions “Please make sure you pay with your own Paypal account to make sure Paypal doesn’t think it’s fraud.” 😐

    • June said

      Yes, this was through my own shop, but PayPal didn’t think that I was at fault – they were accusing my customer of defrauding her husband – so I don’t think that would make a difference.

      My best advice would be that, if/when PayPal contact you to say they are holding your funds while they investigate a transaction, contact your customer and let them know what’s happening. They should have received an email from PayPal too, and if they respond to PayPal and assure them that it’s not fraud and they are okay with it, that should be the end of it.

      Just make sure your customer responds to PayPal within the week or so that they are investigating, as apparently once they decide ‘case closed’, there’s no way to re-open it!

  13. Lisa~ said

    I read your blog for my daughter who crochets. But I just had to chime and and say how sorry I am that you had such an ordeal over something so ridiculous. I’d love to hear PayPal’s excuse for this policy. Like you, I use PayPal in my business all of the time. I hate that you had to use so much energy on this mess, but I am glad to see you are using it for good and spreading the word. Your patterns are so unique; you deserve to get paid for them just like anyone selling non-virtual products. Lisa~

  14. Gene said


RSS feed for comments on this post

Leave a Reply

Thank you so much for taking the time to leave a comment here! I read and appreciate every comment. I only respond to questions here on the blog, so please return to this page to see my reply, or check the box below to subscribe to new comments by email.

Please note that I can only answer questions related to PlanetJune patterns and tutorials (see details), and I can only respond to questions or comments written in English. Thank you :) - June

Your email address will not be published. Required fields are marked *

  • Quick Links: Crochet

    navigation: arrow

    buy crochet patterns and accessories from my online store

    'Everyday Crochet' and 'The Essential Guide to Amigurumi' crochet books by June Gilbank

    Crochet video tutorials and step-by-step photo tutorials

    Free PlanetJune crochet patterns

    Frequently Asked Questions

    Quick Links: Crafts

    navigation: arrow

    Punchneedle Embroidery information, ebook & patterns

    Papercraft ebook & tutorials

    Free PlanetJune craft projects & tutorials

  • Blog Post Categories

  • Blog Archives

  • Welcome to PlanetJune!

    June Gilbank

    Hi, I'm June. Welcome to my world of nature-inspired crochet and crafting. I hope you enjoy your visit!

    If you'd like to get in touch, you can contact me here.
    crocheted Canadian flag by PlanetJune
  • A fanned-out pile of the books Everyday Crochet and The Essential Guide to Amigurumi, with text 'The answers to all your crochet questions at your fingertips - find out more'
  • Support PlanetJune!

    Want to say thanks? You can send me money in seconds at (over $20) or (under $20) or send me a donation through my shop.

    Or simply click through from my links before you shop at Amazon, Etsy, KnitPicks, LoveCrafts or, and I'll make a small commission on your purchase, at no cost to you! Start here:

    ♥ Support PlanetJune ♥

    Tip: This link is also in the footer of every page!

    Thank you so much for your support!