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PayPal and rights for digital sellers

For the first time ever (as far as I know) PayPal has taken the side of the seller in a dispute over the sale of a non-refundable digital item. This is a very encouraging step in the right direction on PayPal’s part, so I want to make as many digital sellers aware of it as possible!

Here’s the thing: PayPal offers a very nice Seller Protection package that covers sellers in the event of disputes or chargebacks. But, this Seller Protection only extends to sellers of tangible goods (i.e. items that can be shipped). PayPal’s user agreement specifies that items/transactions not eligible for PayPal Seller protection, include “Intangible items, including Digital Goods, and services.” So if you sell PDF files, eBooks, mp3 files, etc, there’s no Seller Protection for you.

Rules that govern the sale and refund of physical items cannot apply to digital items: there’s no way to ‘return’ a digital item in exchange for a refund. For that reason, most digital sellers state that all sales are final.

However, sometimes a buyer files a claim with PayPal that the item was not what was expected, usually because they didn’t read the item title or description, just looked at the picture and assumed they were buying a ridiculously inexpensive handcrafted item (with no shipping charges!) instead of a PDF file containing the instructions to make the item themselves…

In these cases, PayPal seems to invariably side with the buyer (in the case of everyone I’ve spoken to about it, at least). They remove the money from the seller’s account and refund it to the buyer, thus making a mockery of the seller’s ‘no refunds/all sales are final’ policy. In this situation, the seller has no comeback: the buyer has the pattern and their money back; the seller is left with nothing but bitterness. Has this happened to you? Please share your story in the comments! I’d love to know how prevalent this really is.

In early December, one of my Etsy customers neglected to read the title or description and asked for a refund after receiving the pattern. I referred the customer to my ‘final sale’ policy but they wouldn’t accept that and launched a “significantly not as described” dispute against me. It’s taken over a month for PayPal to resolve the case, during which time they withdrew the funds from my account, but today, they found in my favour and returned my money to me!

If you’re a digital seller, you may find yourself in the same situation, so here’s my advice:

1. Gather your evidence

Why is the buyer’s claim flawed? Make a list of facts (and figures, if possible) that support your side of the story.

Here’s mine. I ignored my main shop when gathering my figures, as this dispute was over an item in my Etsy shop, so adding sales numbers from my own shop would be misleading. In my Etsy shop (at the time of responding to the dispute):

  • I only sell crochet patterns
  • 2919 crochet patterns already sold
  • 88 other copies of the same item already sold (all 88 using the same photos and description) with no other misunderstandings
  • 100% positive feedback
  • I state “CROCHET PATTERNS” (in capitals) in the item title and mention throughout the description that it’s a pattern that will be emailed as a PDF file
  • My Etsy seller policies clearly state that I sell crochet patterns, not finished items, and that all sales are final
  • The seller confirmation email from Etsy also states that the pattern will be emailed, giving the buyer the chance to contact me prior to my sending the patterns if they had made a mistake

Pretty solid evidence, I think, that “significantly not as described” was not something that can apply here!

2. Present your evidence

The key here is to be professional. Imagine you’re presenting evidence in a court case – the most compelling response is an objective account of the facts you’ve gathered.

You only get one chance to respond to PayPal, so make it count. Don’t hit ‘respond’ and begin typing directly within PayPal; compose your response in your text editor of choice, and save it. Then step away from the computer, do something else, and let yourself cool down.

When you look over it again, edit out any emotional phrases and any waffly bits, so it’s concise and to the point. Make sure you’ve included all the evidence that could count in your favour, and end with a short, clear conclusion. Read it over again, and only then paste it into the PayPal response box and submit it.

3. Wait…

It took over a month for the case to be resolved. During that time, I heard nothing more from PayPal, and I assumed the worst. Then, yesterday, I got the email:

We have concluded our investigation and have decided in your favor. The listing accurately described the item the buyer received. Any funds that may have been temporarily held have been returned to your account.

Victory! I don’t know if this is the start of a change of policy by PayPal, or my evidence was just too compelling for them to ignore, but please feel free to use my case as precedent if the same thing happens to you: PayPal case number PP-001-585-575-355 (or just share the link to this post).

Digital sellers are not a small minority group any more. Digital sales is a massive and fast-growing sector, as books and CDs are replaced by ebooks and mp3 downloads, and self-publishing becomes ever-more prevalent. PayPal would do well to look after their digital sellers; we’re making them a lot of money in commissions.

I hope that my victory this week is a sign of better things to come…


  1. Belinda said

    Thanks for sharing. People are ridiculous. I had a customer want a refund for a $2 pattern because she thought it was confusing. Really…$2? For most of those cases, the project is confusing because it is beyond the skill level of the buyer. Now I have someone who wants a refund because she “accidentally” bought my pattern. How can that happen?!

  2. sarah said

    I have a website selling self hypnosis mp3 audios. PayPal have just refunded someone who bought the whole catalogue. The reason being they did not like the introduction that states not to listen to the audio whilst driving and that they were bad quality. I am so angry at PayPal for allowing this person to literally rob me. What really gets my goat is they have made a mock of my terms and conditions of sales. I seriously feel something should be done to protect us digital sellers. Shame on you PayPal.

  3. Katy said

    I’m glad I found this page, as I just had my first dispute over a pattern. I’ve just written a formal 500 word letter and will cross my fingers, although I’m not hoping to much. I’d just like to add, although you mention seller protection the same is stated for BUYER protection. So you could also argue that the buyer has no right to ask for reimbursement either.

    • Katy said

      Copied and pasted my letter and found it’s too long. It’s hard to write a formally worded letter with such a low character count 🙁

  4. RG said

    I’m glad to read that there is hope for pattern sellers. I’ve been selling knitting patterns online for 4 years now and for the first time ever I have had someone complain they have not received their pattern through an instant ravelry download! In the dispute they said my etsy shop was a scam, yet they did not purchase the pattern from etsy so it left me rather confused. On contact with the buyer she said she had not opened a dispute but has not closed it from her side. I contacted ravelry and they told me they cannot confirm if the person downloaded the pattern, all they can do is make it unavailable from their library if the dispute goes in the buyers favour. I know they have the pattern it’s so frustrating, however I fear paypal will refund them. Its all over a $5 pattern which is a pittance monetary wise however it’s the principal of the topic i’m fighting this for.

  5. Beth said

    I should clarify that my chargebacks were not for issues with the patterns themselves, but because the customers claimed unauthorized use of their credit card. I’m guessing in some cases these were honest mistakes of not remembering the transaction and recognizing the name on the credit card statement. But either PayPal did not pass this information on to the credit card company, or the customer still refused to acknowledge the transaction, figuring they could “win”. For relatively low-value transactions like patterns, probably PayPal and the credit card companies don’t really have the time to spend sorting out the situations.

    Sorry, my frustration is still showing! Thanks again for the inspiring post – it does give me some hope 🙂

  6. Beth said

    Dear June,

    Thanks so much for your tips on responding to PayPal! I sell quilting patterns on Craftsy, and have had 5 chargebacks in as many months. I have lost ALL of them – very frustrating to say the least. As Craftsy pattern buyers have no excuse to think they are purchasing anything but PDFs, it is disheartening to me to think that word is getting out that one can dispute any intangible item purchase (i.e. digital files) with PayPal and get the money back easy peasy. Maybe eventually PayPal will update their policies on this point… your case looks like maybe something is starting to change – congrats to you!

  7. Good for you that the decision went in your favor. Good on you, too, for having clear and concise online sales information. This is one of the best posts I’ve seen on how using online best practices can work for all parties involved.

  8. TracyKM said

    I don’t sell anything, although I’d like to, but PayPal seemed too confusing when I looked into it!
    One of my friends does sell items; both patterns and finished items. She’s had several people lately also say they expected the finished item, when they bought the $4.99 pattern. She also gets people who say they’ve lost the pattern, can they get another copy. I can’t imagine being either of these people, but I guess that’s what makes life interesting!
    Glad your case worked out in your favour!

  9. Wendy said

    Glad to hear that PayPal did something right for once!

    Also, it’s ridiculous that people can argue that they were expecting a physical item, especially when they don’t provide a shipping address or pay for postage!

    Hope you don’t have to deal with too many more of these kinds of complaints.

  10. Julie said

    Great advice June! Thanks so much! I’ve definitely had this happen to me in the past!

  11. Shannon Lewis said

    That is great that Paypal sided with you. Am new to pattern selling and appreciate the information. Will definitely be following.

  12. Deneen said

    I had been reading a lot about this on Ravelry, where basically the consensus was that people get the pattern, have the pattern and then want their money back. I have bought patterns off of Etsy and know they all explicitly state “THIS IS FOR PDF PATTERN”. I purposely don’t sell patterns on Etsy because of the Paypal issue you stated. Thanks for the update. It’s good to know that Paypal is realizing the issues.

  13. Stacey Trock said

    Glad this one went your way!
    I’ve had PayPal decide in my favor before, so it’s not always bad news 🙂
    I had a similar situation to yours: an Etsy buyer purchased a pattern and thought they would be getting a stuffed animal, filed for non-receipt of item, and would not respond to emails/convos.
    I wrote detailed Etsy messages, and explained as much during the PayPal dispute, and PayPal cleared it all up in a couple of days.
    So happy to hear it worked well for you- especially since it’s the more complicated ‘not as described’ sort of case!

  14. Great news. Not had this problem but as a seller of digital patterns this is good news

  15. Emma said

    Luckily this hasn’t happened to me – I’ve only got two cross stitch patterns for sale at the moment, but it is great to know that we are protected. Thanks for sharing!

  16. Meg P said

    Hooray! I am consistently amazed that someone thinks they are getting a crocheted item, rather than a pattern, so I’m THRILLED you won the case! Congrats, June — and thanks, as usual, for sharing the how-to so others can benefit!

  17. I’m glad the case was decided in your favour. PayPal really does need to update their policies for the realities of the marketplace. Your case is a good first step in that direction.

    • June said

      I agree! It’s very alarming that any dishonest person can (or, at least, could before today) claim they thought they were buying a finished item instead of a pattern, and get an automatic refund from PayPal PLUS they get to keep the non-refundable pattern – digital sellers’ entire livelihoods are at stake from that ridiculous premise.

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