Protecting from Internet scams.

February 29, 2008 10:19 AM

At what point is a PayPal transaction considered "cleared?" In other words, when can I stop worrying about fraud. And what other protections can I take to protect myself?

I am selling an item (guitar) of significant cost in a private transaction. I've never met the person, and the transaction is taking place entirely over email and UPS.

I advertised my guitar for sale on a forum dedicated to a specific manufacturer. I am a semi-frequent poster the forum and the buyer is too. He's been around for about a year on the forum, but I've never met him. We agreed on a price. He offered to PayPal me half the cost as a good faith payment so I don't sell to someone else, and the other half in a few days when he gets paid. I don't really have any bad vibe or other reason not to trust this guy, but I told him I wouldn't send the guitar until the whole amount was safely transferred and 'cleared' in my bank account. Seems like a fair thing to ask.

After this, I read some horror stories about people that have done this: that the money isn't really 'cleared' until days or even weeks later and that people have been defrauded by thinking that they were paid, but then Paypal debits the bank account because the buyer [lied, and] claimed the transaction was invalid, fraud, etc.

How long before I don't have to worry about this? Is using PayPal a dumb idea? Are there any other issues I should be concerned about when doing this?

posted by uaudio to work & money (11 answers total)

Whenever I use Paypal, payments (on the main page i think) will either having a "pending" or "completed" next to them. Depending on what method he using to pay you, it could take a number of days for the actual payment to go through, but once the money is in your hands I believe it will something something like "cleared" next to the actual transaction.
posted by pandemic at 11:06 AM on February 29, 2008

Money order would probably be more reliable. Just be sure to let it clear the bank first since there are fake ones of those out there too. And if it is fake, he mailed it, so I think that ups the penalties to mail fraud.

Transferring money with a stranger is very difficult to do securely it seems... a startup opportunity?
posted by cschneid at 11:25 AM on February 29, 2008

My husband recently had a bad selling experience using Paypal, so we found out quite a lot about the limations of Paypal's seller protection.

One can file a claim through Paypal's "Resolution Center" within 45 days of the payment. But the seller isn't in the clear after the 45 days have passed. The buyer can contact his credit card company to request a chargeback. Paypal can't impose any time limit on chargebacks; the buyer has as much time as his CC company allows.

Paypal offers some protection to the seller if a dispute is initiated through Paypal, but there's no protection if the seller sends the item to an address that Paypal hasn't confirmed. An unconfirmed address isn't a sign that the buyer is iffy, it just means the shipping address hasn't been checked and found to be the same as the billing address. But even if those two addresses are identical, if the buyer doesn't have an officially Confirmed Address at the time the payment is made, the seller is out of luck in the dispute process.

To find out more, log on to Paypal and investigate from the point of view of a buyer. Read about the claim process, and the various types of claims a buyer can make. The info for sellers is confusing, and it glosses over a lot of risks.

It seems to me that the buyer is at a great advantage when Paypal is used. In your position, I'd talk with the buyer by telephone to take away some feelings of distance and anonymity. And I'd ask for payment by money order.
posted by wryly at 11:25 AM on February 29, 2008

You can never be sure, but try to set up a new paypal account linked to a new bank account that is only used for that paypal account. As soon as the payment is cleared transfer the funds to your bank. Make sure that it clears and then close both accounts.
posted by Gungho at 11:35 AM on February 29, 2008

Cash is the only payment method with zero risk (and only if you can bring it to the bank before providing the merchandise). If you are uncomfortable using online payment even when you "know" the person from a forum, I'd say that selling things online is not for you.
posted by winston at 11:55 AM on February 29, 2008

But the seller isn't in the clear after the 45 days have passed. The buyer can contact his credit card company to request a chargeback. Paypal can't impose any time limit on chargebacks; the buyer has as much time as his CC company allows.

wryly has it. I have a lot of experience with PayPal and sometimes chargebacks are filed almost six months after the purchase. If you are at all worried, I suggest finding another way of dealing with the transaction; for example perhaps an escrow service? I don't know anything about these though, so perhaps someone else can shed some light on which ones are reliable/how they work.
posted by different at 1:15 PM on February 29, 2008

the best protection you can have is to do the following.

1) have your paypal account link to a bank account with very little money in it.
2) when you receive payment, withdraw funds immediately to bank account.
3) only send the product to a confirmed address
4) have your shipping documented as well as you can
5) once the money enters your bank account, move it to another account immediately

Check around that forum and see if that guy has completed transactions before. If he has good cred, then accept it. Otherwise you could accept a money order (rather than paypal) or a personal check (wait to ship the item to clear).
posted by Stynxno at 1:23 PM on February 29, 2008

Withdraw the funds to your bank account then move them into another bank account. I have a throwaway bank account linked to Paypal, I would never give them details of where my savings/liquid cash are. I use the account solely for taking money out of Paypal and I leave nothing in there.
posted by fire&wings at 1:46 PM on February 29, 2008

Just to clarify what I said, there is never any point at which the PayPal transaction can be considered safe from scam. If it is somehow determined three years later to be fraudulent, then you owe them the money back. The same goes for a money order if it's forged. etc. etc. etc.

Personally, I wouldn't have any trouble accepting PayPal in this case without any special precautions, but I don't want you to believe that you're safer than you are. The approaches being suggested here will often work because PayPal probably won't think it's worth the bother of hunting you down, but they could choose to do so.
posted by winston at 2:30 PM on February 29, 2008

Let me just suggest that you do not use PayPal. I would ask for a US Postal Money order.
posted by procrastination at 9:26 PM on February 29, 2008

Make sure you save any documentation you have from the buyer, and try to (as best you can) verify his/her identity. This way, if something happens with paypal fraud (and keep this thread), you have some ammunition to fight back with.
posted by Todd Lokken at 8:59 PM on April 11, 2008