PayPal's new refund policy has sellers up in arms

Bubbajim

TechSpot Staff
Staff member

PayPal has been the go-to payment platform for many small vendors since it was popularized on eBay and other online marketplaces. Currently, when someone sells goods or services, they are charged a flat transaction fee, plus a percentage-based commission on the sale. If a customer asked for a refund, everything except the small transaction fee was returned, but now PayPal has said it will keep seller’s fees, causing anger among users.

The proposed changes have no impact on buyers, who will still be able to purchase goods and request refunds as they always have. Instead this is a major blow for people using PayPal to sell things.

Anyone selling goods via PayPal pays 2.9% commission on the sale, which will no longer be returned when giving a full or partial refund. The flat fee is set at $0.30, and has never been subject to refunds.

People are angry about the changes, and have been quick to point out what it means in practice. If a vendor sells something for $1,000, but the customer changes their mind, the seller has not only lost their buyer, they will have also lost $29 in the process.

Alongside the refund changes, PayPal are also altering how they handle international payments and currency conversions. Transferring money to another country will no longer have a flat fee, instead PayPal are introducing a variable fee of 5%, with a minimum and maximum cost of $0.99 and $4.99, respectively.

PayPal has said that anyone who disagrees with any of their new terms is free to close their account.

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RickMentor

TS Rookie
The seller loses the customer, transaction fees, seller fees, shipping fees and if able to resell the item it has to be sold as used or open box. No way to recover the lost. If this isn’t a desperate move to save the PayPal. We’ll see how Daniel Schulman respond when amazon, apple Facebook, Venmo, cashapp and others become direct competition with merchant service providers PayPal.
 
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Uncle Al

TS Evangelist
This attitude is a growing trend not only in this industry but others as well. Many have realized they simply cannot be all things to all people and have taken that stance of doing business their way or going elsewhere. Of course the real power still lies with the consumer who can and does vote with their pocket book. Only time will tell when there will be either a winner or a simple change in consumer buying habits .....
 

Evernessince

TS Evangelist
What I don't get is: How can PayPal legally keep the commission percentage when the sale was reversed? The flat $0.30 fee is for the transaction and is the amount paid to processes the transaction and I can understand them keeping that. But to keep a commission on a canceled or reversed sale? No other credit card / payment processor does that. You shouldn't be taking a cut of a canceled sale. Imagine if eBay or Amazon decided to keep their 12 -20% commission as well, even for returned or canceled sales? It's ridiculous.

The average return rate for an online computer parts vendor is 4.8%. Many of those returns are due to customers changing their mind, can't get the product to work in their system, new products released and they are returning to get the new stuff, shipping damage, ect.

Now imagine you are a medium sized business with 95,000 sales a month. That's 4,560 returns. Assuming the average sale price is $200, you are paying $26,448 in additional fees (not including shipping, marketplace fees, ect). That's not including the fact that you are going to be paying that PayPal commission fee again when another customer buys it, only it will be open box. Mind you that's only looking at a single fee and doesn't include marketplace fees, shipping fees, ect. When you have a return you have to pay shipping both ways for the original customer and again when another customer buys it.

All of these additional costs add up and simply make it harder for small sellers to compete. They aren't Amazon, who has their own payment system and marketplace and have exclusive deals with the carriers.
 
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Knot Schure

TS Addict
Sounds like the beginning of the end to me...

Power corrupts, absolute power absolutely corrupts.

Amazon thanks you PayPal.
 
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Eldritch

TS Addict
Wait! Paypal is still relevant? Ebay is still a thing?
This was more shocking than that commission part.
In my personal experience, I haven't bought anything from ebay in last 4 years and didn't log in to my paypal for several years. None of the people I know uses ebay or Paypal to best of my knowledge and still, they have the gall to do this.
Its just like Nokia saying they wont support android.
 

Thrackerzod

TS Booster
I used to sell a great deal on ebay but stopped due to their refund policy. It is too easy for buyers to abuse and they do
How do they abuse it?
eBay's policy is the buyer is always right. A buyer can claim anything they want; item not as described, broken, or straight up lie and say they never got it and eBay will happily give them a refund (out of the seller's wallet of course). Paypal makes things even worse buy giving buyers a full six months to decide they want to return something, and now this.
 
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Theinsanegamer

TS Evangelist
In the end the consumer pay in the form of higher prices to cover this loss to the seller.
I feel this is just going to push more sales to craigslist or other such sites. Ebay and Paypal have gotten too big for their britches, and they are scaring away their core userbase.
 

ShagnWagn

TS Guru
Whoa, really? What is paypal doing to deserve all that money? This is a total joke like the government is for online sales. They are trying to force out-of-state purchases to pay sales tax - a 10% tax increase overnight... for effectively doing NOTHING.

I haven't sold anything on ebay in over a decade. I was just about ready to have a "garage sale" on ebay. I just needed to start taking photos. I was also looking to sell my vehicle worth about $12,000-$15,000. So if they show up and don't like it, I am screwed by PayPal? Uh... NO. I will be deleting my paypal account.

Now, where is the next best place other than ebay?
 

Dimitrios

TS Guru
Whoa, really? What is paypal doing to deserve all that money? This is a total joke like the government is for online sales. They are trying to force out-of-state purchases to pay sales tax - a 10% tax increase overnight... for effectively doing NOTHING.

I haven't sold anything on ebay in over a decade. I was just about ready to have a "garage sale" on ebay. I just needed to start taking photos. I was also looking to sell my vehicle worth about $12,000-$15,000. So if they show up and don't like it, I am screwed by PayPal? Uh... NO. I will be deleting my paypal account.

Now, where is the next best place other than ebay?
Local FACEBOOK MARKETPLACE. I did it once, a lot of people on their!
 

Earl Phlegm

TS Rookie
Wow, what an arrogant stupid way to turn your monopoly into the least desrable option among a flood of new competitors. Smooth move Paypal. Why didn't you just tell all your customers to fo because that's what most of them are going to do. I can think of a number of industry behemoths with the programming power to create competition virtually overnite and the wallet to mass market a huge presence in the same time frame. All they have to do now is offer marginally better terms and they'll be instant major players in a formerly very exclusive market. Greed and stupidity are synonyms in the computer industry unless you have some really good patents but I don't think PayPal has those protecting their share of this market.
 
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treetops

TS Evangelist
eBay's policy is the buyer is always right. A buyer can claim anything they want; item not as described, broken, or straight up lie and say they never got it and eBay will happily give them a refund (out of the seller's wallet of course). Paypal makes things even worse buy giving buyers a full six months to decide they want to return something, and now this.
Is Amazon any different?