Transaction Issues: PayPal Templates to Help You Win 95% of Disputes and Chargebacks

PayPal is one of the most commonly accepted alternative payment methods in e-commerce. Part of that is simply because the platform has been around for a long time, but PayPal also tends to be easier for customers to use and easier for new merchants to set up than traditional payments. Many small businesses start accepting PayPal even before they can accept credit cards.

Unfortunately, no payment method is perfect. Payment disputes are universal in the world of e-commerce, regardless of what payment method the customer used, and PayPal is no exception. PayPal Disputes and Claims follow a different process than typical chargebacks, as they’re handled through PayPal’s internal systems rather than a credit card network. In order to manage these disputes effectively, merchants should know how PayPay Disputes and Claims work, the difference between the two, and the best ways to avoid them.

PayPal encourages buyers to resolve any issue they have with a purchase through the PayPal Resolution Center, and most will do this, resulting in a PayPal dispute or claim. However, buyers can still dispute the charge through their bank as well, resulting in a chargeback. We’ve already covered PayPal chargebacks in depth, so let’s take a closer look at disputes and claims.

When a buyer opens a PayPal dispute, they’re essentially opening a dialogue with the merchant about a serious issue with their purchase. The seller will be given 20 days to resolve the issue with the buyer directly before the dispute can be escalated to a claim.

When the buyer reports that a transaction was unauthorized, a claim will be initiated directly rather than needing to be escalated from an unresolved dispute. Since there’s no dispute in these cases, the dispute fee will be waived

While refunds are the most common solution, any arrangement between the buyer and seller that resolves the problem and convinces the buyer to close their dispute is acceptable. Sellers are free to respond to these issues in other ways, such as sending out a replacement product or offering store credit.

If a customer claims that a dispute due to “Item Not Received” and you’ve delivered the product use this simple template:

Dear Sir or Madam,

The customer, [CUSTOMER NAME], placed order #[ORDER NUMBERS] on [STORE NAME] on [ORDER DATE].

The order was shipped to the provided address: [ADDRESS]

The order was shipped using [CARRIER] with the tracking #[TRACKING NUMBER]. The customer received a shipping notification including the following URL to track the shipment status:[TRACKING URL].

The order was shipped on [SHIPPING DATE]

The order was delivered on [DELIVERY DATE].

These dates fall within our Shipping and Delivery policies detailed here: {{Terms of Service URL}}.

Please contact us at [YOUR PHONE NUMBER] or {{Support Email}} for more questions.

Include the following attachments:

1. Screenshot of tracking URL

2. Screenshot of customer’s order confirmation page

3. Screenshot of Shipping and Delivery policies page

PRO-TIP: Download Simple Seller Protection for Automatic Dispute Resolution. The app automatically screenshots proof of shipping, fills out this template and responds to PayPal for you!

If a customer makes an “Item is Not as Described” claim, follow these steps:

Unfortunately, there’s no simple template for this scenario. If a user issues a complaint about the product they received you should respond to their inquiry. Listen to what the customer is saying do one of two things:

1. If you’re NOT at fault and the product is as described and in good condition, present your case. This is where it important that you:

2. Request a photo of the product the customer received.

3. Take a comparison of the product photos on your site

4. Respond to the dispute with all of the evidence you have compiled and state your case

5. If you are at fault and the product is damaged, incorrect or otherwise not as described you should immediately contact the user and offer an exchange or refund to resolve the issue.

If a customer issues a chargeback on the basis of Fraudulent Charge

If a chargeback is initiated on the basis that it is fraudulent, you’ll need to investigate. To win a chargeback that is claimed to be fraudulent, prove that

1. Check that the billing address and the shipping address match. It is extremely unlikely that someone would use the customer’s card to place an order then ship that order to the cardholder’s address.

2. Check that the billing address on the card and the order also match.

3. Verify that the IP address that was used to place the order is in the same area as the shipping and billing address. You can check the IP address location with this free tool. You can find the customer IP address within Shopify by following these instructions.

If you can verify that the charge is NOT fraudulent, use this template to respond

[SHOP NAME] can confidently conclude that this order is NOT fraudulent. [CUSTOMER NAME] placed order #[ORDER NUMBERS] on [STORE NAME] on [ORDER DATE].

The order was shipped to the provided address: [ADDRESS]

The order details include a matching billing and shipping address, indicating that the customer placed the order and had it shipped to themselves.

The IP address that was used to place this order is within [# of miles] of the shipping address.

Order #[ORDER NUMBER] was delivered to the customer’s address.

Include the following attachments:

1. Screenshot of tracking URL and or delivery confirmation

2. Screenshot of the order details including the name and address

3. Screenshot of relevant IP investigation detail

If a customer issues a chargeback on the basis that they did not receive a refund, but have not returned the product

After a [CHANNEL FOR CONVERSATION] with [CUSTOMER NAME], our team at [BRAND/STORE NAME] has determined that the customer was not satisfied with the product and we would issue a full refund. As stated in our Terms of Service, a refund will be initiated only after the customer provides proof of the return. It is required that the customer provide proof with either a tracking number and/or the shipping receipt.

For reference, here is a link to our Terms of Service [LINK TO TOS]. Attached you will find confirmation of delivery to the customer, a screenshot of the order details and a screenshot of all communication with [CUSTOMER NAME].

Include the following attachments:

1. Screenshot of the delivery confirmation

2. Screenshot of the order details including

3. Screenshot of all communication with the customer

If a customer issues a chargeback on the basis that they did not receive a refund, but you do not have a request for that refund

[CUSTOMER NAME] recently submitted a chargeback on the grounds that they did not receive a refund. Upon investigation [YOUR SHOP] has found no evidence of a refund request from [CUSTOMER NAME]

Our Terms of Service clearly states that refunds will only be issued after a customer returns the product(s) and provides proof with a tracking number and/or the shipping receipt.

For reference, here is a link to our Terms of service [LINK TO TOS]. Attached you will find confirmation of delivery to the customer, a screenshot of the order details and a screenshot of all communication with [CUSTOMER NAME].

Include the following attachments:

1. Screenshot of the delivery confirmation

2. Screenshot of the order details

3. Screenshot of all communication with the customer

If a customer issues a chargeback on the basis that they were not satisfied with the product

[CUSTOMER NAME] contacted [SHOP NAME] on [DATE OF FIRST CONTACT] and explained that the product they received was not acceptable because [INCLUDE CUSTOMER REASON]. In response, we sent a request for photo or video evidence that would demonstrate the issue.

Our Terms of Service and Refund Policy both explicitly indicate that the customer must provide evidence in the form of photo or video in order to receive a refund. As of today, we have not received such evidence.

The customer received the product, please find the tracking number [TRACKING NUMBER] and tracking link:[TRACKING URL].

Include the following attachments:

1. Screenshot of the delivery confirmation

2. Screenshot of the order details

3. Screenshot of our Terms of Service/Refund Policy, indicating that no refund will be provided without photo or video evidence

Beginning in December of 2020, PayPal switched from charging a $20 chargeback fee only when the buyer filed a chargeback with their bank to charging an $8 dispute fee for all transaction reversals.

If a dispute made through the PayPal Dispute Resolution Center is escalated to a claim, the merchant will be charged the new fee.

As part of the new rules, PayPal established a dispute threshold for merchants. If the merchant had more than 100 sales in the past full three months and more than 1.5% of those sales led to a dispute, the seller will be charged a High Volume Dispute Fee, which is double the standard fee.

However, buyers still have the right to dispute a charge with their bank, even if it went through PayPal. If buyers find PayPal’s process unsatisfactory or decide to bypass them entirely, disputes can easily turn into chargebacks.

How Does PayPal Deal With Chargebacks?

Here’s what happens when a customer files a chargeback against a PayPal transaction:

• Buyer contacts their issuing bank and requests a chargeback
• Issuing bank notifies PayPal’s merchant bank
• PayPal’s merchant bank notifies PayPal of the dispute and withdraws funds from PayPal
• PayPal notifies the seller of the dispute, and funds related to the chargeback are placed on hold
• Seller submits their evidence that the chargeback should be denied to the PayPal Resolution Center
• PayPal reviews the evidence
• PayPal passes the evidence to the buyer’s issuing bank
• Issuing bank reviews the evidence and makes a decision on the chargeback case
• Issuing bank notifies the buyer and PayPal of their decision. PayPal notifies the seller of the decision and updates the case status in the Resolution Center

Merchants are advised to adapt their chargeback fighting strategies to account for the unique aspects of the PayPal chargeback process. The optimal approach for fighting PayPal chargebacks depends on the type of products or services being sold.

Here are the most compelling kinds of evidence to provide for each dispute scenario:

Physical goods

• Original item description, including photos
• Transaction receipt with shipping and billing information
• Seller Protection verified information (if the transaction is eligible)
• Shipment tracking number, with time stamp
• Delivery receipt with a delivery address that matches the shipping address provided by the buyer (signature confirmation may be required for transactions over $750)
• Copies of any correspondence between the buyer and seller
• Proof of any refunds issued prior to the chargeback filing
• Proof of any replacement products shipped
• One-page cover letter explaining the seller’s reason for disputing the chargeback

Digital goods

• Original item description
• Transaction receipt with billing information
• Copy of the seller’s return policy and terms & conditions
• Reports that prove that the product was downloaded or used by the buyer (this needs to include identifying information such as the buyer’s name, email, or IP address)
• Copies of any correspondence between the buyer and seller
• Copies of previous completed transactions that were not disputed (in cases where the chargeback is for a recurring billing transaction)
• Proof of any refunds issued prior to the chargeback filing
• One-page cover letter explaining the seller’s reason for disputing the chargeback

Services

• Copy of the service agreement signed by the buyer and seller, outlining all the deliverables and the timeline of the service to be provided
• Transaction receipt with billing information
• Copies of the service cancellation policy and terms of service
• Copies of any correspondence between the buyer and seller
• Service delivery acknowledgement signed by the buyer
• Copies of previous completed transactions that were not disputed (in cases where the chargeback is for a recurring billing transaction)
• Proof of services rendered to the buyer (for digital marketing services and similar businesses)
• Proof of any refunds issued prior to the chargeback filing
• One-page cover letter explaining the seller’s reason for disputing the chargeback

As with any other chargeback problem, it may be helpful for merchants who deal with a high volume of chargebacks to look for qualified, dependable chargeback experts to help them curate and present the evidence that will recover their revenue while showing them how to implement business improvements that will prevent chargebacks from happening in the first place.

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