How To Take Legal Action As A Seller Against PayPal and The Buyer Who Made a False Chargeback and You Lost The Case
When it comes to false chargebacks, PayPal often can be useless even if you provide the proof that the service was provided or item delivered. There are thousands of complaints on the internet regarding similar cases. But here are some legal actions that you can take against both. Especially against the scammer who made the false chargeback to teach them a good lesson.
Legal Actions Against the Buyer
If you believe the chargeback was false—meaning the buyer intentionally misrepresented the facts to reverse a legitimate transaction—you have several potential recourse options. Filing a false chargeback can be considered fraud, which may carry civil and criminal consequences. For instance, it could be treated as theft or wire fraud, potentially leading to fines ranging from $1,000 to $10,000, court costs, blacklisting by financial institutions, damaged credit, loss of banking privileges, or even imprisonment for 1-3 years depending on the jurisdiction and severity. To pursue this:
* Report to authorities: If you have strong evidence (e.g., proof of service delivery, communications showing the buyer’s acknowledgment), you can file a police report for fraud. This might trigger an investigation, though outcomes vary by location and case value. In extreme cases with high dollar amounts, this could escalate to criminal charges against the buyer.
* Civil lawsuit: You can sue the buyer in small claims court (or higher if the amount exceeds small claims limits, typically $5,000–$10,000 depending on your state) for breach of contract, unjust enrichment, or fraud to recover the funds. Gather all evidence like transaction records, service proofs, and dispute communications. This is often recommended as the primary escalation beyond PayPal. Success depends on proving the chargeback was baseless, and you may need to sue in the buyer’s jurisdiction if out-of-state.
* Report buyer abuse to PayPal: If the case was closed against you, appeal within 10 days citing “buyer abuse.” This might not reverse the decision but could flag the buyer for future restrictions.
Keep in mind that chargeback fraud harms merchants through direct losses, higher fees, and potential account risks, but proving intent is key.
Legal Actions Against PayPal
Suing PayPal is more challenging due to their user agreement, which limits liability and favors arbitration over court. PayPal has discretion in dispute resolutions, and sellers are generally liable for lost chargebacks unless Seller Protection applies (which it may not if the buyer won). Here’s what you can do:
* Internal appeal: First, appeal the decision in PayPal’s Resolution Center within 10 days of closure, providing new evidence. This is required before external steps.
* Arbitration: Per PayPal’s terms, most disputes must go to binding arbitration (via AAA) rather than court. You can opt out within 30 days of agreeing to the terms, but if not, arbitration is mandatory for claims like breach of contract. It’s individual only—no class actions—and PayPal covers certain fees for smaller claims.
* Small claims court: If the amount qualifies (e.g., under your state’s limit) and remains individual, you can sue in small claims instead of arbitration. Some users have successfully done this for issues like unfair decisions, winning judgments for refunds or damages. File in your county or PayPal’s (California), but check jurisdiction—PayPal may argue against small claims if out-of-state. Document everything, including breach of their own policies. PayPal’s liability is limited to direct damages; no consequential losses.
* Other options: Complain to the Better Business Bureau or Consumer Financial Protection Bureau (CFPB), which has taken action against PayPal in the past for unrelated issues but may investigate disputes. Consult a lawyer specializing in consumer fraud or payment disputes—some handle PayPal cases on contingency.
Overall, focus on the buyer first, as actions against PayPal are uphill battles due to their terms and discretion in disputes. Consult a local attorney for advice tailored to your situation, evidence, and jurisdiction.