PayPal’s New Refund Policy Sticks It To Sellers With Fees, Drawing Swift Backlash

PayPal doesn't have a stellar reputation among sellers thanks to some of its more aggressive payment policies. A recent announcement of changes to its user agreement has angered sellers who use PayPal, which revolves around how refunds are processed. Starting on May 7, 2019, when a seller issues a partial or full refund to a buyer or refunds a donation to a donor the fees originally paid as the seller are no longer returned. PayPal notes that there is still no fee to make a refund.

Word of the refund policy change surfaced on Ecommercebytes, and the comments on the announcement are far from happy. Many sellers using PayPal on eBay mention that buyers routinely order something, only to change their mind and ask for a refund immediately. Under the new program, PayPal will keep the fees it charged for the deal costing sellers money for the buyer making a decision outside their control. 

SlickDeals user kwadguy explains the policy, writing:

Imagine you're a seller on eBay. You offer 30 day returns. Your buyer purchases a camera for $1000. They pay with PayPal. An hour later, they write and say "I changed my mind, please cancel this order. If you don't, I'll just return unopened when I get it, so save yourself the shipping." So you have to refund. And you just lost $29.

Many of the comments are also talking about closing PayPal accounts and moving to the new eBay payment system as soon as it launches. eBay announced in early 2018 that it would slowly start to replace PayPal as its default payment system with a service called Adyen based in Amsterdam. Sellers on eBay are complaining vocally noting that if you sell higher priced items on eBay, the fees charged can be costly.

One seller noted that PayPal has always kept the fixed 30 cent transaction fee when a refund is issued. It's the percentage of the sale that PayPal will now keep that is the big change. Other eBay sellers are saying that the policy change will have them rethinking offering free returns (which eBay encourages) to buyers.

PayPal is also changing how it charges for sending money to friends and family members with PayPal accounts outside the States. The fee is now 5% of the amount sent with a minimum of $0.99 and a max of $4.99 per transaction. Currency conversion spread will change to 3.25% over a base exchange rate for those sending money in a PayPal transaction.