Posted by Chuck on September 18, 2019
Misc

Published on September 18th, 2019 | by Chuck

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[Update] Major Change to Paypal Refund Policy – Processing Fees Won’t be Refunded on Order Cancellation (Affects eBay Sellers, etc.)

Update 9/18/19: another email went out today on some Paypal accounts indicating the change will go into effect on October 11, 2019 at which point you won’t be refunded for the fee on returns “in line with industry practice”. (Maybe the earlier May 7 date was for personal accounts and this new one is for business accounts? Not sure, in any case, if you are a business owner, you’re going to want to keep an eye out on the fees.)

Original Post:

Paypal sent out an email today with an update today to the Paypal terms which will go into effect on May 7, 2019. Here’s a link to the new terms. There are 3 changes mentioned there, here’s the one we are focused on:

We’re changing how we treat refunds. If you refund (partially or fully) a transaction to a buyer or a donation to a donor, there are no fees to make the refund, but the fees you originally paid as the seller will not be returned to you.

The new terms seem to indicate that the entire 2.90% + $.30 fee will not be refunded in case of an order cancellation/refund. Currently the policy is that the $.30 does not get refunded, but the 2.90% fee does. This makes sense: Paypal likely gets hit with some small transaction fee which gets covered by the $.30, and then there’s the interchange fees which are not charged in the event of a refund.

This is literally insane! It means that an eBay seller or online retailer who makes a $1,000 sale and gets an order cancellation will lose the $29 fee charged by Paypal.

It’s likely larger websites who accept Paypal (e.g. Walmart.com) have special deals with Paypal and won’t be affected by this change. For eBay sellers and other online retailers, this could result in a nice spike in cost of payment processing, depending on what your rate of return/cancellation is.

Hat tip to u/Golden-Squirrel on r/ebay



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Ann
Ann

Hmm, it’s almost like Paypal is *trying* to push sellers away to become exclusive users of Ebay’s payment processing.

Sevillada
Sevillada

Seems like paypal really wants to drive away customers

YoniPDX
YoniPDX

I wonder if it started with Elon Musk (when he was still involved) – He still want’s to drive customers away – but not many competitors that can compete with Tesla 😉

Aditya Shrivastava
Aditya Shrivastava

Hahhahahahaha

steve
steve

what a horrible policy. someone else needs to step up and take their place.

icemule1
icemule1

eBay is coming out with their own payment processing system.

Jenna
Jenna

I’m sure that will be horrible. eBay already doesn’t return fees on refunds themselves

Jason Smith
Jason Smith

They have always refunded my selling fees when giving a refund.

Jonathan S
Jonathan S

When giving a full refund eBay refunds the final value fee.

When giving a partial refund eBay does not refund the final value fee.

amos
amos

It is technically true that they do not refund fees on partial refunds. But this is just a glitch/bug in their system. Just call them, and they will refund the final value fee. We wait usually until we have 3-4 different partial value fee, and then place one call. They refund in full their fees on all returns!

Jonathan S
Jonathan S

Did not know this. Thanks for the tip!

MrDioji
MrDioji

So it’s literally technically true. Funny

adam d
adam d

if you know it exists, so do they, and dont care to fix it and keep the portion of those now in the know. dont trust them to handle their own payment processing any differently, thyere snakes.

Carlos
Carlos

Not correct at all.

vince
vince

It’s even more insane. If you have a paypal account I can literally just send you 10k and then cancel it and you’ll be hit with a $290 charge. Anyone can send you money and cancel and you’ll get a fee. Someone could even accidently send you money and then get it refunded and you’ll be charged. This is for payments for goods and services AND the “send to friends/family” option.

Vic
Vic

This sounds really bad….

LC
LC

sounds like fraud. but alright i get what you’re saying..

Dan
Dan

the whole paypal business model sucks donkey balls. when will ebay grow up and starts managing payments themselves, like amazon does?

Ann
Ann

They already are, as I mentioned in the first comment here. Sellers have to opt into it, and so far, most haven’t. We had a deal on DoC a few months ago where you could save ~$5 on an item from a seller who uses Ebay’s payment system; there were thousands of eligible sellers, though still just a small fraction of all the sellers on Ebay.

Chris F.
Chris F.

At the moment if you opt into eBay’s program, you can only use eBay’s program. This can be confusing for buyers who are used to using PayPal to check out, which is why I haven’t switched over. I’m eager for eBay to release it to general use and allow buyers the choice.

Zaos
Zaos

I’ve purchased plenty of items from ebay, from the same seller, that allows me to choose either Ayden or Paypal.

CARLOS
CARLOS

They are now, managed payments is here and at 2.7%

Parkerthon
Parkerthon

Holy crap. Even as an occasional seller I’ve had people request to cancel sales. This is absolutely ridiculous.

mega
mega

a cancelled sale before they pay is ok no fees inured

carl wilson
carl wilson

Terrible for shopify stores and ebay sellers. Lots of people buy on eBay only because of Paypal buyer protection. Paypal knows this and is flexing on it.

Matt
Matt

Paypal is getting kicked off ebay in the next couple years anyway. They are simply accelerating their demise.

Trevor
Trevor

At least on your own Shopify store, you can disclose and assess a fee for processing refunds. Whether or not that’s a good business idea or if a spiteful buyer will chargeback on the remaining 3% you hold back is yet to be seen.

Tony
Tony

PP is just a lot of BS. They’re luring buyer to use paypal because they known seller hate them. Who offer “180 days no question asked returns” beside Costco?
I have a small value item listed on ebay and set to ship only to US. An Intl buyer bought then ship to a forwarder in FL but i got hit with a hefty 6% transaction fee not counting ebay fee. Normally buyer is the person ho paid for intl transaction fee but now paypal forced me to eat that fee? I only ship to US but how to i known the ship to address is a forwarder and/or buyer is international buyer. Paypal is greedy.

Jonathan S
Jonathan S

PayPal charges 4.4% + $0.30 for non-US customers (billing address) vs. 2.9% + $0.30 on US customers. An $18.75 sale to a customer with an international billing address would have a 6% PayPal once you factor in all of the transaction fees. (A customer with a US billing address would have a 4.5% fee for the same transaction.)

Benjamin P
Benjamin P

This is an insane policy, that needs to be reversed. Selling on swappa will become a disaster. Only form of payment available.

Jason
Jason

What a cash grab. We’ve used merchant accounts and they don’t even do this!

Jab
Jab

Selling on ebay is already a nightmare, but this makes it even worse

HarryTheFirstHarry
HarryTheFirstHarry

this looks like a real bad April Fools joke…except its April 2nd.

The Man
The Man

And this is why people hate Paypal.

Jonathan S
Jonathan S

I have an eBay store. My average sale on eBay is $800 (PayPal takes $23.50 on average). My return rate is 7% since I offer free returns so that I can get the top rated seller badge on my listings. This means that the expected PayPal loss from each transaction is $1.65 (up from $0.02 prior to this policy). This is a bummer, but it won’t shutter my business.

MCT
MCT

Wouldn’t you be losing $23.50 if someone makes a return? How are you getting $1.65?

Jonathan S
Jonathan S

$1.65 is the expected loss per item sold. You are correct that I would lose $23.50 on an average return. If I build this into my expected cost of doing business I should expect the average loss of 7% * $23.50 = $1.65 per item.

To summarize:
Expected loss per return with new PayPal policy = $23.50
Expected loss be item sold with new PayPal policy given 7% returns = $1.65

MCT
MCT

You said in your first post that your return rate is 7%. So approximately 1 out of 14 items will get returned. So PayPal will keep $23.50 for every item returned. Is that correct?

Jonathan S
Jonathan S

That is correct.

H Xu
H Xu

your logic is built on the single fact that you must have sale volume large enough to dilute a single return into the number 7%. Unfortunately , a lot of sellers do not have that power.

To tell the truth, if I do have that volume, Ebay won’t be my first choice for market place, and I can easily negotiate with payment processor for better deal on interchange

“The Guy”
“The Guy”

Given how often buyers back out of high dollar purchases immediately after payment this is a negative. I haven’t used eBays new payment system at all but it will obviously be worth a look now

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