Copilot Advice

Imagine that you have a need to send money to Alice, a close friend of yours. You're pretty young and pretty new to making your own money and having a bank account, but you don't typically use cash or checks. You have plenty of options to send and receive money electronically though. Options include everything from Cash App to PayPal to Venmo to Zelle... and that's just the short list. So you decide to use PayPal to send money to Alice. It seems easy enough to do and you already have enough money that you've received from others to cover the transfer in your PayPal account. You send the money, but it hasn't been taken from your PayPal account yet. The task is complete in your mind though.

Alice receives an email or text message letting her know that she's got money on the way from you. She's happy to know that she has money coming her way, but she's even happier to know that you keep your financial obligations. The notice even says the amount that's been sent as almost a further incentive to take action to collect. All Alice has to do is claim the money, right? She goes to the PayPal website and, because this is the first time that she's ever received money via PayPal, she signs up. A little over half an hour or so later after she's provided her identifying information including name, social security number, driver's license, and bank account to use for transfers and deposits, she initiates the transfer of funds that were waiting for her in her PayPal account into her bank account. The money shows up in her bank account a day or two later. All seems right with the world.

You, being the kind of person to at least make an effort to stay on top of your finances, check your bank account a few days later and find it to be overdrawn. Reviewing the transactions, you see that money was taken by PayPal and it was the key transaction that put your account into the negative. Your bank has charged you an overdraft fee to boot. You're still new to PayPal so you don't really know what to do. It certainly wasn't your intention to have your bank account turn negative and the money was already in your PayPal account so PayPal should not have needed to get money from your bank account. Since the bank charged an overdraft fee on your account and that hasn't happened before, you decide to start by contacting the bank. The bank is sympathetic so they say that they can take care of the situation including reversing the overdraft fee. You're ecstatic! Again, all seems right with the world and you think nothing more of it.

Somewhere around a week or so after Alice confirmed having received the money from you, she receives an email from PayPal with a case number. The case update says the following.

"We completed our review of the case outlined below.

Unfortunately, we are unable to reimburse you because the transaction was not covered under PayPal Seller Protection for the following reason(s):

Other.

Case detail

Sender's email will@somedomain.com

Sender's name Will Someone

Sender's transaction ID 12M12345YB654321T

Your transaction ID 9GV654321T1234567

Transaction date February 10, 2022

Transaction amount $200.00 USD

Thank you for your patience during this process. We appreciate your business. You can find additional information and tips about buying and selling safely on our Business Resource Center."

Alice is quite dismayed at receiving this email from PayPal. A first time PayPal user, she's thinking to herself "When did I open a dispute or file a case? Why are they charging me a fee of any kind? I just received money. I didn't send or sell anything or do anything else to warrant being charged a fee." In a bit of a panic, she checks her bank account and finds that she still has the money that was transferred. Phew! That's a relief. She almost wants to ignore the PayPal email as a fake now, but she too is trying to stay on top of her finances. As such, she logs into her PayPal account to see if anything happened there. Lo and behold! Alice's PayPal account is overdrawn by the original transfer amount plus the $15 dispute fee! She almost faints thinking about the situation, but, she contacts you to discuss the situation and you explain what happened.

Together, you and Alice resolve to contact PayPal thinking that there must be some mistake or at least some way to fix the problem without being forced to pay a $15 fee. It was an honest mistake and not malicious in any way so PayPal must have a way to forgive a first time situation like this. After finding the contact number for PayPal, you reach a customer service representative and explain the situation. The customer service representative delivers the bad news. Their hands are tied so, while the situation is regrettable, they have no mechanism to forgive the $15 dispute fee. In addition, if the account is left in its current negative state for too long, it may be reported to the credit reporting bureaus as a negative item for Alice. Ever the optimists, you ask to speak with a manager and even offer to contact the bank so that all parties can work together to correct the situation. The manager is at least apologetic, but they acknowledge that their hands are tied as well. Not only that, but they point out that you and Alice agreed to the dispute fee as part of signing up for PayPal. But, even reading through PayPal's terms and conditions, you question why anyone would think that they'd ever be subject to a dispute fee if they haven't sold, and never plan to sell, anything through PayPal.

Hearts sink. Optimism is at an all time low and this situation may really test the friendship between you and Alice. For some people, $15 isn't a lot of money. For others, it just might be. And then there is the principal of the thing for Alice as to why she should have to pay any fee if she was just supposed to receive money. If you value the friendship, you really should send her the original transfer amount plus the dispute fee. What would you do in that situation? How would you look at PayPal with regard to sending or receiving money? Would you use them again or would you be more inclined to resolve this situation, delete your PayPal account, and tell everyone about your bad experience which caused you to never use them again?

The scenario that is described above is one that actually happened. It clearly wasn't malicious, but PayPal has an immovable policy where their dispute fee is concerned. Now imagine if the situation wasn't so innocent. Someone sends you money through PayPal with the express intention of getting it back for themself through the bank and effectively ghosting you if you try to contact them about it. You're a new PayPal user so you don't know the details of how things work from any prior experience with them. Per PayPal, the dispute fee is still something that cannot be forgiven as the scam artist didn't claim that the transaction was unauthorized. They just got the bank to return the money under a different rationale and then withdrew the cash from the bank afterwards. The scam artist gets away with not actually paying you and PayPal enriches themselves to some extent off the work of the scam artist. With that more malicious situation being possible, might one therefore question whether PayPal is really appropriate when it comes to sending and receiving money between people? What if the dispute fee grows to be more than $15? Would you still feel obligated to pay it in order to avoid ruining your credit over that amount? Banks are able to use their discretion with regard to fees in a number of situations, but how is it that PayPal isn't? Food for thought.

If you've had a situation like this happen to you with PayPal or any other provider who serves to transfer money between people, let us know at info@moneycopilot.com. Customers of Moneycopilot, LLC benefit from this and other Copilot Advice as well as proven strategies to improve their credit scores into the 700s, pay down unhelpful debt, establish savings where none seemed possible before, and be more strategic with how their money supports goals that help them live a better life. Anyone who is facing challenges getting positive results from managing their finances on their own can benefit from our services and we are happy to help. If you need assistance with improving your financial health or daily money management in general, we are at your service and you can start your journey today. Your wallet will thank you!