http://www.eprairie.com/news/viewnews.asp?newsletterID=4097 By ADAM FENDELMAN Editor-in-Chief 9/3/2002 CHICAGO (Exclusive) - PayPal is an online company that conducts gobs of online transactions every day. Problem is, it's those "virtual" deals that seem most susceptible to fraud, ePrairie has discovered. To understand the potential loophole, it'd help to first understand PayPal's practices to prevent fraud. The company, which says it has been remarkably effective at foiling fraud compared to other Internet sites, has what it calls a "seller protection policy". This essentially means that the Mountain View, Calif.-based company will fight on behalf of sellers when buyers commit various forms of fraud in an attempt to retrieve the seller's deserved receivables. But the policy has at least one big exception: it doesn't cover "virtual" goods. For an online company that makes most of its revenue through online auctions, PayPal says only a small majority of its customers conduct these kinds of transactions. Just one example is an individual who paid for banner ad space, signed a contract and then told his credit card company that he didn't authorize such payment. While that case is still being fought, the gist is that the product or service provided isn't tangible and can't be touched or tracked by online systems, and PayPal therefore doesn't want part in it. A PayPal spokeswoman said she's well aware that "online fraud is rampant" and "preventing it has been tough." She added that the company has a fraud team of 150 people devoted to identifying, tracking and preventing fraud, but when it comes to online goods, that's "as tough as it gets." Without becoming an escrow service (holding funds until both parties agree), she says that PayPal doesn't have a way of verifying the consent of both parties. She also dismisses the issue as one that's not very big and says the company hasn't had enough complaints to warrant spending the required time and resources to prevent virtual fraud. If the transaction's not virtual, PayPal does seem to have in place lots of seller safety measures. For example, sellers are not held liable as long as they have a "verified" business or "premier" account, they ship to the buyer's "confirmed" address, they ship the product within seven days of receiving payment, and they can provide "reasonable proof of shipment that can be tracked online." Also, the product must be “tangible,” the seller must have accepted a single payment from one PayPal account, and the seller must have shipped to a domestic buyer at a U.S. address. PayPal has developed its own "buyer complaint" process so buyers who feel a fake credit card has been used for payment needn't file a "chargeback," which is a motion to a credit card company that initiates an investigation that spans 75 business days. During that period, PayPal recognizes that its allegedly innocent sellers often feel frustrated that they can only sit back and wait. At least if you're a seller who has provided a virtual service, now you know the wait's unnecessary. - ISN is currently hosted by Attrition.org To unsubscribe email majordomoat_private with 'unsubscribe isn' in the BODY of the mail.
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