Paypal Fraud for Unauthorized Transaction

29 replies
Does anybody have any experience with Paypal fraud regarding an unauthorized transaction? Apparently, one of my buyer has lodged a claim that she didn't make a purchase for my ebook.

Also, it happens that the purchase was made through an affiliate's link and the payment was made to my account and then immediately paid to the affiliate. What should be my course of action?
#fraud #paypal #transaction #unauthorized
  • Your case is a classic affiliate fraud scheme. The fraudulent affiliate uses a stolen credit card number, then makes the purchase for which the affiliate receives the commission. By the time the card owner finds out, the affiliate is long gone with the commission. The card owner in your case is most likely not the buyer. You could try and dispute it, but make sure you don't spend the funds you received because in the end, PayPal will most likely debit your account and return the funds to the credit card owner.
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    • Profile picture of the author jlee620
      Originally Posted by stoltingmediagroup View Post

      Your case is a classic affiliate fraud scheme. The fraudulent affiliate uses a stolen credit card number, then makes the purchase for which the affiliate receives the commission. By the time the card owner finds out, the affiliate is long gone with the commission.
      Thanks for telling me. The transaction was made 6 days ago. So, what should I do now? Should I make a Paypal claim against the affiliate?
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      • Profile picture of the author sbucciarel
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        Originally Posted by jlee620 View Post

        Thanks for telling me. The transaction was made 6 days ago. So, what should I do now? Should I make a Paypal claim against the affiliate?
        Yes, you can make a claim against the affiliate. It worked for me with only one and I had about six of them to deal with. But you will only get the commission paid to the affiliate returned (unless they've cleared out their Paypal acct., which usually is the case. You will still be charged for the chargeback and of course have to refund the credit card holder.

        Report the affiliate to whatever platform you used. If you're using JVZoo, move all affiliates that you don't personally know and trust to delayed payment of at least 45 days. Don't approve affiliates you don't personally know without delayed payments available. This stuff is pretty rampant. Every week someone else posts their little horror story.

        PS: If you have any more sales from that affiliate, I would advise you to refund them all immediately, before you get a chargeback.
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  • I added an answer to my original comment, but will paste it here: "Yes, You could try and dispute it, but make sure you don't spend the funds you received because in the end, PayPal will most likely debit your account and return the funds to the credit card owner"
    Signature
    Arnold Stolting - Stolting Media Group
    "I LOVE The Song! The Vibe Is Positive And Firm!" - Kymani Marley. (Son of Bob Marley)
    "Keep Up The Good Work!" Tony Lindsay - Lead Vocalist, Carlos Santana.

    "Very High Quality!" Jeremy Harding - Manager / Producer. Sean Paul.
    "They Are FANTASTIC!" - Willie Crawford.

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    • Profile picture of the author jlee620
      Originally Posted by stoltingmediagroup View Post

      I added an answer to my original comment, but will paste it here: "Yes, You could try and dispute it, but make sure you don't spend the funds you received because in the end, PayPal will most likely debit your account and return the funds to the credit card owner"
      Thanks again. The disputed funds from the buyer is already held. I will definitely refund her transaction. But should I separately lodge a dispute with the affiliate's Paypal account? Also, the affiliate is under WarriorPlus.
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  • At this point you should let PayPal handle the refund transaction. Let them do their investigation first. You never know and might get lucky where the purchase could have been made by the card owner, who may also be the buyer and the affiliate, and simply claimed the unauthorized transaction just because they can. (however that is a very small chance).

    If you however want to refund the buyer yourself right away, make sure you do it through the Paypal resolution system so that it all balances out for your account in the end.

    Regarding the affiliate, you could alert warrior plus regarding this affiliate so they can look into it, and make sure that PayPal is aware regarding the affiliate's PayPal account.
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    Arnold Stolting - Stolting Media Group
    "I LOVE The Song! The Vibe Is Positive And Firm!" - Kymani Marley. (Son of Bob Marley)
    "Keep Up The Good Work!" Tony Lindsay - Lead Vocalist, Carlos Santana.

    "Very High Quality!" Jeremy Harding - Manager / Producer. Sean Paul.
    "They Are FANTASTIC!" - Willie Crawford.

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  • I wonder if that affiliate is Nigerian lol
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    • Profile picture of the author Steven Roberts
      This happened to me last week on W+. I raised a case with Paypal and got my money back, as did the person who was ripped off. It's annoying to say the least.
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  • Profile picture of the author kencalhn
    I'd like to see someone try that with me; I'd file a criminal case w/police. Affiliate cc fraudsters = criminals and collectively I think it's a good idea to report that to law enforcement; why not? If they stole your money they're criminals and should be prosecuted. I know I will if that happens to me. Most police departments (at least in big cities) have 'cybercrime' divisions set up to help with that.
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    • Profile picture of the author Tim_Carter
      Originally Posted by kencalhn View Post

      I'd like to see someone try that with me; I'd file a criminal case w/police. Affiliate cc fraudsters = criminals and collectively I think it's a good idea to report that to law enforcement; why not? If they stole your money they're criminals and should be prosecuted. I know I will if that happens to me. Most police departments (at least in big cities) have 'cybercrime' divisions set up to help with that.
      Ya - good luck with that.
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    • Profile picture of the author nicheblogger75
      Originally Posted by kencalhn View Post

      I'd like to see someone try that with me; I'd file a criminal case w/police. Affiliate cc fraudsters = criminals and collectively I think it's a good idea to report that to law enforcement; why not? If they stole your money they're criminals and should be prosecuted. I know I will if that happens to me. Most police departments (at least in big cities) have 'cybercrime' divisions set up to help with that.
      I had this scam happen to me in November of 2012. It was because I foolishly approved affiliates that I did not know for instant commissions on JVZoo. It resulted in 11 charge backs in one week before I knew what was happening. I was able to refund the rest of the sales before any more damage could be done. Not only did I have to refund the purchase price of the product, which was $19.95, I had to pay a $20 charge back fee for each occurrence and I spent more than an hour on the phone with PayPal explaining what had occurred so I did not get my account shut down.

      I contacted my local law enforcement agency and was told they only had one cyber crimes detective and would not be able to take a case unless it was identity theft or child abuse related. In other words, unless someone steals your identity and drains you of all of your money and runs up credits cards in your name, or it involves child abuse or kidnapping of some kind, the police will most likely not be interested in helping you.

      I, like you, believe that affiliate fraud is a serious crime but the reality of it is that most police departments, even ones in large cities, do not have the resources to pursue these type of frauds.
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  • Profile picture of the author inyourway
    I've actually had the same problem 3 times this week.. I refunded the buyers in all cases and I've blocked 2 of my affiliates. (Both affiliates where responsible for the 3 sales.)

    I guess that's what happens when you just accept all the affiliate requests in W+, without doing any research on each of them. Lesson learned!
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  • Profile picture of the author Sarah Operman
    Do you track the IP addresses with your customer or make the customer confirm their email address when they sign up? If you do both it is almost impossible to lose a case with PayPal for digital goods, especially if the email address confirmed is the same email as the Paypal email.

    If you are not doing this now I would recommend you set this up for the future so this does not happen again.

    That is good for the customer side, for the affiliate side, I would recommend you not approve any affiliates for instant commission until they have a minimum amount of good sales.
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    • Profile picture of the author Arcus Isidar
      I have extensive knowledge of PayPal unauthorized transactions. My internet business operates in a market where fraudulent payments make up about 2% of my orders.

      If you've been selling a lot and this is your first one, I wouldn't worry about it. If you get another one, you might want to set up some type of checkout page that tracks the customer's IP address so you can compare it to their PayPal shipping address. The shipping address and general IP location should be very close, at least within the same state/province within Canada and the US (and within the same country in Europe / other parts of the world). However, these tactics will not protect you 100% of the time, you may want to budget for PayPal fraud in your selling price if they continue. However for an e-book seller they shouldn't be that frequent.
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      • Profile picture of the author nicheblogger75
        Originally Posted by Arcus Isidar View Post

        However for an e-book seller they shouldn't be that frequent.
        I would think eBook & other digital product vendors would have the highest occurrence of this type of fraud due to the nature of the business. The most common means of this happening is when a vendor approves an affiliate that he/she is not familiar with for "instant" commissions.

        When you approve an affiliate for "delayed" commissions it is not possible for them to perpetrate this fraud because the funds are being held in the vendor's account. The whole key to this type of fraud being successful is the instant transfer of commissions to the affiliate's account. If you take away that variable then the scammer has no motive to do this because it will not result in any profit.

        Although, I guess if someone had a vendetta or was out to screw a vendor they could still do this and cause charge backs on the fraudulent transactions. In this case the vendor would not lose the cost of the product because they would be refunding money that is still in their account, but they would still most likely be held responsible for a charge back fee of some kind.

        I also think that this particular method of fraud would not be possible with physical merchandise because I don't know of any affiliate networks that pay instant commissions on the sale of physical products. Don't most affiliate networks that carry physical products, such as Amazon, make the affiliate wait to get paid?

        I could be wrong, but just from the horror stories I've been hearing it seems to be happening almost exclusively with digital products that offer instant commissions.
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      • Profile picture of the author garmahis
        Originally Posted by Arcus Isidar View Post

        I have extensive knowledge of PayPal unauthorized transactions. My internet business operates in a market where fraudulent payments make up about 2% of my orders.

        If you've been selling a lot and this is your first one, I wouldn't worry about it. If you get another one, you might want to set up some type of checkout page that tracks the customer's IP address so you can compare it to their PayPal shipping address. The shipping address and general IP location should be very close, at least within the same state/province within Canada and the US (and within the same country in Europe / other parts of the world). However, these tactics will not protect you 100% of the time, you may want to budget for PayPal fraud in your selling price if they continue. However for an e-book seller they shouldn't be that frequent.
        Exactly the case with my recent PayPal unauthorized transaction claim: the same ip, the same email and buyer still claims the transaction was unauthorized. What you can do?
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  • Profile picture of the author pwwebpromos
    I feel for you. I had a similar experience yesterday. My product is digital/downloadable.

    A "buyer" notified PayPal that the purchase wasn't authorized by him.

    A brief conversation with him convinced me that it wasn't worth the time to pursue it any further.

    Quickest thing to do at that point is just issue a refund and keep that buyers info for future reference.

    In the case of an unscrupulous affiliate....it is never a good idea to set someone you don't know to 'instant payment' status.

    It comes back to bite you in the ass way too often.
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  • Profile picture of the author chris07
    Originally Posted by jlee620 View Post

    Does anybody have any experience with Paypal fraud regarding an unauthorized transaction? Apparently, one of my buyer has lodged a claim that she didn't make a purchase for my ebook.

    Also, it happens that the purchase was made through an affiliate's link and the payment was made to my account and then immediately paid to the affiliate. What should be my course of action?
    I have been here before. I'll tell you this... don't take it lightly, don't ignore it to... Paypal will likely rule in favor of the claimer, that is what Paypal do. Paypal is quite annoying... everybody is a suspect both the buyer and the seller... especially if you sell make money online eBooks... Paypal screwed me up before... so dont take it lightly
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  • Profile picture of the author jlee620
    What exactly is a chargeback and how much does it cost? I reversed the transaction from the Paypal side and I think I'm charged like 0.72 USD for the reversal. Are there any other costs to this reversal or chargeback?
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  • Profile picture of the author vishwa
    Unauthorized transaction mean someone make an order with the consent of the original account holder. You will never won if its a unauthorized transaction.
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  • Profile picture of the author Moneymaker2012
    for digital products, in this case credit card owner is strong,
    you can't do anything except moving on.
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  • Profile picture of the author karolhu
    There's not much you can do as paypal does not cover the price of digital items in a charge back. What will happen is you will lose your money, and have to end up paying the affiliate. I recommend moving away from affiliate marketing sites where something like this can occur.
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  • Profile picture of the author kindsvater
    This is affiliate fraud and I have seen an increase on the forum targeting WSOs. The fraudsters are getting more savvy in making what appear to be legitimate WF accounts with a few posts. They also appear to be "drip feeding" unauthorized transactions across different sellers to try and hide their tracks.


    Steps to take:

    1. In PayPal, file an unauthorized transaction claim against the affiliate and request that PayPal terminate their account. This is to get your money back.

    2. In W+ ban the buyer and block access.

    3. In W+ report the affiliate.

    4. In JVZoo block the buyer's email address. Since this blocklist is shared with other sellers it can help stop more fraud.

    What we need is a place to lookup affiliates with unauthorized transactions filed against them.

    .
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  • Profile picture of the author Brent Stangel
    Don't approve anyone you don't know well for instant!

    If someone has a problem with delayed payments, they will never sell anything anyway.
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    • Profile picture of the author kindsvater
      Originally Posted by Brent Stangel View Post

      Don't approve anyone you don't know well for instant!
      That isn't practical. First, with W+ you cannot pick and choose which affiliates are paid with instant and which are not. With other systems that is possible. But W+ is a major player for WSOs.

      Second, there are too many possible affiliates to know each well. Even if you think you know someone they can still turn out to be a fraudster.
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  • Profile picture of the author anders83k
    good thread, will not do immediate payouts to unknown affiliates, thanks for sharing this
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  • Profile picture of the author denmarks
    I've had the same problem last week. My cousin told me to write about it at vcharges.com and they will give the details. I found there a lot of paypal frauds, to be honest I was surprised and did not expected them to be so many
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  • Profile picture of the author Annie Wright
    Use the form available in the PayPal Resolution Center to file an unauthorized transaction report.

    You can also report such unauthorized charge on Unauthorized Transaction Reports - vCharges.com
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  • Profile picture of the author GreatMarkO
    I've previously had a couple of PayPal customers erroneously claim "Unauthorized Transactions" as a result of them not actually realizing/recognizing the name of my company on their Credit Card statement at the end of the month after they purchased one of my products.

    These were genuine mistakes by the buyers, and in both cases PayPal sided with me (the seller), however, the frustrating thing in both instances is that according to PayPal's dispute T&C's they can take up to 75 days to resolve! In both my cases, it did take that long, during which time the original funds were taken from my account.

    Whilst I eventually got the funds back in both cases (after 75 days though!) I was landed with an administrative fee both times which the original buyer's credit card issuer's levied against PayPal, who in turn passed it onto me!

    So I ended up slightly out of pocket in both instances, even though both claims were found in my favor! (I was able to bill the original customers for these additional charges, who paid this additional "fee" I charged them)

    However, one very important thing that is worth noting relates to the sale of "intangible goods" through PayPal (i.e. things like Digital Software, E-Books, or other downloads etc).

    In the past, PayPal didn't offer Buyer or Seller protection in respect of "intangible goods" so in the event of such disputes, both the Buyer and Seller have equal chance of winning.

    But from 17th June 2014 (in the UK at least), PayPal are introducing Policy Updates which WILL now give Buyers (but not Sellers!) protection in respect to "intangible goods"!!

    So software vendors/e-book publishers beware!! - These upcoming PayPal policy changes potentially put you (the Seller) at increased risk!!
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