Freelancers Beware of Receiving Payments via Credit Card through PayPal
I’m a freelance web designer and I recently had an experience with a client using PayPal as a payment method which I think more freelancers need to be aware of.
Mistake #1: I didn’t research my client.
In February last year, a potential client emailed me and said he’d seen my site in a CSS design showcase and asked me to quote for a project he had. I spent a lot of time helping him through the jargon and helping him lay a good foundation for a successful web project by defining his ideas of what he wanted the site to achieve. After lots of the usual emails back and forth, he then abruptly emailed and said “This is on hold sorry”. He disappeared for a couple of months and then made contact again only after he said he’d “wasted 4 weeks with the last designer”. Now I know obviously this should have sent a few alarm bells ringing, and with hindsight being 20/20, I should have questioned and done a bit of research on this client before I made the decision to accept the job.
Mistake #2: I accepted credit card payments via PayPal.
As the client was in New York and I was in Brisbane, Australia, I thought I’d better be cautious let him know up front that I’ll require payment at regular intervals. First, a small deposit up-front, then only at key stages when work has been completed and approved. I chose PayPal as the payment method for as an easy and secure way of transferring the funds internationally.
I’d had the option to accept credit card payments in PayPal, which didn’t bother me at the time as the transaction was quick and I saw the funds instantly. However, what I didn’t know, and I found out the hard way was that I really wasn’t protected by PayPal and that the client can easily reverse the transaction.
The project was running relatively smoothly. The client was a bit of a strange one, flipping from being unreasonable and rude to ecstatic with my design concepts and actually asked me to marry him, multiple times. I was being paid, so I could tolerate the rudeness and I remained goal focused to get the project finished.
It got to the end of the project and I’d completed everything I had quoted on and I was working per hour for some extra content page customisation when he asked me to copy a competitor’s page into his site. I suggested that I need non-copyrighted content and I’ll design the page around that. He took it as insulting and began to threaten me, saying “you’re not the only designer on the face of the earth” and that he’ll hire someone else. At that point, I’d had enough; I had finished everything he initially contracted me to do so I made the decision to drop him as a client and wished him luck in finding a new designer. I was behind a few hours in payment but cut my losses and installed the full templated site on his server, handed over all the layered Photoshop files and left it at that.
Six Weeks Later
6 weeks later, I get some emails from him asking for me to supply the artwork in vector as he wanted to use the artwork in print material. I explained that I created the artwork for the purposes of incorporating it into the header of the website design, not vector artwork for print – I was hired to create graphics for the website. He threatened to do a reversal of the payment if I didn’t supply the artwork in vector.
He told PayPal and his credit card company he didn’t get what he paid for, and they initiated the reversal of for one of the largest payments. Without question, or any communication with me, PayPal immediately deducted the funds putting my account into the negative. This is part of their regular practice.
In speaking with PayPal they told me that because I don’t have a shipping code or proof of delivery for a tangible product, I’m not covered by their Seller Protection Policy. However, because I’m providing a service and delivered an electronic product, they said they can help me put a case together to appeal the reversal. This was a bit of a farce. I sent the evidence I had – I gave screenshots and emails and even the payment description that he included in the PayPal payment was a direct copy from my quote, saying the hours I had worked and what he had received.
This information apparently gets sent to the credit card company and to quote PayPal:
“Our dedicated claims specialists will gather information from both parties, examine the case, work with both parties to fairly and efficiently resolve the claim, and render a decision. This service is offered free of charge.”
The only resolution of the claim was that, well, the credit card company is going to side with their own customer. I never received a response as to what the outcome was after I had put my case forward and supplied evidence of receipt of the product and service. The full transaction amount remained deducted and there was nothing I could do about it.
I since see the client has actually published his website, including the artwork he claimed he wasn’t happy with and fraudulently claimed to his credit card company that he didn’t receive.
This should not have happened. I was only paid after I had worked diligently to ensure the client approved, then to come back 6 weeks later and initiate a charge back and win is something I’m still coming to terms with. I never knew this could even happen and if I had, I would never have accepted payment via credit card. I thought I was protected by using PayPal. Now I’m in the situation where he’s using the artwork created by me, which he hasn’t paid for and as he’s in a different country it adds a whole level of legal complexity and I’m not sure where to begin. I’ve contacted the Australian Copyright Council for advice and I’ll see what progresses out of that.
I’m sure that there are freelancers out there accepting payments via PayPal unaware that they are not covered and that this can absolutely happen to them if a client disputes a transaction.