Freelancers Beware of Receiving Payments via Credit Card through PayPal

What method of recourse do you plan to take? It’s really not a choice to abandon what’s rightfully yours.

I’d like to see some alternate suggestions. I have used PayPal quite a bit with clients and so far without incident, but if there’s a better solution out there, other than the obvious freelance sites like elance, etc., I’d love to hear from the readers…

Thanks for the warning! So if we are working with an international client, is there a safer electronic alternative to PayPal? Any suggestions that won’t charge a ton of fees?

Do you know who his credit card company is? If so, I would go to directly to them and report his case as fraud, which it is. What he has done is illegal by terms of his credit card contract. If you go directly to that company then they should help. It might also help if you have a business partner in his country to help with some of the correspondence.

It’s not just paypal, this can happen with any credit card and has happened to me. PayPal can’t take money from your bank account or credit card without your permission so don’t ever keep a balance in your account and if someone does this worst case you have to open a new paypal account but at least you’re not out the money.

Wow. This is indeed a sad story that should not have happened. I currently use PayPal to receive payments from clients. My work is mostly small WordPress projects. My question is outside of PayPal what other payment options are other using that are more secure? I’m sure we can all agree good old printed checks are probably the best but inefficient. Is there some other option for electronic payments?

While you should try and do what you can to get your money back, unfortunately the credit cards will almost always side with their clients from the past experience I’ve had. Definitely worth a shot though, you are obviously in the right.

This is why I always remove every paypal payment I get the minute I get it. I may make people just pay in personal checks from now on. Or ship them their files on CD.

Ouch. Main reason I don’t like accepting credit cards myself. I work in accounting and tax, so its very easy for a client to dispute one or two numbers out of a whole return. Including client’s saying they will never pay us for work done, when we do the work and just refuse to claim illegal deductions.

I would hate to have chargebacks over my head. So I know your pain.

Wow, that really stinks and is scary. As a buyer of services, I love using paypal. I didn’t know that it was like this for the seller though

What alternate payment methods are generally acceptable for clients?

I assume this article refers to the ability to accept a credit card payment from someone without a Paypal account. How, if at all, does this risk differ from accepting regular payments via Paypal?

I am so sorry about your experience. I was actually thinking about using Pay Pal myself to make it quicker and easier for clients to pay. I’ve actually used pay pal on some websites I’ve created for my clients to sell without having to have a full e-com site. I might have to reconsider that in the future.

Heck, even this web site uses Pay Pal to sell their Rockstar book.

Hope everything works out for you.

Ok… What i’m going to suggest isn’t nice – but *shrugs* I figure someone like that shouldn’t profit from such ridiculous behaviour anyway.

Try some combination of the following:

* Check if he did use the content you refused to steal – if so, notify the other site involved and discuss what the client is actually like.
* There are some large spam link farms – pay to have the site registered on a few of them and he’ll get completely knocked out of google.
* Register some cheaper similar domains (e.g. if he’s got a .com get the .net and the .org) and put up a lovely splash page detailing your experience with this client. Optimise them heavily to turn up when his name or the company name is googled.

I don’t like paypal much either but i’ve got no ways you can do anything evil to them.
They “froze” US$19000 in one of my friends accounts because he was supposedly engaging in suspicious activities on ebay. They basically kept his money for 6 months before actually handing it over. He had no negative feedback and over 200 positive feedbacks, no dubious or illegal stock. Just things from his house he wanted to sell, mostly books.

Good luck with the followup Cara. I would like to hope that the Australian Copyright Council will act for you and make sure you are reimbursed. We really rely so much on our clients acting morally in this business, don’t we? Unfortunately the dodgy people always seem to know just how to work the system to their best advantage. Let’s hope they get what they deserve this time.

I had the same exact experience happen 1 year ago. Paypal told me because it’s not a tangible product, same BS.

I’m so sorry for your experience! I hope you get what is rightfully yours out of this whole mess.

Unfortunately Paypal is very, very risky. All it takes is one unsubstantiated complaint and they can shut you down for good (and keep any money left in your account). I’ve been in the same situation as you before. I suggest a civil lawsuit as your contract, screenshots, emails and the fact that he’s using your work illegally will ensure a judgment in your favor. Make sure to take a screenshot of his website before he wises up and takes it down.

I believe you might have a case if you show the work you completed and now that he’s published that work he has accepted it and should owe on that work. I would like to think the credit card company could see this and take an objective approach to it.

Don’t hold money in your PayPal account. I generally wait until I have $150 and transfer it to my bank account immediately (because it’s free to do so for amounts over $150).

I’d also suggest that it’s probably OK to accept credit card payments if the client is paying in advance. You’ve just got to make sure you transfer it to your bank account as soon as you get it.

You could also refuse credit card payments for projects over $200, or somesuch. But I think you’d probably be OK accepting card for small projects.

There are definitely risks associated with PayPal and my advice is to use it for getting paid but not for storing money. It’s just not safe enough.

This is horrible and I’ve seen it happen many times. Paypal is notorious for NOT doing anything about chargebacks from credit cards.

Does anyone have experience with this if they’ve mailed out a CD with the files on it? Does that make any difference. I’m beginning to think that I’d like to get the address of the client and mail them a CD with all files on it just to have that on record and just put the shipping costs into the product development costs.

I use PayPal for a business where we ship tangible products. We don’t get a lot of disputes, but the ones we do get are about 50/50 in terms of what gets settled in our favor and what doesn’t. All products not purchased through PayPal (ie: someone else using PayPal to pay you to your PayPal account) are not covered through their seller protection plan. So the other person has to have a PayPal account to be covered at all; tangible products or not.

Directly from PayPal: “Direct Payment and Virtual Terminal transactions are not covered by PayPal’s seller protection policies and programs.”

Warn him before you do this in case he wants to pay up. After he laughs at you, take all of your documentation, correspondence, etc and turn it over to a collection agency. You won’t get the full amount in the end, you may get nothing, but the collection agencies work on a contingency basis (they get paid when you get paid) and will usually only take your case if it looks like they have a case. What he will get is his credit rating destroyed if he doesn’t cough up the dough.

I used to accept Paypal, but I actually deleted my account entirely after hearing some pretty bad horror stories. It’s like so many customer service situations – everything seems so great until something goes wrong, and then you see where you really stand.

As for alternative payment methods, I’d love to see a reliable one for international transactions. As it stands the only really reasonable ones are cheque (unfortunately many banks put a hold on international cheques until they clear, which can take up to 25 business days – although this can be argued with your bank), and wire transfers, which are great, but expensive.

I had the same thing happen to me several years ago. I was doing a CD for this kid and when I was finished, his dad paid via credit card on paypal. They got the CDs printed, shold a bunch and than his dad decided that he didn’t really like it anymore, so he contacted paypal and the credit card company and said that I never completed the work!

Long story short, I emailed paypal with pictures of the actual printed CD, the digital files, our emails and even a statement from the company that printed it. It took at least 6 months, but I eventually got my account out of the negatives.

I’m surprised that none of the comments yet have asked which site is the one with your work up on it.

It is of course very professional of you not to mention the perpetrator by name, wouldn’t it be oh so fun to see what could happen if the internet knew their identity?

I’m no PayPal expert, but to all the folks that mentioned taking money out immediately, I’m really not sure that’ll help at all. If there’s a negative balance on your PayPal account, it still has to get paid. It’s not a matter of having money “in PayPal” that’s lost, it’s that there’s suddenly an unjustified debit.

My heart goes out to you, Cara–there’s risks with everything (checks bouncing, for example). Within one’s own country, checks can be nice, but often PayPal is really the only option. Anyone else have experiences with other systems? My fear is that systems other than PayPal may have just an opaque a confrontation policy.

I appreciate that while you’re still trying to recoup your losses you probably wouldn’t want to say anything, but when it’s all done and dusted it’d be good to know who this client is so the rest of us can avoid dealing with him.

I am very sorry for your very bad experience with paypal. And your article makes me alert about using paypal for my clients payment.

Regarding other aternatives, these services are safe.

Moneybookers.com (http://www.moneybookers.com)
This is very secure. The only downside is it’s limit, currently my limit is a flat zero, and have to wait for couple months to get my limit back. Other than that, all works good. It also accept recurrent payment.

2checkout (http://www.2checkout.com)
2CO is very slow, but they do their job well. The fee is a bit higher than paypal. If you do lots of micro payment of tangible or non-tangible products, 2CO is a great choice.

Very sad to hear; I have dealt with clients like that but have been lucky enough to NOT experience something to that extent. I am very partial to doing business with anyone who is too far away, where I couldn’t just get in my car and resolve the issue if I had to I think you should exploit this fraud so everyone has a name and a face.

I’m so sorry this happened, Cara. I learned my lesson with PayPal a few years ago when I was selling stuff on eBay. Thankfully, it wasn’t too expensive of a lesson at the time. I’ll only use PayPal now for amounts I can afford to lose, or from people whom I actually know.

I hope more people catch on to the fact that PayPal offers virtually no protection for sellers.

Rachelle

Hi Cara, thanks for the warning. I can fully imagine what it feels like to be in that situation. PayPal seems like such a great option, until of course something like this goes wrong. I hope you didn’t loose a large amount of money.

I keep ranting about billing incrementally and not allowing clients to build up a huge debt. It’s the only thing that helps me sleep at night.

Also, I agree with the others that you should pursue getting your money back from the guy in some way.

@ Jeff: What about getting a regular merchant account to process credit cards? I’ve used ProPay for a few years now and have been happy. You’re still subject to chargebacks, but they aren’t quite as easy as through PayPal. You can send invoices through email where the client can then enter their card information through ProPay’s secure site.

@ Amanda: That might be a good idea. Even if files are delivered electronically, still send them in some format through a shipping service that PayPal will recognize, and only ship them to the verified PayPal address of the client.

Rachelle

I had thought of using PayPal for accounts, but based upon this and some of the things tied with the new e-bay/PayPal rules going into effect this week, I’m having to reconsider.

Do you know if you had shipped something on a CD to him, if it would have helped any with your claim? That way you could have a shipping ID attached possibly.

Walter

So what is the best policy to keep money???
Transfer is straight away from paypal to your account? and how do you stop people using credit cards to pay??

Its a pity to hear this, I would recommend that FS does a follow up article highlighting ways to be protected!

Wow, so sorry. Is it just the cynic in me, though, or has anyone else thought that if you were the client and you legitamitely didn’t get what you paid for or had some other sort of legitimate dispute, you wouldn’t be able to get the charge reversed so easily? It seems like “Murphy’s Law” that the guy who’s doing it fraudulently gets away with it, yet when I or my family/friends have had legitimate disputes, the credit card company has some reason or another why they can’t just reverse the charges. My FIL was just telling me a story that happened to him recently, and the credit card company dispute process was a farce. Basically, he had to go deal directly with the company that charged his credit card, and luckily they did reverse the charge. (The charge appeared because he checked some box about getting free coupons at check out when ordering some vitamins online, so it automatically enrolled him in some program that he knew nothing about. There was nothing to make it clear that checking the box would enroll him or result in a credit card charge. My husband has fallen for a similar scam.)

shocking and appalling.
I’m easing into freelance and this definitely puts the fear into me about doing that.

1. I’m glad you made us all aware of your situation and I’m sorry you went through it.
2. since you put the fear into probably all of us hah, I would respectfully beg you or somebody on this site to tell us or help us all figure out safe ways to accept payments so this cant happen be it setting up a merchant acct and a shopping cart to accept payments on our own site or what.
I’m definitely looking for an alternative now because that is unacceptable and i would have logged onto his server and deleted the site probably. your more of a professional than i am in this regard. thats just wrong and i hate to see people wronged like that.

hope to see an alternative payment solution post soon.

Wow! I’ll be more careful with Paypal. I usually withdraw the money immediately though.

I had the opposite problem with Paypal. I mean, I hired somebody in my home country (Argentina). We agreed that I’d pay through Paypal, but at the moment of payment my provider told me that couldn’t convert her money into cash. Basically, she didn’t have a credit card and banks wouldn’t accept Paypal checks.

I prefer to work trough sites like Elnce, RentaCoder, etc., Even when a client hasn’t found me through those sites I ask them to subscribe. In the case of RAC, I have an affiliate account, so I don’t get charged commission for projects of clients that were introduced to the site by me. It also has another two advantages: an escrow account and there is a visible record of the projects I finished and what my clients think about my work.

Yeah, collection agency, get them on his case.

And contact his web host, inform them about the fact he’s using stolen – copywritten materials (your design) on their servers.

Far sad story indeed – I had a similar experience on eBay a while back when I sold an iPod, and the buyer issued a charge-back after he’d received the it! I had already known of this type of thing that happens, so I had already initiated a transferral of the cash to my bank account. Unfortunately, the charge-back was issued on day 3 of 3 that a transferral takes, and PayPal reversed the transaction and refunded the buyer!

I went through the whole complaints process, however PayPal stated that the eBay account was stolen, and they couldn’t let the payment go through because the person who allowed the account to be stolen would be the one who got charged!

As an alternative in the UK, I now solely use http://www.nochex.co.uk which is very similar to PayPal, allows for payment by non-members, and apparently don’t allow charge-backs. Worth a look.

Great article – but how do we protect ourselves now? What can we do for protection, or what payment methods are more secure?

So I think some kind of conclusion would be good for this article – what is/are the best alternative(s)?

Karma WILL get him. What he sows he i soooo going to reap ten fold!!

paypal has both the good and the bad, it is sore on the exchange rate, you are uncertain as to when they may decide to close or track your account, as not long ago i had a similar incident, id been using my paypal account and had completed all the forms etc that they require for a business account so i had stated i was a freelancer and that i provided a SERVICE not selling an ebay product, so i had received one large payment over a k and they started doing checkups, they then froze my account for 3 weeks which during this time i gave them everything they needed and 4 times they said within 48hours your account will be unlocked, then the killer blow came, when they said they had checked everything and even after contacting the last 5 of my clients and all of them stating that they had received their service they decided that they wanted to have further review of our account for a period of, wait for it 180 days so i had to literally refund money, as paypal took a percentage for holding onto it, they still took their 4.2%, and well needless to say i had to change to another account and find a different payment solution, and the funny thing was i wasnt even half way through my monthly receiving balance for them to do this! easy money for them and very little a single individual can do about it as they contacted my clients without permission, froze my accounts without permission and locked my bank account without permission so it crippled the business. personally id go to the debt collectors and show them proof, dates times of the client using and stating that an outstanding balance is to be paid, you may not be US based but you do have international rights to this.

If you weren’t using PayPal and instead had a credit card merchant account, couldn’t he still challenge the charge?

My understanding is that even outside of PayPal, these things happen all the time. So for example, if you’re a small merchant, you probably accept credit cards. You’ll be signed up with your bank and have a little terminal for authorizations at your location. You’ll also be charged monthly fees and reporting fees regardless of how much you actually run through it.

If someone buys something from you, they can call their credit card company and challenge the charge. This could be for any number of reasons. It is my understanding that the bank would then freeze the disputed amount. In fact, some online merchant accounts place a percentage of funds into a holding pool just for this reason before releasing them. It can take months before regular merchant accounts see disputed funds – if at all.

And we already know the risks of accepting checks that bounce, incur bank fees, and never get credited to our accounts.

I’m wondering if the intermediary sites (eLance and Rent-a-Coder) are better since both sides agree and then funds are transfered. It may prevent those chargebacks from out of the blue. At least the customer would have to agree at the time and would have less of a case down the road.

I’ll be interested to hear from others about possible solutions.

Receiving goods and then initiating a chargeback is fraud – plain and simple.

I’d suggest carefully packaging up all the information about this transaction, including links to the offending website, and contacting the local authorities with the details. If you’re lucky the guy will be charged with fraud.

You may even be able to get the FBI to help – the fraud was conducted over the ‘wire’ and international/state boundaries. Might be considered a federal crime.

That’s awful! I’m sorry you were robbed like that. Frankly, that’s exactly what’s happened. You should put in a claim with your bank and state the situation. There’s no way this weirdo should’ve been able to do that.

Thanks for the very important tip. Sorry you had to supply it through personal experience. (

That is horrible! One question, though; if you don’t take PayPal on a regular basis, what else do you use? Do you accept a lot of checks? I always thought PayPal would be the way to go (and has worked okay for me so far) and accepting checks was somehow frowned upon.

You said that you installed the site on his server right. So I assume you still can still log onto his server? If so, log on and remove the pages that you have created from his site. You didn’t hack into his site, he gave you access. He didn’t pay you so he did not purchase the product. Therefore he has no right to keep it and you have every right to take it back.

Also with clients, what you can also do with each payment they make is have them sign or confirm that they have received the product/services for which they paid. This would make it more difficult for them claim any dissatisfaction in the future.

Good luck.

-Sherman

Unbelievably helpful. Thank you. I appreciate your candor and professional attitude about the article as well. Well done.

PayPal is, in general, an absolute customer service nightmare whether you are a merchant or a buyer. In the space of ten days I had a complete runaround from them from both sorting out some account issues and also them screwing up on MacHeist. The long saga is here: http://www.polaine.com/playpen/2008/01/25/paypal-a-customer-service-nightmare/

Google Checkout might be good, but it’s only for US and UK bank accounts at the moment. No idea what their policy is though.

Sorry, Cara, about your experience with that awful client. Fortuanately, what goes around comes around and eventually he’ll get his. But, I have to say, as someone preparing to get into freelance webdesigning this is pretty scary. I was planning on using Paypal to avoid problems with bad checks and/or money orders with customers. But, I think the idea of a few of the posters of sending your work thru a Paypal approved shipper on CD is a good idea in order to be protected thru their Payment Guarantee Policy. Another possibility, though, could be using GoogleCheckout. I was just looking at their chargeback policy on their site and though it seems pretty similiar to what I’ve heard others on this post say about Paypal’s chargeback policy, Google online products are usually pretty good and maybe GoogleCheckout could be a better alternative to Paypal. I know I’ll definitely give them a try.

PS— Someone in this post mentioned something about closing a Paypal account if there is a chargeback that puts you in the negative then opening another one. Wouldn’t Paypal just transfer the negative balance to your new account and then you’d still have to pay?

Ohh… what a sad story. Cara, you have my deepest sympathy.

While PayPal is a horrible company and I do everything I can to not use them, this is more of a credit card issue — and actually part of the reason I *only* pay for things through PayPal via my CC. It is very easy to get a successful chargeback if you have a really good CC company. I have never abused this power, but when I report a deadbeat merchant or something like that all I do is give AMEX the amount of the fraudulent charge and they handle the rest. I always get my money back and I’ve never been asked any questions. It’s like magic.

Of course, this can backfire if you actually did your job and the client is just pissed (or insane). Unfortunately, as you’ve found out, PayPal is completely useless in this regard and all they are really good for is freezing your accounts, so if that’s something you’re interested in, they can help there haha. I do hope you find a way to get your money back, but like most PayPal stories, this might just end with “and there was nothing I could do.”

It seems to me that one possible loophole here may be to modify the wording of your contract so that the final product that you are selling the client is your work on physical media (I.E. when the project is done you mail them a DVD with all their files on it). Ship the DVD to them via FedEx with signature required for delivery, that way you can show PayPal that they received a physical product. I’m not sure if this would work or not, but it seems sound to me, and it makes it hard for them to commit credit card fraud, which is what this really is.

I’m sorry to hear about your ordeal though. I’ve had similar erratic clients myself, and I think the best advice was actually in an article here a few months back about dealing with difficult clients. At the first signs of trouble attempt to get everyone on the same page about what does and does not constitute acceptable behavior, and if it continues cut them loose immediately. I know I wish I had done that on more then one occasion. The headaches are never worth the $. Good luck on resolving this issue.

if you still have their login information, why not delete the work you did on the site?

How frustrating! I hadn’t thought about chargebacks – thank you for writing this so articulately. Did paypal or the credit card companies suggest anything you could have done differently had you known this could happen? Documentation we might all now create that would have influenced them in your favor?

I suspect though that this client causes harm to *everyone* around him – a crazymaker, a griefer. In this case, he succeeded by using the paypal/credit card system. I do wish they’d done more to protect you from his abuse, or that the credit card company looked at the tangible evidence of work received. But my experience has been that people like that find a way to hurt you because they will always go farther than any decent person to accomplish their harmful aim. Yes, the credit card company was complicit, but ultimately, he is the one to blame and his abuse of you included more than non-payment. You did all the right things. The biggest reminder I take from this article is that if someone’s behavior is erratic and inappropriate, their payments will be too, so it is just not worth my time. Like you, I would have given him the benefit of the doubt.

@ Amanda—–But that might not really do much good since Cara said she gave him the Photoshop files and associated files. Unfortuanately, he could just get someone else to put the site back up and continue using all the other files for his other print work.

I’ve had similar issues with paypal. However, as I understand the agreement you need to provide a physical product to be covered by paypal’s policies. The easiest way to do that as a designer is to provide working files to the client on a personally branded CD/DVD. Be sure to close the disc session (avoid additional recording) and mail the disc to the client “for their records”. The mail receipts cover you for payment even if you also transfer content electronically. I’m sure this isn’t a guarantee but at least it creates a better paper trail and you have receipts for an object not just an ftp log file.

What a nightmare. Thanks for the warning and good luck with collection.

Man that really stinks, but if he published what you produced and he didn’t pay for (or reversed payment on), then its also fraud and you can take legal action. Like others have said, when a client pays by credit card those chargebacks can happen whether it was facilitated through PayPal or not. PayPal may suck because they refused to go to bat on your behalf, but not using them (and using another service that’s similar), probably isn’t going to protect anybody any better.

I’d have protections built into your workflow – at the concept stage, design stage and production stage – get sign offs that the client has received what they asked for/paid for before moving forward. You’ll have these as protection later. Keeping every piece communication no matter how seemingly insignificant will also help make your case.

In this case I’d notify him that you’re preparing legal action and notifying the appropriate agency of fraud, and give him 48 hours to respond. Take screenshots of his web site, show them to him, and tell him the case is pretty clear and he can choose to resolve it without legal involvement. I’m sure it’s a little trickier being in different countries but I’ve no doubt there are protections in place nonetheless.

And I’m not above what someone else here said, see if he did in fact steal that content and, since you’ll have a screenshot going into it, use that as leverage! (and notify the other company)

Good luck!
T.

We do business with a number of international clients. The only method of payment accepted is wire transfer. Also, being paid up front is the best way to go, if you can negotiate it and show the value of doing so. Our bank charges $10 for a transfer fee which isn’t bad. The only downside (sometimes) can be receiving less money due to currency translation, so it is important to ensure that the client pays you the correct amount. Of course, exchange rates change throughout the course of the day, so you might see a little less. A solid contract should also be in place with the statement (somewhere) that the work does not belong to the client unless you get paid for it (and the money remains yours).

Sadly this is not the first (or likely last) story I have heard about PayPal payment reversals. The fact that this transaction was done via credit card adds another layer of complexity to getting it resolved, but even if it had been a bank withdrawl or account balance payment, you would still have a hard time getting PayPal to return your money. They are pretty terrible with customer service in that regard, and tend to side with the buyer by default. I had a problem with them regarding an ebay auction I ran, and ultimately I lost my money and the product I sold after PayPal looked into the matter. Long story short, they decided that the buyer was justified in getting a refund for a damaged product (which I doubt very much was actually damaged) but they didn’t seem to care whether or not the buyer had actually returned the product.

This Paypal situation is an instance of where it would pay off to burn the files to CD and mail them to the client, even if you still upload them yourself. That gives you legal proof of your work.

If the client / client’s web host is based in the United States, try going to the company that hosts the web site. You may be able to file a DMCA (Digital Millenium Copyright Act) complaint for that work.

As others have pointed out: this isn’t just a problem with PayPal. It’s a problem with credit card companies in general. PayPal just sucks because they don’t provide strong seller protection.

F*** I can’t believe what I am reading!!
I cannot believe PayPal reversed the transiction!!

First , your Artwork is yours , He hiered you to work on the website not for the printable media so your action was %100 coorect … beside , source files are like negative films of the photographer … you never get it when you have your pictures !!

Second, your mistake was accepting the project after he came back to you … He’s a rude frauding stupid guy … I am sure the other designer left him for his bad manners

@Amanda : even if she had the login info , she cannot go that low …

I feel really sorry for you Cara .. Its something frustrating and we all had some clients like this stupid fag*** once or more … Thanks for your warning Cara .. God bless you

What a horrendous client! You mentioned his request to copy content from another site directly into his – have you checked to see if he’s followed through on that with another designer? If so, it’s worth sending an email to the original company, with a fair warning about his behavior.

Other than that, I agree with the commenter Michael. Try contacting his credit card company directly and see what they can do. Its a long shot, and unfortunately there’s no simple way to resolve things without a long protracted battle.

At the end of the day all that you may take away from it is a lesson learned. Fortunately you’re in good company with a lot of fellow freelancers who’ve learned a similar lesson. And as one, the best advice I can give is to take action, then do everything in your power to let it go and move on. Don’t let the crooks of the world eat away at you.

Cheers

This is crazy. Did you have the client sign a contract? Would that make a difference as far as payment is concerned? I know freelancers who will not do anything without a contract outlining terms of payment and what constitutes a “finished” product. Does anyone have experiences where this offsets the drama and fiasco of PayPal debt?

- Chloe

You mean to say that if someone pays through credit or debit card in paypal,he has the right to withdraw the payment he has done(i mean get back the money even after money paid or sent)?

Wow. Every now and then I find a client that is difficult to deal with. I appreciate the warning about paypal – at least this situation can save me from one possible scenario!

Thanks for this post! I never would have thought risk with paypal. I am in the U.S., I’m not sure about foreign copyright laws but I believe he has committed copyright infringement by using work in which the rights have not been transfered(i.e. payment made to owner). Granted copyright issues are expensive and sometimes not worth dealing with, you could try a cease and desist letter that says you own the work until paid for. Does anything your client signed mention that you own rights until payment is made?

Also, I always thought credit card companies only remove payment if they can’t contact the person and verify the issues. I had issues with a California computer company I ordered parts from, no one would answer the phone, never received my parts I paid for, the card company retracted the payment. They only did this after they verified the company did not answer their business phone.

I have used PayPal for years, but mostly only with established clients. I try to use it only on smaller payments, to both avoid the PayPal fees, and to protect myself from chargebacks. So far, in 5 years, I have only had one reversal, and it was a small amount that I could tolerate losing. PayPal is a great way to manage payments for me, as I live about 25 miles from my post office box, so getting checks sometimes costs more than the PayPal fees (with gas at $3 a gallon). Overall, I think the benefits outweigh the cons, as long as you take precautions to protect yourself.

I wanted to jump in to give everyone a few warnings… there is NO safe way to get paid, except for cash (even that could be fraudulent, just less likely) and possibly wire transfers. I work in the Bookkeeping department at a US bank (until I can break into the freelance world) and I’ve seen many different problems. It’s not a pretty world out there and, sad to say, you aren’t guaranteed anything with any option you choose. Some of this might be obvious, yet people still fall victim to these pitfalls everyday.

Checks, of course, are easily written without funds to back them up or completely fraudulent (even if they look like “official” checks/money orders). There is one possible way to try to protect yourself with checks though: you can try to verify funds by calling whatever bank that check is written off of before you go to cash/deposit it. Not all banks will verify funds, so you can’t completely rely on it. Also, even if funds are available when you call, that does not guarantee that they will be by the time the check hits that person’s account. If it’s supposed to be an official check, such as a money order or cashier’s check, ask if the bank/company that issued it will at least validate that it is not fraudulent. The US Postal Service has a 1-800 number to call and verify postal money orders. A lot of the large US banks have similar recourses. The number one thing to remember is: DO NOT call your bank (as in the bank where you want to deposit the money). Unless it is a check written off of an account at the same bank, they cannot help you verify funds for the check as they cannot see other banks’ information. Please, do not call and ask “has X check that I deposited cleared yet” because they know only as much as you do. It might be surprising to find out how many times I have to explain this to people on a daily basis. Once you deposit a check into your account, it DOES NOT guarantee funds, even though that money has been added to your balance. That check must be sent through the Federal Reserve (in the US) from one bank to another. This process takes time, of course, and no one can tell you exactly how long. It will take longer for a nonlocal check to clear and believe it or not, checks get misrouted all the time, which means an even longer process time. There is no alert sent when a check clears another bank, only when it doesn’t. You might get an advanced warning if it is a large dollar item (Say, in the thousands, but what constitutes as “large dollar” varies from bank to bank), yet Large Dollar Notifications are not mandatory. If the check you need to deposit is large enough to have a local branch in your area, I HIGHLY recommend taking it there and cashing it directly. This is the best way to secure your payment, though not very likely for anyone that is doing long distance work.

As was noted in this article, credit card (and debit card) transactions are not guaranteed, even long after it the charge has been processed. Chargebacks through these means are easy to initiate and do seem to side with the cardholder first. With the increasing “not reliable for any fraudulent charges” line that most large card issuers give, all a customer would have to do is report a charge as unauthorized to initiate a claim and win. It’s disturbing, but very easy to get away with. In situations like that, you just have to present your documentation and hope for the best. Sadly, your account might be debited in advance while any investigation is under way. Claims through credit cards can take almost two months and you probably won’t hear anything about it after the first communication/chargeback.

There is another option that a lot of the money exchanging sites use. It’s called ACH (Auto Clearing House), commonly referred to as EFT (Electronic File Transfer) or echeck. These are not wire transfers. ACHs can take a few days before they show up from one account to another, where as wires can show up in less than 24 hours (depending upon when it was sent). Honestly, ACH is just a fancier way of doing checks electronically. Just like depositing a check, whoever initiates the ACH charge (be it a bank or a money exchange site such as Paypal) does not know if the account they are debiting has enough funds available, which allows the customer to pay without actually having the money. The only real difference an ACH has over a regular check is that it takes a few days less to process since it is all done electronically. Even if time has elapsed and you haven’t seen a chargeback, you are not completely in the clear. In the US, anyone can go to their bank and file that an ACH was unauthorized or even revoke their authorization within 60 days after it has been processed. It just takes a simple form to file and that money is debited from where it was sent. If your customer doesn’t like how something turned out, they just go to the bank, fill out an affidavit revoking their authorization for the ACH and it’s done. There is no contesting this with either bank; the money is simply taken away and that is that. If you used a money exchange site, your argument is with that company and the customer (but the site will probably tell you to work it out with the customer). If the customer was so bold to give you his/her bank information to do a direct ACH, your argument is with him/her. It is now up to you to do collections or take them to court.

I know this is information that isn’t well received, but it’s the truth. There is no 100% guarantee in exchanging money. Add doing business overseas, and it complicates things even more. Of course, not everyone will go the route that the customer did in this article. I just hope people realize that you are putting your faith in the customer to fair and honest…. but as well all know, not everyone is honest.

@Cara:

You have legal recourse in the United States. First, TAKE SCREENSHOTS. Second, file a complaint against his business through http://www.bbb.org

the other ideas above were great:
Contact the ISP and have them remove the site for violation of copyright law.
Contact his credit card company an provide them with proof against his claim.
Contact a collection agency and initiate a claim.
Contact the FBI and inform them of International Credit Card fraud

Or … email him with that outline and let him know those are the steps you plan on taking to recoup your money and property. More often than not, the client will pay up rather than risk legal complications.

best of luck, please update us on what happens!

I’ve had the same thing happen. I’m looking into other options. I got paid by the client a week after I saw the reversal, tried making contact with the client to see what was going on and then contacted PayPal and was given the same speech that I wasn’t protected. In the end my client was short in their bank account and wanted to pay via Credit Card instead of a check. This opened my eyes to how simple it would be for a client to pay you for a project, receive all files etc. and then reverse to get their money back. PayPal makes no attempts to contact you, doesn’t care about your side of the story and neither does you client’s Bank/Credit Card Company.

I understand that PayPal has the policy to protect buyers from fraudulent sellers but in protecting sellers they have left a huge hole in which service providers are being duped.

Cara: Sorry if this has already been asked. I haven’t made my way through all the comments. Seems this is a hot topic and thanks for sharing with all of us. My question is, do you have any other course of action in terms of copyright violation? Did you protect yourself in this manner in the contract? Since payment hasn’t been made, transfer of rights and/or ownership hasn’t been completed. If the client is using your work without permission then they are essentially violating copyright? I guess with this being international you have to weigh the cost/benefit of pursuing or just chalking this up to a lesson learned.

Best of luck and thanks again!

-mt

Excellent article. Freelancers are dependent upon the integrity and protection offered by 3rd party merchant services like Paypal, and clearly we can see that while their service offers a convenient method of accepting payment from anyone – even non-Paypal users – it leaves the seller completely unprotected against a chargeback. I’ve been fortunate enough to work with scrupulous clients recently through Paypal, but after reading this article I will peruse my transactions in greater detail to see if I can identify any such clients.

May I suggest http://propay.com/ it cost a little but it is much more secure and business minded.

wow. that sucks. I know how you feel and I’m sorry it had to go down like that. I know some contract law, being that I was first sued at the age of 19, and have since been to court many times. There is no such thing as an open and shut case for starters. And also, life isn’t fair. The law doesn’t always operate as it should and I have been told by many lawyers “Can’t help you” even if I was fully willing to hire them out of pocket. insane. I got the shaft quite often even when it seemed I had definitive proof.

Many of these people have great ideas. I had to recourse to just bad mouthing/slander (reporting at bbb, yellowbook, anything online and even started a website to just defame those who had wronged me) b/c I had no other legal recourse (It was in a town where the lawyers all worked for the person I wanted to sue sometimes were related).

Your case is indeed very complex, but the solution in either legal system is to make both parties “whole”. This is either you getting the money, or getting your work back. There is so much commenting on this already I’m sure what I say will have already been said. But I would try to destroy their servers…bad devil.

After I read this post I remembered about one client of mine that after I did the job for him (a web page) he said he doesn’t like it at all and needs me to make another design. The next day I was working on the second design, he emailed me and asked me for the PSD for the first design he did not liked and for the PSD of the second design.

Off course I asked him why does he need it if he doesn’t like it and he said that it belongs to him as he paid for it. The problem solved in the end, he did not send the money and I did not send the design.

Clients like this can make freelancers to change their way of behaving with the rest of the clients and to be more careful.

Great post. What software programs do you guys all use for billing? I’ve heard some good things about Billings. Anyone suggest any billing software to avoid problems like this?

Has anyone heard of these people?
http://www.merchantinc.com/

I found them on the website paypalsucks.com. They explain some of the problems with paypal and how to avoid their crap. I am really sorry this had to happen to you but I give you two snaps for bringing it to people’s attention!

Cara, this is a line of many complaints I continually see about PayPal (=eBay). I used to be a power seller on eBay and used PayPal as a form of payment. Whilst I never had a situation like this happen to me, when a customer in Brazil had a very expensive item go missing, which luckily for me was insured, PayPal froze my account, even though I gave them proof of insurance which they stipulate. OK, the account was only frozen for a week, but its so disappointing to see that the seller has no protection whatsoever in these cases and there are far too numerous fellow eBayers to mention who have experienced “buyers being in the hot seat and sellers being in the cold seat” as far as PayPal and eBay goes. Sadly, if they keep putting the buyers at the helm and forgetting the very people who supply the market in the first place, they will quickly be putting themselves out of business.

Mistake #1 was accepting the client after they initially rubbed you the wrong way.

Mistake #2 “handed over all the layered Photoshop files and left it at that.” ~ I don’t know how things are done in Australia, but you never hand over the source files without some sort of premium charge. This is a huge mistake on your part, the client has purchased your time and the deliverables (in the case a website) not your source artwork.

So what do you do now?

Figure out what kind of leverage you still have…
Do you have any any passwords to his hosting, or access to his domain name account?

If you do then delete his site, or forward his domain to another page that contains the article you wrote above, and let his customers know how he scams his vendors. This is a good way to ensure that he pays you plus any fees you may have incurred along with at least a 10 percent fee for the hassle. Unfortunately he has the source artwork so he could have someone rebuild the site for him, but usually this would be more expensive than just paying you, unless he scams them too.

Next, inform some credit agencies about him and let them bug him for a while. At least that will annoy him some and maybe he will think twice the next time he tries this trick.

While these may not work, at least you will feel some satisfaction…

Holy… I wasn’t aware of this. Thanks for the info!

Its actually up to you if you want to accept credit cards through PayPal right? Can you not disable this feature? If so, I would disable it. Only accept payments from verified buyers from PayPal balance or bank, no credit cards. Paypal will deny a virtual item, period.

Yes, I made the mistake of allowing my very first freelancing client to pay me independently through Paypal instead of through ODesk the way he found me. BIG mistake. I have since done other jobs through ODesk for other clients and the payment process is smooth as butter. I love it. Fortunately, I am not out a whole lot of money, but I learned a very valuable lesson: a middleman is really important in order to get paid honestly in this business. I am still trying to eek payment out of him. ODesk has been exceptional in that regard for me.

I once face a problem which is similar with what you (the writer) have been thru. But mine is with western union. This particular client being nice and all during all the normal process in me designing and him consulting, told me that he has paid me the certain amount. So I am getting all excited since this is my first ‘international’ work and the pay is quite good (but of course I am doing a good work for him too). Until when I tried to withdraw the money from Western Union; the banker told me that my name has been spelled wrongly. So I asked the client to correct the mistake with WU, he said he will; when he suddenly disappeared. I waited, gave him a chance. After many emails sort of begging for my own hard work, he told me that he was sick; he was in the hospital, just get out of it and will do the correction. Okay, I told myself and him, I can accept the reason, and kindly ask him to do what need to be done with the WU. But he disappeared again, and reappeared giving me other reason like he was busy, yada yada yada, he will go today yada yada yada, but guess what, I still cant withdraw my money. Finally I gave up, I told him that he cant use any of my artworks for his website, that I am not going to work anymore with him for the project. He remained silent. Last time I checked, he already took back his money from WU.

My mistake is even bigger that Cara – I did not ask for a deposit (or whatever you call it). And I have already gave the client all the needed files before I realized that he, intentionally or not, spelled my name wrongly for the WU. But that was during the ‘early rising’ of my freelance career.

That was very sad. That serve as a lesson to us freelancers. Thanks.

PayPal really is no good for sellers; it surprises me that more people aren’t aware of the horror stories. As a conscientious net-dweller, I never gave Paypal my bank account information, and only used it as a buyer–except once. After a purchase went awry, a seller refunded my payment through Paypal. Which, since he did not use the ‘refund’ link, actually made me the seller for that transaction.

It turns out that when you receive a Paypal payment, you’re actually getting Paypal’s money–they don’t collect from the seller until later. When Paypal subsequently couldn’t collect from this guy, they came after me for their money. I had, of course, withdrawn the refund instantly, so they came after me with a debt collection agency (I have elided the elaborate documentation I provided to demonstrate that I was not the fraudulent party. As Cara pointed out, they don’t really care). In any event, they didn’t have my social security number (I’m American), and therefore they couldn’t do anything to my credit rating.

Very tiresome, though, and now I can’t use Paypal for anything. Bottom line: if you can, use something else.

On a slightly related note, I would be interested in hearing anyone’s suggestions for profitably processing payments on low-margin items. Any way I look at it, the processing fees eat up the profits.

I have account in moneybookers.com but I haven’t not tried that to collect payment from my clients as most of them prefered paypal.

Does anyone here tried 2CO ?

I’m going to add to some of the comments about clearing out your Paypal account frequently.

From what I understand in their TOS, if you get a chargeback, and your PAYPAL account doesn’t have adequate funds, they can and will go into your bank account (if you have one tied to them) to secure those funds. Paypalsucks.com has some more info about this.

I help avoid this situation by keeping the bank account tied to Paypal very low. I never have more money in there than I could afford to lose. I transfer the rest to another account I have at the bank that Paypal does not have access to/rights over.

We still use Paypal for our business, but its stories like these that make me uneasy. I try to push for receiving checks whenever I can. Like many commenters, I also try to vet my clients as much as possible.

I’d charge half of Manhattan to send a client source files. ANd we build in some security measures that allow us to take down a site (but NOT a client’s domain–you probably don’t have rights over doing that) if need be. We’ve never had to do that, and only threatened to once, but it’s a good piece of leverage you can build to protect against non-payment.

Finally, we try to structure our payments so that the phases of payment are larger for the first 2 payments, and smallest for the final one. This makes it less financially painful if the client tries to not pay or we have to cut ties.

Welcome to the world of Paypal and Credit Card Processing. I have had the *wonderful* experience of working with credit cards, merchant banks, and paypal over the last couple of years for an internet services company. Because our business is non-tangible as your is described, there is exactly nothing that you can ever do in these cases. Appeals almost always fail – and this is not limited to just Paypal with credit card, this is all credit cards, and just paypal through its regular system.

I am sure that you have seen commercials touting fraud protection and zero liability to card holders? They do this to win customers, but the way they make it happen is by making the merchant liable, not the card company themselves.

If you want security in this world find an easy way to manage wire transfers..They may cost a little more, but for any work over about $1000 they are definitely worth the hassle.

First and foremost, I am terribly sorry for what happened to you. I actually had the same thing happen to me and like you, I learned that hard way.

Since then (Because most of my work is local), I now refuse payal/credit card payments. Besides the fees, I feel much more comfortable using the good old check/wire method. At times… I feel anciaent, but its what I had to do to avoid being burned by another jerk.

-Marco Castro

The way to handle this is to ship a dvd to the client with the software after each payment. You email him copies with watermarks immediately.

This way it falls under their ‘protection’ and you have a proof of shipment.

What is all comes down to, with PayPal or any other service, is that you never know how good or reliable a company is until something goes wrong — and then how they go about remedying the issue.. And with PayPal — better watch out. Used their service for over 5 years without a hitch. Then, out of nowhere, three consecutive chargebacks. Ironically, all of them mistakes by the client because they didn’t recognize the charge on the CC statement. The best you can get out of PayPal is automated emails stating that they are “working on your behalf” — HOOEY! Took over three months to straighten everything out, if you can call it that.

Couple tips to make your freelance life easier.

1. Don’t use PayPal.

2. Take the extra step and use a real merchant account and payment gateway. We use Landmark Merchant Services in conjunction with Freshbooks and have been happy as a clam ever since. Literally took about two hours to complete the application, have it approved, and be up, running, and accepting CC payments. Even better, our clients love it and the added cost is negligible to the time it saves us. Oh yah, payments are automatically deposited into your account.

3. If you use PayPal and you get a chargeback *from a reliable client*, DON’T DISPUTE IT. Simply call your client and ask for payment by check instead. When we did this, everything worked out fine, But in one instance, after we disputed the charge and the client repaid the invoice by CC through PayPal, PayPal charged the client a second time — even after we informed PayPal that the issue was resolved. So four months later we had to write a check back to the client.

I realize that using PayPal is easy and for someone just starting out it’s definitely a viable option. But if you’re serious about running a business, you need to take the necessary steps to run it as a real business and leave PayPal to the Mom and Pop’s selling cookies on eBay.

I had the same sort of thing happen to me with Paypal. I sold a laptop that was not functioning and put in the auction that it was being sold as is and with no guarantee. Well the person sent a claim to paypal because the LCD was bad as well (which I know it wasn’t). Paypal issued them a full refund, drew my account negative and told the buyer to return all auction items back to me. Well all I received was the LCD screen, they had parted out the rest of the laptop and docking station and got all their money back. I filed a police report and sent the report to Paypal, I never heard anything back, lost all my money and the goods sold.

Hi Cara,

I’m sorry that you’re the one of the “others” victime from frauder and paypal. In my opinion, PayPal is also guilty … They should not to have right to get back the funds they show in your account.

I wrote “one of the others” because I was a victime too … My story happen with ebay but it’s the same system anyway…

At the end, don’t trust PayPal ….

This is what you pay when you want it fast and easy…

For international jobs I make the other party sign a contract and FAX it. Then I sign it and fax them back. The contract states that both parties accept a FAXED signature.
As for work product, burn a CD and add a clause in the contract that acknowledges that a received CD with info is the FACTUAL proof of work completed. Then send it with a delivery notification. There’s your factual proof of work completed.

And after that PayPal or any other payment goes without any problem.

And NEVER, EVER transfer your finished work to client’s server prior to payment completion.

But I live in Europe, where we love paperwork

Then again, I can only be contracted with reference only.

What about public awareness, word of mouth, etc… I for one would not one to spend my money with him and wouldn’t if I knew he’d swindled others. If he treats you, the designer this way, how is he going to treat his customers?

Now that’s just downright nasty. I’m so sorry you had to go through that. It mightn’t be a comfort, but Karma is vengeful; this guy will get his comeuppance in some shape or form.

As for you, my dear, live and create just as much as you did before the jerk turned up. The world has a way of taking care of its own.

I had a similar experience with Paypal myself about two years ago and have used a merchant payment gateway ever since. What I was able to do though was send off Cease & Desist letters to the ex-client, his host, and domain name registrar.

The content, design, and other materials you provided that your client is now using is effectively stolen property. He did not pay for it (or did, but then maliciously “unpaid” for it). If I were you I would find a template C&D letter and send it off as quickly as possible.

These types of people should not be allowed to get away with their scams.

Perhaps you can consider telegraphic transfer. Understood that such payment cannot be terminated easily.

I have also the same experienced with PayPal a few months ago. I was selling a non-exclusive template. The buyer (Indian) send me the payment and I’ll send him the template – I never know it was a credit card payment. Email communication was going smoothly as I provided him support and extra help without any other cost. Unfortunately, a month later I just received a case in PayPal in which the buyer stated that the payment is UNAUTHORIZED – I just asked myself how come where we are communicating every now and then… So, he really got his money back and until now he’s using the template.

My question is, do we have an option in PayPal NOT to accept credit card payments? My account is Premier.

While I agree that this was a horrendous situation, this is a perfect example of why freelancers and independent contractors need to protect themselves with signed legal documentation. There are plenty of pre-designed contractual agreements that can be found online (or at your local library) for free. Here is a suggestion for the next time around:
1) An agreement specifying that the deposit is non-refundable must be signed – work should be specified to progress when the transaction has cleared. This agreement should list the general scope of work that you agree to provide with receipt of this deposit, which would indicate your initial analysis of what services need to be provided.
2) With each payment, there needs to be a signed acknowledgment that indicates what services were provided up to this point. An invoice should list the services. The receipt of payment for the service should be generated for the customer and a copy filed in your system.

My suggestions come from experience within corporate and government environments, where certain services may also be strictly electronic with no tangible product/good to prove what work was done. If the customer wants you to continue the work, the customer must be willing to acknowledge with his/her signature the services that have been provided already and that payment received is justified. If the customer doesn’t want to sign, then there is no need to proceed with providing service to them.

Initially, I would have been mad at Paypal too, if I were in your shoes. However, there are layers of legal protection that you can set up for yourself so that you are never screwed out of money like this again. Paypal obviously has their policies/procedures set in place to protect their customers and their business – other credit card transaction service providers will also have their own policies/procedures. As freelancers and independent contractors, we cannot completely rely and blindly trust our vendors/suppliers – we must have legal documentation set up to protect ourselves if everyone decides to turn on us or not provide the proper rectification. Business involving financial transactions should always be documented in a manner where you will be justified within a court setting – it will protect you.

I really hope this piece of advice helps you and others in the future. I’m terribly sorry that you had to go through this experience and I appreciate your post on the situation.
~ Lonnie )

Ouch man! I always stay away from devious clients from the start. There’s no use in risking with unstable and suspicious people. Anyway I think that even if you’ve had received your payment from a paypal account he could’ve also retract his money back. There’s a similar procedure for paypal as well. Good luck with your further gigs.

I’ve been burned by PayPal also, but the real kicker is the product was physical, they were given the registered post tracking code, delivery confirmation and a copy of the guy’s signature. I cut my losses after multiple phone calls resulting in nothing. Now, I only pay for some things I buy via PayPal, as using it to accept payments is risky.

As I see you’re a fellow Australian, I’d suggest using PayMate for credit card transactions – they don’t get in the middle of transactions like PayPal does (buyers are told to contact the seller regarding disputes).

I appreciate all of the horror stories with PayPal and other payment methods, but I think the real point (as made by Chloe) is DID YOU HAVE A CONTRACT? A solid contract that lays everything out in advance will eliminate these problems and give you legal recourse anywhere – including with PayPal.

Never accept work or do work without a contract. Any client that complains is not worth doing business with. Once they’ve signed the contract – and given you the initial deposit – they are locked into the terms of the agreement. And your options are more straight forward and easy to navigate.

WOW, this truely sucks!

I hope you get your money back and even more to pay for everything you’ve lost as well as the costs you’ve incurred in getting everything settled. I was unaware of this oddity in the Paypal system,I will most definitely be a lot more wary of who I deal with and I will always have a contracts signed by default from now on.

Good luck!

I’m sorry this happened to you! Thanks for sharing though,this is sure to help many of us who might be prone to fall into the same trap someday!

Paypal is notorious for this sort of thing – I’ve had the same thing happen with an overseas client claiming they didn’t receive something that clearly they had – and Paypal does ( and gleefully will) go into your bank account and take your funds without warning. As is mentioned above – there are entire cottage industries built around the notion that “paypal sucks”..:-)

I would however, use every means neccessary to make sure the guy who made off with your design pays for it…if you can’t get the money, find creative ways to cry out, shout out and point out his malfeasance and thievery until his reputation feels it. Knowing your hard work was showing up on his site, for free…..would slowly, and surely drive me insane. I don’t even know you and I’ll have a hard time sleeping tonight. Of course, I have anger management issues, but I still think you need some revenge..:-)

I think this is not a paypal issue, but client matter. You just got a trouble client.
It’s defferent!

For my paypal work, I have my paypal account tied to a savings account at my bank. I use this only for paypal.

I take my money from Paypal and transfer it once cleared into my savings account.

Once that clears, I move it into my checking account that is linked to my savings account. This checking account has never been used for any paypal, so they have no idea of its numbers and routing codes and all that. This checking account also has a debit card associated to it, so I can use this money more easily. This puts it out of the reach of Paypal and less scrupulous people. It’s an extra step or five, but I’ve felt it’s the right way to do it.

I’ve heard too many horror stories on the net about paypal siding with the wrong side of a case. I decided this is the best way to still accept paypal payments and still be safe.

Good luck.

Sorry for your lost, but this is bit your fault too, Paypal work great if you follow the rules… when I take on new clients, everything is written in details in fee and the type of work, and if I’m able to meet to clients that works better, and make them sign it to policy/tos, in your case since he lives in the states, you should’ve asked for a digital signature, you can make one using a php submit form. My rules is simple; 40% before I start the work, and 60% at complete. And no refund on digital item…

Definitely see what you can do in regards of this person using your artwork without payment and thus infringing copyrights. Hopefully you are well documented in regards to the project and exchange between you and this former client. Of course, you’ve made mistakes too (as you noticed yourself), but all the same, if all else fails I’d probably would spread the word and actually NAME the person and caution others to do business with; so far you’ve been really correct by not labeling the person directly. This is, when all else fails.

I am so sorry for what happened to you. Thank you for the article! My sister was offered a freelance writing job where the payment is by Visa on PayPal. It didn’t seems right to me so I convinced her not to do it. I am so very glad she listened to me after reading this.

Ah.. what is the world coming to, when a person cant hang on to their wages.. and companies can just withdraw payments from your pockets. In such a case this could have been thousands of dollars, and I’m sure there will be enough frauds that will be jumping on that wagon after they read this story. Nothing beats hard cash, or like in the case of Argentina, back to the ye-old gold and silver. I wonder if this can also happen outside of the evil PayPal company.. like dealing directly with Visa payments via your merchant facility. I guess we need to protect our selves by talking directly with the banks. I think in Australia St. George bank has a descent on-line payment facility. Something to look into..

Hi,
I wanted to let you know that I just had a talk with paypal. I told them about how we all were talking on the blogs and sites about our dilema, and the person I spoke with said they were always interested in new solutions. I told her that we needed to come up with a way to protect designers. Since we are selling a service, and not a tangible, trackable object, and clients can submit claims or withdraw payments with no issues, and she stated that we all should get together and come up with a different solution for ourselves. She said that they understood our issues, and asked if we could come up with a way for our business to work with their product and submit it to them. I think this is a good idea, and we all should do it. This is the second time that a client has either found a cheaper designer, or just tried to get money back after the work was completed, and filed a claim and really messed me up. We need to jump on this and throw ideas their way.

I’m really sorry to hear that this happened to you.

Unfortunately, I’ve had similar things happen to me on more than one and it’s why I will never again use PayPal.

Something to note: It doesn’t matter if you withdraw the payment from your account immediately. Let’s say someone pays you $200 and you immediately send it to your bank account. Then this person decides to file a claim against you. At this point the “funds” are put on hold, so even if you have $0 in your account, suddenly your balance becomes -$200. And when the buyer wins (and they always do – PayPal doesn’t look into any of the disputes and they side with the buyer 99% of the time), suddenly you owe $200 to PayPal. If you don’t pay it? Your credit score is lowered. A lot.

Advice to anyone who plans on using PayPal, be it for small transactions or large – don’t. Pay the extra money for a merchant account or go with the slightly more inconvenient paper payments. Trust me – the quick convenience is NOT worth it once anything goes wrong with your account.

sad to hear that.. that was unjust enrichment and of course fraud on the part of the client..

I’m in Australia and make artistic goods on commission and require full payment up front to cover all materials and to book my time. I used Paypal to receive international payments until one customer, after having received their product, made a chargeback through their credit card company. The US customer had written an e-mail to say that they had received and were happy with their product, and I had also used an online tracking option for delivery. This all should have been enough for Paypal to challenge the chargeback, but at that time sellers outside of the US were not covered (Australian sellers still don’t have adequate seller protection until late March 2008). After they realised that they weren’t required to help me it was just “Pfft, go away”.

As a result of the chargeback, I was unable to cover materials for other orders and had to refund some $$$ projects that I was unable to complete on time – so it had a cumulative effect. I placed a ban on payment by Paypal and made international customers pay by cashiers/bank cheque or Western Union money order – if they want the product they’ll make the effort – plus I wanted to reduce my workload.

In my anger at Paypal, I found a website that was gathering names and information for a class action against Paypal. I had the option of asking for a large payout or a smaller and more likely payout if the case was successful. I chose the smaller amount and eventually received SOME of the money that was lost.

It didn’t make any difference financially, but I DID WIN against Paypal – search for class actions against Paypal.

Years later, I’m beginning to use Paypal again but only for orders under a certain amount. You might consider setting a limit (whatever you’re willing to lose – a day’s pay?) and have higher amounts paid by more secure means.

Hey all, sorry to hear so many of you have had bad experiences with clients and PayPal. Personally I don’t have any horror stories to tell, and if I can give any advise its that you have to protect yourself from the outset. Many freelance designers are designers first and businesspeople second, and it HAS to be the other way around or this kinda crap has a higher chance of happenning I reckon.

I reckon all this is a symptom rather than a cause. As a business person I always do background checks on clients where possible, I get everything in writing, especially the initial negotiations with contracts/specifications and whatnot. Lastly and most importantly I write off any unprofessional clients and try to build repeat business with the clients I like and perform well for.

The things I hate about some freelancers (especially beginners), is that they’re so eager to take on new clients they forgo the necessary due diligence.

Prevention is the best medicine in business I reckon. If clients don’t pay, report them, pursue litigation if you have the time and energy, but personally I don’t waste my time on bad people. They’ll get theirs in time.

My payments come via cheques or Western Union Money Transfers (Cash). If I don’t get cash upfront for everything I at least get 50% down. We’re selling a service, we have to have standards or people will take advantage of those who undercut either prices or practices to get their foot in the door.

just my two cents.
Cheers and good luck!
Mike

Sorry to hear you have had problems. Ill be honest, i have been in the EXACT same situation as you on 2 occasions now. Literally your story is the same as my experience. I have now refused to use paypal and have invested in a credit card processor company, 2checkout. Although that service cost a little more than paypal, its worth it for the peace of mind that my money cant be snatched back from me once the work is complete.

Also before handing over the files now to clients, i get a signed disclaimer from them stating that they are fully happy with the word provided, and that they will have no reason to request a refund after the disclaimer has been signed. Any genuine clients will have no problem in filling the disclaimer out. Those that do have a problem doesn’t get their files. it really is as simple as that.

Unfortunately ive been burned too many times before, and will now no longer allow myself to be ripped off by these scammers.

I have used http://www.merchantinc.com for several years with absolutley no bumps in the road. PaypalSucks.com lists them as an alternative. But, they are actually not. PayPal is the alternative to the real merchant account 99% of all merchants use.

Oh yeah, I hate paypal.

i`m tryin to build a web page so that i can sell stuff online, now that i hav seen the problems u went thro pay pal, i`m reluctant to use it. i think it will be safer for me to use money transfer systems such as western union

I regularly use my credit card to scam vendors out of their money via my Paypal payments on ebay, I pretend to live in Madrid and get items shipped to my holding address (from which they get sold at a later date using a different ebay account), yet reside in another part of Europe.
If I had a conscience then I might have felt sorry for you Cara, however as using Paypal to scam vendors is a great source of income for me with very little risk, i`ll not have a bad word said about them.
Catch me if you can suckers – Jose Luis Castro Castro .

I had a very similar experience. I found a guy on craigslist who wanted 4 projects done, and he was an agency that was subcontrating out the work.

1) A youtube clone built in 3 weeks using clipshare
2) Adding UPS realtime shipping quotes to an existing PHP site.
3) An Ajax Photo zoom/pan ala http://tinyurl.com/6my47o
4) Convert a flash site to a PHP data site

I told him that I really needed to pass on #3 and #4 and concentrating on #1 and #2. I received the deposits on #1 and 2 thru paypal and built the clipshare site and bought a UPS/XML code from http://www.sonicode.com/upsxmlship.php to integrate.

I delivered the clipshare site as asked and then the client asked that I edit clipshares source code and debug why it wasnt functioning to his clients specifications. I told him it was beyond scope of our agreement, but we could cancel the project – he could keep the final 50% and we needed to concentrate on delivering project #2 as needed.

When I installed the soniccode files it didnt function as needed, and I realised that I would have to hand code the PHP to pull the UPS data. The ecommerce site wasnt OSCommerce or any open source app, but a custom PHP cart built by another developer.

After 3 weeks, I delivered the UPS code exactly as requested and the client promised an extra $500 bonus if I delivered on that date. All code was on their server and tested and working properly. After 1 week I asked if they needed anything else and inquired about the final 50%. The client was very very brazen, hostile, vulgar and confrontational and disputed the INITIAL 50% DEPOSITS thru paypal and claimed that he DIDNT LIKE the quality of the work. He is using the work I did, and has no legal or moral claim to taking the money back – but he is doing it anyway. I am literally receiving $0 for the time I have invested.

horrible story and it is sad to say that I have heard the same type thing before. PayPal has caused nothing but problems for me, and my partner has just started a company and I don’t see any option except PP until she has the full merchant account set up.

I’m mostly surprised about the reactions here. Did really so many people thought that PayPal is a secure way of payment? Hey, the internet is full with stories of freelancers and webshops that lost thousands (!) of Dollars because of PayPals not existing security.

Just came across this. Thanks for posting this as a warning to all. Sorry I haven’t read all the comments above as there are a lot of them!

I really hope (if you haven’t already) that you manage to get this sc*m bag banged to rights as what he has done is just down right wrong. Hopefully from the publicity you get here you will find some way of getting your money or at least bringing down some injunction so that his site is taken down.

People like that just need to be taught a lesson. I wish you all the best.

Best wishes,

Mark

I felt sorry for your lost, you already wasted your time just to finish the ‘bad guy’ jobs and you’ve got nothing except teardrops and anger.

My website accepting payment with credit card through PayPal, but almost 80% income from my PayPal account are suffer from the chargeback. It looks like PayPal buyers can always make a claim even the transaction was made more than 1 month ago, so for someone who’s provide services, obviously PayPal is the worst scenario. You should consider another payment method.
I use https://www.moneybookers.com to accept some payment through wire transfer beside PayPal and i’m very satisfied with their services. I’ve never get a chargeback and it’s very easy to withdraw our money.
Although it’s difficult to get approvement if you want to uses Moneybookers credit card payment service (Moneybookers approvement for wire transfer almost instantly), but once you get approved, you will never get any chargebacks.

Oh, you probably should create a new article and list all the ‘bad guy’ website domains and e-mail addresses, at least we know that their website was built by sucking the freelancer tears.

You could release his theme to every single free template website out there

Something like that has just happened with our online store. They claimed that our client made a complaint but he never did. So they took the 250€ of the order and gave it away to our client. Why? Because with that they earn sale fee and chargeback fee. So our client at some point had the products and all the money, but he was a very honest person and he made us a Bank Transfer. Paypal kept sending us e-mails saying that this was due to a complaint, even after I told them that my client and his bank didn’t do any complaint. If he had done a complaint he would never make us a bank transfer. So Paypal was lying all the time.

Paypal is a total fraud. They have stolen us more than 20€. Not about the money, even if it was 1€ it would be theft anyway and we would feel the same lack of trust in them.

I would not recommend them to my worst enemy. Paypal can work with buyers, but does not give any security to a seller.

To Ryan:

“PayPal can’t take money from your bank account or credit card without your permission”

yes they can, at the time they did this we didn’t had 250€ in our Paypal account and they just took it from our bank account.

we had to cancel our credit card and bank account that was related to the Paypal account

they do what they want

Just an FYI, transferring money out of the PayPal account isn’t going to help. When your balance is negative (like in the author’s case) they do a pull on your linked checking account.

Just an FYI, transferring money out of the PayPal account isn’t going to help. When your balance is negative (like in the author’s case) they do a pull on your linked checking account.

Next time send him a CD/DVD with confirmation. I’ve even sent up-to-date invoice letters with foam in it with confirmation so I’m protected for doing work for someone. Receiving a strait payment with no records is not the smartest thing to do. Hope this helps.

I’m not to crazy about Paypal. One limitation I realized was that they will not take payments over 4000.00. At some point I had to cut loose and get a real credit card processing company that I can do over the phone for our graphic design studio. Anyone want me to refer them to the company I use, let me know by contacting us through our website.

Incredible Story. Thanks for sharing!

I will certainly use caution when using Paypal.

Might be a bit late for this advice, however I recently completed some work for a company in Thailand and to receive payment when work was completed satisfactorily we agreed an international bank transfer. In the UK this costs around £30 to the sender (didn’t cost me anything to receive it). Sure it’s not instantaneous, however it’s pretty secure (get your bank to open you an account specifically to receive payments if you’re not happy giving out your main account IBAN/SWIFT codes). My bank actually posted me a letter saying they’d received the money but online banking meant I’d seen that I’d received the money days before the letter arrived. Main plus point: no charge-backs and no percentage fees (I’m with HSBC).

Not sure if this applies to other countries but it was virtually painless for me.

dear Cara… something similar happened with me, and instead of seeking recourse from PayPal, I went to my bank and signed a fraud declaration that PayPal took funds without permission. I then shut my paypal account and my bank did everything their end, I received the money back from my bank (HSBC, UK) who sorted everything out from a fraud perspective, – which it is if paypal don’t have permission. just because they have your bank details doesn’t give them carte-blanche to steal your money eh?!
Best wishes getting your money back, I really hope that your bank have a fraud dept who will sort this out.
Sam

Wow what a horrible experience!

All my work so far has cheques only, but at some point I will be moving to a paypal / credit card transactions, athough this news has shaken my confidence in Paypal!!!

A lesson to be learned for all I guess…

Karlos

Hey Cara,

That story is oh so real, just makes you more alert more then anything what is possible out there. PayPal is a great service, yet there are numerous sides to it which you have to understand and be aware of.

You particular case involves the client who initiated this process, but there are times when PayPal can lock your funds for few months without your own access to it, There are some horror stories around, simple google search will uncover a lot of truth.

As for dealing with clients who send you money, simple wire it straight away to your bank account so such thing won’t happen. And if your clients places an order, he is up for a bill, he seriously dint have a leg to stand on.

I hope you can resolve your situation, but don’t waste too much of your energy, some of these you got to keep an eye on, but don’t loose your sleep over it. Life goes on! Hope you been good and all that.

grig

I could have told this story myself. A similar thing happened to me some time ago… client loved the work, paid in full via a combination of PayPal and direct Visa, then decided he could keep his deliverables for free by simply reversing the charges.

Our direct Visa processor heard our case, and mediated on our behalf to dispute the chargeback. Having plenty of written evidence, including signed contracts, we won without much effort. Apart from having our accounts completely frozen while they investigated, we eventually got that portion back.

PayPal was the exact opposite. They simply took the money out of our account and gave it to the fraudster, no questions asked. They refused to consider our documentation or hear our case. They cost us several thousand dollars, which we had by then already spent on things like payroll and general operating costs.

And of course, the client is still using the materials they (at this point, “half”) stole from us. Being in another country protects them to some degree – it’s not worth pursuing in court.

We will NEVER accept PayPal again, and would caution other service providers against using them as well.

If you want to accept credit cards, do it through your bank. It’s not difficult to set up. Currency conversion is as simple as adding a line to your TOS.

Otherwise, business cheques and wire transfers are the best way to go.

That sounds terrible.For how long after the transaction can a client request a reversal of his payment?I was trying to install PayPal on my website and after days of trying to get “receive” payment option I found out thru a direct e mail to them( via the very small “contact us” at the very bottom fo the page ) that as I am from South Africa that I do not qualify for this.Anyway somewhere in the many replies above I saw someone ask for an alternative and below link is what i tried
Moneybookers
https://www.moneybookers.com/app/?rid=8018992
I have no idea if same complaints apply but have searched the web for complaints and found none.All complaints seem to be with PayPal

Wow… I’ve heard story after story like this. Fact is, whenever you’re doing a project, make sure that contracts are in place and the specifics are outlined. Credit card companies will always side with the client unless there’s SOLID evidence of the service/product being supplied.

The same thing happened to us several times, PAYPAL wont fight any charge back , we have lost over $90,000 after doing $3 Million business with PAYPAL. Google checkout is no better. We have stopped using these and have moved on to authorize. Basically every charge back for service products are lost , no matter how much proof you give them.

DO THIS – GO AND GET A SOFTWARE FROM COMPANY LIKE BILLCOLLECTORINABOX and report them as bad credit. It has worked for us. When they need to get that car or house they will find their credit damage and start giving you calls to take it off their report. If they did this to you, give it back to them in a way they will not do this to others like us in future

What if you asked the client to create a paypal account. Use the credit card to transfer funds to his account and then send them to your account.

Paypal can surely not take out funds from your paypal account, or can they ?

what a pity.
did you use “request money”
or your client just send money via paypal to your account with several amount that both of you dealt.

i think if you first send request money via paypal and notes the description, u will be secure.

It wanted to know if is possible with Pie Pal to receive payments of clients of other countries
Thank you

Thank you very much for sharing this.
I had other kinds of problems with paypal and dealing with their customer support felt like talking to a machine…

That sounds like a disaster!!! I cant imagine anything worse!! And he’s actually using the work too. Royally shafted, having read this i can certainly say i will never ever use paypal, i had considered it versus protx as there is no subscription charge with paypal, but i dont think its worth the risk. I have a PDQ machine in my office so im able to take payment in the same method as they do in highstreet shops & use card holder not present. Works great and its safe.. but quite expensive.

I too have heard horror stories about PayPal, including one person who was scammed out of almost $20,000 because a stolen identity was used to apply for a credit card. When the innocent person whose identity was stolen was charged for the service, of course the credit card company discovered it was fraudulent, and it was the seller who paid and had to shut down his business.

My recourse is to do business only with clients who come with bulletproof recommendations. I had one client who stole services from me, never paid, and then opened his own business in direct competition with me. Of course, his business lasted less than a year because of his business practices.

I think the best way to deal with this is, if you trust or at least have references on the person or even if the amount of money is few, then I don’t see any arm in using paypal.
If you don’t, know don’t trust, or if it is a large amount of money, then use Wester Union. If the buyer becomes suspicious of you for using this type of payment, instead of demanding the the full payment upfront make him only pay a week in advance…

One should not accept PayPal because payments can be canceled at any time by the buyer, regardless of the method they used to fund the purchase (credit card or from funds already in their account). The only difference between the two is you’ll also be accessed a chargeback fee if they used a credit card.

The customer does not need to have received your goods to do this. I had several buyers cancel their payment immediately after I emailed them their tracking number. Fortunately the items I shipped were still in transit and I was able to have UPS or USPS pull the item from their system and send it back to me; however, I was out the shipping, my time, and a sale because most of these items had other legit bidders who would have actually paid for the item. eBay/PayPal told me they had technology to prevent this – lol – they are not even good liars (or more likely don’t even make the effort because they know they can get away with anything and their is nothing you can do).

It does not matter if you have proof eBay/PayPal

Hi,

It would appear the person you were dealing with was a nasty bully. I am sorry for your trouble.
However, I believe if you pursue Paypal with a little more determination, there may be a better outcome. There appears to have been a communication breakdown between you and Paypal.

You need to contact them again and point them to this site and demand to know the outcome of this dispute. I’m sure its also not in favor of Paypal to have their service fraudulently abused by any user such your client.

” 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.”

Colm

Hey I feel for you. It’s almost better not to take credit cards cause it gives the customer the option to steal by making a false charge back,saying the item wasn’t as described or I never got it.. I had a customer that bought a new cellphone from me. I recieved an e-mail from him saying, Thank you i finally recieved item, I am very happy!!
He lives in Spain, anyway just 2 days later this !!##@$$?!! decides to do a dispute with Paypal. Bottom line, even after providing tracking numbers and invoices Paypal was still taking this guys side. So what I am out $300? No way, so what I did sent him an e-mail stating that I am representing my client. Which is actually me. He thought I was some big shot lawyer!! I made up some phony name with an e-mail thatsaid from the law offices of Todd Miller or whatever…Scared the .. out of this loser!!
. I made it look totally official. I said if you do not drop this dispute immediatly with Paypal. We will sue you for fraudulent online activities in court. We have your e-mail stating you recieved the item. Suddenly this jerk changed his tune..and withdrew his dispute!!
And I am not out $300. He got a new phone, and I got to keep the profit!!
Case closed.
Take care,
Mark
I suggest you maybe look into this

Try paypay.com or monebookers. I use both of them. Paypal is not cool anymore.

Try paypay.com or moneybookers. I use both of them. Paypal is not cool anymore.

I have heard about this from another friend before. This is why we only take cheques for all projects. But then, we are a Canadian company with only US and Canada clients. For us, its not that hard to set up a US account.

Arnold