PayPal Strikes Again

I don’t have a lot to add to the story that is now sweeping the Internet about PayPal’s latest atrocity, but I’m going to pass it along anyway because it demonstrates how a company goes from screwing up the small details to screwing up the big details and eventually moves into legal and social problems it can’t get out of (or just ignore). Please feel free to pass these comments – and the associated story – along to anyone you know who still isn’t clear on why it is important to give your first- and second-level customer service personnel the power to handle problems, and the training to do so. And to anyone who isn’t clear on why stupidity is a problem in a business setting…

The story, originally from the Consumerist website, but now spreading out across the Internet, is that a PayPal user sold a vintage violin on EBay, the buyer then claimed it was a forgery, and PayPal told the buyer that he could have his money back if he destroyed the instrument. The buyer did so, and sent pictures of the wreckage to the seller and PayPal; PayPal then deducted the money from the seller’s account and gave it back to him. The seller is now out a vintage instrument and/or $2500 (it depends on your point of view), and is seriously considering legal action against all of the offending parties, as well as planning to avoid PayPal for the rest of her days…

Now, if this story doesn’t make any sense to you, that’s because the procedure followed in this case was the wrong one. There are laws against selling forged goods (over the Internet or otherwise), and if someone does sell you something over EBay that turns out to be a forgery, you can request that the company freeze the seller’s account and return your purchase price to you, assuming the seller didn’t empty out the account as soon as they got your money. But you can’t just declare that you think the thing is a forgery and demand your money back; you will need to find some evidence to support your claim. You also have a duty to report the crime (forgery is a crime; so is fraud) to the appropriate authorities. But apparently the people at PayPal who handled the case didn’t know that…

By the same token, forged goods are often ordered destroyed once the criminal proceedings are over, in order to prevent anyone else from being defrauded in the same manner. But that determination will be made by the court, once the time comes. If all forgeries were destroyed at once no one would ever be prosecuted for that crime due to the complete lack of evidence. For that matter, if the only authority you need to declare something a forgery is to say you think it’s a forgery, what would keep anyone from buying something, declaring it a forgery, putting together a fake picture of the wreckage, getting a refund, and then selling the item at 100% profit?

I feel quite certain that PayPal has a corporate policy about forgeries; I am even more convinced that this isn’t it, or the company would already be out of business. If the violin in our story was authentic then the company is accessory to theft, destruction of private property, fraud, and possibly liable for the value of the instrument (not the selling price; the actual value); if the violin is actually a forgery (although it’s not clear of what) then the company is guilty of obstruction of justice, destruction of evidence, and possibly tampering with a Federal investigation. Even a few such charges would be enough to shut down the company; if we consider that as many as 5% of all EBay purchases are believed to be fraudulent, and that EBay has around 500,000 auctions going at any one time, that would mean that PayPal could be involved with as many as 25,000 fraud cases A DAY. And if even a tiny fraction of them are mishandled this badly, every employee they have would be in jail long ago…

I don’t know where the breakdown happened in this case. It’s possible that PayPal doesn’t train its Level One personnel on how to handle this kind of thing; it’s also possible that the actual procedure takes work, and the PayPal personnel just figured this would keep them from having to do it. But I do know that the more common these stories become, the less likely anyone is to buy or sell anything of particular value this way. Eventually, people may come to believe that you’d be better off buying something off the back of a truck for cash than you would for buying something off of EBay using PayPal – and it is stories like this one that will build such a belief…