Stay Protected: Dealing With Chargeback Scammers


People have been using Paypal as a trusted method of payment for absolutely donkeys for all kinds of transactions and services. Of all the options, Paypal is the most popular online finance handler and is often used by artists to send and receive payments for commissions, projects or services.

If you are an artist who creates digital artwork (or any service that include the production of intangible items) currently using Paypal as a sole method for sending and receiving payment – you may want to consider the following.

The following screenshot was taken from Paypal’s current seller protection policy.

What does this mean for providers of creative items & services?

This doesn’t only affect visual artists, this also applies to music producers, videographers, photographers, or any other creative disciplines that provide a service involving digital content or services of any kind.

The buyer is automatically covered if they decide to issue a chargeback for whatever reason as Paypal’s policy does not protect digital content or digital service providers, leaving you vulnerable to notorious ‘chargeback scammers’ who exploit this loophole.

There have been tonnes of instances where artists have been left short as a result of false claims and unwarranted refunds being issued in favour of scam artists. Check out just one of the thousands of examples below.

(Following image screenshot from Nouraii on Deviant Art)

“Ok, I don’t get it. What’s happened here?” Let me break it down…

The artist had submitted artwork to various clients. They had completed the projects, sent them over and received payment. This should have been the end of it; the artist successfully met their end of the deal and the clients were happy and aptly paid for the services.

However, what the artist didn’t know – is that she had unknowingly taken on chargeback scammers who promptly filed for refunds as soon as they paid the money. They did this by filing false claims, using a bunch of false reasons. They can literally say anything. “The image was not to my liking“, “I don’t recognise this transaction“., “I haven’t received anything“, or any other scenarios they drum up and guess what? As sellers of digital services and products are not protected by Paypal – this often ends up in their favour and leaves you out of pocket.

Yes, it sucks.

Once the refund claims have been filed, Paypal will automatically take the amount out of your Paypal account (hence the red writing in the screenshot) before even investigating the situation. This also affects your ability to use Paypal for other services in the meantime as your account is in the red. The reason they do this, is to ensure they have the money to return to the claimant, so if you’ve already withdrawn the money and deposited it into your bank account, this will leave you in a negative balance.

To add salt to the wound, if you then try to re-transfer the money back into your Paypal account from your bank – this takes 5-7 working days. Meaning your balance will remain in the red until the money finally shows up in your Paypal balance again.

When Paypal processes a payment for a business, they take a percentage. In some cases, when a chargeback scammer slaps you with a refund claim, not only do you end up having that payment reversed and refunded to the buyer;  you’re also then charged Paypal’s fees on top of that; so you end up paying back amounts you never even received in the first place!

This last point isn’t necessarily limited to Paypal, however: Paypal permits users to purchase goods using credit cards, making it ten times easier to attempt chargebacks. How so? Well, if you are by chance successful in rebuking their refund claim and Paypal closes the case – they can just issue a chargeback through their credit card company instead. Chargeback regulations are out dated and don’t consider the fast paced evolving technological and digital services that actually hold everything together. However, with all this being said – there is hope. Stay with me here.

How can I prevent all of this from happening?

Well, to be frank – due to Paypal’s seller protection policy…it’s not often preventable.  You can however, think about applying the following steps to armour yourselves:

  • Send a physical copy of the artwork via recorded delivery along with the digital file. (Art print, paper, card, disc)

This will give your case more weight as a tangible item has been included in the transaction, with viable proof of delivery.

  •  Send a watermarked proof shot of the completed image or content where possible and request confirmation of satisfaction before proceeding with payment.

Ensure you send them the final copy (completely saddled with watermarks, but clear enough for them to see the image) and ask them to confirm if it is to their liking. This way you’ll have confirmation in writing that they absolutely loved whatever it is you sold them, so they can’t pull any bullshit once they receive it.

  • Send files using a service like ‘We Transfer’ as they confirm when the recipient has received the item(s) and also downloaded the content.

Save these e-mails as they can serve as proof of delivery. Albeit for intangible items (which Paypal doesn’t cover you for) but it won’t hurt to keep a hold of this.

  • Be clear about what the buyer will receive. For example, if you are creating an illustration for a client – you need to outline what they will receive throughout the process. It may look something like this:

– Initial sketch

– First draft (watermarked)

– Revised draft (watermarked)

– Final copy (watermarked)

– Final copy upon payment (no watermark).

Ensure this is all outlined on the invoice and contract, as receipt of the buyers agreement to your terms. Also save evidence of each document sent (screenshot your life away).

  • Send an invoice through Paypal.

Clearly state everything they are paying for and what they can expect to receive. This way, all of the information is directly accessible to Paypal so they can see for themselves what the agreed terms were.


Are there alternatives?

Great news! There are a number of alternative platforms and methods you can consider going forward with your creative endeavours. If you live in the U.K, there are platforms like Monzo, which serves as an online bank in which you can have your own Monzo bank account and card. The way they handle disputes is different to Paypal, as they investigate cases before removing the queried amount from your bank account. They take both tangible and non tangible items into consideration.

Transferwise is an option for international transactions, or you could consider using platforms like Etsy to provide digital services, as they have policies more tailored to creators and custom made products.

Stripe is another payment platform to be looked up – in any case, whichever method you opt to run with – see how they treat artists and how they go about protecting the rights of artists. The most ludicrous of claims are successfully being filed as a result of this clause in Paypals’ seller protection policy, we need to be sure to read the fine print on everything; as that one line of text could mean the difference between a successful transaction, or getting scammed.

Find out more about chargeback scammers here