Upheld: unfair handling of buyer protection claim; failure to require item return complaint against PayPal UK Ltd

Decision detail

Summary

Mr R sold a vintage mechanical item via PayPal to a buyer who later claimed it was not in the condition advertised. When the buyer raised a buyer protection claim, PayPal accepted it and refunded the buyer without requiring the item to be returned to Mr R. Since Mr R had already withdrawn the funds, his account went into negative balance, leaving him without both the money and the item. The ombudsman upheld Mr R's complaint, finding this outcome unfair and unforeseeable, as it resulted in unequal treatment between the buyer (who retained both item and money) and Mr R (who had neither). PayPal was ordered to clear the negative balance and pay £200 compensation.

The Ombudsman's reasoning

The ombudsman found it unfair and unforeseeable that Mr R would be left without both the money and the item. While PayPal's terms permit non-return of items in some cases, those examples relate to intangible items, not physical goods. The buyer had explicitly stated they would return the item for a full refund, but PayPal accepted the claim without making return conditional. The ombudsman reasoned that for fair treatment on equal terms, both parties should be restored to their pre-claim position. PayPal's decision to accept the claim without requiring return resulted in the buyer's betterment (having both item and money) while leaving Mr R with neither. Regarding the account eligibility issue, the ombudsman found that if PayPal failed to conduct sufficient due diligence before accepting the payment, it cannot now use the terms it failed to properly enforce to deny Mr R protection.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website