Gleaned from a newsgroup this a.m.: "Here's the most common Paypal scam:
You sell somebody something and you're paid with a credit card. You withdraw the funds and ship the item. The buyer receives the item and then calls the credit card company and claims it's defective. The credit card company immediately issues a chargeback, without any kind of investigation. Paypal is the 'merchant of record' and must return the money to the CC company. It then attempts to recover its loss from your Paypal account. If there's no money in it, it is empowered through the terms of service contract you signed to get into your bank account and withdraw whatever it deems is owed it. Finally, your account will be frozen until Paypal arbitrarily decides otherwise. The buyer has your item, you have zero $, and your account is frozen. The credit card company, while enabling the scam and triggering the whole process, is not to blame. It cannot dispute the cardholder's claim that the item is defective, short of sending someone to inspect it personally. It cannot wait to issue a chargeback until the item has been returned to the seller, since the seller himself might be the scammer and claim either the item was perfect when shipped and the buyer damaged it, or it was damaged in shipping, or any other excuse. Paypal is also caught in the middle. It has lost money, namely, the amount you withdrew from your account before you mailed the item. It has a choice of either absorbing the loss or going after your money with all its resources. Guess which one it will do? And can you blame it? The system is inherently impossible to fix because the seller is not the 'merchant of record' and has no recourse with the credit card company. I'm fairly active on eBay and, as a seller, will not accept Paypal for more than $100 precisely because of this scam. But as a buyer I will use Paypal every time and pay only with a credit card. Bob G"
