How Does Paypal Seller Protection Work?

General Features
All Paypal account holders in the United States are automatically eligible for Paypal Seller Protection. The protection covers sellers on any transaction Paypal determines as fraudulent on the buyer's side or involving shipping issues, at no cost to the seller and no annual limit on coverage.
Transaction Eligibility
To be eligible for Paypal Seller Protection, the item must have been shipped within 7 days of payment receipt. The item cannot be in a digital format or consist of services, and it must not have been delivered in person or picked up by the buyer. The seller's Paypal account must be linked to a bank account verified through Paypal. Proof of delivery or proof of shipment is necessary, depending on the type of claim filed.
Types of Claims
There are several ways a buyer can initiate a transaction dispute. He can file a challenge to a payment made directly through Paypal, or a charge back challenging a payment filed with a credit card company. He also can file a reversal, which challenges a payment made through a bank. A reversal also can be initiated directly by Paypal. The buyer may claim the package never arrived, that the item was significantly not as described, or that an unauthorized payment was made, meaning that someone else made the payment and was not authorized to do so.
Documentation Requirements
Proof of delivery is allowed for documentation if a buyer files a claim for an unauthorized payment or a package not received. The seller must provide online tracking documentation from a shipping company which verifies the date of delivery and the address of the recipient. For payments of $250 or higher, the recipient's signature is required to confirm delivery for the transaction to be eligible for Paypal Seller Protection. Proof of shipment is acceptable for Paypal Seller Protection coverage if a buyer states the package was not delivered or that there was an unauthorized payment. This document, such as the seller's delivery confirmation receipt, must show the status as shipped and the date of shipment, along with the buyer's address.
Transaction Review
After a claim is made, Paypal puts a temporary hold on the seller's Paypal account for the amount in dispute while reviewing the case. If the transaction fits the requirements for Paypal Seller Protection, Paypal releases the hold. Even if the package did not arrive, the seller is not responsible for issuing a refund, which Paypal handles on its own.