How PayPal claims work: Why they occur, and how to respond to them

What is a claim?

When a customer and a business owner can’t resolve a dispute, the customer can file a claim to request a refund from the payment processor, such as PayPal. However, if a customer suspects fraud in their account, they can skip the dispute process and file a claim right away.

Learn more about what a claim is and why it can happen.

Common reasons for claims

There are a few different types of claims you should be familiar with, including:

• Item Not Received (INR): In this case, the buyer is claiming they ordered and paid for an item but didn’t receive it.
• Significantly Not As Described (SNAD): This happens when the buyer claims the item they received is significantly different than they expected, based on your product description. For instance, the buyer ordered a red sweater but received a blue one instead.
• Unauthorised Transaction: If a complaint is filed for this reason, it means the buyer’s account may have been compromised or hacked, and someone made a purchase from the account without their permission.

How to escalate a dispute to a claim on PayPal?

Struggling to resolve a dispute with a customer? If you feel the need to escalate it to a claim, follow these steps:

1. Log in to your account with PayPal.
2. Go to the Resolution Centre.
3. Click View next to the dispute you want to escalate.
4. Click Escalate this dispute to a PayPal claim near the bottom of the page.
5. Follow the instructions.
6. Click Escalate to a claim.

How will I know if a claim has been filed against me?

If a claim has been logged, you’ll be notified via email. You’ll also see that a case is created in the Resolution Centre.

Will I be penalised from having a claim filed against me?

Having a claim filed against you doesn’t necessarily mean you’ll be penalised. There are no automatic fees levied against you, and your seller feedback won’t automatically be affected.

But you should keep in mind that if your claim rate is too high or other indicators are trending negatively, your account could be reviewed, and reserves or limitations could be put in place.

For instance, a temporary hold may automatically be placed on money when a claim is opened. This hold will stay in place while you work with the buyer to resolve the claim and will be released back to you if the claim is settled in your favour. For Item Not Received (INR) claims, if you provide the relevant information as outlined in the PayPal Seller Protection, and the claim is decided in your favour, the money will be released to you. (Limits apply)

Once a claim has been filed, the best thing to do is quickly provide any requested information.

How to respond to a claim?

Resolving a claim filed with PayPal can be simple. If a customer files a claim or a dispute is escalated to a claim, follow these steps to respond as soon as possible:

1. Log in to your account with PayPal.
2. Go to the Resolution Centre.
3. Click Respond in the Action column next to your claim.
4. Select how you would like to respond and click Continue.

After you make a selection, follow the instructions. Keep in mind that once you upload the files, you won’t be able to view them again — you’ll just see a summary of the information you’ve submitted.

How will the claim be processed with PayPal?

If a claim is filed, you as the seller would be asked to respond within 10 days. If you don’t respond, the claim will automatically close in the customer’s favour — and a full refund will be issued.

If you do respond, PayPal will work to evaluate the information provided and determine the outcome. This claim resolution process usually takes about 30 days, but more complex cases may run longer.

How to help prevent claims?

Preventing claims comes down to curbing disputes. The good news is there are a few steps you can take to help avoid them from happening in the first place, such as:

• Be honest about your products: Make sure your item descriptions and photos are accurate, detailed, and truthful. The last thing you want is for a customer to wind up disappointed that your product isn’t what they expected.
• Clearly communicate your shipping practices: Give customers the tools and information they need for shipping and tracking, so they know what to expect and when to expect it. Make sure to ship items promptly, too. And if an item may take weeks to arrive, include that information on your product detail page, so they don’t feel duped after purchase.
• Display your customer service information: Your phone number, email address, and chat functions should be clearly visible on your website to make it easy for customers to get in touch with you if there's a problem.
• Outline your refunds and returns policy: Be upfront with your refunds and returns policy, and give customers the information they need to start the process.
• Stay responsive: If customers can't get in touch with you, they may get frustrated and upset — so make sure you're available to help troubleshoot issues. Learn more about how to prevent claims with great customer service.

Instead of worrying about when you may face a customer claim, take a proactive approach with risk management solutions.

Plus, check out our comprehensive guide on how to manage disputes and claims.