Chargebacks911
PayPal Refund Scam

How Do PayPal Refund Scams & Other “Money Back” Tricks Work? How Can You Protect Yourself?

A PayPal refund scam (also known as a PayPal overpayment scam) is a crafty, but surprisingly simple form of wire fraud.

These overpayment scams typically involve someone making a purchase from you, but then sending you more for an item than you expected. The fraudster will then claim the overpayment was a mistake, or offer some other excuse, and request that you return the difference.

This might not seem alarming at first. If you send that money, though, you might lose even more than the value of the initial sale.

Refund scams like this can be a real disaster if you fall prey to one. Thankfully, they’re also relatively easy to avoid if you know what to watch out for.

How These Refund Scams Work

As we touched on earlier, a PayPal refund scam is a form of wire fraud, meaning it’s financial fraud involving the use of telecommunication technology. Wire fraud covers a lot of different practices, all focused on different targets. With overpayment and refund scams specifically, it seems that scammers generally try to target small-scale, good-natured sellers who want to do the right thing. 

In short, a scammer arranges to make a purchase, typically using a peer-to-peer payment platform like PayPal, Cash App, or other similar service. The buyer overpays for the item, then contacts the seller, saying the extra amount was an oversight or a mistake, and requests a refund.

In many cases, the buyer will ask for the funds to be sent to a third account. Typically, they’ll offer some excuse, such as that the original account is closed. So, the seller innocently sends the refund, ships the item sold, and assumes the matter is settled.

What the seller doesn’t realize is that the buyer is actually a fraudster, and they’re spending money from a hijacked credit card or PayPal account. Upon receiving the “refund,” the scammer will vanish. Then, when the real user discovers the fraud, the merchant gets hit with a dispute.

Another variation on this theme is a first-person PayPal refund scam. Here, the buyer will wait for the seller to transfer the funds for the overpaid amount, then will either cancel the payment for the original transaction, or file a dispute for reimbursement.

How to Tell if You’re Being Targeted: 5 Red Flags

PayPal scams are fairly prevalent on Facebook Marketplace, LetGo, and Craigslist. There are a lot of different tactics, including advance fee scams, shipping label scams, and phishing scams.

PayPal refund scams, in particular, are confidence scams for the digital age. To make them happen, the scammer has to convince you that they made an innocent mistake that only you can rectify. They will usually appear approachable and friendly, but in a bit of a hurry. After all, they have to instill a sense of urgency in order to convince you to rush a payment without really thinking it through. 

Become a Full-Fledged Chargeback Genius

The only resource you need to become an expert on chargebacks, customer disputes, and friendly fraud.

Download the Guide

Unsure if the person on the other end of a transaction is a PayPal refund scammer? Watch for these red flags in your buyer’s demeanor or behavior:

Red Flag #1
 | 
Overpayment

The first red flag you should be aware of is that an overpayment was processed at all. Think about it: how many times have you accidentally overpaid for an item? How often have customers you know and trust paid you more than the price quoted?

It’s possible for a user to key-in the wrong amount when sending a payment via PayPal or other P2P service. However, it’s not exactly commonplace, is it?

Red Flag #2
 | 
Urgency

The urgency they approach you with is your second red flag. Posing as a legitimate buyer, the scammer is going to be in a hurry to get their overpayment back. They will contact you and attempt to push you to wire them a refund for their overpayment. If you respond with discernible suspicion, they can get nasty very quickly.

Cancellation or refunding the order to the original account won’t satisfy them. The only reason a buyer would take issue with a canceled order is that they aren’t going to get anything out of it.  If a full refund was what they wanted, they wouldn’t be pushing for you to wire money to another account.

Red Flag #3
 | 
Vague or Illogical Conversations

The messages exchanged between you and this individual will often be strange. They may be tonally flat, long-winded and rambling, and full of misspellings and uncommon grammatical errors. 

You may see odd word choices, or phrases like “kindly,” “please to,” or “thanks you.” Another common error is to use “Dear” as if it’s a title, rather than a salutation. In a similar vein, scam messages are unlikely to address you by name. Instead, salutations may begin with a generic “Dear User,” “Hello Sir/Madam,” or “To Whom It May Concern.”

Red Flag #4
 | 
Requests for Personal Information

Scammers can disguise fake email addresses or websites using spoofing tactics to trick unsuspecting PayPal users into handing over sensitive personal information. Account passwords, social security numbers, home or work addresses, credit card or bank account numbers, PINs, or even places and dates of birth could be targeted.

Other times, fraudsters may launch phishing attacks via so-called “lookalike domains” (e.g. replacing the lowercase “l” in “PayPal” with the number “1”). In either case, the outcome is the same: if a victim supplies enough personal information, or clicks on a malicious link, the scammer may be able to take over the user’s account and use it to conduct unauthorized activity.

Red Flag #5
 | 
Changing Account Details

This scheme is similar to the overpayment scam tactic. The difference is that the scammer uses hacked PayPal accounts to make purchases. Upon making an (unauthorized) purchase, the fraudster contacts the merchant and asks for a refund of the amount to a different account controlled by the scammer.

The merchant is basically being used as a money mule. The scammer’s “purchase” and the merchant’s subsequent “refund” helps the fraudster launder funds from a victim’s account into the scammer’s account.

Refund scams are just one example of third-party fraud. Do you know the others?

5 Common PayPal Refund Scam Tactics

If you accept PayPal for goods and services, you could be targeted for PayPal refund scams. Keep in mind that scams like this don’t just happen on PayPal, though. Amazon Marketplace scams and Cash App refund scams are popular with fraudsters, too, because they are fairly easy to perpetrate with little upfront legwork.

Generally speaking, you may always be a target for scammers so long as you sell goods and services through any P2P platform. While this isn’t great news, it doesn’t have to be the end of the world. Simply being aware of the risks and committing to a few best practices can prevent you from becoming a victim.

Tactic #1
 | 
Malicious PayPal Invoice Attachments

A scammer might send a fake invoice via email. Unsuspecting victims who believe the PayPal invoice is real will attempt to pay it by clicking on links or buttons embedded in the payment form.

Unfortunately, the attachment is neither from PayPal, nor is it a payable invoice at all. Instead, embedded in the file is malware that allows scammers to siphon information from a victim’s device or account.

Tactic #2
 | 
Fake Claims for Refunds

Here, a scammer purchases an item from a merchant. They then allege that they aren’t satisfied with their purchase, or that their order was not delivered. In reality, the scammer is hoping to score a returnless refund so they can get an item for free.

The scammer may also claim that their account was hacked and that the purchase occurred as a result of unauthorized activity. If the merchant refuses to answer the scammer’s refund request, the fraudster may file a chargeback.

Tactic #3
 | 
Account Verification Scams

Scammers using this tactic will send emails with fake URLs or QR codes that instruct victims to verify their accounts. Scammers may also call users or leave voicemail messages asking them to verify their account details. Victims who attempt to “verify” their account details will inadvertently send these details over to scammers.

Tactic #4
 | 
Fake Delivery/Shipping Address Scams

Here, a scammer makes a purchase and intentionally includes an incorrect shipping address. They then contact the shipping company directly to provide their real address for delivery.

The scammer then complains, demanding a refund or threatening to file a complaint with PayPal alleging a failed shipment. As a result, the merchant who was the target of the scam loses out on both the merchandise delivered and the money involved in the transaction.

Tactic #5
 | 
Fraudulent Password Reset Emails

A scammer using this tactic sends fake phishing emails disguised as password reset requests. These emails will usually include links that victims can click on to “secure” their accounts. The link will then lead to a fake PayPal login page that steals the victim’s login or payment information.

Talk to the experts today to help protect your business against fraud, financial scams, and chargebacks.

How to Stop a PayPal Refund Scam

Make it a shop policy to never simply comply with a request for an overpayment to be refunded. Period.

If you approach each attempt as a scam right off the bat, you’re far less likely to fall prey to a PayPal refund scam. If you are contacted by a buyer demanding or requesting a refund for an overpayment, immediately cancel the order, rather than refunding it.

Here is a step-by-step process to follow if you’re being you have been targeted:

50 Insider Tips for Preventing More Chargebacks

In this exclusive guide, we outline the 50 most effective tools and strategies to reduce the overall number of chargebacks you receive.

Get the FREE guide

What to Do if You’ve Been a Victim 

The three-step process above should help you avoid PayPal refund scams. What do you do if you already wired the money requested, though?

If it’s too late, and you’ve already sent the funds the scammer requested, there are a few things you can do to mitigate your losses. It’s important to note that you won’t get the money you sent back, nor the item, if it’s already been sent out. At this stage, you’re in damage control. Here are your next steps:

PayPal Refund Scams: A Final Note

Unfortunately, there is no surefire way to protect yourself and your business from fraud. What works for one business might not work for another, and every business is different. That said, following the steps outlined above could help prevent PayPal refund scams and other types of fraud. 

Whether you’re fighting PayPal refund scams or another form of criminal fraud, the more solutions you combine together, the lower your risk threshold should be. With advanced fraud prevention solutions, though, you could limit risk, increase revenue, and improve customer satisfaction. 

This post PayPal Refund Scam appeared first on Chargebacks911