Freelancers Beware of Receiving Payments via Credit Card through PayPal
Cara WilliamsI’m a freelance web designer and I recently had an experience with a client using PayPal as a payment method which I think more freelancers need to be aware of.
Mistake #1: I didn’t research my client.
In February last year, a potential client emailed me and said he’d seen my site in a CSS design showcase and asked me to quote for a project he had. I spent a lot of time helping him through the jargon and helping him lay a good foundation for a successful web project by defining his ideas of what he wanted the site to achieve. After lots of the usual emails back and forth, he then abruptly emailed and said “This is on hold sorry”. He disappeared for a couple of months and then made contact again only after he said he’d “wasted 4 weeks with the last designer”. Now I know obviously this should have sent a few alarm bells ringing, and with hindsight being 20/20, I should have questioned and done a bit of research on this client before I made the decision to accept the job.
Mistake #2: I accepted credit card payments via PayPal.
As the client was in New York and I was in Brisbane, Australia, I thought I’d better be cautious let him know up front that I’ll require payment at regular intervals. First, a small deposit up-front, then only at key stages when work has been completed and approved. I chose PayPal as the payment method for as an easy and secure way of transferring the funds internationally.
I’d had the option to accept credit card payments in PayPal, which didn’t bother me at the time as the transaction was quick and I saw the funds instantly. However, what I didn’t know, and I found out the hard way was that I really wasn’t protected by PayPal and that the client can easily reverse the transaction.
The project was running relatively smoothly. The client was a bit of a strange one, flipping from being unreasonable and rude to ecstatic with my design concepts and actually asked me to marry him, multiple times. I was being paid, so I could tolerate the rudeness and I remained goal focused to get the project finished.
It got to the end of the project and I’d completed everything I had quoted on and I was working per hour for some extra content page customisation when he asked me to copy a competitor’s page into his site. I suggested that I need non-copyrighted content and I’ll design the page around that. He took it as insulting and began to threaten me, saying “you’re not the only designer on the face of the earth” and that he’ll hire someone else. At that point, I’d had enough; I had finished everything he initially contracted me to do so I made the decision to drop him as a client and wished him luck in finding a new designer. I was behind a few hours in payment but cut my losses and installed the full templated site on his server, handed over all the layered Photoshop files and left it at that.
Six Weeks Later
6 weeks later, I get some emails from him asking for me to supply the artwork in vector as he wanted to use the artwork in print material. I explained that I created the artwork for the purposes of incorporating it into the header of the website design, not vector artwork for print - I was hired to create graphics for the website. He threatened to do a reversal of the payment if I didn’t supply the artwork in vector.
He told PayPal and his credit card company he didn’t get what he paid for, and they initiated the reversal of for one of the largest payments. Without question, or any communication with me, PayPal immediately deducted the funds putting my account into the negative. This is part of their regular practice.
PayPal Policy
In speaking with PayPal they told me that because I don’t have a shipping code or proof of delivery for a tangible product, I’m not covered by their Seller Protection Policy. However, because I’m providing a service and delivered an electronic product, they said they can help me put a case together to appeal the reversal. This was a bit of a farce. I sent the evidence I had - I gave screenshots and emails and even the payment description that he included in the PayPal payment was a direct copy from my quote, saying the hours I had worked and what he had received.
This information apparently gets sent to the credit card company and to quote PayPal:
“Our dedicated claims specialists will gather information from both parties, examine the case, work with both parties to fairly and efficiently resolve the claim, and render a decision. This service is offered free of charge.”
The only resolution of the claim was that, well, the credit card company is going to side with their own customer. I never received a response as to what the outcome was after I had put my case forward and supplied evidence of receipt of the product and service. The full transaction amount remained deducted and there was nothing I could do about it.
I since see the client has actually published his website, including the artwork he claimed he wasn’t happy with and fraudulently claimed to his credit card company that he didn’t receive.
This should not have happened. I was only paid after I had worked diligently to ensure the client approved, then to come back 6 weeks later and initiate a charge back and win is something I’m still coming to terms with. I never knew this could even happen and if I had, I would never have accepted payment via credit card. I thought I was protected by using PayPal. Now I’m in the situation where he’s using the artwork created by me, which he hasn’t paid for and as he’s in a different country it adds a whole level of legal complexity and I’m not sure where to begin. I’ve contacted the Australian Copyright Council for advice and I’ll see what progresses out of that.
I’m sure that there are freelancers out there accepting payments via PayPal unaware that they are not covered and that this can absolutely happen to them if a client disputes a transaction.
This was a guest post by Cara Williams of CaraWilliams.com.au
Thomas Allen
February 20th, 2008
What method of recourse do you plan to take? It’s really not a choice to abandon what’s rightfully yours.
Jeff
February 20th, 2008
I’d like to see some alternate suggestions. I have used PayPal quite a bit with clients and so far without incident, but if there’s a better solution out there, other than the obvious freelance sites like elance, etc., I’d love to hear from the readers…
Dave Yankowiak
February 20th, 2008
Thanks for the warning! So if we are working with an international client, is there a safer electronic alternative to PayPal? Any suggestions that won’t charge a ton of fees?
Michael
February 20th, 2008
Do you know who his credit card company is? If so, I would go to directly to them and report his case as fraud, which it is. What he has done is illegal by terms of his credit card contract. If you go directly to that company then they should help. It might also help if you have a business partner in his country to help with some of the correspondence.
Ryan
February 20th, 2008
It’s not just paypal, this can happen with any credit card and has happened to me. PayPal can’t take money from your bank account or credit card without your permission so don’t ever keep a balance in your account and if someone does this worst case you have to open a new paypal account but at least you’re not out the money.
Paul
February 20th, 2008
Wow. This is indeed a sad story that should not have happened. I currently use PayPal to receive payments from clients. My work is mostly small WordPress projects. My question is outside of PayPal what other payment options are other using that are more secure? I’m sure we can all agree good old printed checks are probably the best but inefficient. Is there some other option for electronic payments?
Dave
February 20th, 2008
While you should try and do what you can to get your money back, unfortunately the credit cards will almost always side with their clients from the past experience I’ve had. Definitely worth a shot though, you are obviously in the right.
Amanda
February 20th, 2008
This is why I always remove every paypal payment I get the minute I get it. I may make people just pay in personal checks from now on. Or ship them their files on CD.
Lutomes
February 20th, 2008
Ouch. Main reason I don’t like accepting credit cards myself. I work in accounting and tax, so its very easy for a client to dispute one or two numbers out of a whole return. Including client’s saying they will never pay us for work done, when we do the work and just refuse to claim illegal deductions.
I would hate to have chargebacks over my head. So I know your pain.
Christopher Humphries
February 20th, 2008
Wow, that really stinks and is scary. As a buyer of services, I love using paypal. I didn’t know that it was like this for the seller though
What alternate payment methods are generally acceptable for clients?
Kenn Wilson
February 20th, 2008
I assume this article refers to the ability to accept a credit card payment from someone without a Paypal account. How, if at all, does this risk differ from accepting regular payments via Paypal?
Albert
February 20th, 2008
I am so sorry about your experience. I was actually thinking about using Pay Pal myself to make it quicker and easier for clients to pay. I’ve actually used pay pal on some websites I’ve created for my clients to sell without having to have a full e-com site. I might have to reconsider that in the future.
Heck, even this web site uses Pay Pal to sell their Rockstar book.
Hope everything works out for you.
Mr. Crash
February 20th, 2008
Ok… What i’m going to suggest isn’t nice - but *shrugs* I figure someone like that shouldn’t profit from such ridiculous behaviour anyway.
Try some combination of the following:
* Check if he did use the content you refused to steal - if so, notify the other site involved and discuss what the client is actually like.
* There are some large spam link farms - pay to have the site registered on a few of them and he’ll get completely knocked out of google.
* Register some cheaper similar domains (e.g. if he’s got a .com get the .net and the .org) and put up a lovely splash page detailing your experience with this client. Optimise them heavily to turn up when his name or the company name is googled.
I don’t like paypal much either but i’ve got no ways you can do anything evil to them.
They “froze” US$19000 in one of my friends accounts because he was supposedly engaging in suspicious activities on ebay. They basically kept his money for 6 months before actually handing it over. He had no negative feedback and over 200 positive feedbacks, no dubious or illegal stock. Just things from his house he wanted to sell, mostly books.
Kerri
February 20th, 2008
Good luck with the followup Cara. I would like to hope that the Australian Copyright Council will act for you and make sure you are reimbursed. We really rely so much on our clients acting morally in this business, don’t we? Unfortunately the dodgy people always seem to know just how to work the system to their best advantage. Let’s hope they get what they deserve this time.
NONOFYOURBIZ
February 20th, 2008
I had the same exact experience happen 1 year ago. Paypal told me because it’s not a tangible product, same BS.
Allena
February 20th, 2008
I’m so sorry for your experience! I hope you get what is rightfully yours out of this whole mess.
Jon
February 20th, 2008
Unfortunately Paypal is very, very risky. All it takes is one unsubstantiated complaint and they can shut you down for good (and keep any money left in your account). I’ve been in the same situation as you before. I suggest a civil lawsuit as your contract, screenshots, emails and the fact that he’s using your work illegally will ensure a judgment in your favor. Make sure to take a screenshot of his website before he wises up and takes it down.
Brett Nyquist
February 20th, 2008
I believe you might have a case if you show the work you completed and now that he’s published that work he has accepted it and should owe on that work. I would like to think the credit card company could see this and take an objective approach to it.
Skellie
February 20th, 2008
Don’t hold money in your PayPal account. I generally wait until I have $150 and transfer it to my bank account immediately (because it’s free to do so for amounts over $150).
I’d also suggest that it’s probably OK to accept credit card payments if the client is paying in advance. You’ve just got to make sure you transfer it to your bank account as soon as you get it.
You could also refuse credit card payments for projects over $200, or somesuch. But I think you’d probably be OK accepting card for small projects.
There are definitely risks associated with PayPal and my advice is to use it for getting paid but not for storing money. It’s just not safe enough.
Mike Smith
February 20th, 2008
This is horrible and I’ve seen it happen many times. Paypal is notorious for NOT doing anything about chargebacks from credit cards.
Does anyone have experience with this if they’ve mailed out a CD with the files on it? Does that make any difference. I’m beginning to think that I’d like to get the address of the client and mail them a CD with all files on it just to have that on record and just put the shipping costs into the product development costs.
Drew
February 20th, 2008
I use PayPal for a business where we ship tangible products. We don’t get a lot of disputes, but the ones we do get are about 50/50 in terms of what gets settled in our favor and what doesn’t. All products not purchased through PayPal (ie: someone else using PayPal to pay you to your PayPal account) are not covered through their seller protection plan. So the other person has to have a PayPal account to be covered at all; tangible products or not.
Directly from PayPal: “Direct Payment and Virtual Terminal transactions are not covered by PayPal’s seller protection policies and programs.”
Tim
February 20th, 2008
Warn him before you do this in case he wants to pay up. After he laughs at you, take all of your documentation, correspondence, etc and turn it over to a collection agency. You won’t get the full amount in the end, you may get nothing, but the collection agencies work on a contingency basis (they get paid when you get paid) and will usually only take your case if it looks like they have a case. What he will get is his credit rating destroyed if he doesn’t cough up the dough.
mave
February 20th, 2008
I used to accept Paypal, but I actually deleted my account entirely after hearing some pretty bad horror stories. It’s like so many customer service situations - everything seems so great until something goes wrong, and then you see where you really stand.
As for alternative payment methods, I’d love to see a reliable one for international transactions. As it stands the only really reasonable ones are cheque (unfortunately many banks put a hold on international cheques until they clear, which can take up to 25 business days - although this can be argued with your bank), and wire transfers, which are great, but expensive.
Justin Ryan
February 20th, 2008
I had the same thing happen to me several years ago. I was doing a CD for this kid and when I was finished, his dad paid via credit card on paypal. They got the CDs printed, shold a bunch and than his dad decided that he didn’t really like it anymore, so he contacted paypal and the credit card company and said that I never completed the work!
Long story short, I emailed paypal with pictures of the actual printed CD, the digital files, our emails and even a statement from the company that printed it. It took at least 6 months, but I eventually got my account out of the negatives.
Christian Nally
February 20th, 2008
I’m surprised that none of the comments yet have asked which site is the one with your work up on it.
It is of course very professional of you not to mention the perpetrator by name, wouldn’t it be oh so fun to see what could happen if the internet knew their identity?
John Brougher
February 20th, 2008
I’m no PayPal expert, but to all the folks that mentioned taking money out immediately, I’m really not sure that’ll help at all. If there’s a negative balance on your PayPal account, it still has to get paid. It’s not a matter of having money “in PayPal” that’s lost, it’s that there’s suddenly an unjustified debit.
My heart goes out to you, Cara–there’s risks with everything (checks bouncing, for example). Within one’s own country, checks can be nice, but often PayPal is really the only option. Anyone else have experiences with other systems? My fear is that systems other than PayPal may have just an opaque a confrontation policy.
John Faulds
February 20th, 2008
I appreciate that while you’re still trying to recoup your losses you probably wouldn’t want to say anything, but when it’s all done and dusted it’d be good to know who this client is so the rest of us can avoid dealing with him.
Kuswanto
February 20th, 2008
I am very sorry for your very bad experience with paypal. And your article makes me alert about using paypal for my clients payment.
Regarding other aternatives, these services are safe.
Moneybookers.com (http://www.moneybookers.com)
This is very secure. The only downside is it’s limit, currently my limit is a flat zero, and have to wait for couple months to get my limit back. Other than that, all works good. It also accept recurrent payment.
2checkout (http://www.2checkout.com)
2CO is very slow, but they do their job well. The fee is a bit higher than paypal. If you do lots of micro payment of tangible or non-tangible products, 2CO is a great choice.
Scott Taylor
February 20th, 2008
Very sad to hear; I have dealt with clients like that but have been lucky enough to NOT experience something to that extent. I am very partial to doing business with anyone who is too far away, where I couldn’t just get in my car and resolve the issue if I had to
I think you should exploit this fraud so everyone has a name and a face.
Rachelle Matherne - Five by Five PR
February 20th, 2008
I’m so sorry this happened, Cara. I learned my lesson with PayPal a few years ago when I was selling stuff on eBay. Thankfully, it wasn’t too expensive of a lesson at the time. I’ll only use PayPal now for amounts I can afford to lose, or from people whom I actually know.
I hope more people catch on to the fact that PayPal offers virtually no protection for sellers.
Rachelle
riki
February 20th, 2008
Hi Cara, thanks for the warning. I can fully imagine what it feels like to be in that situation. PayPal seems like such a great option, until of course something like this goes wrong. I hope you didn’t loose a large amount of money.
I keep ranting about billing incrementally and not allowing clients to build up a huge debt. It’s the only thing that helps me sleep at night.
Rachelle Matherne - Five by Five PR
February 20th, 2008
Also, I agree with the others that you should pursue getting your money back from the guy in some way.
@ Jeff: What about getting a regular merchant account to process credit cards? I’ve used ProPay for a few years now and have been happy. You’re still subject to chargebacks, but they aren’t quite as easy as through PayPal. You can send invoices through email where the client can then enter their card information through ProPay’s secure site.
@ Amanda: That might be a good idea. Even if files are delivered electronically, still send them in some format through a shipping service that PayPal will recognize, and only ship them to the verified PayPal address of the client.
Rachelle
walter wimberly
February 20th, 2008
I had thought of using PayPal for accounts, but based upon this and some of the things tied with the new e-bay/PayPal rules going into effect this week, I’m having to reconsider.
Do you know if you had shipped something on a CD to him, if it would have helped any with your claim? That way you could have a shipping ID attached possibly.
Walter
Jermayn Parker
February 20th, 2008
So what is the best policy to keep money???
Transfer is straight away from paypal to your account? and how do you stop people using credit cards to pay??
Its a pity to hear this, I would recommend that FS does a follow up article highlighting ways to be protected!
PJK
February 20th, 2008
Wow, so sorry. Is it just the cynic in me, though, or has anyone else thought that if you were the client and you legitamitely didn’t get what you paid for or had some other sort of legitimate dispute, you wouldn’t be able to get the charge reversed so easily? It seems like “Murphy’s Law” that the guy who’s doing it fraudulently gets away with it, yet when I or my family/friends have had legitimate disputes, the credit card company has some reason or another why they can’t just reverse the charges. My FIL was just telling me a story that happened to him recently, and the credit card company dispute process was a farce. Basically, he had to go deal directly with the company that charged his credit card, and luckily they did reverse the charge. (The charge appeared because he checked some box about getting free coupons at check out when ordering some vitamins online, so it automatically enrolled him in some program that he knew nothing about. There was nothing to make it clear that checking the box would enroll him or result in a credit card charge. My husband has fallen for a similar scam.)
David Sparks
February 20th, 2008
shocking and appalling.
I’m easing into freelance and this definitely puts the fear into me about doing that.
1. I’m glad you made us all aware of your situation and I’m sorry you went through it.
2. since you put the fear into probably all of us hah, I would respectfully beg you or somebody on this site to tell us or help us all figure out safe ways to accept payments so this cant happen be it setting up a merchant acct and a shopping cart to accept payments on our own site or what.
I’m definitely looking for an alternative now because that is unacceptable and i would have logged onto his server and deleted the site probably. your more of a professional than i am in this regard. thats just wrong and i hate to see people wronged like that.
hope to see an alternative payment solution post soon.
Pablo Matamoros
February 20th, 2008
Wow! I’ll be more careful with Paypal. I usually withdraw the money immediately though.
I had the opposite problem with Paypal. I mean, I hired somebody in my home country (Argentina). We agreed that I’d pay through Paypal, but at the moment of payment my provider told me that couldn’t convert her money into cash. Basically, she didn’t have a credit card and banks wouldn’t accept Paypal checks.
I prefer to work trough sites like Elnce, RentaCoder, etc., Even when a client hasn’t found me through those sites I ask them to subscribe. In the case of RAC, I have an affiliate account, so I don’t get charged commission for projects of clients that were introduced to the site by me. It also has another two advantages: an escrow account and there is a visible record of the projects I finished and what my clients think about my work.
Todd
February 20th, 2008
Yeah, collection agency, get them on his case.
And contact his web host, inform them about the fact he’s using stolen - copywritten materials (your design) on their servers.
Phil Rae
February 20th, 2008
Far sad story indeed - I had a similar experience on eBay a while back when I sold an iPod, and the buyer issued a charge-back after he’d received the it! I had already known of this type of thing that happens, so I had already initiated a transferral of the cash to my bank account. Unfortunately, the charge-back was issued on day 3 of 3 that a transferral takes, and PayPal reversed the transaction and refunded the buyer!
I went through the whole complaints process, however PayPal stated that the eBay account was stolen, and they couldn’t let the payment go through because the person who allowed the account to be stolen would be the one who got charged!
As an alternative in the UK, I now solely use http://www.nochex.co.uk which is very similar to PayPal, allows for payment by non-members, and apparently don’t allow charge-backs. Worth a look.
Alexander Obenauer
February 20th, 2008
Great article - but how do we protect ourselves now? What can we do for protection, or what payment methods are more secure?
Dave Ellis
February 20th, 2008
So I think some kind of conclusion would be good for this article - what is/are the best alternative(s)?
No Worries
February 20th, 2008
Karma WILL get him. What he sows he i soooo going to reap ten fold!!
ross
February 20th, 2008
paypal has both the good and the bad, it is sore on the exchange rate, you are uncertain as to when they may decide to close or track your account, as not long ago i had a similar incident, id been using my paypal account and had completed all the forms etc that they require for a business account so i had stated i was a freelancer and that i provided a SERVICE not selling an ebay product, so i had received one large payment over a k and they started doing checkups, they then froze my account for 3 weeks which during this time i gave them everything they needed and 4 times they said within 48hours your account will be unlocked, then the killer blow came, when they said they had checked everything and even after contacting the last 5 of my clients and all of them stating that they had received their service they decided that they wanted to have further review of our account for a period of, wait for it 180 days
so i had to literally refund money, as paypal took a percentage for holding onto it, they still took their 4.2%, and well needless to say i had to change to another account and find a different payment solution, and the funny thing was i wasnt even half way through my monthly receiving balance for them to do this! easy money for them and very little a single individual can do about it as they contacted my clients without permission, froze my accounts without permission and locked my bank account without permission so it crippled the business. personally id go to the debt collectors and show them proof, dates times of the client using and stating that an outstanding balance is to be paid, you may not be US based but you do have international rights to this.
Scott_S
February 20th, 2008
If you weren’t using PayPal and instead had a credit card merchant account, couldn’t he still challenge the charge?
My understanding is that even outside of PayPal, these things happen all the time. So for example, if you’re a small merchant, you probably accept credit cards. You’ll be signed up with your bank and have a little terminal for authorizations at your location. You’ll also be charged monthly fees and reporting fees regardless of how much you actually run through it.
If someone buys something from you, they can call their credit card company and challenge the charge. This could be for any number of reasons. It is my understanding that the bank would then freeze the disputed amount. In fact, some online merchant accounts place a percentage of funds into a holding pool just for this reason before releasing them. It can take months before regular merchant accounts see disputed funds - if at all.
And we already know the risks of accepting checks that bounce, incur bank fees, and never get credited to our accounts.
I’m wondering if the intermediary sites (eLance and Rent-a-Coder) are better since both sides agree and then funds are transfered. It may prevent those chargebacks from out of the blue. At least the customer would have to agree at the time and would have less of a case down the road.
I’ll be interested to hear from others about possible solutions.
Goldie
February 20th, 2008
Receiving goods and then initiating a chargeback is fraud - plain and simple.
I’d suggest carefully packaging up all the information about this transaction, including links to the offending website, and contacting the local authorities with the details. If you’re lucky the guy will be charged with fraud.
You may even be able to get the FBI to help - the fraud was conducted over the ‘wire’ and international/state boundaries. Might be considered a federal crime.
Lori
February 20th, 2008
That’s awful! I’m sorry you were robbed like that. Frankly, that’s exactly what’s happened. You should put in a claim with your bank and state the situation. There’s no way this weirdo should’ve been able to do that.
Thanks for the very important tip. Sorry you had to supply it through personal experience. :((
Matt
February 20th, 2008
That is horrible! One question, though; if you don’t take PayPal on a regular basis, what else do you use? Do you accept a lot of checks? I always thought PayPal would be the way to go (and has worked okay for me so far) and accepting checks was somehow frowned upon.
Sherman
February 20th, 2008
You said that you installed the site on his server right. So I assume you still can still log onto his server? If so, log on and remove the pages that you have created from his site. You didn’t hack into his site, he gave you access. He didn’t pay you so he did not purchase the product. Therefore he has no right to keep it and you have every right to take it back.
Also with clients, what you can also do with each payment they make is have them sign or confirm that they have received the product/services for which they paid. This would make it more difficult for them claim any dissatisfaction in the future.
Good luck.
-Sherman
Matthew Smith
February 20th, 2008
Unbelievably helpful. Thank you. I appreciate your candor and professional attitude about the article as well. Well done.
Andy Polaine
February 20th, 2008
PayPal is, in general, an absolute customer service nightmare whether you are a merchant or a buyer. In the space of ten days I had a complete runaround from them from both sorting out some account issues and also them screwing up on MacHeist. The long saga is here: http://www.polaine.com/playpen/2008/01/25/paypal-a-customer-service-nightmare/
Google Checkout might be good, but it’s only for US and UK bank accounts at the moment. No idea what their policy is though.
Will
February 20th, 2008
Sorry, Cara, about your experience with that awful client. Fortuanately, what goes around comes around and eventually he’ll get his. But, I have to say, as someone preparing to get into freelance webdesigning this is pretty scary. I was planning on using Paypal to avoid problems with bad checks and/or money orders with customers. But, I think the idea of a few of the posters of sending your work thru a Paypal approved shipper on CD is a good idea in order to be protected thru their Payment Guarantee Policy. Another possibility, though, could be using GoogleCheckout. I was just looking at their chargeback policy on their site and though it seems pretty similiar to what I’ve heard others on this post say about Paypal’s chargeback policy, Google online products are usually pretty good and maybe GoogleCheckout could be a better alternative to Paypal. I know I’ll definitely give them a try.
PS— Someone in this post mentioned something about closing a Paypal account if there is a chargeback that puts you in the negative then opening another one. Wouldn’t Paypal just transfer the negative balance to your new account and then you’d still have to pay?
Dina at Wordfeeder.com
February 20th, 2008
Ohh… what a sad story. Cara, you have my deepest sympathy.
Tom
February 20th, 2008
While PayPal is a horrible company and I do everything I can to not use them, this is more of a credit card issue — and actually part of the reason I *only* pay for things through PayPal via my CC. It is very easy to get a successful chargeback if you have a really good CC company. I have never abused this power, but when I report a deadbeat merchant or something like that all I do is give AMEX the amount of the fraudulent charge and they handle the rest. I always get my money back and I’ve never been asked any questions. It’s like magic.
Of course, this can backfire if you actually did your job and the client is just pissed (or insane). Unfortunately, as you’ve found out, PayPal is completely useless in this regard and all they are really good for is freezing your accounts, so if that’s something you’re interested in, they can help there haha. I do hope you find a way to get your money back, but like most PayPal stories, this might just end with “and there was nothing I could do.”
Nick
February 20th, 2008
It seems to me that one possible loophole here may be to modify the wording of your contract so that the final product that you are selling the client is your work on physical media (I.E. when the project is done you mail them a DVD with all their files on it). Ship the DVD to them via FedEx with signature required for delivery, that way you can show PayPal that they received a physical product. I’m not sure if this would work or not, but it seems sound to me, and it makes it hard for them to commit credit card fraud, which is what this really is.
I’m sorry to hear about your ordeal though. I’ve had similar erratic clients myself, and I think the best advice was actually in an article here a few months back about dealing with difficult clients. At the first signs of trouble attempt to get everyone on the same page about what does and does not constitute acceptable behavior, and if it continues cut them loose immediately. I know I wish I had done that on more then one occasion. The headaches are never worth the $. Good luck on resolving this issue.
Amanda
February 20th, 2008
if you still have their login information, why not delete the work you did on the site?
Diana
February 20th, 2008
How frustrating! I hadn’t thought about chargebacks - thank you for writing this so articulately. Did paypal or the credit card companies suggest anything you could have done differently had you known this could happen? Documentation we might all now create that would have influenced them in your favor?
I suspect though that this client causes harm to *everyone* around him - a crazymaker, a griefer. In this case, he succeeded by using the paypal/credit card system. I do wish they’d done more to protect you from his abuse, or that the credit card company looked at the tangible evidence of work received. But my experience has been that people like that find a way to hurt you because they will always go farther than any decent person to accomplish their harmful aim. Yes, the credit card company was complicit, but ultimately, he is the one to blame and his abuse of you included more than non-payment. You did all the right things. The biggest reminder I take from this article is that if someone’s behavior is erratic and inappropriate, their payments will be too, so it is just not worth my time. Like you, I would have given him the benefit of the doubt.
Will
February 20th, 2008
@ Amanda—–But that might not really do much good since Cara said she gave him the Photoshop files and associated files. Unfortuanately, he could just get someone else to put the site back up and continue using all the other files for his other print work.
Bryce
February 20th, 2008
I’ve had similar issues with paypal. However, as I understand the agreement you need to provide a physical product to be covered by paypal’s policies. The easiest way to do that as a designer is to provide working files to the client on a personally branded CD/DVD. Be sure to close the disc session (avoid additional recording) and mail the disc to the client “for their records”. The mail receipts cover you for payment even if you also transfer content electronically. I’m sure this isn’t a guarantee but at least it creates a better paper trail and you have receipts for an object not just an ftp log file.
John
February 20th, 2008
What a nightmare. Thanks for the warning and good luck with collection.
Tonya
February 20th, 2008
Man that really stinks, but if he published what you produced and he didn’t pay for (or reversed payment on), then its also fraud and you can take legal action. Like others have said, when a client pays by credit card those chargebacks can happen whether it was facilitated through PayPal or not. PayPal may suck because they refused to go to bat on your behalf, but not using them (and using another service that’s similar), probably isn’t going to protect anybody any better.
I’d have protections built into your workflow - at the concept stage, design stage and production stage - get sign offs that the client has received what they asked for/paid for before moving forward. You’ll have these as protection later. Keeping every piece communication no matter how seemingly insignificant will also help make your case.
In this case I’d notify him that you’re preparing legal action and notifying the appropriate agency of fraud, and give him 48 hours to respond. Take screenshots of his web site, show them to him, and tell him the case is pretty clear and he can choose to resolve it without legal involvement. I’m sure it’s a little trickier being in different countries but I’ve no doubt there are protections in place nonetheless.
And I’m not above what someone else here said, see if he did in fact steal that content and, since you’ll have a screenshot going into it, use that as leverage! (and notify the other company)
Good luck!
T.
Robert Dempsey
February 20th, 2008
We do business with a number of international clients. The only method of payment accepted is wire transfer. Also, being paid up front is the best way to go, if you can negotiate it and show the value of doing so. Our bank charges $10 for a transfer fee which isn’t bad. The only downside (sometimes) can be receiving less money due to currency translation, so it is important to ensure that the client pays you the correct amount. Of course, exchange rates change throughout the course of the day, so you might see a little less. A solid contract should also be in place with the statement (somewhere) that the work does not belong to the client unless you get paid for it (and the money remains yours).
Mike McD
February 20th, 2008
Sadly this is not the first (or likely last) story I have heard about PayPal payment reversals. The fact that this transaction was done via credit card adds another layer of complexity to getting it resolved, but even if it had been a bank withdrawl or account balance payment, you would still have a hard time getting PayPal to return your money. They are pretty terrible with customer service in that regard, and tend to side with the buyer by default. I had a problem with them regarding an ebay auction I ran, and ultimately I lost my money and the product I sold after PayPal looked into the matter. Long story short, they decided that the buyer was justified in getting a refund for a damaged product (which I doubt very much was actually damaged) but they didn’t seem to care whether or not the buyer had actually returned the product.
Donald R. Anderson
February 20th, 2008
This Paypal situation is an instance of where it would pay off to burn the files to CD and mail them to the client, even if you still upload them yourself. That gives you legal proof of your work.
tiffany
February 20th, 2008
If the client / client’s web host is based in the United States, try going to the company that hosts the web site. You may be able to file a DMCA (Digital Millenium Copyright Act) complaint for that work.
As others have pointed out: this isn’t just a problem with PayPal. It’s a problem with credit card companies in general. PayPal just sucks because they don’t provide strong seller protection.
Ahmad Alfy
February 20th, 2008
F*** I can’t believe what I am reading!!
I cannot believe PayPal reversed the transiction!!
First , your Artwork is yours , He hiered you to work on the website not for the printable media so your action was %100 coorect … beside , source files are like negative films of the photographer … you never get it when you have your pictures !!
Second, your mistake was accepting the project after he came back to you … He’s a rude frauding stupid guy … I am sure the other designer left him for his bad manners
@Amanda : even if she had the login info , she cannot go that low …
I feel really sorry for you Cara .. Its something frustrating and we all had some clients like this stupid fag*** once or more … Thanks for your warning Cara .. God bless you
Chris Laskey
February 20th, 2008
What a horrendous client! You mentioned his request to copy content from another site directly into his - have you checked to see if he’s followed through on that with another designer? If so, it’s worth sending an email to the original company, with a fair warning about his behavior.
Other than that, I agree with the commenter Michael. Try contacting his credit card company directly and see what they can do. Its a long shot, and unfortunately there’s no simple way to resolve things without a long protracted battle.
At the end of the day all that you may take away from it is a lesson learned. Fortunately you’re in good company with a lot of fellow freelancers who’ve learned a similar lesson. And as one, the best advice I can give is to take action, then do everything in your power to let it go and move on. Don’t let the crooks of the world eat away at you.
Cheers
Chloe Online
February 20th, 2008
This is crazy. Did you have the client sign a contract? Would that make a difference as far as payment is concerned? I know freelancers who will not do anything without a contract outlining terms of payment and what constitutes a “finished” product. Does anyone have experiences where this offsets the drama and fiasco of PayPal debt?
- Chloe
sagar trapasia
February 20th, 2008
You mean to say that if someone pays through credit or debit card in paypal,he has the right to withdraw the payment he has done(i mean get back the money even after money paid or sent)?
Katherine
February 20th, 2008
Wow. Every now and then I find a client that is difficult to deal with. I appreciate the warning about paypal - at least this situation can save me from one possible scenario!
Kayla Altepeter
February 20th, 2008
Thanks for this post! I never would have thought risk with paypal. I am in the U.S., I’m not sure about foreign copyright laws but I believe he has committed copyright infringement by using work in which the rights have not been transfered(i.e. payment made to owner). Granted copyright issues are expensive and sometimes not worth dealing with, you could try a cease and desist letter that says you own the work until paid for. Does anything your client signed mention that you own rights until payment is made?
Also, I always thought credit card companies only remove payment if they can’t contact the person and verify the issues. I had issues with a California computer company I ordered parts from, no one would answer the phone, never received my parts I paid for, the card company retracted the payment. They only did this after they verified the company did not answer their business phone.
John Winningham
February 20th, 2008
I have used PayPal for years, but mostly only with established clients. I try to use it only on smaller payments, to both avoid the PayPal fees, and to protect myself from chargebacks. So far, in 5 years, I have only had one reversal, and it was a small amount that I could tolerate losing. PayPal is a great way to manage payments for me, as I live about 25 miles from my post office box, so getting checks sometimes costs more than the PayPal fees (with gas at $3 a gallon). Overall, I think the benefits outweigh the cons, as long as you take precautions to protect yourself.
Chesme
February 20th, 2008
I wanted to jump in to give everyone a few warnings… there is NO safe way to get paid, except for cash (even that could be fraudulent, just less likely) and possibly wire transfers. I work in the Bookkeeping department at a US bank (until I can break into the freelance world) and I’ve seen many different problems. It’s not a pretty world out there and, sad to say, you aren’t guaranteed anything with any option you choose. Some of this might be obvious, yet people still fall victim to these pitfalls everyday.
Checks, of course, are easily written without funds to back them up or completely fraudulent (even if they look like “official” checks/money orders). There is one possible way to try to protect yourself with checks though: you can try to verify funds by calling whatever bank that check is written off of before you go to cash/deposit it. Not all banks will verify funds, so you can’t completely rely on it. Also, even if funds are available when you call, that does not guarantee that they will be by the time the check hits that person’s account. If it’s supposed to be an official check, such as a money order or cashier’s check, ask if the bank/company that issued it will at least validate that it is not fraudulent. The US Postal Service has a 1-800 number to call and verify postal money orders. A lot of the large US banks have similar recourses. The number one thing to remember is: DO NOT call your bank (as in the bank where you want to deposit the money). Unless it is a check written off of an account at the same bank, they cannot help you verify funds for the check as they cannot see other banks’ information. Please, do not call and ask “has X check that I deposited cleared yet” because they know only as much as you do. It might be surprising to find out how many times I have to explain this to people on a daily basis. Once you deposit a check into your account, it DOES NOT guarantee funds, even though that money has been added to your balance. That check must be sent through the Federal Reserve (in the US) from one bank to another. This process takes time, of course, and no one can tell you exactly how long. It will take longer for a nonlocal check to clear and believe it or not, checks get misrouted all the time, which means an even longer process time. There is no alert sent when a check clears another bank, only when it doesn’t. You might get an advanced warning if it is a large dollar item (Say, in the thousands, but what constitutes as “large dollar” varies from bank to bank), yet Large Dollar Notifications are not mandatory. If the check you need to deposit is large enough to have a local branch in your area, I HIGHLY recommend taking it there and cashing it directly. This is the best way to secure your payment, though not very likely for anyone that is doing long distance work.
As was noted in this article, credit card (and debit card) transactions are not guaranteed, even long after it the charge has been processed. Chargebacks through these means are easy to initiate and do seem to side with the cardholder first. With the increasing “not reliable for any fraudulent charges” line that most large card issuers give, all a customer would have to do is report a charge as unauthorized to initiate a claim and win. It’s disturbing, but very easy to get away with. In situations like that, you just have to present your documentation and hope for the best. Sadly, your account might be debited in advance while any investigation is under way. Claims through credit cards can take almost two months and you probably won’t hear anything about it after the first communication/chargeback.
There is another option that a lot of the money exchanging sites use. It’s called ACH (Auto Clearing House), commonly referred to as EFT (Electronic File Transfer) or echeck. These are not wire transfers. ACHs can take a few days before they show up from one account to another, where as wires can show up in less than 24 hours (depending upon when it was sent). Honestly, ACH is just a fancier way of doing checks electronically. Just like depositing a check, whoever initiates the ACH charge (be it a bank or a money exchange site such as Paypal) does not know if the account they are debiting has enough funds available, which allows the customer to pay without actually having the money. The only real difference an ACH has over a regular check is that it takes a few days less to process since it is all done electronically. Even if time has elapsed and you haven’t seen a chargeback, you are not completely in the clear. In the US, anyone can go to their bank and file that an ACH was unauthorized or even revoke their authorization within 60 days after it has been processed. It just takes a simple form to file and that money is debited from where it was sent. If your customer doesn’t like how something turned out, they just go to the bank, fill out an affidavit revoking their authorization for the ACH and it’s done. There is no contesting this with either bank; the money is simply taken away and that is that. If you used a money exchange site, your argument is with that company and the customer (but the site will probably tell you to work it out with the customer). If the customer was so bold to give you his/her bank information to do a direct ACH, your argument is with him/her. It is now up to you to do collections or take them to court.
I know this is information that isn’t well received, but it’s the truth. There is no 100% guarantee in exchanging money. Add doing business overseas, and it complicates things even more. Of course, not everyone will go the route that the customer did in this article. I just hope people realize that you are putting your faith in the customer to fair and honest…. but as well all know, not everyone is honest.
Robin Noelle
February 20th, 2008
@Cara:
You have legal recourse in the United States. First, TAKE SCREENSHOTS. Second, file a complaint against his business through http://www.bbb.org
the other ideas above were great:
Contact the ISP and have them remove the site for violation of copyright law.
Contact his credit card company an provide them with proof against his claim.
Contact a collection agency and initiate a claim.
Contact the FBI and inform them of International Credit Card fraud
Or … email him with that outline and let him know those are the steps you plan on taking to recoup your money and property. More often than not, the client will pay up rather than risk legal complications.
best of luck, please update us on what happens!
mindtwitch
February 20th, 2008
I’ve had the same thing happen. I’m looking into other options. I got paid by the client a week after I saw the reversal, tried making contact with the client to see what was going on and then contacted PayPal and was given the same speech that I wasn’t protected. In the end my client was short in their bank account and wanted to pay via Credit Card instead of a check. This opened my eyes to how simple it would be for a client to pay you for a project, receive all files etc. and then reverse to get their money back. PayPal makes no attempts to contact you, doesn’t care about your side of the story and neither does you client’s Bank/Credit Card Company.
I understand that PayPal has the policy to protect buyers from fraudulent sellers but in protecting sellers they have left a huge hole in which service providers are being duped.
Cara: Sorry if this has already been asked. I haven’t made my way through all the comments. Seems this is a hot topic and thanks for sharing with all of us. My question is, do you have any other course of action in terms of copyright violation? Did you protect yourself in this manner in the contract? Since payment hasn’t been made, transfer of rights and/or ownership hasn’t been completed. If the client is using your work without permission then they are essentially violating copyright? I guess with this being international you have to weigh the cost/benefit of pursuing or just chalking this up to a lesson learned.
Best of luck and thanks again!
-mt
Luke Smith
February 20th, 2008
Excellent article. Freelancers are dependent upon the integrity and protection offered by 3rd party merchant services like Paypal, and clearly we can see that while their service offers a convenient method of accepting payment from anyone - even non-Paypal users - it leaves the seller completely unprotected against a chargeback. I’ve been fortunate enough to work with scrupulous clients recently through Paypal, but after reading this article I will peruse my transactions in greater detail to see if I can identify any such clients.
Digitalbrian
February 20th, 2008
May I suggest http://propay.com/ it cost a little but it is much more secure and business minded.
sean steezy
February 20th, 2008
wow. that sucks. I know how you feel and I’m sorry it had to go down like that. I know some contract law, being that I was first sued at the age of 19, and have since been to court many times. There is no such thing as an open and shut case for starters. And also, life isn’t fair. The law doesn’t always operate as it should and I have been told by many lawyers “Can’t help you” even if I was fully willing to hire them out of pocket. insane. I got the shaft quite often even when it seemed I had definitive proof.
Many of these people have great ideas. I had to recourse to just bad mouthing/slander (reporting at bbb, yellowbook, anything online and even started a website to just defame those who had wronged me) b/c I had no other legal recourse (It was in a town where the lawyers all worked for the person I wanted to sue sometimes were related).
Your case is indeed very complex, but the solution in either legal system is to make both parties “whole”. This is either you getting the money, or getting your work back. There is so much commenting on this already I’m sure what I say will have already been said. But I would try to destroy their servers…bad devil.
Constantin Potorac
February 20th, 2008
After I read this post I remembered about one client of mine that after I did the job for him (a web page) he said he doesn’t like it at all and needs me to make another design. The next day I was working on the second design, he emailed me and asked me for the PSD for the first design he did not liked and for the PSD of the second design.
Off course I asked him why does he need it if he doesn’t like it and he said that it belongs to him as he paid for it. The problem solved in the end, he did not send the money and I did not send the design.
Clients like this can make freelancers to change their way of behaving with the rest of the clients and to be more careful.
Bryan A. McCarty
February 21st, 2008
Great post. What software programs do you guys all use for billing? I’ve heard some good things about Billings. Anyone suggest any billing software to avoid problems like this?