Question: How do I prevent getting ripped-off by subscribing members using PayPal ?
Answer: I can’t – and neither can you

The Problem:
Over at GrownUpGeek.com we have a private forum area for premium subscribers. For $5.99 and then $1.99/mo after the first month, subscribers get access to all the latest Myspace codes, they can make posts with relaxed rules, they get an email account, a blog, and a few other things – but most people pay so they can access the codes. Every time we publish a new code that allows someone to view hidden or private info on a Myspace page or Photobucket page, we send out a newsletter notification and get a huge flood in new premium subscribers. Then.. 2 hours later, we get several cancellations, and one month later when everyone gets their credit-card bills, the PayPal disputes and credit-card chargebacks begin.

Many of these chargebacks and disputes are just misunderstandings. Members don’t recall signing up or are somehow confused. After submitting information to PayPal such as the member ID, signup date, etc, I usually prevail. But several of these disputes fall into the following categories:

• Under aged kids so desperate to find out the goods on their ex-boyfriend they use their parent’s credit card without permission
• Some are using stolen credit cards.
• Some sign up with their credit card, access the premium forum area, find what they’re looking for then when their credit-card bill comes they claim they don’t know what the charge is for and dispute it.

Losing a credit card charge-back or PayPal Dispute:
The worst part about losing a dispute is that not only do they take back all my money, but if it was a credit card transaction, PayPal charges ME and additional $10. Even though only a tiny fraction of our thousands of subscribers pull this shit every month, it still ads up to a significant amount of lost revenue.

Last week I called PayPal’s dispute department and asked for some help or tips and specific steps i could take to prevent being ripped off this way – and here is PayPal’s official answer that I’m sharing with all of you:

“We’re sorry, but PayPal offers no protection of any kind for merchants selling ‘virtual’ products such as premium-content subscriptions.”

So what does this mean in layman’s terms?
It means that if you sell any virtual product such as an eBook, services like website setup, or premium access to forums, anybody can dispute their credit card or PayPal charge AND YOU WILL LOOSE. Off-the-record my dispute specialist told me that most credit card companies will not allow a customer to do this sort of thing more than once, but that does not help me – or you, very much.

If you have any tips on how to prevent this kind of PayPal ripoff, please post a comment.