This is more of an ebay issue than paypal, but I will share it anyways. I sold two high ticket items (over $600). Both arrived damaged, to two separate addresses. On one case, the buyer agreed to a replacement, the other, the buyer did not even indicate if the item was working, did not agree to troubleshooting, and did not agree to provide pictures of damage. Funds frozen on both cases, resulting in a negative balance since some funds were already disposed of. First item, customer filed a complaint, got a full refund from Ebay even though he agreed to a replacement, so now he has both the money and the items.
Second buyer also filed a claim, stating my item was insured, when I informed them that there was a denial on the damage claim (so no insurance money). Ebay refunded him as well, but since there was no funds left, I am stuck with no merchandise, and a negative paypal account. My main issue is that Ebay does not even contact a seller to get their “take” on a claim anymore e, and furthermore, their practice of allowing buyers to keep the merchandise even after a “money back guarantee” is just aiding fraud and fueling the corruption.
They should have no right to issue a refund, certainly not without getting all the facts, especially from a seller, and they should not ever release funds until such “damaged” merchandise is returned to the seller. I can only take comfort now that I had the foresight to close my linked bank account before they were able to extract any more money from me. They will not see another penny from me, nor will I ever do business with them again.
Source: http://www.paypalwarning.com/frozen-funds-scamming-buyers/