I was discussing earlier with someone about the possibility that this was a credit card payment and the submitter did not have a PayPal account. I thought the transaction appeared to me a normal one, but it seems that it was a credit card payment. PayPal needs to process the refund as it's not an option availble to us. I find it odd that we're unable to initiate the refund. You need to send an email authorizing the refund to resolution at paypal.com and include the following info with your refund request: Transaction ID Transaction Date Transaction Type Transaction Status Transaction Amount Surprisingly, PayPal was pretty quick to repond to our inquiry.
They do get back to you Creed, been in touch with them for a few hooky transactions myself. Reason why they can't reverse is likely down to the credit card/bank debit card on account has expired and not been verified. Was the buyer marked as verified, if so paypal are legally obligated to provide you with details. For what its worth, if you've tried to refund and can prove you have then the balls in the other persons court, its up to them to claim the money, if they don't you can keep it without worry.
Maybe the submiter lives in a send-only country, so he cannot receive any kind of money including refund. But I don't know how paypal acts in these cases.
Cracking point there, doh, we don't see the obvious. If they paid without having an account and perhaps the card expired then paypal can't do squat. Great answer Riks.