over the years paypal has handled thousands of transactions for us. we have won every single case in the resolution center (whenever we were given the option to say something). yet few times every year shameless customers are there that pay, use our services and then call the credit company or bank and reverse the payment and the money are taken from our paypal account without giving us even a chance to defend our own money. we called paypal on the phone and they said that such things happen because they are obliged to return the money with no questions asked by international financial regulations that they have to comply with. I quite doubt the story of these regulations as this is an obvious encouragement for financial fraud. But whatever, we are too small to argue anyway with paypal. Is there anything practical to do to avoid such fraud as we are not eligible for the seller protection (no tangible goods involved).
Visa and Mastercard regulations trump Paypal in every situation. Since the card issuing bank has final say, even over paypal, if a customer bypasses Paypal's dispute system and goes directly to their bank to make a chargeback, you have no recourse. Unfortunately it is completely legal, and is essentially the fundamental of the card issuers. Whenever the chargeback is ruled in favor of the customer (which the card issuer decides), the money is automatically withdrawn from Paypal's bank account and returned to the customer. There's nothing Paypal can do once the issuer has decided that the chargeback was legitimate and the customer should get their money back. The only option is to not accept credit card funded Paypal payments. If you have a real merchant account, you can fight chargebacks yourself. Since paypal is a 3rd party processor, the chargeback is against Paypal and not you, and they obviously aren't handling them in a good way for their sellers.