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Payment Reversed By Paypal – What Should You Do?

When I opened my mailbox, I was in for a shock. Barely 2 days ago, I had received a payment of $120 from my client. And now this stupid mail from PayPal said that the payment had been reversed. From the wording of the mail PayPal sent, it was quite clear that the problem pertained only to India. When I did a bit of web search, I found that many other bloggers and freelancers from India faced the same problem.

What should I do?

When I first read the mail from PayPal, I panicked for a while but soon realized that the mail itself contained the solution. So, if you happen to receive such reversal mail from PayPal, my very first suggestion would be – Don’t panic. Go through the complete mail to understand how the payment can be resent to you.

Now that you have understood the process yourself, send a mail to your client asking him/her to resend the payment following the process set out in the PayPal mail. Support your mail by annexing the content of the PayPal reversal mail. Draft your mail in a professional and courteous manner. Here’s what I wrote to my client in an offline instant message:

Paypal has reversed the payment you made. (I searched for “paypal stops india payment” on the net and could see that others are also facing the same problem).

I received the below mail from paypal. Can you make the payment again as per the below mail please? Sorry for the inconvenience.

Here’s the mail I received from PayPal:

“Your payment of 120 has been sent back to the sender of the payment.

We reversed this payment because we have stopped allowing personal payments to be sent to or from India.

If this was a payment for a purchase of goods or services, and not a personal payment, then you may contact the buyer and have him or her resend the payment as follows: (a) click the Send Money tab, (b) select “Goods,” and (c) provide a shipping address.

If this payment was a personal payment such as a gift, then we have requested that the sender find another payment method until we restore personal payments to and from India.

We are trying to resolve this issue as quickly as possible and we’re sorry for any inconvenience.

Thank you,


The client resent the payment within half-an-hour. Here is the screenshot:

transaction reversed by paypal

Who is affected by this?

Anybody sending payment to India or receiving payment in India is affected by this change in PayPal policy. This is irrespective of the amount of the payment. A payment as small as $5 is also covered by this. As can be seen from the above screenshot, payment of $5 I sent to my Indian vendor was also reversed; I had to resend it selecting the ‘goods’ button instead of ‘services/Other’. Thus, if you are an Indian, sending payment to another Indian, even then you need to follow the new procedure.

Does PayPal send any message to the sender?

This is a bit confusing. The PayPal mail sent to the vendor says:

“If this payment was a personal payment such as a gift, then we have requested that the sender find another payment method until we restore personal payments to and from India.”

However, there seems to be no option for personal payment. There are just 3 types of payment options you can select from:

  • Goods
  • eBay Items
  • Services/Other

Thus, the answer would be: No, PayPal does not send any message to the sender. Though the payment goes back to the sender, he will come to know of it only if he goes through his transactions by logging in to his PayPal account.

When the payment sent to my vendor was reversed, I didn’t get any mail from PayPal. It is only after getting mail from my vendor that I logged in to my PayPal account to see that the payment had, in fact, been reversed.

So, if the payment you received gets reversed, don’t presume that your client knows it. If you don’t send a mail, it’s most likely to go unnoticed.

What prompted PayPal?

It’s not just that we bloggers and freelancers are affected by this sudden change in PayPal policy. PayPal itself is losing its revenue from the reversed payment. So what made PayPal take such a nasty step without any prior notice? Is it under RBI scanner? Had it thus far been violating the Foreign Exchange Management ACT? Is this policy change temporary till it sorts out the issue? Or is it planning to wind up its operations in India? What do you say? Do share your thoughts with us.

Leave a Comment

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{ 7 comments… read them below or add one }

David March 16, 2010

I received $50 from reviewstream and i don’t think they are going to resend the payment.Anyways thanks for the tip.I’ll try and get back to you.


Ethan Steiner May 10, 2010

Remember hearing a few months ago about paypal doing this, but then never heard anything more. Does anyone know if paypal ever explained why it made this very disruptive policy change?


Richard Karn December 24, 2011

A customer purchased an investment report from us on Dec 12,2011. PayPal approved the transaction. Receiving PayPal’s transaction approval, our website released the report to the customer. Three days later we received notification that the transaction was being reviewed by PayPal. We contacted the client and determined that he had not requested a refund, filed a complaint, or been in any way dissatisfied with out report. I relayed this information to PayPal. Eleven days later, on Dec 23, 2011, PayPal refunded the client’s money.

This amounts to PayPal distributing our copyrighted intellectual property to my client free of charge. After 1 hour and 15 minutes on the telephone with a variety of customer service representatives, the first two of whom lied to me and stated the reversal had been requested by our client, which was patently untrue, I eventually had a long conversation with a customer service manager named Gavin, who proceeded to tell me that it was all my fault because we did MAIL our reports to our clients so PayPal would have a tracking number to verify delivery. I offered proof of delivery both through our website and from the client’s admission. PayPal was not interested: their proprietary technology saw reason to refund the client his money; they would not tell me based this determination was based on–so their intellectual property is inviolate but they are fine with distributing ours.

I find this appalling and a horrible reflection on the business practices of PayPal. What right does PayPal have to inject themselves into a transaction that was successfully concluded to the satisfaction of both the buyer and the seller and essentially give our work away free of charge?

I would welcome comments and/or suggestions regarding what we should do in this case.

Richard Karn


Nathan February 25, 2012

Hey Richard, today i was put into a situation with PayPal almost identical to yours. I was wondering what was the outcome of your issue and/or any further steps you took?



romeo December 1, 2012

Thank you Richard. Even I was facing the same problem. Paypal reversed my payment. Then I communicated with the client. Thank god he made the payment again. But what if he refused to do so. Then will I loose my money?
Also In India if you receive a payment it goes to your bank within 7 days. How can I refund the money if in case of emergency after 7 days to the client?


Aiplabro July 18, 2014

Yes nice point on online transaction……its happen with anybody….
Thanks for sharing this…


Pawan November 19, 2014

i would to say that how i will solve my payment problem through pay pal…please update some correct information


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