---
title: "PayPal chargeback process for marketplaces"
description: "Learn about the PayPal chargeback process for marketplaces, and the guidelines to defend a chargeback."
url: "https://docs.adyen.com/risk-management/chargeback-guidelines/paypal-chargebacks"
source_url: "https://docs.adyen.com/risk-management/chargeback-guidelines/paypal-chargebacks.md"
canonical: "https://docs.adyen.com/risk-management/chargeback-guidelines/paypal-chargebacks"
last_modified: "2026-06-01T15:33:16+02:00"
language: "en"
---

# PayPal chargeback process for marketplaces

Learn about the PayPal chargeback process for marketplaces, and the guidelines to defend a chargeback.

[View source](/risk-management/chargeback-guidelines/paypal-chargebacks.md)

When a shopper (a buyer on your marketplace) doesn't agree with a PayPal payment, they can raise a dispute either:

* Through their bank or card issuer.
* Directly with the seller on your marketplace or in the PayPal Resolution Center.

When PayPal informs Adyen that a payment is disputed, we do not know to which seller on your marketplace this payment belongs. All we can do is inform you of the dispute, and let you review and defend the dispute on behalf of your seller. You can do this using the Adyen [Disputes API](/risk-management/disputes-api) or your [Customer Area](https://ca-test.adyen.com/).

As a marketplace, you have to implement your own business logic to manage disputes on behalf of your sellers.

You have a limited number of days to respond to a dispute before it is lost in the shopper's favor. You can see the number of days remaining on the dispute details page.

## How PayPal disputes work

When a shopper disputes a PayPal payment, the dispute can start either in the inquiry stage or the claim stage, depending on the reason code.\
When PayPal notifies us that a payment is disputed, we open a dispute corresponding to the PayPal dispute lifecycle stage. The dispute starts either with a Request for Information (RFI) in case of an inquiry stage dispute, or with a Notification of Chargeback (NoC) in case of a claim stage dispute.

### Inquiry stage - Request for Information

If the dispute reason code is `MERCHANDISE_OR_SERVICE_NOT_RECEIVED` or `MERCHANDISE_OR_SERVICE_NOT_AS_DESCRIBED`, the dispute can start as an inquiry. Adyen will send you a Request for Information.\
During this stage, the seller and the shopper can exchange messages and try to resolve the dispute without involving PayPal. The seller can accept the dispute and refund the shopper, or offer a partial refund.

If you receive an RFI, you can:

* Fully refund the payment. This creates a refund on Adyen's side.

* Fully accept the dispute. This creates a chargeback on Adyen's side.

* Make an offer to the shopper to partially accept the dispute. If the shopper accepts the offer and PayPal approves it, this creates a chargeback for the partial amount.

* Wait until the dispute expires and moves to the claim stage, so you can try to defend it. You cannot defend a PayPal dispute until it enters the claim stage.

* You have 20 days to respond to an RFI before the dispute escalates to the claim stage. It is also possible that the dispute moves to the claim stage because the shopper escalated the dispute to PayPal.

### Claim stage - Notification of Chargeback

If the seller and the shopper cannot reach a resolution within 20 days, either of them can escalate the dispute to PayPal. At this point, the dispute enters the claim stage. Adyen will send you a Notification of Chargeback.\
If you receive an NoC, you can either accept the dispute (chargeback), or defend the dispute by uploading the relevant defense documents. When you receive an NoC, you have 10 days to respond before the dispute escalates to a chargeback.

## Overview of the PayPal chargeback flow

The PayPal chargeback flow for marketplaces is as follows:

### RFI/Inquiry stage:

1. [Request for Information](#request-for-information)
2. Dispute Defense Period Ended

### NoC/Claim stage:

3. [Notification of Chargeback](#notification-of-chargeback)
4. [Information Supplied](#information-supplied)
5. Prearbitration Won or Prearbitration Lost
6. [Chargeback](#chargeback)

![PayPal chargeback flow diagram](/user/pages/docs/10.risk-management/21.chargeback-guidelines/paypal-chargebacks/paypal-flow-updated.svg?decoding=auto\&fetchpriority=auto)

## Request for Information

If the dispute is in the inquiry stage, we send you a [REQUEST\_FOR\_INFORMATION](/risk-management/disputes-api/dispute-notifications#request_for_information) webhook.\
You can also find the PayPal dispute notifications in your Customer Area under **Revenue & risk** > **Disputes** > **Requests for Information**.\
The dispute process starts, and we will report on the number of days you have left to respond before the dispute escalates and you receive a NoC.\
We recommend that you inform your seller that a dispute has been created and that they need to prepare their defense documents.

Do the following:

1. Review the reason code of the dispute. For a PayPal dispute to begin as an inquiry/RFI, the only possible dispute reason codes are as follows:

   | Dispute reason code                          | Description                                                                |
   | -------------------------------------------- | -------------------------------------------------------------------------- |
   | MERCHANDISE\_OR\_SERVICE\_NOT\_RECEIVED      | The customer did not receive the merchandise or service.                   |
   | MERCHANDISE\_OR\_SERVICE\_NOT\_AS\_DESCRIBED | The customer reports that the merchandise or service was not as described. |

2. Decide what to do. At this stage, you can:

   * Ask the seller to exchange messages with the shopper in the PayPal portal.
   * Accept the dispute in your [Customer Area](https://ca-test.adyen.com/) or with a call to the [`/acceptDispute` ](/risk-management/disputes-api#accept-dispute)endpoint of our Disputes API. The case will then be closed for defense.
   * Make an offer to partially accept the dispute. You can make an offer in your [Customer Area](https://ca-test.adyen.com/) or with a call to the [`/acceptDispute` ](/risk-management/disputes-api#accept-dispute)endpoint of our Disputes API. The offer is reviewed by PayPal, and if it is approved, it results in a partial chargeback and a resolved dispute.

## Notification of Chargeback

When PayPal initiates a Notification of Chargeback, the chargeback process begins. The Notification of Chargeback (NoC) journal is booked, and we send you a [NOTIFICATION\_OF\_CHARGEBACK](/risk-management/disputes-api/dispute-notifications#notification_of_chargeback) webhook.\
You can:

* Accept the chargeback in your [Customer Area](https://ca-test.adyen.com/) or using the [Disputes API](/risk-management/disputes-api). The dispute is lost and you can no longer defend it. The **DisputeDefensePeriodEnded** journal is booked, and a chargeback is opened.
* [Defend the dispute](#defend-a-dispute) by uploading evidence.

### Defend a dispute

If you do not agree with the dispute, you can try to defend it. You cannot submit defense documents until you receive a NoC. Once you receive an NoC, you have only one attempt to submit all the necessary information. After that, it is no longer possible to make any changes to the documents. To defend the dispute:

1. Review the reason code of the dispute. The following table shows the possible reason codes for PayPal disputes:

   | Dispute reason code                          | Description                                                                                                                                          |
   | -------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------- |
   | MERCHANDISE\_OR\_SERVICE\_NOT\_RECEIVED      | The customer did not receive the merchandise or service.                                                                                             |
   | MERCHANDISE\_OR\_SERVICE\_NOT\_AS\_DESCRIBED | The customer reports that the merchandise or service was not as described.                                                                           |
   | UNAUTHORISED                                 | The customer did not authorize the purchase of the merchandise or service.The customer did not authorize the purchase of the merchandise or service. |
   | CREDIT\_NOT\_PROCESSED                       | The customer did not authorize the purchase of the merchandise or service.                                                                           |
   | DUPLICATE\_TRANSACTION                       | The transaction was a duplicate.                                                                                                                     |
   | INCORRECT\_AMOUNT                            | The customer was charged an incorrect amount.                                                                                                        |
   | PAYMENT\_BY\_OTHER\_MEANS                    | The customer paid for the transaction through other means.                                                                                           |
   | CANCELED\_RECURRING\_BILLING                 | The customer was incorrectly charged because the shopper canceled recurring billing.                                                                 |
   | UNKNOWN                                      | Other reason.                                                                                                                                        |

2. Prepare your defense documents. See [Defense Requirements](/risk-management/understanding-disputes/dispute-reason-codes#defense_requirements) for file formats and document types.\
   When using the Disputes API to respond to an RFI, you need to provide the **Defense reason code**.

   | Defense reason code              | Document type                                                                                                                               |
   | -------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- |
   | ProofOfFulfillment               | PayPal commonly requests shipping details, tracking numbers, delivery confirmations, or any other evidence of successful order fulfillment. |
   | MerchandiseNotAsDescribedReason  | A description of the item, an item URL, your return policy, or a copy of a contract or an affidavit.                                        |
   | UnauthorisedReason               | A proof of delivery signature or a proof of receipt copy.                                                                                   |
   | ProofOfRefund                    | Refund ID(s).                                                                                                                               |
   | IncorrectAmountReason            | A document that explains the price difference.                                                                                              |
   | ProofOfRefundForAmountDifference | The refund ID, for the difference in amount.                                                                                                |
   | CreditNotProcessedReason         | A document explaining why the credit is due.                                                                                                |
   | CancelledRecurringBillingReason  | A subscription agreement.                                                                                                                   |
   | OtherReason                      | Refer to the information in the RFI to determine the relevant defense documentation.                                                        |

3. Submit your defense documents using our [Disputes API](/risk-management/disputes-api) or your [Customer Area](/risk-management/manage-disputes#defending-disputes). Be sure to address the dispute reason and provide information that supports your position. An overview of the order details is not enough.

## Information supplied

Adyen received your defense documents and forwarded them to PayPal. It is not possible to change these documents.

Based on the information you provided, PayPal assesses the dispute and makes a decision:

* If PayPal accepts your defense, the **PreArbitrationWon** journal is booked and you receive a [PREARBITRATION\_WON](/risk-management/disputes-api/dispute-notifications#prearbitration_won) webhook.
* If PayPal rejects your defense, you receive a [chargeback](#chargeback).

## Chargeback

If PayPal doesn't accept your defense, they initiate a chargeback. The **Chargeback** journal is booked, you receive a [CHARGEBACK](/risk-management/disputes-api/dispute-notifications#chargeback) webhook, and your account is debited.\
You cannot defend this chargeback. This is the final status, and the dispute is lost.

## Dispute fees

Fees related to a PayPal dispute or chargeback are booked using the **PaymentCost** journal type. This journal type is included in the [Settlement details report](/reporting/settlement-reconciliation/transaction-level/settlement-details-report#journal-types) and the merchant payout details sheet in the [Monthly and Daily finance reports](/reporting/closing-your-fiscal-period/monthly-and-daily-finance-report#merchant-payout-details-sheet).

* Dispute fees: there is a dispute administration fee for each dispute, and an additional fee for lost disputes. A dispute fee will not be present if the dispute was covered by "**Seller Protection**".
* Hold: PayPal can place a hold on your funds to cover the cost of an upcoming chargeback. This does not happen very often. Verify with your PayPal representative or Adyen contact if a hold applies to your account.
