How PayPal and Apple’s Fraud Policies Punish the Honest User

In mid-November last year, I woke up to the sound of my inbox suddenly being flooded with new messages. I have things set to alert me whenever PayPal, Wells Fargo, or iTunes emails me because I know that means that money is either being given to me or taken away. To my surprise, what I discovered that morning was incredibly concerning, and would result in what could be the most frustrating customer experience of my life.

I’m going to state here that this situation is very personal, and my experiences may not reflect the interaction millions of customers of both PayPal and Apple enjoy with these two companies. Unfortunately, this is a story of how the policies of these two companies may result in a downward spiral that can turn a loyal customer into an unsatisfied one.

Day 1: The Fraud

That flood of email I received came from two parties. iTunes was letting me know that purchases had been made inside of an app called iMobster. PayPal, on the other hand, was confirming these purchases and making me aware that it was drawing the funds out of my secondary payment method as I had recently depleted my PayPal account in a withdrawal.

These purchases kept coming in, one after another, until the total added up to roughly $470.00. Each transaction was handled separately, causing PayPal to withdraw funds 11 separate times. By the time I had changed my password in iTunes, I was out a small fortune.

Roughly half of these transactions were covered by PayPal, and the other half covered by my bank. This means that I had a case of fraud extending form iTunes to two separate financial institutions, one being my primary bank account.

I tried to reach iTunes customer service only to discover that iTunes has no over-the-phone customer service. In order to receive support from iTunes, you have to file a request online and wait for a response. As far as I was concerned, someone had hacked my iTunes account, and I needed help right away. I asked my wife to try to find some number for Apple to report fraud, intending to come back to this after calling my financial institutions in hopes of stopping the stream of money before it left me completely broke.

I then called PayPal and told it to stop sending money to iTunes, reporting the incident as fraud. The PayPal representative I spoke to was very courteous and helpful, though he couldn’t confirm whether or not I would experience the dreaded PayPal account freeze as a result. After all, all of my income comes to me via PayPal. A claim was made, and I moved on to my next financial institution, Wells Fargo.

Calling Wells Fargo to report fraud is easy. It has a line set up and I reached someone right away. I told the representative there that I had reported the claim through PayPal, but wanted it noted that the charges made on my account that day were fraudulent in nature. The representative appeared to understand, and helped me make record of the incident.

Then, I managed to get ahold of someone at Apple through its Mac support line. As the owner of a MacBook Pro, iMac, two iPads, three iPhones, two iPod touches, and an iPod Classic, I assumed that I was in the right place. Thankfully, the representative there was able to help me file a claim. I informed the representative that I had filed a claim with both financial institutions, indicating that one had flooded over into another. This may have been my mistake, as I later found out.

Three Days Later

Three days later, my money was returned by PayPal and I received a message that the claims I had submitted were handled. No freeze was put on my account, and everything looked pretty good. Granted, PayPal only refunded the amount that was originally on my PayPal account, stating my financial institution had to file claim for the money it took from Wells Fargo. This is understandable, so I thought nothing of it.

Wells Fargo returned my money that day, too. Everything looked handled and I never experienced a moment of downtime between the initial fraudulent purchases and my refund.

Three Months Later

Three months later, in February, I received a series of email messages from PayPal stating that my account is “limited” until I change my password, confirm my credit card (having removed my primary account from PayPal and replaced it with a MasterCard), and receive a phone call from PayPal. I followed all of these steps, and the account was unfrozen after two days. It wasn’t that dramatic an issue, and I understood the reasoning behind it.

Surprisingly, it took that long for Wells Fargo to file its fraud claim with PayPal. I suppose that’s the bank’s policy, but it seemed like an awfully long time to wait and reach out to another party regarding possible fraud.

I was further shocked to discover that my Apple ID was disabled. This meant I couldn’t update already-purchased apps from the Apple and iTunes App Stores, register OS X Lion or any new equipment purchases, or anything else that required me to log in to my Apple ID. When you test and write about software for a living, this can be a very concerning occurrence.

I spent over an hour on the phone with Mac support (remember, iTunes doesn’t have a customer support line) to have my account re enabled. This call was followed by an apology from the supervisor I was on the line with, stating iTunes recognized the issue was four months old, and everything was fine now. Awesome, I thought.

Wells Fargo sent me a letter that day stating all claims were resolved, and the refund I had received 90 days prior could now be considered permanent. I thought everything was over with. Boy, was I wrong.

One Week Later: The Second Account Freezing

Seven days later, my account was frozen again by PayPal. This freezing was due to the same batch of claims resulting from the same fraud I had reported almost four months ago. I went through the reactivation steps again with PayPal, and everything was put right again within the hour.

My Apple ID was also frozen (again), and this time I received some startling news from the supervisor at Mac support via the chat she had with iTunes support (which was apparently being very pushy with her for having bothered them).

She told me that if I reactivate my account now, and iTunes freezes it again, I’ll never regain access under any circumstances. That means that by using my Apple ID, I could risk losing access to my software purchases, licenses, and OS X Lion. Yes, I could lose everything I had spent my hard earned money on, having to start over from scratch with the hardware I still had in-hand. I’d have to buy Mac OS X Lion again, Final Cut Pro, Compressor, hundreds of dollars in iOS apps, and hundreds more in Mac software.

To say the least, I’m discouraged. The situation I currently find myself in is rather strange. Not only do I have to wait for a mandatory 30 days for PayPal to respond to Wells Fargo (its policy, apparently), but I risk losing all of my software during that time. I opted to have it hold off on reactivating my Apple ID, leaving me (and my wife) without the ability to update our software, register new devices, or enjoy any of the benefits of iCloud.

Final Thoughts

I understand PayPal and Apple having the policies they have, though this experience has left me with a bad taste in my mouth for both companies. Their policies don’t allow for legitimate claims to be filed without risking access to items and services purchased by loyal customers. The problem with iTunes account hacks is that they are too common. My sister-in-law, and several members of the LockerGnome team, have had the same happen to them. Yet, this policy punishes honest users that fall victim to a security flaw that shouldn’t exist.

Yes, I’m a victim. Someone, somewhere, stole $470 from me. By filing a claim, which I’m legally entitled to do, I risk losing thousands more in software that I legally purchased. My livelihood depends on being able to use and review software, and that livelihood is at risk right now unless I volunteer to sit out for what could be well over a month while PayPal, Apple, and Wells Fargo agree that what happened was wrong and needs to be fixed.

This is my story; what is yours? Have PayPal and/or Apple’s policies regarding fraud ever had an impact on you in a negative way? I’ll do my best to keep you updated as to what happens when the matter finally resolves. For now, I can only hope that I don’t need to update my software.

UPDATE: February 29, 2012

After this article was published, I received a call from Apple. The representative that called stated that this post had brought the situation to the company’s attention, and that the repeated disabling was an automatic result of PayPal having submitted the reports multiple times.

She went on to clarify that in the event that the policy regarding three account deactivations and permanent loss of purchases is intended to combat abusers of the chargeback system and that if anyone does get denied access to their account for filing legitimate claims, they are able to protest the ban via iTunes support. There was an acknowledgement of the fact that iTunes has no phone service, and while the online submission system may appear cold and automated, there are hundreds of support reps reading each and every message as it comes in.

At this point, I’m still awaiting PayPal to finish its four-month inquiry into the fraudulent charges. I received a call from a representative today, but was unable to answer. Whomever called me from PayPal left no message and, upon returning the call, no representative had any notes or indication that a call had been made. I can only hope the call was a confirmation that the matter was nearing resolution.

For the time being, the situation appears to be heading towards a smooth resolution, and my Apple purchases (all 240+ of them) are safe. Thanks to Apple for addressing the matter and restoring my faith in the brand.

UPDATE: March 1, 2012

I received another call from PayPal this morning. The agent was quick to recognize that the blog post had brought the situation to their attention before clarifying the situation that took place on their side of the ping pong match that had been taking place over the past several months.

He let me know that he was personally overseeing the completion of the process, assuring me that my account was indeed in good standing and would remain so throughout. The limitations placed on my account previously were automatically applied by their internal system as Wells Fargo, my primary banking institution, filed their claims with PayPal. The situation was further confused by some back-and-forth with iTunes.

He went on to inform me that members of the management team were going to work with Apple to make sure situations like these are avoided in the future. Perhaps this is the one truly good result to come from this muddled mess.

Both PayPal and Apple were asked whether or not something like this could really be resolved if the victim (I use that term loosely) didn’t have a blog of their own to state their case to. As this situation has apparently reached some higher office with both of these companies, I was assured that actions are taking place internally to prevent this type of situation from occurring to others in the future.

I pointed both parties to the comments at the bottom of this blog post. I’m not alone, and this situation is not as uncommon as you might believe. Spoofing (their words, not mine) takes place with iTunes accounts often, and it is a serious problem for everyone involved. Apple loses money having to spend manhours tracking down these cases, customers pay fraud reporting fees (in my case, Wells Fargo charged me $35), and PayPal has to deal with the PR nightmare that is outspoken bloggers such as myself.

I spent ten years working in customer service for AT&T, Apple, local government, and even Sears. Throughout my entire experience, I’ve learned that front-line agents are often pushed between a rock and a hard place. They have to deal with false claims and dishonest customers every day. When an honest case does come along, it’s hard to avoid being jaded to the situation, and the general response is to recite the canned statements you have to give 100 times per day. Being in customer service sucks, and being on the front lines of this effort is more difficult than it sounds.

In this case, an Apple rep in Canada was pressed for information she couldn’t provide because iTunes support for them is only available via chat in increments of about two minutes. Anything more than that and the reps receive some pushback from the often overwhelmed employees. This inability to communicate with iTunes support directly meant the case couldn’t be properly relayed, and made for a difficult experience.

On PayPal’s side, they have to deal with countless cases of fraud every day. PayPal is a big company, and to handle what possibly amounts to millions of transactions every day through eBay and other online sales platforms, dishonesty from customers can be a major problem. The reps are given a set of expectations to follow, and in order to protect the company, they are often as strict as they are broad.

Was I a victim of PayPal or Apple? No. I was the victim of some spoofer that wanted to make a quick buck by selling in-game currency or items. What followed was a mess brought on by a difficult case, confusing policies, and a general lack of communication on the part of everyone involved. If I can hope for anything to come out of my own personal struggles, it’s that no one reading this has to go through it again. If PayPal and Apple are good on their word, your support of this article and amazing outreach may quite possibly help make that happen.

Thank you for reading this, sharing your stories, and spreading the word.

Article Written by

Ryan Matthew Pierson has worked as a broadcaster, writer, and producer for media outlets ranging from local radio stations to internationally syndicated programs. His experience includes every aspect of media production. He has over a decade of experience in terrestrial radio, Internet multimedia, and commercial video production.