PayDotCom Scam Alert for Merchants

From forums and blogs that I follow, I have come across a few cases reported by merchants who fall victims to affiliate scam.

Let’s call it PayDotCom Affiliate Scam or PAS for short.

If you are merchant using PayDotCom (PDC) to sell your products online, please beware of this tactic.

This is the modus operandi the affiliates use in brief:

• The affiliate had two PDC usernames.

• The affiliate sent a number of orders to the merchant.

• Merchant paid him for those sales. Merchant started getting more orders from him.

• All of sudden, merchant started getting chargebacks (sometimes one a day and can be up to 5 a day). Upon investigation, by looking at where the sales came from, they all came from the same (one) affiliate.

• All the customer were having the same email addresses – Gmail or Yahoo account.

How did the affiliate make money?

First he made orders through his own affiliate link. Then the merchant paid him commissions to his affiliate account based on the “sales” he made himself. Then, he asked for refund for purchases orders he made. The net effect? He earned commissions from the merchant for ZERO sales (because of his chargebacks).

Who suffered the most? The merchant of course! Because he paid the affiliate the commission for sales that have been refunded.

Pretty sneaky, huh?

If you are currently using PDC for payment processing, be more alert about this trick. If this happens, the only thing you can do is to report to PDC and file a complaint to Paypal asking for a refund (for affiliate commissions that you had paid).

As of now, I have not found a good alternative yet. But I was told Google Checkout and E-junkie are two solutions that are worth looking at to reduce scam, fraud, and chargebacks. They are reliable and the feedback I receive is great.

NOTE: If you plan to sign up with E-junkie, enter EJVIDEOS as the promotion code. You’ll receive 67 days free trial instead of the normal 7 days. The code is tested to be working at the time of writing.

Update – April 26th, 2010: Ever since I use e-junkie till now, I am extremely satisified with this fantastic shopping cart software. It is easy to add products, track inventory, create discount codes, and more. Best of all, e-junkie only charges a flat fee per month (depending on the package), it doesn’t charge by number of transactions.  Try it and feel the difference.

Tagged as: PayDotCom Scam