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Lawsuit Claims PayPal Takes Sides In Disputed Transactions

BOSTON (CBS) - PayPal is one of the largest online payments companies in the world and the company processes millions of dollars in transactions every year. But some sellers claim the company is taking sides when it comes to disputed transactions.

Johanna Santiago of Hanover is one of those sellers who feels like she got ripped off. She posted a vintage Louis Vuitton handbag for sale last fall on several online sites. She found a buyer just before Christmas and agreed to sell the bag at a discounted price of $800. "I could tell she wanted the bag just as much as I did a few years ago," Santiago explained.

She shipped the bag and two days later she got a confirmation from the Post Office that it was delivered. But, the next day she was surprised to find an email from PayPal saying there was a dispute because the buyer claims she never got the bag. Johanna sent PayPal the tracking information, but PayPal still sided with the buyer. "I'm left now with a missing bag and PayPal withholding the money from me," she said.

This is a common complaint online. One seller wrote: "They will always side with the buyer."

Another person posted: "Sellers beware. PayPal focuses on buyers."

Anthony Ferrigno is a California lawyer who filed a class action suit claiming PayPal and its former parent company eBay do not give sellers a fair shake in their dispute resolution.

"They have a policy, we think, the buyer is almost always right and the buyer almost always wins," he said.

That is in spite of the fact that PayPal's website promises world class security for sellers.

"When eBay and PayPal promise that they are going to protect sellers and keep their money safe, they have a duty to do that," Ferrigno added.

After reading some reviews of the woman who bought her bag, Johanna is now convinced she never had any intention of paying for it. "She had a review that said: 'I do not recommend this buyer. She buys expensive items, ruins them and then files for a dispute," Johanna said recalling the online review.

"They are encouraging fraud on the part of unscrupulous buyers," Ferrigno said.

PayPal disagrees. In an emailed statement a company spokesperson told us: "We've carefully reviewed the complaint and do not believe there is any merit to this lawsuit. We plan to vigorously defend ourselves."

Whatever the courts decide, Johanna says if she needs to sell something in the future, she'll find another way. "

I'm done with PayPal," she said.

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