I used to accept PayPal as a payment method when I was doing freelancing, ran hundreds of thousands of dollars through my account over the many years of having it. One client refuted a payment SIX MONTHS later, and they granted it to him based on the fact that it was a digital service and there's no way to verify it was successfully transferred.
I immediately closed my bank account (PayPal wouldn't let me remove it while a refund was being made. Yes they were going to debit my bank account since I had no funds in my account, which I never kept).
Now they've put that amount in collections and honestly, as someone who cares about his credit, that one will stay the time until it's removed. I'm not paying them, or the thief.
You could get together all your documentation with respect to that transaction and dispute that negative credit item directly with the three credit bureaus.
Exactly right, up to now the dispute existed in PayPal's walled garden and played out under their rules. PayPal's dispute resolution process has some serious flaws - with many high-profile examples - and often drags out to just slightly longer than the time limit for chargebacks (funny that, huh?).
I would raise the stakes a bit more and send PayPal a hard copy of supporting documentation and tell them that you will be disputing any negative report. Send this by a recorded delivery method like registered mail or courier. This means you can go to court and prove that PayPal had clear evidence of fraud and failed to take appropriate action. It also proves that they had knowledge of these facts prior to making the negative report to the credit agencies, which puts them in a bad spot if this all ends up in court. In the USA, the Fair Debt Reporting Act covers this scenario but similar laws exist in other countries.
Keep good documentation and send everything by a trackable method and never let these companies get away with ignoring you when you have a legitimate issue. Just make sure you are sure you have proof that you are correct, otherwise keep better documentation next time.
I immediately closed my bank account (PayPal wouldn't let me remove it while a refund was being made. Yes they were going to debit my bank account since I had no funds in my account, which I never kept).
Now they've put that amount in collections and honestly, as someone who cares about his credit, that one will stay the time until it's removed. I'm not paying them, or the thief.