That is almost the same situation I had. First advice I can give is file a BBB report. Do not accept anything they offer except a full waiving of the fees. If it continues, keep pressing on with it and be as nice as possible until it is time to not be so nice anymore.
If someone claimed a crime took place and that their identity was stolen, that person should be reimbursed by their insurance company...and not the person who sold the item to them that did nothing wrong.
It is a horrid business practice. If the buyer had his personal info stolen, its their fault for not having insurance to cover any loses. Since the reversal was made through a bank/credit card, the bank should handle that. Paypal should not dip into the sellers account and force a refund.
It makes no sense at all. The banks have things in place to protect from these types of charges, and they will reverse unauthorized charges. But, Paypal doesn't recognize it that way. They feel that since the bank/credit card paid for the item through paypals service, somehow they are obliged to claim authority over it and dictate all the legalities of the situation.
Their policies do not follow normal bank laws and they fought me on their policy about this for months. I was told that they have it in their policy to do what they want, so they do it. Even if a crime took place, they don't have to actually investigate it, even though they said they do. The investigation that took place from Paypals end was that first phone call the buyers bank made to Paypal about the Identity Theft.
Paypal claimed there was an investigation and they confirmed unauthorized access. How was this performed without a police report? Without their insurance company involved and how was I totally left out of the entire situation as the only person who saw the person to picked the item up, and had evidence.
The answer is: Paypal doesn't really investigate it. The bank called them and said this buyers identity was stolen ( the bank didn't investigate it either so they are equally stupid ). After that, the buyer got all his money back and never had to open a dialogue with me, the police or paypal.
Horrid policy. Im so sorry your husband had to experience the same thing I did. I made my case to that executive rep, I can only hope he cares enough to reform some policies. Clearly, HUNDREDS of users in that thread alone were upset. That was just one reddit post...the actual complain list for this issue on other sites is huge.