On April 7 PayPal released an update to its user agreement that changed how the company handles refunds. The new policy, which goes into effect on May 7, will significantly impact ecommerce sellers who use PayPal to process credit card transactions.

Until now PayPal has charged sellers a flat $0.30 fee plus 2.9% of each transaction. When a seller granted a refund to a buyer the $0.30 was never refunded, but PayPal returned the 2.9% transaction fee to the seller.  Beginning on May 7 PayPal will stop returning any fees on refunds at all. The changes will not have any impact on buyers.

The impact will be felt most for big-ticket items that get returned. A $1,000 purchase, for example, would incur $29 in fees that will now be lost. It will also be strongly felt by sellers who frequently return shipping overages.

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