Vishal Vora used eBay to auction a £115 BabyBjörn bouncer when his children had grown out of it. He washed it, listed it as used and accepted an offer of £56 plus £5 postage from an expectant mother. As soon as it was delivered the buyer complained that it was “literally covered in faeces” and demanded a £20 reduction in the price. Vora offered £7.50, although the screenshot of a photo sent by the buyer did not show evidence of staining.

The buyer then opened a case with eBay which advised she could return it and receive a refund. She was duly refunded by the company but she never sent the bouncer back. Weeks later, Vora found photos on the buyer’s social media accounts showing her baby happily installed in it.

For most eBay sellers the story would end there. Vora, however, decided to make a stand. He emailed the buyer demanding the item, or his money back. She then reported him to the police for harassment. So he took her to court and, two years after the sale, was awarded £62.

“It happens often, buyers thinking they are entitled to free goods due to eBay’s liberal approach to refunds,” he says. “My case wasn’t about money, more about the principle.”

The principle came at a cost – the £70 in court fees and administration outweighed the award and he must find a further £70 if he wants a summary of the judgment.

In 2014 Vora issued legal proceedings after selling an iPhone4 to a buyer who claimed the box arrived empty. Despite proof from the Post Office that the parcel weight corresponded with a handset, eBay refunded the buyer. It eventually settled out of court.

Vora is one of a legion of sellers to have fallen victim to eBay’s lavish buyer-protection policy. Launched in 2013, it refunds buyers who raise a dispute if an item is not received, or not as described. The promise was to encourage buyer confidence in the online auction site, but it can be exploited by unscrupulous buyers to obtain free goods. Scores of sellers, both private and business, have contacted the Observer over the years to complain that the company has unquestioningly refunded buyers who had failed to return the goods they bought or sent them back used, damaged or substituted.

Anna Wabrobska is a business seller of car parts. When a buyer returned a part, which he admitted had been damaged by his mechanic, eBay told her it would investigate but then refunded the buyer without her knowledge.

“When I appealed they told me to submit a police report,” she says. “The police say they do not deal with such cases, so eBay told me to get a crime reference number from Action Fraud. I did so, but my appeal was rejected as I did not provide the report from the police.”

Ebay told the Observer that, as the buyer had declared the part “not as described”, he was due a refund. Business sellers do not have the right to appeal against a decision under eBay rules which leaves a court as the only alternative, it says.

Catherine Lewis was left out of pocket after selling a coat. When the buyer claimed she had not received it, eBay issued a refund. But when Lewis studied feedback about the buyer, she got a shock. “All the messages told the same story,” she says. “Buyer claimed item didn’t arrive, eBay gave refund. Even on items that were signed for. Worse, the buyer has been reported to eBay three times before for this and no action has been taken.” Only when the Observer intervened did eBay refund Lewis.

Ebay insists that each dispute is investigated before refunds are issued. “As an online marketplace we take action to protect thousands of sellers in the UK every month, and we’re constantly improving our systems to make our marketplace as safe as possible,” it insists. “Our team is on the lookout 24/7 for bad buyer behaviour and they’re backed by large-scale, automated detection systems that examine millions of transactions every day.”

However, the company freely acknowledges that its policies are designed to keep customers spending. Buyers can, for instance, leave anonymous negative feedback against a seller, but sellers are only given a positive button to rate buyers, although they can type a more forthright comment beneath the cheery “+” heading. The seller’s only recourse, if a comment unjustifiably damages their status, is to report a buyer to eBay and negative comments are only removed if eBay receives numerous complaints about an individual.

Most controversially of all, any case opened by a buyer shows as a defect on the seller’s record and a maximum defect rate of 2% (0.5% for top-rated sellers) is permitted before penalty fees kick in.

Since eBay ordered its business sellers to extend their returns policy from 14 to 30 days last year, sellers complain that return rates have escalated and they are being penalised for complying. Customers who change their mind about a purchase often cite a return as “not as described” rather than “no longer wanted” to avoid incurring postage charges and these count against a seller unless they are successfully appealed.

Ebay counters that its penalty fees for return rates of over 2% are “to ensure buyers receive the best shopping experience possible, bringing more buyers and more sales for sellers” and “maliciously filed returns are stripped out of the calculations”.

Like Vishal Vora, other sellers are fighting back. Roland Grimm, a personal seller, sold a Tannoy to a buyer who, 60 days after confirming receipt, claimed it had never arrived and raised a dispute with PayPal which offers an alternative buyer protection scheme to eBay.

“Professional scammers often never notify eBay, nor leave feedback because, if they do, sellers can respond via feedback which stays forever to warn other sellers,” he says. “Instead, they make a PayPal claim after 60 days when the sales record for a transaction disappears from the seller’s file and feedback can no longer be left on the buyer’s record.”

Grimm supplied PayPal with proof of postage and the buyer’s confirmation of receipt but PayPal nonetheless issued a refund. It eventually settled out of court days before the hearing. The company declined to comment.

Grimm is now considering legal action against eBay after a seller claimed a keyboard he had sold was defective. It was returned damaged. In its response to the buyer, eBay wrote that although the item had been returned “in a different condition to which it was sent” he would be refunded anyway.

Ebay claimed that, since it can’t verify the condition an item is returned in, it refunds sellers on a courtesy basis, but that Grimm has made several such claims of returned goods, so no longer qualifies. Ian Ewers received a similar message to Grimm after a buyer claimed two brand new £2,300 power supply units he’d sold were faulty a week after leaving a five-star review of them. They were sent back unboxed, poorly packaged and apparently damaged during use.

He sent before and after photos to eBay who told him they would refund the buyer and Ewers could appeal against their decision afterwards. When he tried to do so, he was refused. A message from customer services explained opaquely: “I understand that in our return policy the buyer should return an item in same condition and most of the times we our seller how if they receive item back in different condition. However, there are policy in place for this seller’s coverage and I am afraid in this case it would not be possible to grant your appeal [sic].”

Ebay told the Observer that business sellers can’t appeal against faulty returns and says since the buyer provided a detailed description of the problem he had a right to return the goods. It has since unleashed debt collectors to recover the £2,300 from Ewers. “I’ve told them to take me to court and I look forward to defending the claim if it ever happens,” he says. He has also withdrawn his custom from eBay to whom he’s paid nearly £30,000 in sellers’ fees over 14 years. “I have finally realised I cannot do business with this company any longer,” he says. “Ebay sellers are like sitting ducks waiting to be scammed.”