People using Paypal to buy goods on Ebay will be given a full refund, including postage costs, if they fall victim to fraudsters.

The payment service provider, which is owned by the auction site, has also removed rules capping refunds and stipulating the type of seller that has to be involved for buyers to qualify for a refund.

According to Carl Scheible, UK managing director of Paypal, the new improvements, which came into force on 30 September, have been “driven by user feedback”.

Under the payment provider’s original Buyer Protection scheme, consumers were protected up to a maximum of £500 per transaction from qualifying sellers – those who had received more than 50 feedback responses, of which 98 per cent had to be positive, and who were either a verified Premier or Business Paypal account. The maximum protection for buying from all other sellers was £150.

With more than 20 million users, the online auction site has become a haven for fraudsters; 4,500 crimes were committed on the auction site last year, according to figures released by 36 out of 52 police forces in the UK. However, the figure could be higher as some police forces were unable to supply statistics under the Freedom of Information Act.

Consumers wishing to make a claim must have used the 'Pay Now' buttons on Ebay or have associated the payment with the Ebay item number on the Paypal site.

People must also still raise the dispute within 45 days of payment and a claim must be made within 20 days of the dispute being raised.

To try and resolve the matter quickly, Paypal said it would continue to act as a mediator between the buyer and the seller. However, if matters could not be resolved this way, it would review the claim and decide on reimbursement.

The new protection does not cover 'intangible goods', such as airline tickets, or motor vehicles. Buyers using Paypal to fund purchases from other online retailers will not get the cover.

Also if a refund is refused, those using credit cards to make payments through Paypal will not be able to apply for a refund from their issuing bank. Section 75 of the Consumer Credit Act will not apply, according to payments association Apacs. This is because the consumer has brought a third party – Paypal – into the transaction.

Paypal has also brought in changes for sellers. Now all UK-registered Ebay sellers will be protected for transactions in all 190 countries supported by Paypal. (This protection has been available only to Ebay Powersellers.) Paypal is also removing the £3,250 annual protection limit for eligible claims.