Sender accidentally sent payment using bank account instead of PayPal balance… what happens now?

[DandyChiggins]

My sender sent me $1,700 via PayPal over the weekend. I immediately transferred the amount to my bank and used it to pay off some debt. Problem is, my sender accidentally sent the payment without noticing that the payment source was set as his bank account, not his PayPal balance. His bank sent an email today stating that due to insufficient funds, his transfer to me wasn’t completed. It was then he realized what he’d done, so he immediately sent me the payment again using his PayPal balance. I then transferred it to my bank account. What happens next? Obviously some sort of payment reversal will be coming. Since I now have the “real” money in my bank account, am I in the clear when PayPal takes back the money from the first failed transaction? Are we going to be under suspicion of fraud, or does this kind of thing happen all the time? I would love insight into what the probable next steps will be.

[PayPal_Bindu]

Hello @DandyChiggins 

Thank you for joining the PayPal Help Community!

I understand your concern about receiving the double payments to your PayPal account. When a payment is paid using a bank account, money to the receiver completes instantly as PayPal funds this on sender's behalf and wait for a bank transaction to clear. As the bank was failed to fund the transaction, the sender's account will go negative. You have to refund the extra $1700 back to the sender. Here's the article with the information on how to refund the payment in your PayPal account. 

Hope this information helps,

Bindu