PayPal isn't supporting Isadore. They've recognized that she does not have evidence to support her claim, which is fantastic news. I just called my bank for an update and the rep said we are now at "Pre-Arbitration", which is formality that happens before arbitration. He said arbitration is necessary if the two banks involved cannot reach an agreement. I would love for Isadore's bank to drop their support of her too - but that might be too much to hope for! I should have an answer by April 17th.
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PayPal only gives up if the client has no supporting evidence. She must have had nothing.
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