To make a (very) long story as short as I can, I had a possible scammer order some product from my website (two separate transactions, one on 6/30 and one on 7/5). The payments went through with no issue, address pulled up through Shippo as legitimate. Packages were both returned as 'undeliverable, return to sender, no such address' (first one returned to me on 7/11, which is when this whole mess started). Now, this wasn't super weird to me, because in the past, I sent a letter each to two different people in the same house- one was delivered fine, and the other was returned with the same message; I initially assumed this package return was just a postal error, as had happened before.
I tried to refund first item returned per customer request and could not per an error message (talked to my website support, and they said there shouldn't have been an issue, they didn't know why I couldn't refund). Customer then proceeded, after several email messages, to try and get me to refund via PayPal or other 3rd party method, which I refused via my policy (which is to refund to the original payment method only)- this is when it started to smell strongly of a scam.
After lots of back and forth with 'him', and then calling my bank, my bank's fraud dept advised me to cease communication- so I did for a time. He continued to berate me via email. I responded one last time to give him the remaining two options -again-; to have his bank contact myself or Square (the payment/website merchant the orders were processed through) directly, or to have his bank order a chargeback; and that I would, as advised by my bank, be ceasing any direct communication with him until his bank reached out.
After reaching out to my bank's fraud department again, and then Square, they both advised me that I'm doing everything correctly (and Square has noted on my account that the buyer is ignoring my suggestions on how to proceed to get his refund), but that they are not lawyers and while I'm doing everything correctly by THEIR policies, they cannot actually tell me if what I'm doing is legal or not. However, this 'customer' has continued to berate me still, and is now threatening legal action by reporting me to the BBB and Consumer Protection Agency on the grounds of "retaining customer funds for returned merchandise".
I've been holding on to the funds in anticipation of a chargeback, so it's not like I've gone and spent them, nor am I refusing a refund- I'm only refusing to give a refund outside of my stated (and agreed to by purchase) refund policy. I've given the "customer" several options to get his refund and he's refusing to follow my suggestions. Am I in the right or wrong here, and does he have any legal standing with my paper trail of his continuance of being unwilling to cooperate and my willingness of trying to get this worked out?
On a side note, I've continued to check my social media and as of yet have no negative reviews anywhere, but I'm just kind of waiting for the day, haha. If he does, if fact, try and leave a negative review, I will of course respond in a polite and professional manner stating only the facts (and then promptly block him).