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ProPay / Fraudulent non-fee reimbursement

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I have been using Propay for about a year but today was an eye opener!

I sold an item on eBay for 499.00, the buyer paid with CC via Propay. The buyer asked to return the item and I agreed. After he returned it to me I issued almost a full refund (minus shipping).

Now here is the issue, Propay charged me $16.60 for the $499 transaction. But did not refund any of the fees once the refund was given PLUS added .35 cents fee. I then used the online and here is the conversation...
A customer service representative will be with you shortly. ProPay's Secure Live Chat is available weekdays from 6:30am MT to 7pm MT. We appreciate your patience.
ProPay's Privacy Policy www.propay.com/legal/privacy.aspx
You have been connected to Nancy R.
Nancy R: Hi there! Thank you for contacting ProPay. How can I help you?

Tyrone: Hello, I did a refund but the fees were not refunded
Nancy R: How long ago did you initiate that refund?
Tyrone: 12/22/2006
Tyrone: today
Nancy R: If I can get the e-mail address of your ProPay Account, I'll be better able to help.
Tyrone: cpuparts@******.***
Nancy R: The funds were sent back. It may take the card issuing bank several days to process the refund.
Tyrone: no not the funds to the customer
Tyrone: the fees I paid on the $500
Tyrone: the $16.60
Nancy R: I'm sorry, I still don't understand.
Tyrone: Propay charged me $16.60 to process the $500 charge
Nancy R: Yes. That sounds about right.
Tyrone: I refunded most of the trans, but I did not get back the the processing fees
Nancy R: Because the card was still processed, we will not be returning the processing fees.
Tyrone: WHAT!
Tyrone: show me where in the EULA does it say that!
Nancy R: I'm sorry, what is EULA?
Tyrone: End user license agreement'
Nancy R: Have you read through our Payment Services Agreement?
Tyrone: Yes
Nancy R: I don't know if it will include that information specifically but I can tell you that because we are charged those fees by Visa, MasterCard, etc, and are not refunded, we also do not refund them. Let me do some research and I'll try to find the information you're looking for.
Tyrone: Every other service refund these amounts
Tyrone: you never mention anything about not refunding processing fees during a refund
Tyrone: even your help section says you only need the amount of the
Tyrone: transaction + .35 cents
Tyrone: nothing about not being refunded the processing amount
Tyrone: Show me anywhere where it says that
Nancy R: I would be delighted to show that to you. It will take some time to locate. Could I e-mail you with the information as soon as it is found?
Tyrone: your help section says:
Tyrone: f you issue a full refund after the transaction has been processed and settled, or a partial refund at any time, the fee ($0.35) will not be refunded to you, and you will be required to have enough money in your account to process the refund. Transactions are processed each evening.
Tyrone: No,
Tyrone: you don't know it because it does not exist
Tyrone: I demand a refund of the Fees
Nancy R:The fees are non-refundable. Have a nice day.

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