Magento order status updated to "Processing" even when PayPal payment fails

Question

I have an issue with Magento 1.9 and PayPal payment method. When a customer pays with PayPal and there is a payment review the order in such cases order status would be set to "Payment Review" that is correct.

However, the problem is, in instances where the payment actually fails (i.e., insufficient funds in customer account), Magento updates order status to "Processing" & customers ends up getting free goods.

What I need to do is, when such "Failed" IPN invoked I need to set "Closed" status to that particular order. I spent more that 4 hours to find the solution but didn't found any proper solution.

If someone have any fixes for this please share with me.

PayPal IPN response variables:

        [payer_email] => [email protected]
        [payer_id] => xxxxxxxxxxxx
        [payer_status] => unverified
        [payment_date] => 14:33:46 Jun 08, 2015 PDT
        [payment_gross] => 43.24
        [payment_status] => Failed
        [payment_type] => echeck
        [protection_eligibility] => Ineligible

Thanks in advance.

Answer 1

We faced the same issue and found the root cause of it. It appears to be an open issue on Magento Bug Tracker.

See https://www.magentocommerce.com/bug-tracking/issue/index/id/1041

You can fix it by rewriting the Ipn model as below:

<?php
/**
 * Rewrite the core fix an issue with IPN notifications of "failed" payments
 */
class Magento_CoreFixes_Model_Paypal_Ipn extends Mage_Paypal_Model_Ipn
{

    /**
     * @see https://www.magentocommerce.com/bug-tracking/issue/index/id/1041
     */
    protected function _registerPaymentFailure()
    {
        $this->_importPaymentInformation();

        // This is the fix allowing order to get the cancelled status
        foreach ($this->_order->getInvoiceCollection() as $invoice){
            $invoice->cancel()->save();
        }

        $this->_order
            ->registerCancellation($this->_createIpnComment(''), false)
            ->save();
    }
}

Hope it helps!

Answer 2

Pierre MARTIN's answer led me straight to the source of this problem, and made it trivial to fix.

I've wrapped that fix up into a module which can be easily installed into any store. You can find the source and installation instructions on GitHub

This happens because, if the order has uncanceled invoices, the call to registerCancellation() throws an exception. An exception means and the status never gets changed, and defaults to "processing".