Unfortunately just got this email from PayPal. 
Quote
An eCheck payment from partners name removed was declined by the sender's bank. We will automatically try to process this payment again in 3 business days. It then usually takes 3-5 days for the money to be deposited into your account. Please do not ship items until you receive payment.
I've tried to read that a few times and I still can't figure out exactly what is happening. Does that mean that they've attempted to refund you and there is no fund in order to refund you? I just don't understand why they are sending you payment, unless that is what Paypal is saying in regards to the refund.
Yes hes contacted me on Skype, PayPal tried to withdraw the money from his account to refund me but he didnt have the funds available so it got declined. Its now gone to review status with PayPal on the dispute.