ModCloth ModCloth.com Refused to issue cash refund on new merchandise return, Internet

I purchased a jacket from ModCloth.com for $109.99.  When I received the jacket, I tried it on once.  It was the wrong size.  I immediately replaced it in the plastic bag and package and returned it to ModCloth, requesting a paypal refund, which is how I paid.

Today I received an email from ModCloth telling me that because the item was returned with animal hair, they are issuing a store credit instead of cash refund.  I called them and told them this was unacceptable.  They said that the item is "damaged" and "unsellable". 

I told them that I tried it on once and immediately returned it.  Any stray animal hair could be removed in less than a minute with a lint roller.  The item was NOT TORN OR STAINED.  I find it hard to believe that it is "unsellable" due to a few animal hairs that could be removed.  They refuse to give me a paypal refund.