I found a solution on the net.

Here it is:

1. login as root (or sudo..) and do the following:

2. apt-get install python-software-properties

3. sudo add-apt-repository ppa:thefrontiergroup/vsftpd

4. sudo apt-get update

5. sudo apt-get install vsftpd

6. vi /etc/vsftpd.conf and add the following
allow_writeable_chroot=YES

7. sudo service vsftpd restart

How did you set it up?

I set it up per instructions.

Which ones?

https://www.digitalocean.com/community/articles/how-to-set-up-vsftpd-on-ubuntu-12-04

When is it that you get the 550 permission denied error? Are you able to log in via FileZilla?

Yes I can log in. I'm still getting the same error even after reinstalling vsftpd. There's definately a permissions problem somewhere along the line but I don't know how to solve it.