PayPal removes protection for crowdfunding pledges

May 9, 2016 // 9:32 a.m.

Tags: #buyer-protection #crowd-funding #crowdfunding #indiegogo #kickstarter #payment-processor #paypal #purchase-protection

Payment processing firm PayPal has announced that it is to cease offering Purchase Protection coverage for payments to crowdfunding sites, leaving victims of failed or malicious campaigns with one fewer avenue to attempt a refund.

PayPal's Purchase Protection programme, also known as Buyer Protection, was originally introduced as a means of reassuring customers as to the safety of once and former owner eBay's auction site. Under the terms, buyers purchasing goods or services for delivery to a verified address could claim a refund directly from PayPal in the event that said goods or services are not supplied or do not match the auction description. The wording of the Purchase Protection clause in the company's user agreement has also been thought to cover payments made to crowdfunding sites such as Kickstarter: if a campaign fails to deliver on its promises, backers had at least a chance of requesting a refund from PayPal - albeit only within 180 days of making the original payment.

From the 25th of June, PayPal will no longer accept Purchase Protection dispute claims for crowd-funding payments, the comapny has announced. In a series of changes to the terms and conditions, the company is specifically excluding 'payments on crowdfunding platforms,' alongside 'anything purchased from or an amount paid to a government agency [and] gambling, gaming and/or any other activity with an entry fee and a prize.'

The changes come as several high-profile crowdfunding campaigns hit the rocks, most recently the Central Standard Timing CST-01 watch campaign which has declared bankruptcy with over 7,600 backers left out of pocket and with no hardware.

UPDATE:
PayPal has confirmed that the changes to the Purchase Protection programme are region-specific, and will not be coming to the UK in June. 'In Australia, Brazil, Canada, Japan, United States and certain other countries, we have excluded payments made to crowdfunding campaigns from our buyer protection programs,' a spokesperson for the company explained. 'This is consistent with the risks and uncertainties involved in contributing to crowdfunding campaigns, which do not guarantee a return for the investment made in these types of campaigns. We work with our crowdfunding platform partners to encourage fundraisers to communicate the risks involved in investing in their campaign to donors.'
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