PayPal Won’t Protect Your Payments To Crowdfunding Projects

Image courtesy of André-Pierre du Plessis

If you’re using PayPal to help fund yet some friend’s hot sauce Kickstarter project, listen up. Starting next month, PayPal’s Purchase Protection won’t cover the transactions made on crowdfunding platforms. 

PayPal sent emails to users last week notifying them that as of June 25 any transaction completed on a crowdfunding site will be made at the account holders’ own risk.

The upcoming user agreement change means that if a campaign or project goes bust or doesn’t deliver what was promised, PayPal users can’t dispute the charge to get their funds back.

The update was made as an amendment to Section 13.5 which covers ineligible items under the purchase protection system.

In all, three new items were added to the ineligible list:

• Payments on crowdfunding platforms
• Anything purchased from or an amount paid to a government agency
• Gambling, gaming and/or any other activity with an entry fee and a prize

Additionally, the company updated the length of time users must wait to contest a transaction. Buyers must now wait at least seven days to escalate a dispute to a claim regardless of the transaction amount.

A rep for PayPal tells Engadget that the crowdfunding change was made to reflect the potential risks associated with crowdfunding.

“In Australia, Brazil, Canada, Japan, United States and certain other countries, we have excluded payments made to crowdfunding campaigns from our buyer protection programs,” the company said in a statement. “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.”

The company said it would continue to work with “our crowdfunding platform partners to encourage fundraisers to communicate the risks involved in investing in their campaign to donors.”

PayPal stops protecting you when crowdfunding goes bust (updated) [Engadget]