PayPal quietly removes buyer protections for Indiegogo and other crowdfunding platforms

Changes to terms and conditions generally rank alongside slow-news-day local stories in terms of public interest, but this one is arguably quite important about what it says about the climate for crowdfunding. PayPal has quietly updated its terms and conditions to opt-out crowdfunding payments from its infamous Purchase Protection program. The new terms and conditions will come in to effect from June 25 2016.

The program, more usually used in conjunction with eBay (unsurprisingly given it was an eBay subsidiary between 2002 and 2014), allows users to open disputes over items which aren’t as describe or just never show up.

That’s an occupational hazard with crowdfunding. Obviously backing a project on Indiegogo is different to purchasing something on eBay, so the real surprise here is why it has taken quite so long to catch up. Most people who use crowdfunding regularly will have thrown good money after bad product (myself included), and I must say it never occurred to me to even try the policy. Crowdfunds are, by their very nature, risky. You’re putting money into a pot based on someone’s idea with only instinct to guide you as to whether the idea will emerge. Nonetheless, a Kickstarter report from last year suggested that just 9% of projects fail to deliver rewards, which isn’t too bad in the greater scheme of things, though it’s unclear if that’s an industry standard or not. In any case, Kickstarter isn’t integrated with PayPal, so it’s a semi-moot point.kickstarter_not_backed_by_paypal

In a statement sent to Tech Crunch, PayPal said:

“In Australia, Brazil, Canada, Japan, United States and other countries, we have excluded payments made to crowdfunding campaigns from our buyer protection programs. 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.”

It makes sense, but it’s still probably a useful thing to see the sensible thing written up clearly: if you back a crowdfunding campaign, you’re taking a risk – so for God’s sake use careful judgement, and don’t put in money you can’t afford to lose.

READ NEXT: What happens after a Kickstarter is funded?

Correction: An earlier version of this article suggested that Kickstarter would be affected by the change. Kickstarter has never been integrated with PayPal, so will have suffer no impact.

Image: Rex Hammock used under Creative Commons

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