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​Buyer beware: PayPal drops purchase protection for crowdfunding

Planning on crowdfunding a pair of hamburger earmuffs or those fancy neon hover boots? Be warned: PayPal won't back your purchase if the campaign falls through.

PayPal is paring back its protections for people making purchases via crowdsourcing sites.


Keen to kickstart a community project or back the latest invention on the Internet? Take note: PayPal has updated its terms of service, removing purchase protection for payments made on crowdfunding platforms.

The new policy comes into effect as of June 25, and it also drops protections for users paying for gambling and gaming (or "any other activity with an entry fee and a prize") or making payments to government agencies. PayPal did not immediately respond to a request for additional comment.

PayPal has long billed its policy as a way to protect buyers if a purchase "doesn't go as planned" and has even expanded it to cover digital purchases like Uber rides and digital music purchases. But as of next month, the company will no longer foot the bill if your chosen crowdfunding campaign collapses or if the final product isn't quite what you were after.

PayPal issued the following statement about the change:

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.

Gone are the days of pledging your support for a potato salad, safe in the knowledge that you'll be protected even if the mayonnaise is subpar. It was a simpler time.

Updated 5:25 p.m. PT: Added statement from PayPal.