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Kickstarter addresses questions about refunds on failed projects

As the funding platform grows at a fast rate -- helping pay for million dollar projects -- it explains that the responsibility of refunds for failed projects falls on project creators.

Kickstarter says that project creators have the responsibility of issuing refunds for their failed projects.
Screenshot by Dara Kerr/CNET

After concerns were raised about where donors' money goes if Kickstarter projects are never finished, the crowd-source funding platform addressed its accountability today.

"The number of creative projects that have been funded and produced on Kickstarter in the past three years is enormous," the company's co-founders, Perry Chen, Yancey Strickler, and Charles Adler, wrote in a blog post today. "But of course not every project goes perfectly. Delays do occur, especially with more complicated projects. Some creators get in over their heads dealing with processes that are new to them."

Ultimately, Kickstarter concluded that the responsibility of refunds falls on the project creators. Under the company's Terms of Use, creators are legally required to "fulfill the promises of their project" and are also obliged to "refund any backer whose reward they do not or cannot fulfill."

Here's more from Kickstarter's co-founders on why the company itself cannot issue refunds:

Kickstarter doesn't issue refunds, as transactions are between backers and the creator. In fact, Kickstarter never has the funds at all. When a project is successfully funded, money is transferred directly from backers' credit cards to the project creator's Amazon Payments account. It's up to the creator to issue a refund, which they can do through their Amazon Payments account.

Kickstarter is just 3-years-old but has grown fast -- funding bigger and costlier projects and expanding overseas. To date, around 30,000 projects have been funded by more than 2 million people, including a handful of million dollar projects and one for a gaming console that recently pulled in $8.5 million.

Since its inception, the company has become stricter about projects' "Estimated Delivery Dates" and creators' experience and backgrounds -- but in the end it boils down to backers wanting to invest in projects they believe are worthwhile.

As the co-founders wrote, "On Kickstarter, people ultimately decide the validity and worthiness of a project by whether they decide to fund it."