PayPal remove purchase protection for ‘gambles’

You back a crowd funded business that goes bust, you pay to enter a competition and don’t win, you pay the government for a service which you decide you don’t like, what do you do? Well up until June the 25th this year, if you live in the US and paid with PayPal you’d simply do a PayPal chargeback.

PayPal have had enough of offering purchase protection for things which you know are a gamble to start with, so (at least in the US) they’re updating their policy to exclude these payments from protection.

On crowd funding specifically PayPal have said “In Australia, Brazil, Canada, Japan, United States and certain 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“.

The keyword is the last one – “Donors”. When crowd funding you may be supporting a new startup to hopefully produce a product or service – often your contribution means that you’ll be among the first on the list to receive a free product when it is eventually manufactured. You’re a “Donor” though, you’re not buying the product you’re giving the money as seed funding in the hope of getting a freebie later down the line.

I’m not surprised PayPal is adding these three activities to their list of items not eligible for purchase protection. The only surprise is that they’ve not already excluded them and that (unless I missed an update) they’re not including EU countries and the UK in the list.