PayPal - Online Payment Provider

PayPal Removes ‘Purchase Protection’ for Crowdfund Payments

PayPal has been the choice method of payment for those involved in crowd-funding campaigns due to their support and protection, but this may now change following a change in their Terms & Conditions.

Crowd-funding is without question a gamble, many basic projects successfully deliver on time and provide the ‘perk’ committed to the backer, but from time to time a project fails and it is generally catastrophic (Zano).

PayPal - Online Payment Provider
PayPal – Online Payment Provider

When a project fails (and even before), backers look to their payment provider for refunds and up until now, the majority have been successful provided that the claim can be evidenced and is still within a specific period of time since the initial transaction.

The relief from one Zano investor in obtaining a PayPal refund
The relief from one Zano investor in obtaining a PayPal refund

Just this week, PayPal have amended the Terms & Conditions of their ‘Payment Protection’ policy to incorporate the following exceptions (within section 13.3 – Ineligible Items):

“We’re updating the list of items that are not eligible for Purchase Protection. The new items that will not be eligible are:

  • 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.”

In our view this is a positive move by PayPal and we believe/hope that the credit card companies will follow suit. The shield of ‘payment protection’ has prompted some backers to be careless and complacent in their blind-backing of crowd-fund projects before completing any form of due-diligence on the company and/or viability of the products promised on delivery.

Zano - The largest failed European crowd-funder campaign
Zano – The largest failed European crowd-funder campaign

With quadcopters and drones being amongst the hot crowd-fund projects at this time, these changes will hopefully prompt new startups to think a little harder about whether they can realistically deliver whilst also pushing backers to think twice before handing over their hard-earned cash.

We asked PayPal to comment on this change to their Terms & Conditions, they responded with the following cryptic answer:

“Thank you for contacting PayPal.

Effective November 2016, Significantly Not As Described issues for payments made to fund, in whole or part, a project or business opportunity even if a tangible item is offered in return is not covered by PayPal Purchase (Buyer) Protection. If you paid for your item using PayPal but bought it on a site other than eBay, please open a dispute on the PayPal website.”

This response would suggest that if item(s) received as a consequence of a crowd-funded project were not “as described” then Payment Protection could still be invoked. We have asked PayPal for further clarification and will update this article if received.  You can read more about the revised PayPal policies here.

Have you lost money or invested recently in a crowd-funded drone/quadcopter project, if so add a comment below.

Join the discussion on the DroningON Discussion Group, click here

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