PayPal Removes Payment Protection From Crowd Funding Project Transactions

👤by Tim Harmer Comments 📅06.05.2016 00:42:40

In the latest update to their User Agreement For PayPal Services, set to go into effect on June 25th 2016, PayPal have amended the eligibility requirements for Payment Protection in a manner that reduces buyer protections when investing in crowdfunded projects.

The amendment specifically modifies Section 13 of the PayPal User Agreement in the following ways:

SECTION 13.2 Eligibility Requirements

We’re updating the eligibility requirement for Purchase Protection. The revisions to Section 13.2 will be as follows:

We’re deleting the requirement that user’s pay for the full amount of the item with one payment.
We’re adding that you must respond to PayPal’s request for documentation and other information in a timely manner.

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
- We’re also clarifying the exclusion for items equivalent to cash to now include stored value items such as gift cards and pre-paid cards.

SECTION 13.5 Dispute Resolution

- We’re updating the second bullet of Section 13.5 and are now requiring all buyers to wait at least 7 days to escalate a dispute to a claim regardless of the transaction amount.

It's notable that game services have also been added to the 'ineligible items' list.

PayPal Purchase Protection is only valid for transactions between two PayPal accounts, significantly restricting when and how it is used. Such transactions are however popular on crowdfunding sites such as Patreon, and have been an important reassurance for consumers seeking to ensure they're not scammed out of their 'rewards'.

The move is likely down the the perceived risk of crowdfunded projects failing prior to fulfilling their obligations, without the means to refund investors. It remains to be seen if the change in policy will have a chilling effect on the use of such sites.


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