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PayPal stops protecting you when crowdfunding goes bust (updated)

It's ending purchase protection for crowdfunding on June 25th.
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Andrew Harrer/Bloomberg via Getty Images

PayPal won't be so crowdfunding-friendly in the future. The payment giant is dropping Purchase Protection for crowdfunding projects as of a user agreement change coming June 25th. From then on, you back efforts at your own risk -- if a campaign goes bust or otherwise doesn't deliver what you were promised, you can't dispute the PayPal charge to get your cash back. You might not want to take a chance on that too-cool-to-be-true gadget, then.

The move is unfortunate if you like to give artists and inventors a helping hand, but it's not all that shocking in light of crowdfunding's riskiness. Kickstarter notes that about 9 percent of its projects never deliver, for example -- if the failure rate is similar or worse on those crowdfunding sites that take PayPal, that's a lot of potential refunds. We've asked PayPal for its official reasoning, but it might simply be a matter of wanting to keep costs down.

Update: Sure enough, PayPal tells us that the policy change reflects the "risks and uncertainties" of crowdfunding. You can read its full statement below.

"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."

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