PayPal has announced plans to eliminate its Purchase Protection coverage for customers who give money to crowdfunding projects. The new policy takes effect on June 25th, 2016, and says "payments on crowdfunding platforms" are ineligible for protection. The broad move could be a response to the well-documented frequency of fraud and failure on crowdfunding platforms — one Kickstarter study found that 9 percent of all its projects failed to deliver rewards.

The new policy means that people who use PayPal to support crowdfunding projects won't be able to recoup their money by disputing the charge — meaning PayPal won't provide relief if a project fails to deliver, delivers a broken product, or is completely fraudulent. The change mostly impacts Indiegogo; Kickstarter payments were already not protected by PayPal. (Kickstarter itself also does not take any responsibility for fulfilling rewards, and does not permit people who funded successful projects to request chargebacks.) We've asked PayPal to explain the reason for the change, but it's likely the company just doesn't want to assume the risk from crowdfunding's ongoing trust problem.