When It Comes To Charitable Donations, PayPal Is Not Your Friend

A woman donated to 13 charities. Only 3 got the money.

Terry Kass probably thought she was doing a good thing when she donated $3,250 to 13 charities using PayPal’s Giving Fund service. She must have been furious when she discovered ten of those charities never received the money.

Kass donated to each organization using a Giving Fund page, which promised 100% of her donations would be used to benefit the charities. When Kass checked with an employee at Highland Park-Highwood Legal Aid Clinic, however, they told her the clinic hadn’t received the funds. After following up with PayPal, Kass learned that $100 of her donation was split between three charities — and that PayPal was holding the rest.

Kass donated to 13 charities using PayPal’s Giving Fund. Only three received the money. | PayPal

On February 28, Kass filed a proposed class action suit against PayPal (the suit is proposed because a judge still needs to certify its class action status). The suit alleges that PayPal neglected to tell Kass her money never reached its intended recipients. Additionally, the charities were never notified that money was donated to their organization.

“We have no idea where the money is going,” Kass’ attorney Chris Dore told The Guardian. “Most people will never find out that their money never got where it was supposed to go and the organizations are none the wiser, either.”

PayPal’s Giving Fund only sends money to a charity if the charity possesses two PayPal accounts: a business account and a Giving Fund account.

“PayPal does state on its Giving Fund website that it will only distribute money to those organizations that have a Giving Fund account configured,” writes TechCrunch’s Sarah Perez. She adds:

“But these charities still have profile pages, even when that’s not the case. And on these pages, there’s no indication that they’re not registered to receive PayPal donations. Ultimately, this is misleading to consumers.”

Even charities the site lists as “trusted” might not be equipped to receive funds, the suit says.

The suit further alleges that if a charity doesn’t have both accounts, PayPal keeps the money for six months in an interest-bearing account “that inures to PayPal Giving Fund’s benefit.” If the charity hasn’t registered the two accounts in that time, PayPal passes the money along to another charity, “without regard to the intention, beliefs, or desires of the donor.”

Theoretically, it’s possible a consumer could donate to a charity that represents their beliefs, only to discover the money was used to support an organization completely at odds with their values.

A PayPal spokesperson told CNBC that when a donation is received for a charity that hasn’t enrolled, PayPal’s Giving Fund does notify them of the gift and help them enroll. The spokesperson added, “we are disappointed by the lawsuit and we are fully prepared to defend ourselves vigorously in this matter.”

According to PayPal, Giving Fund channeled $7.3 billion in donations in 2016, and transmits $35 million a year in the US and UK alone. But who is getting the money? Hopefully, the suit will resolve that question.

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