Donations made using PayPal platform may never reach charities, lawsuit says

When the new platform was created, PayPal also created PayPal Giving Fund to process and disburse charitable donations made through its platform. When it's not, the backlash can be great.

PayPal's website says that charitable organizations must enroll with PayPal Giving Fund, and its donation delivery policy reads: "While we make every effort to deliver the donation according to the donor's wishes, we retain exclusive legal control over all donations and reserve the right to redirect the donation to another charitable organization in the event that a charity does not enroll with PayPal Giving Fund or fails to meet our criteria for receiving a donation".

In a lawsuit filed Tuesday in U.S. District Court of Northern Illinois, Terry Kass alleged she made $3,700 in donations to 13 charities on December 30 after receiving an email from PayPal encouraging charitable donations via the Giving Fund. PayPal promised to waive its normal transaction fee and add an additional 1 percent to the donation if made before the end of the year. If the charity doesn't have an account with both, they won't get the donations, even if they're listed on the PayPal Giving Fund site.

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However, the plaintiffs say that the system is flawed. After that, once a month the donations are transferred to the respective charities, as per the PayPal Site. When donors give some amount via the firm's fundraising platform, they initially go through PayPal Giving Fund section.

Friends for Health and Kass say PayPal Giving Fund is an admirable endeavor, but in practice falls short of its mission on numerous fronts. "Likewise, thousands of charities have been deprived of much needed funds they never knew were even intended for them", the suit claims.

Kass represents all people in the United States who donated money to an organization through PayPal's giving platform while Friends For Health is bringing the suit on behalf of organizations to which a donation was made but is not registered and those that are displayed on the giving platform but not registered.

"As such, instead of delivering a combined $3,250 to thirteen different charities, defendants only delivered a combined $100, or 3% of her donation, to those three charities". Due to this, just $100 went donated to the charities Kass selected, and the rest $3,150 aimed at local charities was withheld. The plaintiffs are seeking actual, treble, and statutory damages for alleged violations of the Lanham Act and the District of Columbia Consumer Protection Procedures Act, according to Courthouse News. PayPal doesn't routinely inform nonprofits not registered with them or the PayPal Charitable Giving Fund that it is holding gifts intended for them.

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In response, PayPal said in a statement that the company has fostered "positive change and significant social impact by connecting donors and charities", and that it is fully prepared to defend itself. It makes sense for PayPal to verify that charities aren't scams before it donates to them, of course, but the discrepancy between what they present on the website - "choose from over a million charities now" - and how it's actually done is harder to explain. If you are among the class of consumers described in the suit, you may eventually be eligible to participate in whatever compensation the court awards, if any.

Editor's note: This story is about a class-action lawsuit.

Please note that under our Privacy Policy, we can not provide you with the names of other consumers who may be similarly affected.

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