Lawsuit: Donations made on PayPal may not go to charity of your choice

When you donate to a charity using PayPal, how can you be sure your money is going to the right place?

That’s the big question PayPal will have to answer as it faces a class-action lawsuit alleging that donations made on its platform are being diverted to different charities — or not reaching them at all.

“On its face, PayPal Giving Fund is an admirable endeavor; however, in practice, it falls woefully short of that mission on numerous fronts,” says the lawsuit, which was filed in Illinois on Tuesday.

In the lawsuit, plaintiff Terry Kass said she made $3,250 in donations last year to 13 charities using PayPal, but later learned that 10 of the groups wouldn’t receive the funds because they weren’t registered with the company’s Giving Fund. However, Kass claims the unregistered charities were listed as potential donation recipients “without their knowledge or consent.”

San Jose-based Paypal “only recently became aware of this filing and we are reviewing the contents,” a spokesman told SiliconBeat in an email Wednesday. “We are fully prepared to defend ourselves in this matter.”

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.”

The plaintiffs have a problem with that.

From the lawsuit: “Without any form of notice, if the customer’s chosen charity doesn’t establish therequisite accounts and subsequently claim the donations within six months, Defendants take control of the money and donate it to an organization of their choosing without regard to the intention, beliefs, or desires of the donor.”

Kass and co-plaintiff Friends for Health, one of the charities she wanted to donate to but which did not receive her donation, say that PayPal fails to inform potential charity recipients that they need to register, and that “thousands” of charities have therefore missed out on donations. They are asking PayPal to distribute the donations, plus interest.

“We have no idea where the money is going,” said Chris Dore, one of the plaintiffs’ attorneys, according to the Guardian.

In addition, the class-action lawsuit accuses PayPal of misrepresenting its relationships with the charities it lists on its site; says the company fails to notify charities it is holding donations for them; and that PayPal benefits from accruing interest on the funds it holds for six months before diverting them.

(New) A PayPal spokeswoman sent SiliconBeat an updated statement Thursday, saying that the “Giving Fund does not hold any donations in interest-bearing accounts, and therefore earns no interest on any charitable donations.” She also said that “when PayPal Giving Fund receives a donation to benefit a charity that hasn’t enrolled, we contact the charity to notify them of the gift and help them enroll. ” (End new)

Last month, PayPal announced that it facilitated more than $7 billion in charitable donations in 2016.


Photo: An exterior view of PayPal offices in San Jose in 2011. (Paul Sakuma/AP)


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