PayPal is under fire after news broke that it allegedly “misled tens of thousands of people about charitable donations made on the company’s platform.” As a result, a class action lawsuit was filed on Tuesday in Illinois that claims “the PayPal Giving Fund would tell users they were donating to a specific organization of their choice,” when in all actuality the company was redirecting donation funds to a different charity without letting donors or original charities know.
PayPal is under fire after news broke that it allegedly “misled tens of thousands of people about charitable donations made on the company’s platform.” As a result, a class action lawsuit was filed on Tuesday in Illinois that claims “the PayPal Giving Fund would tell users they were donating to a specific organization of their choice,” when in all actuality the company was redirecting donation funds to a different charity without letting donors or original charities know. Understandably, this has more than a few people upset, primarily because many organizations likely missed out on donations because of what PayPal did.
In their defense, PayPal says their policies “allow for donations to be redirected,” though they deny that any donations that were redirected were done without notifying donors. They also deny that their actions earned them any interest.
Obviously, not all donations are being redirected. So what donations are being redirected, and why? Well, the lawsuit is only disputing donations made through the PayPal Giving Fund Platform, not necessarily “money donated to a charity that simply goes through a PayPal account.” Also, at this time it doesn’t appear that donations to large charities have been affected.
Wonder what the Giving Fund Platform is and why it’s the center of this fiasco? Well, right now the Giving Fund platform is accepting “donations to organizations that aren’t yet signed up on the platform.” However, as is acknowledged on PayPal’s website, it only distributes funds to “organizations that have a Giving Fund account” on top of their regular PayPal account. While most large national and international charities have both of these types of accounts, many smaller charities do not, and only have the standard PayPal account. The problem is that many of these smaller charities are still listed on the Giving Funds website, “without any indication that they aren’t set up to receive funds.”
Despite these allegations, PayPal has pushed back, claiming that when these smaller charities without Giving Fund accounts receive donations, “PayPal will contact the organization at regular intervals in order to enroll them. After six months, if they don’t enroll, the funds may be reassigned.” So it’s not like PayPal is doing this without at least trying to make things right, right?
Not according to the lawsuit, which claims “PayPal and the Giving Fund generally fail to inform charities that there are funds waiting for them.” To make matters worse, often times donors receive a “misleading confirmation that their donation went through,” while “PayPal accrues interest on the donation for six months before redirecting it to another group.” During those six months, donors have no reason to suspect their donations weren’t received by the charities they intended their donations for.
So who filed this particular lawsuit? Certainly, many people have been affected by this issue? Well, it was filed by a nonprofit, Friends for Health, and Terry Kass “on behalf of anyone who was affected by the practice.” Kass herself was personally affected by this issue when she “attempted to donate money to Friends for Health and a number of other charities,” but “only $100 of $3,250 actually went through to the organization of her choice.” How did she discover this? Well, it was during a chance encounter with one of the intended recipients, “a local legal aid clinic,” when she learned her donation wasn’t received. Immediately she contacted PayPal for an explanation, but was “told multiple times that her donations were delivered.” Later a PayPal employee finally explained to her that organizations need to register for Giving Fund accounts, or PayPal “would redistribute these funds to similar charities.”
Whether there needs to be better communication between parties or a change in policy is yet to be determined, but the current policy doesn’t seem very fair to donors. Hopefully, a resolution can be made soon.
Sources:
Lawsuit Alleges That PayPal Diverted Donations To Different Charities
PayPal Redirects Charitable Contributions Without Consent, Lawsuit Says
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