PayPal joined the giving platform back in 2013 with the PayPal Giving Fund. This program allowed users to choose from a list of charities on PayPal’s website and make donations promising that 100% of the donation would be delivered to the intended charity. Primarily using eBay marketplaces, sellers could give some or all of their proceeds from sales in donations, buyers could add a donation to their purchase, and PayPal users could flat out make donations to charities of their choosing.
Sounds great, right? Well earlier this year a lawsuit was filed against PayPal for misrepresenting its relationships with nonprofit organizations and redirecting funds without consent. The lawsuit was filed in federal court in Chicago and it was requested that the suit receive a class action status on behalf of all charities and donors that were misled by PayPal’s actions.
On their website, donors are led to believe that they can give to over one million U.S. nonprofit organizations, but what isn’t made clear is that only nonprofits that have a PayPal business account and have registered with PayPal Charitable Giving Fund may be eligible to receive these gifts. According to the filed complaint only 29,000 nonprofits actually had registered accounts in 2015. If a donation is made to an unregistered charity the donation is held and neither the charity nor the donor is alerted. The suit claims that unprocessed donations are then redirected to a charity of PayPal’s choosing.
“Tens of thousands of generous individuals after placing their trust in PayPal have made donations, that, unbeknownst to them, have never reached their chosen charity. Likewise, thousands of charities have been deprived of much needed funds they never knew were even intended for them,” the suit alleges.
The claim identified a total of seven causes for action and requested 16 actions of the court ranging from certifying the complaint as a class action to forcing PayPal and its Giving Fund to make a complete accounting of funds donated and awarding actual, punitive, compensatory, and other damages to the plaintiffs. Also called into question was PayPal’s claim that 100% of the donations made are given to the selected charity.
In response to the allegations PayPal issued the following statement: “PayPal only recently became aware of this filling and we are reviewing the contents. PayPal and PayPal Giving Fund foster positive change and significant social impact by connecting donors and charities. We are fully prepared to defend ourselves in this matter.”
(Compiled from Class Action Suit Filed against PayPal’s Giving Platform, Michael Wyland from NonProft Quarterly and Class action claims PayPal diverted charitable donations to its own selections, Christopher Maynard from Consumer Affairs)