If You’re Using PayPal For Charity Donations, Your Cause Might Not Be Getting The Money
Until your charity requests money, it can be held to generate interest and even given to another organization.
Over the past 20 years, PayPal has emerged as a convenient and universal way to pay, but if you’re using the platform to make charitable donations, you’ll want to check with the specific cause (especially if it’s a small one) to ensure that they’ve received your gift. Similarly, if you’ve sold anything on eBay with the proceeds going to a charity, your effort and contribution may be subject to the same obstacles described below.
A recent lawsuit, first reported by The Guardian, claims that the PayPal Giving Fund has held onto the funds donated to charities that aren’t registered on the platform and fails to notify them that further action is needed to collect the funds. The suit goes on to state that PayPal will then transfer the funds to an interest-bearing account, then give them to a “similar” registered charity if action isn’t taken by the original recipient.
If you’re on the receiving end of donations, rather than the giving end, this link can walk charities through the specific issues and fixes:
MT @NoKillSC: Does your org accept PayPal donations? Make sure you're registered so you can receive those donations https://t.co/LIfSnODe1W— Nonprofit Quarterly (@Nonprofit Quarterly) 1488462007.0
This issue likely won’t affect those giving to larger charities that are registered with PayPal, but rather smaller ones that don’t conduct as much oversight over the various platforms and notifications (if they come at all). PayPal claims to make an effort to reach the charities through conventional means (e-mail, mail, phone) to let them know that donations are in-hand and await action for distribution, but the lawsuit alleges that of the “millions” of charities PayPal claims are available for giving, only 29,000 or so are registered with the Giving Fund. The promised notifications for non-registered charities are what’s being contended, with the plaintiffs in the class action PayPal falls well short of their assurance to notify.
PayPal has issued some cagey wording, as Gizmodo points out, claiming that “100% of your donation will go to your chosen cause.” However, there’s a distinction between a “cause” and a “charity.” If your specified charity isn’t actively keeping an eye out for incoming donations, your money could be redirected to a different organization altogether.
If you’re running a small charity, the easiest thing to do to avoid this mess is to register, then, once registered, submit an inquiry about any earmarked funds that haven’t been transferred. A cursory search suggests that money is held in this sort of interest-bearing charity escrow for six months, then redirected to another charity of your “cause” (whatever that may mean).
Your money will still be as tax-deductible as you intended, but if you’re trying to support a specific organization, PayPal’s policies may keep you from doing so, especially if it’s a small charity.