A new breed of companies are posing as charities and robbing the not-for-profit sector of tens of millions of dollars, the National Association of Charitable Recyclers (NACRO) says.

Legal proceedings are currently underway against a company which stole dozens of The Smith Family's clothing collection bins and repainted them with the name "Smith's Clothing Bin".

NACRO executive manager Kerryn Caulfield says this is just the tip of the iceberg.

She says more and more companies are employing similar, deceptive tactics around Australia, leading people to believe they are putting their unwanted goods in charity bins.

"Commercial collection merchants have coexisted with the charitable recycling industry for years - many trade in the lower-grade goods that the charities can't sell through their opportunity shops," she said.

"The worrying trend is the way by which the new breed are behaving.

"There is little conscience, and yes, it is increasing ... they are taking many tens of millions of dollars out of the collection stream."

Ms Caulfield says the public is being duped by commercial operators which portray themselves as charities.

She says recycling companies frequently pay a small annual fee to an organisation, like Breast Cancer Foundation Australia, for the use of its logo on their bins.

"The public are led to believe that their donations will be used for charitable purposes by the charity featured on the collection bin and/or collection bags that are dropped on householders," she said.

"In reality, a for-profit commercial waste collection merchant receives the donated goods."

She says while this is legal, it is diverting funds from charity-run community programs into the pockets of private company directors.

"Charities feed and clothe Australian men, women and children overwhelmed by life's hardships, and a significant number of these community programs are funded by the income derived from charitable recycling programs," she said.

"It is not illegal to operate a recycling business, but no company has the right to present itself or masquerade as a charity when it is not a charity."

Ms Caulfield says Australian charities like The Salvation Army, St Vincent de Paul, Lifeline, The Smith Family and The Brotherhood of St Laurence, which rely on the proceeds from their collection bins, have been "acutely affected".

"Stocks of quality clothing and household goods are short in all states," she said.

"Bag drops throughout Melbourne have stripped households of what they would have normally donated to charities - The Salvation Army has resorted to advertising for donations.

"Some of the for-profits even have the temerity to sell stock to the charities."

John Knowles from Good Samaritan Industries WA, a Uniting Church-affiliated charity, says he has 600 recycling bins around Perth which supply 25 op shops.

He says the money made goes towards the charity's community programs which help the disabled, homeless and people with drug addictions.

But he says the rise of commercial recyclers is reducing donations to his bins.

"The public should have confidence that its donation is going to a good cause and I think those donations should be going wholly and solely to a registered charity," he said.

"Generally we know that charities are trying to do the right thing - when you have a privately-owned company, a percentage of the money is not going to the charitable work but to the owner instead."

He says companies which are "genuinely cheating the public should be drummed out of business".

Sour grapes

But those within the commercial recycling industry, and charities which receive their annual donations, say it is sour grapes on the not-for-profit sector's behalf.

Allround Recycling is a Melbourne-based company which has recently sold its 150 collection bins around the city.

Its general manager, Robert Karavesov, says while their collection bins were operating over the past year, for the 12 years during and prior to that, Allround Recycling was also supporting charitable recyclers, which it continues to do.

He says he buys the surplus stock from charities which does not sell in their op shops.

"And our bins were collecting a very minute figure compared to what the charities were getting," he said.

Initially, the company's bins boasted large Breast Cancer Australia and Children First logos, accompanied with before and after images of clothed African children.

But prior to being sold off, the company worked with the ACCC to re-do the design, which now clearly states the company is a commercial recycling service and is a corporate partner of Breast Cancer Australia.

Mr Karavesov says it was never the company's intention to mislead people.

A spokesman from Breast Cancer Australia says the money from Allround Recycling goes toward achieving the charity's objectives.

"There is no doubt that businesses out there try to build a relationship with us as a self-serving way to generate more business for themselves," he said.

But he says he finds NACRO's stance "perplexing", and asked why the clothing bin business should be exclusively for not-for-profits.

He says it is "sour grapes" on NACRO's behalf.

"They had a stranglehold on an industry and now private entrepreneurs are coming in and making money out of it," he said.

A Children First spokeswoman says she believes if people are being misled it is because they are making a false assumption about a company.

She says Allround Recycling make a "substantial donation" to the charity, and that there is room for both companies and not-for-profits in the clothing recycling industry.