Giving Fund platform says it allows donations to ‘over a million charities’ – but few actually get funds because they aren’t registered with company, suit says

Charitable donations made through PayPal’s Giving Fund platform may never reach their intended recipients, a federal class-action lawsuit filed Tuesday in Chicago has alleged.

PayPal’s charitable platform, which the company says raised more than $7bn in 2016, claims to allow individuals to give directly to “over a million charities”. But only a fraction of those charities actually receive the donations, the lawsuit alleges, because they aren’t registered with PayPal. Donations made to non-registered charities are held by PayPal for six months before being transferred to other not-for-profit organizations, according to the suit.

“We have no idea where the money is going,” said Chris Dore, one of the attorneys bringing the suit on behalf of Terry Kass and the North Shore Health Center. “We are trying to just get the money where it’s supposed to go.”

“PayPal only recently became aware of this filing and we are reviewing the contents,” a PayPal spokesman said in a statement. “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.”

The suit stems from the experience of Terry Kass, an Illinois resident who used PayPal’s system to donate $3,250 to 13 local and national charities in late 2016. Kass had received an email from PayPal promising an additional 1% donation from PayPal if she used their platform, the suit states.

Kass searched for the charities she wanted – including the North Shore Health Center, Kol Hadash Humanistic Congregation, Chicago Foundation for Women, and the Highland Park-Highwood Legal Aid Clinic – and found a special PayPal page for each one. The PayPal sites promised that 100% of her donation would go to the chosen charity.

After making the donations, however, Kass learned from an employee of the legal aid clinic that her donation had not been received. Kass pursued the issue with PayPal and learned that 10 out of her 13 charities were not registered with PayPal Giving Fund.

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Not only did PayPal not notify Kass that her donations had not been received, but the company did not inform the charities that they needed to register in order to receive the funds intended for them, the suit alleges.

“As a general practice, neither [PayPal nor PayPal Giving Fund] notifies unregistered charities that they are holding donations for them,” the complaint states. “Instead, Defendants transfer the donations to an interest bearing account that inures to PayPal Giving Fund’s benefit.”

According to the complaint, PayPal told Kass that the payments company would “redistribute these funds to similar charities” if the unregistered organizations did not register within six months.

“There are thousands of people out there who believe that their money has gone where it’s supposed to go,” said Dore. “Most people will never find out that their money never got where it was supposed to go and the organizations are none the wiser, either.”

The complaint suggests that PayPal’s motive was to “force charitable organizations that might not have otherwise created PayPal business accounts to open and utilize such accounts in their daily business, thus generating revenues for PayPal” through its fees.