The nonprofit organization Friends for Health: Supporting the North Shore Health Center (GuideStar page) and Terry Kass (a woman who attempted to give money to the charity) have filed a class action lawsuit against Paypal’s Giving Fund. The plaintiffs allege that PayPal redirected donations without obtaining permission from donors.
PayPal tells donors that they can use the Giving Fund interface to donate to any charity of their choosing. However, PayPal didn’t make it clear that only charities with PayPal business accounts can receive those donations.
The complaint further alleges that charities that do not have business accounts are not properly notified when people have donated to their organization. PayPal holds onto these donations for 60 days and after that time slot has expired, the money is given to another organization of PayPal’s choosing. An excerpt from the 36-page courthouse document reads:
“[…] 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.”
In the case of Kass, she gifted $3,250 to 13 different nonprofits, including Friends for Health. However, only three of those nonprofits had PayPal business accounts. The other ten organizations never received her donations, and instead were regifted to other charities.
This also causes a tax problem. Upon donating through the Giving Fund interface, users are given a tax receipt that details how much money they gave and to which organizations. When PayPal redirects a donor’s funds, it renders that receipt inaccurate.
A PayPal spokesperson released the following statement about the lawsuit:
“PayPal only recently became aware of this filing 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.”