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Paypal Sued for Alleged Misuse of Charity Donations

By William Vogeler, Esq. on March 01, 2017 | Last updated on March 21, 2019

No good deed goes unpunished, including those good deeds you can't account for.

That's the problem facing PayPay and its PayPal Charitable Giving Fund. The company is being sued for failing to account for funds that users donate to charities through its website.

The class action lawsuit, filed in Chicago's federal district court, does not allege that PayPay takes the money and runs. Rather, it says PayPal takes the donations intended for certain charities and then gives it to other charities.

Pay Who?

PayPal offers its platform as an efficient way for users to make donations to trustworthy organizations. PayPal offers to add 1% to many consumers' donations. The lawsuit, however, says the company is not as efficient as advertised.

"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," the complaint says. "Likewise, thousands of charities have been deprived of much needed funds they never knew were even intended for them."

Terry Kass, an individual plaintiff in the case, says she donated $3,250 to thirteen specific charities through PayPal. Kass said the company emailed tax receipts to document her donations, but PayPal failed to distribute the money to ten of the charities.

"Connecting Donors and Charities"

The problem for PayPal is that many charities listed on its website do not have accounts with PayPal, which is required for donations to be processed. Instead of notifying those charities when people intend to donate to them, the suit says, PayPal redirects unclaimed donations to organizations of its own choosing.

PayPal, saying it is reviewing the complaint, responded with a statement.

"PayPal and PayPal Giving Fund foster positive change and significant social impact by connecting donors and charities," the company said. "We are fully prepared to defend ourselves in this matter."

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