PayPal Giving Fund Under Legal Fire

PayPal's Giving Fund is the subject of a lawsuit.

Photo: Gil C / Shutterstock.com

PayPal is facing a lawsuit over its Giving Fund platform, which plaintiffs maintain isn’t delivering their money to the charities it promises. The platform purports to give 100 percent of donations to the charity indicated by the donor, and in some cases offers a 1-percent match. But that doesn’t seem to be working out.

According to a lawsuit filed on behalf of Terry Kass and the North Shore Health Center, what is happening instead is that charities that are not registered with PayPal aren’t receiving their money. PayPal holds donations made to non-registered organizations for six months, then, according to the lawsuit, they are transferred to other nonprofits.

Essentially, Kass used PayPal’s system to donate more than $3,000 to a number of local and national charities in late 2016. She had received an email promising that PayPal would donate an additional 1 percent if she used their platform. She found a special PayPal page for each of the organizations to which she wanted to donate and did so. Later, Kass learned that her donation to one of those organizations had not been received. She got in touch with PayPal and learned that 10 of the 13 charities to which she had donated were not registered with the PayPal Giving Fund, and thus, they had not received her donations.

Furthermore, the plaintiffs in the suit were not notified that their money wasn’t going to their designated charities, and the nonprofits in question were not notified that they needed to register with PayPal in order to receive this money.

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

The complaint also 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 the company’s transaction fees.

“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.”

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