PayPal charged with playing fast and loose with charity money in lawsuit

A proposed class action lawsuit filed in Chicago has accused PayPal of deception over charitable donations, when it diverted funds without informing the donor or the intended recipient, despite confirming the donation in emails.

Terry Kass, the lead plaintiff in the case, claims she used PayPal’s platform to give $3,250 to thirteen charities, including ten Chicago ones, in December 2016. Despite receiving an email confirming she had made the donations to the designated charity, she discovered the company failed to distribute the money to 10 of them. Only $100 was sent to three charities of her choosing, with the rest withheld by the company.

The lawsuit was filed in Chicago’s federal district court on Monday and accuses the internet payment company of systematic deception and potentially depriving charities of millions of dollars in donations, while donors are not acknowledged for their support.

The internet payment company with over 200 million accounts moved $354 billion in 57 currencies across more than 190 nations, generating a total revenue of $10.8 billion in 2016, according to its 4th quarter results.

The lawsuit claims PayPal's actions amounted to unjust enrichment, conversion, and a violation of consumer protection laws. It also accuses the company of misusing the brands and trademarks of the local charities.

PayPal touts its platform as an efficient way to contribute to charities and offers to add one percent to consumers’ donations. It also has a policy of diverting the money to other organizations if a recipient has not claimed the money after six months.

In response to the allegations, a PayPal spokesperson said the company is prepared to defend itself in the case.

“PayPal on 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,” the spokesperson added, according to Fortune magazine.

According to the complaint, “only three of thirteen organizations had a registered account with PayPal Giving Fund.” At the time of the donations, defendants didn’t inform Kass that ten of her organizations were not registered, and therefore would not receive the donated funds. The Defendants didn’t inform the charities about the donations or that in order to receive the funds they needed to register new accounts.

The complaint said the theft was discovered only when an employee of a legal clinic, one of the designated charities told the plaintiff they hadn’t received the money.

The plaintiff “contacted PayPal on multiple occasions and was repeatedly told that all of her donations had reached their destination.”

Later Kass found out the legal clinic had an account with PayPal.

PayPal lists a group of charities as "trusted" recipients in a database, but the suit found even if they are listed, it doesn’t mean they will receive the funds. Charities must have two accounts — a giving fund account, and a business account — in order to receive donations.

PayPal's giving fund generates more than $35 million in donations each year to benefit charities in the US and UK, according to its website.