A class action lawsuit was filed against online payment company PayPal on Tuesday in Chicago, referring to the way it handles charitable donations. The suit targets the company’s charitable wing, the PayPal Giving Fund, which has allegedly been misleading its customers. Apparently, the funds they donate while thinking that they are helping the charities listed on the company’s homepage, are actually sent to other charities without either party’s knowledge.

The bigger issue is that some of the charities which are search-able through the Giving platform are actually not set up to receive donations through PayPal. In order to receive the funds, the organizations needs to have a PayPal business account along with a separate account with the Giving Fund.

If they fail to have any of these, or don’t set them up, they will never receive the donations. And that seems to be the case with several charities listed as beneficiaries on the PayPal Giving Fund page. The suit claims that the unregistered charities are also not being provided with any alert regarding the funds they have received through PayPal, nor are they being acquainted with the need to make an account to claim their donations.

Large national or international charity houses generally have a registered PayPal account, therefore the ones most affected by these actions are small organizations that work at local levels. The lawsuit claims that there are “hundreds of thousands” of these smaller charities, which have a hard time fund-raising, and just because they don’t have a PayPal account they are loosing their much deserved funds.

PayPal’s website lists those organizations and charities without their consent, says the suit. The suit also alleges that if the unregistered charities don’t clam their donations or register their accounts within six months, their funds get directed to some other organization chosen by PayPal,  without the donor being consulted at any point.

Lead plaintiff Terry Kass said that she donated a combined amount of $3,250 to 13 national and local-level charities using PayPal’s Giving platform, but out of them only three were registered with PayPal, but all of them had profile pages on the Giving Fund’s website. Due to this, just $100 went donated to the charities Kass selected, and the rest $3,150 aimed at local charities was withheld.

The suit notifies that Friends for Health, which is one of the organizations Kass aimed for, has never registered for an account with the PayPal Giving Fund, and still appears on PayPal’s website for accepting donations.

What is worth noting is that PayPal’s Giving Fund nowhere mentions the fact that they only make donations to the charities registered with them. And organizations still have a profile page, despite not being registered. Their Donation Delivery Policy also mentions that they try to contact the unregistered charities  “at regular intervals for a period of at least six months in order to enroll them.”

The lawsuit claims that they “often fail to provide notice” to the charities without legitimate accounts.

The plaintiff claimed that even though the unregistered charities are alerted about the funds and they register with a legal account, PayPal still continues to hold the funds for additional time in order to generate more revenue for itself.

And the last allegation is that though the donor are not anonymous, their names and identities are not provided to the organizations receiving the charity. After the confirmation provided to them, the donors think that the charity has been made, even though the firm is unregistered.

Considering all these issues, the suit says;

PayPal Giving Fund is a failed vehicle for matching donors and recipients, and instead stands as an obstruction to achieving the important goals of thousands of donors and charities worldwide.

The plaintiff wants the company to deliver all the withheld donations to the  appropriate charities, with interest where appropriate, along with the additional 1 percent donation in marketing materials. The want their identities to be revealed to the charities in case for future fundings as well as for receiving other updates.

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