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PayPal Charity Site Accused of Rerouting Funds Minus Consent

PayPal Charity Site Accused of Rerouting Funds Minus Consent

PayPal Charity Site Accused of Rerouting Funds Minus Consent
The PayPal application is arranged for a photograph on a mobile phone (Photographer: Andrew Harrer/Bloomberg)

(Bloomberg) -- The PayPal Charitable Giving Fund was accused in a lawsuit of not telling donors that their gifts may never reach their intended charities if the organizations aren’t registered with the online payment platform.

An Illinois resident alleged that she used PayPal Holdings Inc.’s charity site to make $3,250 in year-end donations last year to 13 different charities, only to learn that 10 of the groups wouldn’t receive the funds because they weren’t registered.

The company doesn’t tell donors that unregistered charities won’t receive their donations, and it also doesn’t tell those groups that contributions have been made to them, according to the complaint. PayPal issues erroneous tax receipts for contributions when the money isn’t disbursed to the donor’s chosen organization, according to the complaint.

Thousands of organizations don’t even know that PayPal has listed them as eligible charities and that they can’t claim gifts unless they register, according to the complaint. If the groups don’t open PayPal accounts within six months, their donations are confiscated by PayPal and redirected to organizations of the company’s choosing, Jay Edelson, an attorney who specializes in consumer privacy litigation, wrote in the complaint filed Tuesday in Chicago federal court.

"Tens of thousands of generous individuals have made donations, after placing their trust in PayPal, that, unbeknownst to them, have never reached their chosen charity," according to the complaint. "Likewise, thousands of charities have been deprived of much needed funds they never knew were even intended for them."

The case is Friends for Health v. PayPal Inc., 17-cv-01542, U.S. District Court, Northern District of Illinois (Chicago).

--With assistance from Spencer Soper

To contact the reporters on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net, Janan Hanna in Chicago at jhanna31@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net, Peter Blumberg