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By David Drake
Several news outlets reported recently that a class action lawsuit has been filed against PayPal for its handling of donations through its PayPal Giving Fund. Even if your nonprofit doesn’t use PayPal as its giving platform, this can affect your nonprofit.
What is the PayPal Giving Fund?
To be honest, I had never heard of the PayPal Giving Fund until this news broke. It functions a bit like a workplace giving campaign. Donors go onto the PayPal Giving Fund website and enter in either the name of a specific charity, a cause, or a geographic area, and a list of charities that fit that criteria appear. Donors can then make a gift directly to the charity from that list. PayPal proudly states that 100% of the contribution goes to the nonprofit.
So, what’s the problem?
The problem is this – the charities listed on the site were loaded by PayPal without notifying the nonprofit. The gifts are made to a 501(c)3 that PayPay has established, so they are responsible for providing the donor with a receipt. The suit alleges that PayPay does not release the funds to the charities unless they have registered with the site, even though they are listed. So, while your nonprofit is probably listed on PayPal Giving Fund, donations intended for your organization may not be getting to you. Worse, if the funds are not claimed in six months, PayPay “reassigns” them to other nonprofits that are registered! So, donations that should be coming to you are going someplace else, and your donors aren't being thanked and stewarded by you. If your organization isn't registered with the PayPal Giving Fund, it should do so immediately.
But wait, there’s more
Additional damage may be done to nonprofits who use PayPal as their giving platform, and many small nonprofits do because it is inexpensive and easy to set up. However, donors who catch a glimpse of the stories may think that donations made on your organization’s website through PayPay may have somehow been mis-directed. Donations made through the regular PayPay system are not affected by the PayPal Giving Fund issue.
Pay close attention to your online giving volume, and if it drops, consider posting a message on your donation page that explains the issue. Otherwise, when donors see the PayPal logo, they may head elsewhere. I know it is always a tough call to raise an issue before your donors ask about it, but I think in this case, it is better to be ahead of the curve.
Unfortunately, nonprofits don’t need any more news that discourages people from giving. PayPal set up its Giving Fund with good intentions, but as they say, the devil is in the details.