Security & Fraud

PayPal Facing Class Action Lawsuit Over Charitable Donations

PayPal is facing a potential class action lawsuit over how the payment company handled charity donations.

According to a court filing by law firm Edelson PC, Edelson filed what is seen as a first-of-kind consumer class action in Federal District Court in Illinois, contending PayPal and PayPal Giving Fund violated a slew of laws. The lawsuit, which was brought forth on behalf of individuals and a nonprofit organization, claims that some of the donations made through PayPal Giving Fund didn’t end up at the nonprofit organizations that the consumers making the donation specified. The lawsuit alleges the consumers have no clue where the money they donated actually landed.

In 2016, the PayPal Giving Fund processed around $7.3 billion in contributions, according to Edelson. The law firm argues in the suit that consumers don’t know where the money ends up, because PayPal allegedly won’t give the donations to nonprofits unless said nonprofits have a registered account with PayPal and the PayPal Giving Fund. What’s more, the lawsuit contends nonprofits that don’t register are never told that there are donations waiting for them, and, after a lapse of six months, donations that aren’t claimed are taken back by PayPal and redirected elsewhere.

According to a report in CNBC, one plaintiff said out of the $3,250 in donations she made in December to 13 different charities, only $100 was distributed between three charities that she actually chose. The rest is sitting with PayPal, according to the lawsuit. PayPal didn’t respond to media requests to comment.

While it may be facing a lawsuit over where it’s directing donations, PayPal saw a strong year in 2016 in terms of charitable giving, with the company saying during the holidays it surpassed $971 million. In the same year, PayPal said it processed $7.3 billion in contributions, which marks an 11 percent increase in donations to charities. PayPal also found that eight million users in 181 countries gave to more than 282,000 charities, which resulted in 2016 becoming the biggest year for PayPal donations at the year’s end.

Paypal today (Mar. 2) issued the following statement: “PayPal recently became aware of this filing related to our holiday giving campaign, and we are reviewing the contents. To be clear, PayPal Giving Fund has not redirected any of the charitable gifts donated during our holiday campaign. PayPal and PayPal Giving Fund have a long history of fostering significant social impact by connecting donors and charities. We work to ensure as many charities as possible can benefit from our global donation campaigns. When PayPal Giving Fund receives a donation to benefit a charity that hasn’t enrolled, we contact the charity to notify them of the gift and help them enroll. PayPal Giving Fund does not hold any donations in interest bearing accounts, and therefore earns no interest on any charitable donations. We are disappointed by the lawsuit, and we are fully prepared to defend ourselves vigorously in this matter.”

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