On February 28, 2017, a complaint was filed against PayPal in a proposed class action lawsuit related to charitable donations. PayPal provides online-payment processing services, including enabling customers to donate money to charitable organizations. PayPal Giving Fund is a charitable organization that processes and distributes the charitable donations made through PayPal.
The complaint alleges, among other things, that PayPal lists charities on its Web site that aren’t registered with PayPal to receive donations, and a donation to an unregistered charity instead can be redirected to another charitable organization selected by PayPal Giving Fund without notice to the donor or to the intended charitable organization recipient.
PayPal, in a statement to CNBC, responded that the PayPal Giving Fund does notify the intended charitable organization of the donation if the organization has not yet registered with PayPal. There is a six-month period for the charitable organization to register with PayPal and claim the donations.
Page 4 of the complaint alleges that an individual donated $3,250 to thirteen different national and local-level charitable organizations through PayPal in, but only $100 of that amount (3% of the donation) was delivered to the charities the donor selected.
According PayPal Giving Fund’s 2015 IRS Form 990, they received $36,958,614 of contributions, gifts, and grants in 2015; they paid out $29,120,849 of grants and other assistance to domestic organizations and governments in 2015; and they paid out $7,694,521 of grants and other assistance to foreign organizations, governments, and individuals in 2015.
You can read a copy of the February 28, 2017, complaint here: Friends for Health v. PayPal complaint.