On January 14, 2020, the New York Attorney General entered into an Assurance of Discontinuance (the “Settlement”) with PayPal Charitable Giving Fund (“PPGF”)—PayPal, Inc.’s charitable giving arm—to resolve issues raised during an investigation into PPGF’s 2016 giving campaign. The Settlement highlights the importance of adequate disclosure and vetting for third-party fundraising platforms that solicit charitable funds online.

PPGF is a 501(c)(3) nonprofit corporation that does business throughout the United States. It functions as a third-party fundraising platform that accepts contributions from individuals and then makes equivalent grants to charities selected by those individuals, at no cost to the donor or the charity. PPGF vets each selected charity before granting funds; if the charity does not meet PPGF’s vetting criteria, PPGF will grant the funds to a comparable charity that does meet such criteria. Prior to PPGF’s 2016 giving campaign, only charities that enrolled with PPGF, maintained a PayPal account, and satisfied PPGF’s vetting criteria (such charities, “Enrolled Charities”) were eligible to receive grants. A list of Enrolled Charities was accessible on PPGF’s website.

For its 2016 giving campaign, PPGF added charities that were not Enrolled Charities to the list of charities on its giving website (the “Cause Hub”). The added charities were on a list of 501(c)(3) charitable organizations provided by Guidestar USA, Inc. but were not enrolled with PPGF (such charities, “Unenrolled Charities”). After the addition of the Unenrolled Charities, a multistate group consisting of representatives of state Attorneys General, Secretaries of the State, and state consumer protection agencies from 23 states (such group, the “Multistate Group”) initiated an inquiry into PPGF’s disclosure and vetting practices.

In the spring of 2017, PPGF removed the listing of Unenrolled Charities from the Cause Hub to address the Multistate Group’s concerns, and PPGF fully cooperated with the Multistate Group in its inquiries. Ultimately, PPGF agreed to implement certain disclosure standards to ensure that donors have the information necessary to make informed decisions about their charitable giving.

Specifically, under the Settlement, PPGF agrees that it will:

  • make “unavoidable and prominent” disclosures that donors are making donations to PPGF and not to the donor’s selected charity, and PPGF will not use language implying that donors are making a direct donation to their selected charity. (Here, “unavoidable and prominent” means (a) the information is not included in an optional pop up window or on another page accessible by a link, and (b) the information must be located on a page that every donor must access prior to making a donation and in a position on that page that is in immediate proximity to a necessary field/button used by every donor)
  • make “unavoidable and prominent” disclosures to donors regarding fees charged for use of the PPGF platform, or the absence of such fees.
  • make “unavoidable and prominent” disclosures regarding the expected time frame in which grant funds will be disbursed to the selected charity.
  • make “unavoidable and prominent” disclosures that PPGF may redirect funds to a comparable charity under certain circumstances, and clearly describe such circumstances.
  • disclose that donors’ contact information is not shared with charities that are deemed ineligible to receive a grant.
  • notify donors when it redirects a donation to an organization other than the one the donor selected.
  • disclose whether the charity vetting process includes review for compliance with state charitable registration requirements.
  • ensure that charities listed on the Cause Hub are specifically identified as either Enrolled or Unenrolled, and explain what each designation means in practical terms.

PPGF must fulfill certain other requirements as part of the Settlement, including (a) providing biannual data to the Multistate Group regarding any redirection of grants to charities other than the ones selected by donors, and (b) making a $200,000.00 donation to the National Association of Attorneys General Charities Enforcement and Training Fund to cover costs associated with actions brought by state charities regulators and provide related training. The Settlement’s material terms are consistent with agreements entered into by PPGF and other entities comprising the Multistate Group.

In the wake of the Settlement, entities operating third-party fundraising platforms, and even charities that may receive funds via such platforms, should review  disclosure language to ensure that donors receive sufficient information and contributions are made as intended.

– Ahsaki Benion