
PayPal Redirects Charitable Contributions Without Consent, Lawsuit Says - jayzee
https://www.nytimes.com/2017/03/01/technology/paypal-giving-fund-lawsuit.html
======
paulmd
Remember when in the aftermath of Katrina, Paypal seized donations fundraised
from Something Awful intended for the Red Cross for "fraud" and then refused
to release them even when everyone told them they knew full well what was
going on? After they got called onto the mat they finally agreed to release
the funds but only to one of their own selected list of charities, all of
which had vastly greater overhead expenses. In the end Lowtax finally had to
tell them to refund everyone and have them make individual donations instead.

Paypal is shit, the best thing you can hope is that you fly under the radar,
because the horror stories are very real. They are not a bank, they are an
unholy, unregulated "money transmitter" and if they choose to screw you there
is nothing you can do about it. Have fun with your mandatory binding
arbitration.

~~~
aleksandrm
PayPal is a nightmarish company. I've lost ~3000 USD to PayPal when I was
doing small business back in early 2000s. Their "buyer first" policy had
screwed us big time, even though we have provided all the documentation to
contest the bogus claims. PayPal froze our money, and terrorized me for a
whole year with collections agencies. It was awful. I am out of 3K dollars,
and I have stopped using PayPal since.

~~~
jliptzin
Same here, about $2,000 they claim I owe them because they stupidly decided to
refund money to an obvious scammer. Luckily I had already withdrawn the money.
This happened when I was 15 and since then I am banned for life from Paypal -
every time I tried opening up a new account they would eventually ban me.
However during the last 15 years I have started multiple successful businesses
and used alternatives like Stripe instead of Paypal and they are missing out
on literally hundreds of thousands of dollars in fees.

~~~
kevin_thibedeau
At 15 you aren't allowed to have an account with PayPal and were technically
defrauding them with a false birthday to get in. It isn't much of a stretch
for them to ban you for that alone. Even if you were emancipated, it would be
nearly impossible to prove that to a web business with no allowances for
unusual circumstances.

~~~
jliptzin
Maybe they changed the policy since 1999? I don't remember lying about my age
at the time, and they had my SSN. Plus my age never came up as a factor during
my fight with them about the ban.

------
Animats
PayPal is going to lose this one. They're acting as a charity fund-raiser,
which is highly regulated due to a long history of flaky fund-raising.[1]
PayPal is probably going to claim they're a special snowflake because they're
a payment processor or something, but that probably won't fly, because PayPal
claimed to the public that they were collecting funds on behalf of a charity.

[1] [https://oag.ca.gov/charities](https://oag.ca.gov/charities)

------
jakobegger
Why is it, when an established company does something like this, the headline
talks about "redirecting contributions", instead of calling it what it is?

Why not just say "Paypal Defrauds Donors"?

~~~
linuxkerneldev
I remember that several Xorg developers alleged that Paypal robbed Xorg. I
think Xorg never got anything back.
[https://ubuntuforums.org/archive/index.php/t-1417033.html](https://ubuntuforums.org/archive/index.php/t-1417033.html)

I recall reading a bible quote or might have been another religious book. It
said, when a powerless man breaks the law, a crime has been committed, but
when a powerful man breaks the law, the law was unclear.

~~~
philipov
Because when you have lots of money, you can afford to use the threat of
expensive libel lawsuits to keep people in line. The prospect of dragging
someone into litigation is enough of a chilling effect they don't even have to
commit to it for it to be effective.

~~~
conflagration
Like a Universal Health Care you could have a "Universal Law Care", a per se
legal costs insurance for every natural person. You might have to pay low
fares measured in daily rates calculated from your rate of income/wealth for
any legal action you take, but nothing that would put your way of life at
risk. With automated processes in law becoming more and more of a thing, it
would be possible to handle cases faster and on a much finer grained basis,
without sucking so much time and resources. Think of a fully-automated
arbitration process. There would still be "manual law", where you could always
escalate to, if you think Robo-Judge is wrong. Meanwhile wet-ware judicature
would also get much more efficient/cheaper by help of automation (I think a
wide-spread acceptance of teleconferencing into court would also help).

In a scenario like this, such obvious fraud would not be a thing anymore imo.
And we could be there soon (except maybe for the Universal Law Care part).

~~~
notahacker
Legal aid (and no-win, no-fee class action lawyers for "obvious" cases)
already exists. But that doesn't mean that corporations don't have deeper
pockets and a stronger interest in winning in many circumstances. And unless
you've got hard AI, RoboJudge isn't going to understand the intricacies of how
PayPal markets its donation service to consumers and distributes revenues and
whether its disclaimers were sufficiently clear and obvious to its intended
audience

------
Nightshaxx
So my parents run a non-profit and a recently letter we got from Amazon Smile
explains what is happening here. Amazon Smile is a service were you can choose
a charity for Amazon to donate to. When you shop at Amazon, a small percentage
of that money goes to the selected charity.

Recently they got a letter in the mail explaining they had been chosen as
recipients of this Amazon Smile money. The thing is, they never chose to be
featured on Amazon Smile. Amazon used some database of non-profits (that they
had never heard of) in order to present options to customers, then notified
the non-profits later. The letter specifically said that in order to collect
the money, they needed to create an account with Amazon smile.

PayPal is probably just pre-populating their list of charities, failing to
fully notify recipients of the donations, then saying "Whoops, I guess we got
to do something with the money."

~~~
rspeer
Dammit. I've been using Amazon Smile to donate to a small non-profit. It's
obscure enough that I was surprised to find it listed as an option, but given
that it was there, I just assumed that they would get the money set aside for
them.

Is Amazon doing the same thing (withholding donations from charities that
don't register for their service)? Is there any way to check?

~~~
Nightshaxx
"If you do not register your charitable organization, including providing
accurate bank account information for an electronic transfer, the AmazonSmile
Foundation will still track and store donations earned in each calendar
quarter. Once you’ve registered your charitable organization, your
organization will be eligible to receive in the next donation cycle all
donation amounts that were previously allocated to your organization and were
not subject to reallocation under the Participation Agreement."

 _but_

"Please note that donations that have been allocated to an unregistered
charitable organization from customers that made their first supporting
purchase more than eight full quarters ago and have not been distributed will
be reallocated to other registered charitable organizations."

~~~
rspeer
Sounds like exactly the same situation as PayPal, and there's no way for me as
a customer to check who's actually getting the donation, right?

------
djrogers
This looks really bad for PayPal.

"It did not have an account with the Giving Fund, even though its profile page
there included its logo, mission statement and tax identification number."

TLDR; PayPal is soliciting donations for over a million charities, most of
whom are unaware of this.

~~~
MichaelBurge
It sounds like they already have a team manually collecting information on
charities. It wouldn't be so unreasonable for them to manually write a check
to the actual charity after 6 months with no collection, which would take most
of the meat away from the lawsuit. The free money would probably help their
conversion rates with this trick, too.

~~~
BHSPitMonkey
> It sounds like they already have a team manually collecting information on
> charities.

Probably not. There are many online databases of registered charities already,
and I wouldn't be surprised if new ones get scraped into them automatically.
It seems likely that PayPal would have used an already existing dataset.

------
lolc
At least some of the donations would have been made directly to charities had
Paypal not advertized in their name. So charities who weren't informed,
couldn't get or didn't want a Paypal account were deprived of donations.

They did the whole thing to get people to use Paypal but didn't want to put in
the effort to run it properly. In effect they ended up defrauding charities.
If you put up a sign that says "accepting donations for charity X" and then
don't make every effort to donate the collected money to X, it's fraud.

"Paypal accused of defrauding charities" would have been the appropriate
title.

------
RichardHeart
Using charities legally registered names and goodwill to acquire money into
your business, with literally no connection whatsoever to those legally
registered entities is the definition of fraud.

Imagine you started to collect on behalf of the red cross, directly to your
personal bank account, then sent the red cross a letter, letting them know
that if they wanted to register with you and accept your terms, you might give
them some money that you fraudulently collected by abusing their name and good
will.

Fuck PAYPAL

------
uladzislau
So basically PayPal itself would call it fraud if somebody else would be doing
it, right?

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jfim
It looks like that the Humble Bundle is also affected by this. On their
webpage, it says "Charitable contributions administered by PayPal Giving Fund"
and "PayPal Giving Fund retains ultimate discretion and control over the use
of the donations it receives from Humble Bundle."

Is there a way to know which charities are registered with Paypal?

~~~
jeff18
Humble Bundle co-founder here. This does not apply to us. The lawsuit refers
to a feature PayPal Giving Fund launched a few months ago on their own
website, to let people pay charities that are not yet registered.

On our side, for charities that are paid via PayPal Giving Fund, we require
them to be fully onboarded. For our "choose your own charity" feature, which
lets you customize which charity you are supporting, we only allow our
customers to choose charities that are fully registered with PPGF. You can
verify this by noting that we only support a fraction of the charities listed
on PPGF.

Why use PPGF (or Tides.org, our backup) in the first place? There are
regulations that require you and the charity to do a fair amount of paperwork
and register with various states. When you are tiny, you can probably fly
under the radar, but when you are approaching $100M raised for charity, it is
a good idea to be fully compliant.

PPGF is an easy way to maintain sanity, because we can focus on fully
complying with every state with the PayPal Giving Fund 501(c)3. PPGF then
handles maintaining compliance with the states (+ UK) on their side.

However, for this to actually legally work, the PPGF needs to retain control
over the funds, hence the scary disclaimer on the site. If they didn't
actually pay a charity we work with, which has never happened, we would
obviously let the customer know and make it right. We will be updating the
disclaimer next week to be less opaque.

~~~
jfim
Thanks, that makes a lot of sense! :)

------
dandelion_lover
PayPal is long known for its fraudulent behavior. Here is a good list of
references:

[https://minifree.org/paypal/](https://minifree.org/paypal/)

------
ploggingdev
I think this (charity donations) is one of the perfect use cases for the
blockchain. To be clear, I am not suggesting Bitcoin, but the underlying
blockchain technology.

Having publicly visible transactions will be a huge boost to transparency and
shady practices like those described in the article just won't fly. Every
other month a news article about banks exploring blockchain tech keep popping
up in the media and I hope banks find a way to incorporate blockchain
technology into the existing system.

~~~
eximius
Blockchain technology is (nearly) useless without the blockchain being public.
Banks need stronger distibuted consensus primitives than theyre using now, but
blockchain is overkill.

~~~
detaro
It would be interesting to figure out how much of the process you could make
public without compromising the privacy of the donors too much.

How much additional risk would be added by just publishing a log of all
donations, with just the sender anonymized (with the sender knowing or even
choosing the id, so they can verify their donation went through?), and how
could that be mitigated?

~~~
z3t4
With Bitcoin it is almost impossible to figure out who an account belongs to.
It's however easy to follow the money as every transaction is public. So while
you can see what the charity does with the money, and also confirm that they
received it, it's almost impossible for the charity to figure out who sent the
donation.

An account in Bitcoin is just a long random number. And you can create as many
accounts as you like. In order to find out who the account belongs to you have
to trace back the money to an exchange, and not only hope they will cooperate,
but also that they have not deleted the records of the transfer.

------
yaur
It seems to me that the donors are the little fish here and that charities
who's logos were used with the intent to deceive the customer/doner are the
ones that can eat PatPal alive.

------
everybodyknows
Given the founder's opinion, caught on video, that "single-digit millionaires
have no effective access to the legal system", perhaps they weren't too
concerned.

[https://theintercept.com/2016/10/31/trump-fan-peter-thiel-
sa...](https://theintercept.com/2016/10/31/trump-fan-peter-thiel-says-single-
digit-millionaires-have-no-effective-access-to-our-legal-system/)

But this offense will tried in a different courtroom, the same that VW and
Uber have lately been 'splaining themselves in.

------
bfuller
Whoever owns PayPal must have had experience running an extortion racket

~~~
Analemma_
I'm just glad Y Combinator would never do business with a person like that.

~~~
hkmurakami
Don't the PayPal mafia all hate the current PayPal?

------
TrinaryWorksToo
Man, I donated through this. I didn't know the charity wouldn't get the money.

~~~
Gibbon1
You could write a letter demanding proof that they directed your money
properly or refund it.

------
intopieces
They picked the perfect plaintiff to lead this fight. A woman who did her due
dilligence -- compared PayPal's website to the charity websites, donated a
significant amount of money, then followed up with those donations. Unless
PayPal can prove they repeatedly attempted to disburse the money to the
charities by encouraging them to open an account, I don't see how PayPal can
come out on top with this one.

Truly a garbage company.

------
tyingq
The actual lawsuit: [https://www.scribd.com/document/340533057/PayPal-
Complaint-F...](https://www.scribd.com/document/340533057/PayPal-Complaint-
Feb-28)

Aside from the contributions themselves, they are seeking $1,500 per occurance
in "treble damages" and an unspecified amount for punitive damages.

------
nannePOPI
If a human were to do something like this he would get prison time. Instead
since it has been done by "a company", nothing will be done. I wish we, the
humanity, would start to treat limited liability only as a financial tool. If
something like this is done, it's not the company that must be sued, but the
people who made it.

~~~
mikeash
Maybe companies should be "imprisoned" as well for things like this. Obviously
you can't actually put them in prison, but you could force them to cease
operations for a period of time, which is effectively what you do to a person
when you imprison them.

~~~
greenyoda
Unfortunately, this also hurts the employees of the company, most of whom had
no connection to the criminal act. I'd rather hold the decision-makers who
perpetrated the crime personally responsible.

~~~
mikeash
That's no different from imprisoning individuals, where their family or anyone
else who depends on them gets hurt. If you depend on a criminal then you'll
suffer when they're punished.

------
davidgerard
How is (a) claiming you accept donations on behalf of a charity and (b) not
passing them on anything other than blatantly fraudulent? Surely at the least
those charities have a claim against PayPal as well.

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partycoder
It seems this needs to be appended to
[https://en.wikipedia.org/wiki/PayPal#Criticism](https://en.wikipedia.org/wiki/PayPal#Criticism)

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solotronics
if you have been screwed by PayPal please consider Bitcoin. I started
accepting Bitcoin for various things and really love being fully in control of
my money. there are no intermediaries!

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throwawaylalala
If they are a money "transmitter", then how are you allowed to keep a balance?
I am ignorant of the lawsaround that, but it seems that's a womp rate sized
hole?

------
mayyuen318
So it is kind of hijacking those charities to be their members?

------
bostand
Paypal is evil, but what are the alternatives?

AliPay? WebMoney? Bitcoin??

~~~
happywolf
The good'ol cash or physical check will always work. Don't believe so called
the 'new money': you lose all control of your own money and at someone else's
mercy.

~~~
innocenat
I doubt anything physical would work if you are on different continent.

~~~
happywolf
Then using a credit card will be the best bet as you can file charge-back.

