PayPal sued over alleged diversion of charitable donations from intended recipients

A class-action lawsuit had been filed against PayPal in Chicago over way the company handled charitable donations.

According to the suit, the company's charitable arm, the PayPal Giving Fund, was misleading consumers who believed they were giving directly to the charities listed on the company's homepage, but whose funds at times were redirected to different charities without their  knowledge.

The charities that PayPal listed on its "Giving" platform, and which were searchable through its database, were actually set up to receive donations through PayPal. To accept the funds, the organisations needed to have a PayPal business account and a separate account with the PayPal Giving Fund.

In the event, they did not have these they did not receive the donation.

According to the suit, besides this, the unregistered charities were not being alerted that they had received a donation through PayPal or that they needed to create an account to accept the money.

According to the lawsuit, money marked for specific charities through PayPal's Giving Fund was often redirected to other causes when the charity it was meant for did not have a PayPal account. The Giving Fund allowed users to donate to over a million charitable organisations, and PayPal encouraged donations with perks like a 1 per cent matching donation from PayPal.

According to the lawsuit filed in the Federal District Court of Northern Illinois, the smaller, local charities that were not PayPal-savvy lost out on donations. In case of failure to set up an account within six months of receiving a donation, the funds were redirected; the policy was laid out by PayPal online.

"On its face, PayPal Giving Fund is an admirable endeavor; however, in practice, it falls woefully short of that mission on numerous fronts," the complaint said.

PayPal said in a statement to The New York Times, ''PayPal and PayPal Giving Fund foster positive change and significant social impact by connecting donors and charities. We are fully prepared to defend ourselves in this matter.''