The holidays are just around the corner, which means the season of giving is nearly upon us. But a recent action taken by the FTC shows just how important it is for consumers to be cautious when it comes to the organizations and causes they choose to donate to.
This week, the agency -- in coordination with regulators from New York, New Jersey, Minnesota, and Virginia -- secured a settlement with a charity funding operation that allegedly defrauded consumers out of millions of dollars in donations.
The settlement names four defendants who ran several charities that were supposed to raise money for veterans, retired and disabled law enforcement officers, breast cancer survivors, and others in need. However, they allegedly pocketed up to 90 percent of these donations to pay themselves. Regulators say the sometimes less than two percent of proceeds went to the groups that were supposed to receive the funds.
As part of the settlement, the charity fundraising business is being forced to shut down and the defendants will have surrender tens of millions of dollars to the aforementioned states. The FTC says these funds will then be redistributed to legitimate charities “that perform services that mirror those promised by the sham charities.”
“This action puts fundraisers on notice: the FTC will not only shut down sham charities, it will aggressively pursue their fundraisers who participate in the deception,” said Andrew Smith, the director of the FTC’s Bureau of Consumer Protection.
Do your research before donating
This case highlights just how important it is for consumers to do their research before donating money to a charity. New York Attorney General Letitia James says that establishing trust with a charitable cause through proper vetting can ensure that your generosity isn’t being exploited.
“My office will continue to work with partners such as the FTC and other states to take action that protects donors and charitable entities,” she said.
Smith says consumers can use the FTC’s website at this address to learn how to spot a potential charity scam.