Avoid charity scams

Tips for charitable donors

Avoid charity scamsIn May of this year, the Federal Trade Commission levied charges against the Cancer Fund of America, Cancer Support Services, the Children’s Cancer Fund of America, and the Breast Cancer Society. These are legitimate charitable organizations that engaged in unethical donor solicitation strategies resulting in less than 3% of the money raised actually going to cancer patients.

Between 2008 and 2012, these organizations hired professional fundraiser organizations that solicited donations via telemarketing calls, direct mail and websites endorsed with the names of supposed cancer patients. The fundraisers then took a cut of 80% to 95% of whatever money they raised – retaining a total of $187 million for themselves. The FTC reports that while this is one of the largest charity scam cases it has ever filed, the tactics used to defraud donors and charity recipients are not uncommon.*

The following are tips to help avoid this and other potential charity scams.

To help mitigate fundraiser kickbacks, always send your contributions directly to the charitable organization – even if it was a professional fundraiser that initially contacted you. This will help ensure that 100% of your gift actually goes to the charity.

Some charities call potential donors and begin that conversation by remarking that the donor has given to the organization in the past. Or so they say. If you don’t recognize the charity, ask the caller to provide specific information regarding when and how much you gave in the past. Verify this information by researching previous entries in your checkbook or past credit card bills, or conduct a date, transaction amount or keyword search of your bank account online. Before giving, confirm for yourself that you’ve supported this particular charity before. If the caller can’t offer any evidence supporting that claim, consider whether you want to support an organization that does not retain accurate donor records – or may resort to deceit for solicitations.

Have you received customized mailing labels, generic greeting cards or other items in the mail along with a request for a donation? If so, consider how much that organization spends on overhead expenses to mass mail unsolicited promotional items. If you’re still interested in supporting the charity, it’s worth vetting what percentage of their donations actually goes to their mission and how much is spent on overhead. If you do receive labels or cards or other items, don’t feel guilty about using them despite the fact that you do not send the charity a donation. By using them, you give the organization exposure via their branded materials – thus making its investment not a total loss.

Another common scam tactic is for an organization to have a similar name as a well-known charity, but no affiliation at all. That way it can request a donation and you’re simply volunteering to hand over money to a fraudster. For example, the National Humane Society is not the same as the Humane Society of the United States. Just because two organizations sound similar doesn’t mean they are both charities; it’s up to individual donors to verify legitimacy. Be sure it is a 501(c)(3) charity and that your donation qualifies for a tax deduction.

It’s always important to vet any charity you’re considering. As a rule of thumb, look for at least 75% of an organization’s budget to be allocated to programs and services that support its mission statement. Researching a charity may seem like an awful lot of work, but there are ways to make the vetting process easier. For example, you can use a website such as CharityNavigator.org to both research potential charities and make an online donation.

And of course, you can always donate through the Raymond James Charitable Endowment Fund (RJCEF), where we ensure that the charity is a qualified organization under the IRS for you. You can also ask that your donation be anonymous and/or that your information never be shared.

In general when making charitable donations, it is wise to safeguard your personal information by contacting the charity or making a note on your check instructing the organization not to share your information. Personal data is a valuable commodity – both to charities and scammers – so do not respond directly to email solicitations or give such information to a phone solicitor.

As a final note, never let a charity’s representative – legitimate or not – bully or guilt you into making a donation. If it is well-run and has an established reputation, a charitable organization should not have to rely on pressure tactics.

*“The Seedy, Profitable World of Scam Charities,” The Atlantic, May 20, 2015.

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