After nearly 20 years in the bankruptcy business, I am often pleasantly surprised at how truly generous my clients are. Rarely do I have a bankruptcy client who does not have some history of charitable giving. They may strain to meet family obligations, overcome job layoffs, and deal with unexpected expenses like car problems, yet many continue to give. Every time I see this, it renews my faith in the essential goodness of people. It is important to me that the hard-earned money people give so generously be correctly used, and not be stolen by charlatans cruelly masquerading as charities.
Up to half of charitable giving in the U.S. occurs in November and December of any given year. Scammers know this and intensify their efforts to trick you out of your well-intentioned donation. If you are considering a donation to an unfamiliar charity, consider checking that charity’s grade on a charity vetting service like charitynavigator.org. Charitynavigator.org is a well-respected watchdog that identifies some, but not all, ”ineffective” charities and can occasionally identify a “phishing” criminal organization posing as a charitable organization.
Where Money is Freely Given, There You Will Also Find Those Who Prey on Your Good Intentions
We can classify charities into three groups. The “good” charities are those in which at least 75% of the money collected is actually used for the underlying charitable purpose or cause.
The “ugly” classification are not always all bad, but can be termed “ineffective” charities. “Ineffective” charities are those which consume a major proportion of donations in administrative fees, marketing costs, and salaries, leaving little money to distribute to the underlying charitable cause. Consuming more than 25% of donations in administrative, marketing, and salary expenses is considered “ugly”.
When considering a donation to a new, unfamiliar charity, you should assure yourself that your money is not at risk by taking some time to research the charity. That way, you can avoid “bad” phishing fraudsters who would steal from you, and also bypass “ugly”, ineffective charities that waste your money. In order to help you protect your best intentions during this holiday season from being dashed to pieces, I’ve listed some of the favorite charitable areas that holiday season scammers target below. At the end of this article, I’ve provided a list of five investigatory tools, including charitynavigator.org, that will help you vet a new charity. Special thanks to the excellent website scambusters.org for significant contributions to this article.
Police and Firefighter Charities: Approach With Caution
Not all police and firefighter charities misappropriate donations. Sadly, some do, sullying the good names of brave first responders who selflessly answer calls for help every day. Charitynavigator.org identifies a number of such police and firefighter charities as “ineffective” charities that pay large salaries to operators and spend lavishly on marketing operations, leaving little to go towards the intended cause.
If you aren’t completely sure that the first responder charity that interests you is in the “good” classification, then it may be worth asking for written “effectiveness” materials before donating. Also consider that if a particular police or fire department is identified as the beneficiary, then contact that organization’s outreach coordinator or public relations office to make sure that the charity in question is one that the organization is familiar with.
If You Plan to Donate a Car, Carefully Research the Charity
Charities that offer a “donate a car” option often uses a middleman who collects, reconditions, and then sells the donated cars, usually at an auction. The middleman takes first cut at the proceeds in order to recoup the costs to get the car ready to sell, and turns over the net sale proceeds to the charity. The problem is that these middlemen may not be honest. The middleman may intentionally disable a car to claim that it needed their towing services and repairs, fees and overhead that are deducted from the sale proceeds, leaving less money for the charitable cause.
How can you donate a car and ensure your donation is not abused? Look for a charity that will actually use the car instead of just selling it. You might donate it to a vocational school program as a “laboratory car” for kids learning the automotive trade. Some organizations like the Goodwill or Salvation Army might actually use the car to deliver items or meals. Another alternative is to find a suitable family in need that really could use the car in their daily lives. To avoid a messy transfer process for yourself and the worthy family, you may be able to arrange to donate the car through a charity. The charity may be able act as a legal conduit to ensure that you receive a fair tax deduction for the value of the car if you itemize deductions.
Also consider just selling the car outright, then donating the proceeds to a well vetted charitable cause. If you are too busy to market the car, some car lots will accept cars for consignment sale, a more transparent method than donating the car to a charity since the consignment fee for the car lot sale is known up front.
Unsolicited Charity E-Mails That Tug at Your Heartstrings May Pull Everything Out of Your Wallet
Most “real” charities do not use unsolicited e-mail campaigns to generate new donations. If you receive unsolicited email from the “American Red Cross” that asks you to click on a link to make a donation, be wary. The website you click through to could be an official looking but phony lookalike website that asks for credit card data, social security number, and other personal information. Dead giveaways include misspellings in the text of the email, links that seem too long or don’t contain the name of the charity before the “top level domain” portion—the portion before the “.org”—or web addresses that don’t end in familiar “.org” domains, but instead end in “.ru” or other foreign domains.
Well known legitimate organizations like the American Red Cross are so well known that criminals have created clone sites that exist only to capture your data and steal as much money as possible, and your identity, too. If you do receive an unsolicited “American Red Cross” or other charitable sounding email asking for donations, and you are moved to donate to the cause, there is a way to donate while avoiding the phony phisher: visit the official “American Red Cross” website at https://www.redcross.org, and donate there. The American Red Cross has a long history of providing aid domestically and internationally. If you know the link you’re clicking on is the correct one for the charitable organization you mean to visit, then it is OK to make a donation there. Protect yourself from being hoodwinked by spam email by clicking through to a spoofed website pretending to be the real charity.
Unsolicited Charity Phone Calls May be the Wrong Number for You
Some legitimate charities do use cold-call telemarketing phone banks to raise money. Charitable organizations—and politicians, you may have noticed—are not restricted by the “do not call registry” as are for-profit businesses. However effective telemarketing may be, some of the telemarketing businesses employed by otherwise legitimate charities extract large percentages of the donations received, charge high fees to charities, or both.
Should receive a charitable telemarketing phone call that interests you, you can do one of two things before handing over your credit card number. First, you could request detailed written information be sent to you to confirm the percentage of your donation that goes to the charity versus the portion that will go to the telemarketing firm. Second, and even better, you could politely end the call, and then visit the underlying charity’s web site. Find the donation link, or the physical address where the charity can receive a good old fashioned check. You’ll cut out the middleman and add in more effective dollars to the cause proper through your donation.
What to Do With Your Donation Dollars in This World of Good, Bad, and Ugly Charities?
While some if not most smaller charities are perfectly legitimate and are not “bad” phishers or “ugly” ineffective charities, there is legitimate concern that the good little guys are hard to vet successfully. The sad fact is that scammers and “phishers” may also lurk among obscure, smaller charities where charity names may sound legit, but the truth is harder to prove. It may be safer to stick with larger, more famous charities that you know, and those that you can vet successfully, versus one that may be legit, but hasn’t been around long enough to earn the trust of the charity rating agencies.
Even some “big” charities can fall from grace in the eyes of the charity vetting organizations. It always pays to check one of the watchdog vetting services. For example, charitynavigator.org dropped the Susan G. Komen for the Cure cancer charity from four stars down to two stars in 2013 for a number of reasons, including a frowned upon practice called “Pinkwashing”. Pinkwashing is a practice in which the charity’s endorsement is given to corporate sponsors in exchange for contributions. In some cases, the contributing corporations sold products that may even have had a carcinogenic link. In addition, some staff salaries may be inordinately large. As recently as 2010, the Harris Interactive Equitrend brand equity poll ranked Susan G. Komen as one of the most trusted charitable brands in America. Susan G. Komen may have a battle ahead to regain its place at the top of the charities ranked by the charity vetting organizations.
If you don’t have the time and investigatory interest to carefully research and evaluate charities, then consider these options:
- Act locally. Food banks, local homeless shelters, animal shelters, and family crisis centers always need funds.
- Consider a multi-charity clearing house like the United Way, which investigates and vets local and national causes, and then allocate funds from shared donation sources.
- Consider well-known organizations in which you have strong personal belief and trust, including World Vision, Médecins Sans Frontières (known as Doctors Without Borders in the U.S.), Amnesty International, the Muscular Dystrophy Association, and the Red Cross.
- Finally, always consider your faith group if you are involved in religious practice, or the school or college you attended. Your faith group many have an outreach “Deacon’s Fund”, “Bishop’s Storehouse”, or other fund that provides aid to families in need in the congregation or community. Many colleges have students with needs programs, or opportunities to fund new acquisitions or other worthy activities.
Best of luck navigating safely to the many good charities in our world, while avoiding the bad and ugly charities. Here are a few sites to visit when researching potential charities:
