What To Do If You've Donated To A Fraudulent Charity

It happened after September 11, Katrina, Sandy, the Boston Marathon, and other disasters, man-made and natural, around the world. After serious tragedies, when a compassionate public is at its most vulnerable, unscrupulous individuals find taking advantage the world's generosity comes easy. Within hours - even minutes - of the news, new operations spring up, offering to collect donations in support of victims.

Thanks to today's electronic environment where sharing news is effective and fast, with only one mouse-click, well-meaning people spread information at a faster rate than ever. Who has time to fact-check when lives are on the line? That's how one message on Twitter, purporting that the owner would donate $1 to Boston's victims every time the message was shared, spread so quickly.

Just pausing for a few seconds to look at the basic facts about the owner of that Twitter account should have been enough to signal the lack of validity to the statement, but the rewards of sharing such a message outweighed the risk. After all, the Twitter message wasn't asking anyone to send any money.

In the scam spectrum, this was pretty tame. Once money is involved, the stakes are higher. Use common sense before giving any relief organization your money:
  • An official-sounding name doesn't make an organization official. Make sure the organization shares important information online, like its founders and board members.
  • Organizations must file with their state before soliciting donations. It's worth a call to the appropriate Department of State before sending money.
  • Sites like CharityNavigator can tell you more about a non-profit organization, but even legitimate pop-up charities might not be listed in the immediate aftermath.
  • The IRS website allows visitors to search for an organization's 501(c)3 (non-profit) status. But the IRS can take months to grant the status, so again, if timely giving is important, you might not yet know whether your contributions are tax-deductible.
  • Don't give anyone cash, and don't give money to an organization that calls you out of the blue. The Office of the New Jersey Attorney General puts it bestDon't give simply because of a pathetic “sob story.”

Not all charities are tax-deductible. If you are giving to a fund that helps a specific person or family, your money may be put to good use, but the organization will not be listed with the IRS as a 501(c)3 non-profit organization. Organizations can get into trouble if they claim donations will be tax deductible and are later unable to receive the blessing from the IRS, and when you pay your taxes, you could be hit with penalties and interest if you claim a donation is tax-deductible when it's not.

Once you've parted with your money, your options are limited if you later find out the organization was fraudulent. Getting back your money could be a long process. There are  some helpful suggestions from the New York Department of State, and I have amended with my own thoughts.

1. Contact the authorities.

You should report the suspected fraudulent charity with the details of the incident in which your money was solicited to the proper authorities. These include:
  • Your state's Department of State, and the Department of State from wherever the fraudulent charity operates.
  • The Attorney General's offices for both states. If there is enough evidence of fraud, the states will want to sue the organization to recover the money for the donors and possible pursue criminal charges as well.
  • Contact the Federal Trade Commission and report the incident.

2. Share a warning through social media.

When the “Blogger” software was released, its tagline was “push-button publishing for the people.” The World Wide Web had been around for years, but new software made it very easy and fast for anyone with an internet connection to have a voice, spreading news and opinions. The world hasn't slowed down since. The next video seen by millions of people is not going to be a program broadcast by a major television network or a blockbuster movie in a theater. It's going to be a clip uploaded to YouTube, spreading from one person to around the world like a fast-moving virus, made by some kid with nothing more than a webcam.

This gives a power of influence to anyone, and you can use that power to let others know about the fraud you experienced. There are laws against defamation, so before you publicly slam a company for committing fraud you better be prepared for that company to come after you; but if you can get the message out, warning the public and sharing the facts, you can help bring attention to the issue and possible prevent others from falling into the same trap.

3. Recover your money.

If you paid with a credit card, you're in pretty good shape. If you become aware of the fraud rather quickly, you can contact the credit card issuer. You will have to show that you made an effort to recover the money directly from the perpetrator, but a fraudulent organization will be difficult to contact after they take your money.

Disputing the charge will most likely end up in a cancellation of your payment to the organization, and you won't be liable for what you paid.

If you paid with a check that has already cleared, getting your money back might be more difficult. You might need to wait for your state to take legal action, and that could be a long process.

In times of crisis, don't let your guard down. Compassion is a great virtue; I'm thankful knowing that the human spirit is alive and people, emotionally moved, are looking to help in the face of a crisis. I think everyone who's been aware of the news lately has seen similar support after the recent events, the bombing at the Boston Marathon and the explosion in West, Texas.

The urge - the need - to help immediately is powerful, but it can't be an excuse for making bad decisions about money. Don't give money without due diligence, and if you find yourself a victim of a charity scam, report it to the authorities and warn others.

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