It’s the Season for Online Charity Scams
Life + Money

It’s the Season for Online Charity Scams


It's the season to be jolly. Unfortunately, 'tis also the season for charity scams.

Consumers often become more generously minded in December, thanks partly to the many appeals they see and hear in malls and on the streets. A survey by Charity Navigator found that charities receive 41 percent of their donations in the last few weeks of the year. The approaching year-end tax deadline also makes December a great month to take charitable deductions.

Related:  Why Everything You Know About Charitable Giving Is Wrong

But the very impulses that make us want to give can make us less cautious about whom or what we give to. Scam artists are all too aware of this. Currently, certain online types of charity scams are on the rise, according to several experts.

Crowdfunding, for one, offers increasing opportunities for charitable giving - and for scams, according to Bennett Weiner, chief operating officer of BBB Wise Giving Alliance, the charity-monitoring organization affiliated with the Better Business Bureau.

"You can read stories about individuals in need, or organizations that may be soliciting for various projects," he said. "Don't assume that the organizations or individuals on those sites have necessarily been vetted to any great degree. They may have verified that the organization has tax exempt status, and that may be it." In other words, you may be able to take a deduction for your donation, but that doesn't mean the entity you are funding is putting your money to use in any way close to what you intend.

There are other scams lurking online for careless givers, said Bill Kowalski, director of operations at Rehmann Corporate Investigative Services, part of Rehmann Financial Advisors. "If you are online looking for a place to give, if you mistype, there are similar sites with similar names," he said. Scam artists buy up URLs that are similar to the names of charities, and if your'e not careful, you can make a donation on the wrong site.

Related:  Tax Tips: 3 Charitable Deduction Traps to Avoid 

Not all those charities are fraudulent per se, Kowalski said. But even so, they may misuse your money. "We saw this after 9/11. Some charities cropped up and gave 5 percent to actual victims. In my mind, that's a fraud."

One challenge for charity monitors such as the Wise Giving Alliance is that they rarely receive complaints about charity schemes. "When people make a contribution, that's the end of the transaction. they're not expecting anything in return," Weiner said. "You don't know necessarily that there's a problem until much later on."

There are also added enforcement challenges if disasters occur around holiday time, since fraudulent charities often crop up in the wake of disasters.

After Hurricane Sandy, the New Jersey Division of Consumer Affairs issued warnings about charity scams, and later settled a case with the operators of the so-called Hurricane Sandy Relief Foundation, which agreed to shut down its website and hand over more than $300,000 in donations to an administrator appointed by the court.

Related:  How to Maximize Tax Breaks on Charitable Giving 

Relatively few people fall for charity scams like telephone pitches for nonexistent or fraudulent organizations, Kowalski said, pointing to 2010 data showing that "probably under 6 percent" become victims of that kind of fraud.

To protect yourself from charity scams, Kowalski advises sticking to charities with a proven track record. "There is nothing inherently more dangerous about giving online as long as you've done your research. Anything that tugs on your heartstrings that's new and different - do your research before you contribute to things like that."

Organizations like the Wise Giving Alliance and Charity Navigator provide online information about charities, including whether they meet certain standards and how efficiently they spend their money. It's also a good idea to avoid snap decisions about donations, even when the solicitor on the phone is telling a heartbreaking story.

Kowalski and Weiner say researching a charity is your best protection against fraud, but in a 2011 report on charitable giving, 90 percent of donors said a nonprofit's performance was important to them, but only 30 percent actually researched charities.

"Most charities are honest and trustworthy," Weiner said. "But if you take no measures, you're going to be more susceptible to being taken when it happens." To paraphrase Ronald Reagan, trust but verify, even when it comes to charitable giving.

This article originally appeared in CNBC.

Read more at CNBC:
Charities get holiday boost from crowdfunding
Why the wealthy don't give more to charity
After the hurricane, beware of scams named for Sandy