Chris Babin , Vice President of the Better Business Bureau, joined News15 Today to talk about crowdfunding scams.
Crowdfunding campaigns are helping to raise money for those affected by the widespread coronavirus cancellations and closures. These online fundraisers are supporting everything from continuing free school lunch programs to assisting out-of-work hospitality industry employees.
Crowdfunding can make supporting – and raising money for – a good cause easier than ever, but it’s not without issues. Con artists can use crowdfunding platforms to deceive donors and steal money for personal use. Or the money can be raised with the best intentions, but not end up used for its stated purpose.
Should You Donate to that Crowdfunding Cause?
Potential crowdfunding donors should proceed with caution and do research before making a donation to any individual or cause. The following tips will help you practice smart giving if you decide to donate on a crowdfunding platform.
Give to individuals and organizations you know personally. Charities can be vetted, but it is much harder to verify the trustworthiness of individuals who have posted a request for financial help. The safest way to donate on a crowdfunding platform is to give to someone you already know.
Photos don’t mean a campaign is legitimate. Con artists often use pictures of victims without their permission to make donors believe the campaign is legitimate. This is especially true in the wake of a major tragedy.
Not all crowdfunding sites have the same rules. Some platforms do a better job of reviewing projects and postings than others. Make sure you read up on the website’s rules, regulations, and procedures. For example, on one site, if a post claims to support the victims of a recent tragedy, the site holds any funds collected for victims and distributes them directly to the identified persons or families. On other sites, donors must rely on the creator of the post to follow through on any assistance they promise to give.
Transparency is key. Vague descriptions of how donated funds will be used is a big red flag. Trustworthy charities and individuals will clearly explain the intended use of collected funds.
Avoid duplicate efforts. Stay up to date on the latest news about victim support efforts. If government agencies offer to pay for healthcare or funeral costs, for example, any crowdfunding pages that offer the same assistance may have to ask donors if their funds can be used in an alternative way.
Beware of emotional appeals and images. Scammers love to con people out of money by telling overly dramatic tales that elicit an emotional response. They usually pair their appeals with urgent pleas, saying they need the money right now. In addition, they may support their stories with heart wrenching images.
Not all donations are tax deductible. In general, donations made to help a specifically identified individual or family are not deductible as a charity donation for federal income tax purposes. Also, if a nonprofit organization is soliciting for donations, see if it is tax exempt as a charity under section 501 (c) (3) of the Internal Revenue Code.
Consider donating on specialized crowdfunding websites. When crowdfunding sites are dedicated to a specific kind of giving, such as medical funding or school projects, they are more likely to have experience spotting problems or scams. General crowdfunding sites may experience more challenges overseeing user activity.