Last week, the Federal Trade Commission (FTC) and the National Association of State Charity Officials (NASCO) hosted “Give & Take: Consumers, Contributions, and Charity,” a conference exploring consumer protection issues in the changing landscape of charitable giving. Day One of the conference kicked off with introductory remarks by Acting Director of the Bureau of Consumer Protection Tom Pahl, as well as Colorado Attorney General Cynthia Coffman (Day Two was not open to the public). Some of our readers may recognize General Coffman’s name because she was a panelist at Venable’s 2016 Advertising Law Symposium, where she also expressed her state’s strong interest in combatting charitable solicitation fraud. Government enforcers are clearly paying more attention to this industry, as we have written before.
Two key takeaways for charitable organizations and their fundraisers emerged: first, law enforcement against perceived charitable solicitation fraud using traditional telemarketing and direct mail methods remains top of mind for the FTC and State Attorneys General. These regulators still consider the FTC and multistate action against Cancer Fund of America, which we have reported on previously, the crown jewel of cooperative law enforcement in this sector, and are building on that effort. Second, regulators acknowledge the emergence of newer forms of charitable solicitation, such as Internet appeals, social media campaigns, and crowdfunding. Users of these newer platforms are less formally regulated right now, but the gap between regulation of traditional and newer methods of fundraising appears to be closing. A few key highlights:
- Regulation Struggles to Keep Pace with Emerging Fundraising Platforms. Charity regulators have observed the increasing popularity of non-traditional methods of philanthropy, but they continue to grapple with how to apply existing laws and regulations (or whether to implement new ones) to the constantly evolving fundraising landscape. Take, for example, viral social media fundraising campaigns (think: ALS Ice Bucket challenge), which often lack the participation of a professional fundraiser or other third party with custody or control over the funds. Or the creation of a fraudulent GoFundMe webpage that raises money under false pretenses. The application of state consumer protection and charitable solicitation laws to these types of conduct remain an open question in some panelists’ eyes.
- Regulators Want to Help Donors Help Themselves. As regulators attempt to adapt existing policies to new fundraising methods, they are at the same time encouraging prospective donors to engage in “self-help” by conducting research on the charities that seek donations. The conference panelists offered several suggested resources that donors can consult in order to educate themselves and guard against fraud. These include: (1) the charity’s website; (2) the charity’s IRS Form 990; (3) watchdog websites such as Charity Navigator and GuideStar; and (4) Better Business Bureau resources such as the Wise Giving Alliance’s Standards for Charity Accountability and the BBB’s Scam Tracker.
- Oversight is Increasing as Regulators Maximize Resources. Historically, charity officials’ oversight of charitable organizations and for-profit charity fundraisers suffered from a dearth of resources and difficulty in coordinating enforcement across state lines. This is no longer the case. As mentioned above, the Cancer Fund of America multistate litigation continues to be placed on a regulatory pedestal as evidence that law enforcers can coordinate a massive investigation into alleged charity fraud using both state and federal resources. Industry can expect this trend to continue, whether through the launch of the much anticipated single-portal charity registration system, greater sharing of information through informal communications or more formal task forces, utilization of searchable Form 990 filings, or simply more frequent regulators’ conferences such as this one.
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It is now more important than ever that charities and their fundraisers prioritize compliance with state charitable solicitation laws, state consumer protection laws, and applicable federal laws (e.g., the FTC’s Telemarketing Sales Rule or Section 5 of the FTC Act). They should be mindful, too, that the First Amendment will not protect solicitations that are deceptive. Representations made during telemarketing pitches, during social media campaigns, on websites, and in regulatory filings must, therefore, be accurate and nonmisleading.
Videos from the conference are available on the FTC website.