A button that's supposed to make it easier for charitable giving only makes things more confusing for people just trying to collect funds for the needy. Yesterday, PayPal asked Regretsy, "the fail blog of handcrafts," to refund an entire holiday toy-drive's worth of donations because the craft seller didn't meet "non-profit status." The whole thing blew up into a big Internet PR mess, forcing Pay Pal to make a public apology and give back the funds. But the whole thing shows how unnecessarily convoluted PayPal's donation process is.
After having had already collected donations for a charity toy drive, Regretsy had to give back all the funds it collected. PayPal froze the account, and kept all of the fees (!), claiming Regretsy can't run a charity using its service, since it's not a non-profit organization — at least that was the explanation it gave Regretsy's Helen Killer. Paypal tweaked its reasoning later, in its apology post. But the sentiment is there. "We have clear guidelines for any business that uses PayPal to accept donations," writes PayPal's director of communications Anuj Nayar. "For example, we require certain documentation to prevent misuse of the donated funds and, if the recipient claims charitable status, to determine whether they are properly registered. We do this to protect our customers and to protect our business" he continues.
But, as Killer points out, PayPal's terms explicitly say that the donate button can be used for any worthy cause, non-profit or not. In fact, PayPal's Acceptable User Agreements mention acceptable donation button usages for those without non-profit status, points out a blogger on Geek Girl.
Approval is needed before your charity accepts PayPal donations; donations not associated with a charity or nonprofit organization don’t need to meet these requirements. This requires people to provide proof of tax-exempt status, something that a charitable organization would need to do, sure. But it doesn’t say anything about charitable activity by a non-charity or for-profit entity, or say anything about donations associated with charitable activity (as opposed to a charitable organization). In fact, if you’re not associated with a charity, then you don’t need to meet those requirements (even though PayPal made April submit a mountain of paperwork and probably also a urine sample–I wouldn’t put it past them).
But now that we do know there are serious restrictions, why would PayPal make it that easy to implement the donate button? One just has to add some HTML code to their site and it's there. Considering Pay Pal retroactively made Killer submit a bunch of paper work, proving her legitimacy and then proceeded to deem her unworthy of gift-giving. You'd think PayPal would put those hoops right up front.