The PayPal Charitable Giving Fund Settlement and Variance Power - Why Disclosure Matters

A multi-state settlement agreement between PayPal Charitable Giving Fund (PPGF) and almost two-dozen states was announced to address issues of transparency and PPGF’s website disclosures. One notable area state regulators found lacking was disclosure by PPGF of the fact that PPGF could exercise its “variance power” to reassign a donor’s gift if the selected charity did not pass PPGF’s vetting process.

Variance power is a common topic of conversation at the Council and community foundations often ask how explicitly variance power must be disclosed to donors. Per the settlement agreement, PPGF must modify its disclosures to ensure that donors:

  1. know they are donating to PPGF and not directly to the eventual charitable recipient;
  2. the fees associated with use of the platform;
  3. the length of time it may take for a gift to reach its eventual charitable recipient; and
  4. that PPGF has the ability to redirect gifts to other charitable recipients using its variance power (and PPGF must inform donors when this happens).

The settlement also requires disclosure regarding the advantages of being a PayPal enrolled charity compared with a nonenrolled charity.

While the settlement agreement only applies to this specific case, the issues highlight state regulators’ concern about transparency and disclosure to donors by charities that sponsor donor advised funds. The National Standards for U.S. Communities Foundations™ program has long required disclosure of a community foundation’s variance power to its donors, whether that be in a fund agreement or in separate policies or guidelines.

A helpful article with more information on the settlement agreement can be found at https://www.perlmanandperlman.com/paypal-giving-fund-enters-multi-state-settlement-ensure-transparency-donors/.