I have recently heard about charity fraud. How can I protect myself?



News reports detailing identity theft and other financial scams are almost a daily event. Yet in the days after Hurricane Katrina, thousands of Americans contributed millions of dollars to agencies collecting donations for the victims without giving much thought to fraud protection. As the devastation along the Gulf Coast unfolded, everyone wanted to do something to help. Many legitimate national organizations quickly set up means to collect donations. Unfortunately, many con artists trying to take advantage of the emotions of the moment also began soliciting funds for fraudulent charities.

Utahns are well-known for their compassion and generous offerings. However, Utahns are also well-known for their high bankruptcy rate, high debt-to-income ratio and for their susceptibility to scammers. The Utah Foundation Research Report indicates that Utahns rank eighth in the nation in charitable generosity on the Catalogue for Philanthropy Generosity Index. This ranking compares each state’s income levels to its donation levels. Utah ranks 31st in income (or “having”) and is second in donations (or “giving”). The difference between these rankings creates a generosity index.

Because Utahns are so generous, it is important to consider the following guidelines from the Federal Trade Commission when making charitable contributions:

Be wary of appeals that tug at your heartstrings, especially pleas involving patriotism and current events.

Ask for the name of the charity if the solicitor does not provide it promptly. Ask what percentage of the donation is used to support the causes described in the solicitation and what percentage is used for administrative costs. (This information can be obtained by going to the Better Business Bureau’s Wise Giving Alliance at www.give.org.) Call the charity to find out if it is aware of the solicitation and has authorized the use of its name. If the telemarketer claims the charity supports local organizations, call local groups to verify. Discuss the donation with a trusted family member or friend before committing the funds. Don’t provide credit card or bank account information until you have reviewed all information from the charity and made the decision to donate. Ask for a receipt showing the amount of the contribution and stating that it is tax deductible. Understand that contributions made to a “tax exempt” organization are not necessarily tax deductible. Avoid cash gifts. Cash can be lost or stolen. For security and tax record purposes, it is best to pay by a check made payable to the beneficiary, not the solicitor. Be wary of groups selling merchandise claiming that all profits will benefit victims. Some may be legitimate; others may have no association with the organization they claim to represent and may be using a charity’s name without approval. Remember that the need for contributions will be ongoing and that in the months ahead, there will be many opportunities to provide support. Take time to choose the recipients of your charitable giving to make sure your dollars reach helping hands.

For more information, contact the Federal Trade Commission at http://www.ftc.gov or the Utah Division of Consumer Protection at http://www.commerce.utah.gov/dcp/ or by phone at 801-530-6601.

Posted on 2 Dec 2005

Ann House
Bankruptcy Prevention

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