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July 2009 | Volume 28 / Number 2
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Ending Charity Fraud, Misrepresentation, and Bad Practices

By Brendan Read
Senior Contributing Editor, Customer Interaction Solutions


If there is a hereafter there should be an especially nasty place for those who manipulate individuals’ altruistic instincts by conning them—typically via telemarketing--to hand over cash to bogus front organizations that funnel the money into undeserved pockets. Barring that the authorities should have these skels arrested, charged with fraud and if pled or found guilty sentence them to the vilest community service assignments there are: like picking garbage and cleaning cesspools, septic tanks, stables and zoo pens in 100-degree heat. Or if prosecutions are not feasible, giving the defendants the 'option' of paying the penalty by such 'barter' and strongly encouraging them to take it.

The Federal Trade Commission has caught a few of these vermin in its traps. The FTC (News - Alert), joined by 48 states, recently brought 76 enforcement actions against 32 fundraising companies, 22 non-profits or purported to be ones on whose behalf fund were solicited, and 31 individuals in "Operation False Charity". These include two FTC actions against alleged sham non-profits and the telemarketers who made deceptive claims about these so-called charities.

What is more disturbing, but more commonplace unfortunately are misrepresentations made by legitimate telemarketers calling on behalf of actual charities to boost their takes and what the public consensus appears to be too-low gains (15 percent or less) by these nonprofits. A recent news story about teleservices firm CDG closing down several of its contact centers also includes a mention that the FTC has looked at the firm. To cite the South Florida Business Journal: “The company's tactics have come under scrutiny from the Federal Trade Commission and others who allege CDG exaggerates the amount of donations that go toward charitable causes.”




In defense of CDG and other teleservices firms, and their charity clientele, while the returns seem low there are huge costs—mainly labor--in managing outbound fundraising campaigns. While these companies can significantly lower the expenses and increase the haul such as with offshoring and more autodialing do existing and prospective donors, and clients want that? Charities point out, correctly, that what they have left over is more than what they had before their campaigns. Chuck Hurley, chief executive of Mothers Against Drunk Driving told the Long Island Business News, in a story published Oct.10, 2008, that MADD national tried more 'down-home methods of fundraising', but they failed. MADD national in 2005 lost money on golf tournaments, made a mere $585 after expenses on walking, running and biking events and earned only $326 on dinners and luncheons. “’If you think it’s easy to raise money for a nonprofit organization, even one as important as MADD, you're new to this,’” said Hurley.

Yet charities run the risk of losing credibility with donors and the public with such campaigns. If the misrepresentations and low takes continue and if the telemarketers annoy people with too many live agent or autodialed calls, they could face legislated restrictions on their fine efforts. Just like what happened with commercial telemarketers.

To prevent that from happening with charities there needs to be reform of telemarketed fundraising. There should be a combination of stiffer and aggressively enforced laws and penalties to reflect the vileness of the fraud, ways to remove the temptation of misrepresentation, and a review of practices to increase returns while maintaining a viable teleservices industry. To make these changes happen organizations such as the American Teleservices Association, the Direct Marketing Association, and the Canadian Marketing Association and the charities need to step up to the (collection) plate to come up with best practices that become standards that in turn form the basis of laws. It is in their best interests, and the public’s to create a feasible consensus solution set that the lawmakers and regulators can support and put in place.

By making worthy causes more worthy to donate and by sending and at the same time delivering a tough message to those parasites that infect and abuse individuals’ good nature as unwitting hosts, more people and organizations can get the help they need. This is the least we can do for those who have and continue to serve us and who try to make our world a better place. CIS

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