Thursday, March 05, 2015

NY AG - "Beware of crowdfunding sites like Kickstarter, Go Fund Me..."

NEW YORK – Attorney General Eric T. Schneiderman today announced that his office is offering tips to consumers for using crowdfunding websites to make charitable and other donations. The sites, which allow users to post fundraising solicitations and receive donations, are changing how individuals raise and donate funds. The websites, typically for-profit, often claim a portion of the funds raised as a commission for providing a platform for fundraising.

“New Yorkers are good and charitable people who are always willing to help others in need,” said Attorney General Schneiderman. “As more charitable giving moves online and to crowdfunding websites, there is an opportunity for users to harness innovation to achieve worthy goals. It is also important that New Yorkers follow some basic tips to stay safe and to understand how their contributions are being used.”
Crowdfunding is a growing avenue for both charitable and non-charitable giving that has eliminated barriers for both donors and those seeking donations. While most donors in New York State still use traditional methods for their charitable giving, the rapid growth in crowdfunding is changing how people think about giving and allows for direct peer-to-peer donating that differs from giving contributions to organizations.
According to Forbes, there has been a 50% increase in crowdfunding in just the last few years, and the average crowdfunding donation in 2013 was $88. As consumers utilize this new platform for giving, there are important tips that can be followed to be informed and to stay safe.

Tips for Consumers
There are many different crowdfunding platforms. Make sure you understand how the platform you are using works:
  • Use reputable, well-established websites with a known track record. Some crowdfunding websites vet projects and others do not. You should understand what the website requires from a campaign before it is posted.
  • Know what you are getting for your contribution. In some cases your contribution will be a donation, and in others it may entitle you to a product or a share of a company.
  • Know what protections the crowdfunding platform provides. In most cases, the platform will not reimburse you if a campaign fails to deliver what it promised.
  • Be aware that many of the laws regulating charities do not apply to many postings on crowdfunding websites. Your first line of defense when donating is to check the terms and conditions of crowdfunding websites. There are several important questions you should ask when reviewing terms and conditions?
    • Is the website vouching for the credibility of the charitable cause?
    • Does the website check to see if funds raised are going towards the intended purpose stated on the website?
    • If I believe my donation did not go towards its intended purpose, what recourse do I have to get a refund?
  • Understand if there are any fees associated with each contribution and whether a crowdfunding website is retaining a portion of your contribution. While it is normal for crowdfunding sites to retain a portion of donations, be aware of what percentage end up going towards the charitable purpose.
  • Don’t give out sensitive personal information such as a Social Security number or password to anyone who solicits a contribution from you. When donating online, make sure the website is secure and includes ‘https’ in the web address. Donating with a credit card provides more protection than a check while still offering a paper trail documenting the transaction.
Thoroughly research the project before contributing:
  • Be wary of campaigns with few details. Credible projects will have established web and social media presence, and offer regular updates.
  • Check the campaign creator’s social media accounts to confirm identities and real-world connections.
  • Many crowdfunding platforms will let you write to a project’s creator. Ask questions and review how the creator has responded to others.
  • Compare details with other campaigns for similar products. If it seems too good to be true, it usually is.
What to do if you believe you have been scammed:
If you believe you are the victim of a scam, please file a complaint with Attorney General Eric Schneiderman’s Office by calling the consumer helpline at 1-800-771-7755, e-mailing the Charities bureau at or filing a complaint at

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