Happy Consumer Protection Friday. (If I keep writing it perhaps others will join in and make it a real thing.)
Typically, I cover MLM scams because I find it interesting how they confuse victims into thinking they are legitimate business opportunities. This week I'm switching it up. I'm going to look into car donation charities. You've probably heard those annoying, earworm, jingles sung by kids on the radio (yes Kars4Kids I'm looking at you... and please make an attempt to learn to spell).
Are they good charities or should you put your money elsewhere? Let's find out.
To start, I should mention that I normally wouldn't have thought about car donation companies being scams. I've gotten rid of one car in the last 15+ years and it was a sale as a private party. I don't remember how I moved the cars before that.
Car donation scams cross my radar when this LA Times headline piqued my interest: California Atty. Gen. Kamala Harris sues to shut down 2 car donation charities.
It's not very often that I hear about Attorneys General suing companies. It is less often that those companies are charities. The article was full of information that I didn't know. This was perhaps the gem: "...car donation organizations give a much smaller portion of the donations they receive to charity than similar sorts of fundraising campaigns, spending nearly two-thirds on salaries for their own employees and other administrative costs."
So if you donate a car worth $9,000, you are really only giving $3,000 to the people who need it.
Is that really a scam? I say that a scam is in the eye of the beholder and my opinion of a scam is not necessarily going to be yours. That said my opinion allows for a very broad definition.
These car charities definitely fit my opinion of a scam. Why? Simply because it isn't what a consumer (or in this case the charity gifter) would expect. It feels to me that the organization exists to create well-paying jobs for the people who work at the organization... and maybe give away some money to help others in need in order to sleep well at night. Aside from the salaries at the charity, there are also high advertising costs (the radio airtime on those jingles isn't free) to bring in the money for the jobs and the recipients of the charity. Finally, I presume that the cars often need to be fixed up before being passed on to the recipient.
So then I went to look for more articles. I found this one on Kars 4 Kids, which said:
"According to [Doug White, professor at Columbia University], many car-donation-based charities that operate under this simple model 'hoodwink' the public, losing a large portion of the money raised from the sale to the middlemen who recycle the car or sell it on behalf of the charity. Kars 4 Kids is one of the few that does most of the work in house and thus avoids many of these losses."
I'd definitely call "hookwink" the same as "scam", wouldn't you? However, it at least sounds like Kars for Kids might be a good charity because it doesn't use the middleman, right?
Not so fast.
NBC's New York affiliate found:
"Financial statements for two nonprofits associated with Kars 4 Kids show the charity lost more than $5 million on real estate investments in 2010. In the same time frame, Kars 4 Kids spent about $6 million on programs for children."
That makes it sound like it's "Kars 4 Real Estate Investments" doesn't it? There's also this:
"In 2009, attorneys general in Pennsylvania and Oregon forced Oorah to pay $130,000 in fines for failing to disclose the religious purpose in ads."
You didn't realize that Kars 4 Kids (which gives its money to Oorah and Joy of Our Youth) is a religious organization. I didn't either. It's fine to donate to religious organizations, but maybe people would donate to a religion of their own faith... if the jingle actually disclosed it.
Fortunately, it looks like I'm not the only one to cover this. It seems like BankRate has a consumer warning. About.com is very blunt: "The ads that you see everywhere that offer to help you make a car donation to charity are almost always rip-offs."
So how do you avoid these car donation scams? I'd personally just avoid donating cars and money to them. If you have a car that is working condition, perhaps you can sell it for cash. Then donate the cash to a reputable charity that you've researched and vetted. This way, you know where your money is going.
Years ago I created a car site with a friend's help. I had forgotten about it until this article. It turns out that How to Donate a Car is one of the most popular articles. Now I have to go back and see if the author I hired was accurate.
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