Personal crowdfunding booms; how to avoid scams

Personal crowdfunding booms; how to avoid scams


The number of people crowdfunding for personal emergencies and causes is booming, with stories that tug at your heartstrings. When you donate, you can help someone with things like medical bills, tuition, or recovering from a house fire.

Marla Vaughan was just diagnosed with Multiple Sclerosis on her 21st birthday.

Said Vaughan, "I have bad back pain. My legs give out sometimes, my arms just feel weak."

With medical bills piling up, she says she had to drop out of college. Now she's one of 600 thousand people successfully raising money for medical bills on GoFundMe. But she took a step to make sure her supporters know her cause is real.

"My mom said maybe you should put your diagnosis paper up there, so people don't think it's a scam," Vaughan told us. "So I was like that's a good idea."

Crowdfunding sites say fraudulent campaigns are extremely rare, because, as GoFundMe says, "crowdfunding creates a robust paper trail." But the Better Business Bureau warns you, it does happen, because the people who start campaigns are not required to report how they spend the money, like a 501(c)(3) must report to the IRS.

Said Tom Gallagher, President of the Better Business Bureau, "There's no way of knowing, that I'm aware of, where the money goes or how it gets there."

When Eric Garner died after NYPD officers placed him in a choke hold last summer, 19 crowdfunding sites starting raising money for his family. But the Washington Post reported in February that family members say they hadn't received all the money.  

A GoFundMe representative tells us the site did vet and remove campaigns for Garner's family that "showed untrustworthy behavior" and transferred all funds from a legitimate campaign to Garner's wife.    
41-year-old Joanna Leigh of Boston was just indicted in March. She's accused of faking a brain injury from the Boston Marathon bombing and fraudulently receiving nearly 40 thousand dollars raised online.

We asked GoFundMe, one of the most popular personal crowdfunding sites, how it roots out fraud. The site sent us a statement saying it investigates every complaint and can remove accounts, refund donors, and ban users..

The Better Business Bureau offers some tips to help you donate safely.

Tip one: only donate to campaigns where you know the person or organization running it, or can check them out. Don't hesitate to request more information.

Said Gallagher, "Know where it's going to and that the people you want to have the benefit of that are actually going to get that."

Tip two: only give money you can afford to lose.

And tip three: remember donations are not tax deductible unless the recipient is a 501(c)(3).

Being transparent, like Marla showing you her diagnosis, is helping her cause.

"A bunch of friends and family have helped," she showed us on her page.

So far she's raised $720 toward her goal of treating her MS and getting back to school.