What Canada Can Learn From U.S. in Combat against Charity Fraud

In Lessons for Canada in the American approach to telemarketing fraud against charities, published in LawNow, author Peter Broder shares his thoughts on curbing abuse in charitable fundraising and financial exploitation of charities’ names in Canada.  The first few paragraphs of the article capture its essence:

Earlier this year, the U.S. Federal Trade Commission (FTC) won massive judgments against two different telemarketing groups for misrepresenting to donors the benefits to charities associated with their solicitations. Canadian officials would do well to take note of these successes.

One FTC case stemmed from the telemarketer suggesting, during solicitations, that he or she worked directly for the charities on whose behalf funds were being sought and that these groups received all proceeds of donations. In fact, only a small percentage of each gift went to the charity. The other action related to a cause-related marketing scheme, where goods were sold at a premium with a percentage of the proceeds purportedly going to charities or disabled individuals. The claim that charities or the disabled benefited was untrue.

The penalties imposed were staggering….

Under U.S. law, the FTC enjoys wide authority to move against consumer fraud and, more specifically, to enforce a prohibition on “unfair and deceptive practices” in commerce. In contrast, Canada’s Competition Act focuses more on “false or misleading representations” usually related to products. In addition to this discrepancy, the constitutional authority given to the federal government differs in the two countries making it more difficult for Canadian regulators to seek civil penalties.

As well as the Competition Act, the Canadian legal framework also features a variety of provincial consumer protection laws, and in some provinces, statutes specifically governing fundraising practices. In the U.S., many states also have consumer protection legislation and often also have laws regulating fundraising.

But the kind of conduct attacked by the FTC frequently falls outside of what would be provincial jurisdiction, or is beyond the scope of current provincial statutes in Canada. Modern technology allows unscrupulous operators to set up in jurisdictions without strong legislation or with lax enforcement and conduct their business across borders to reach markets in other provinces. Like privacy, environmental, and securities legislation, a federal presence in this field is becoming essential for effective regulation. In part, this could entail playing a multi-jurisdictional, multi-agency co-role as is sometimes done by the FTC in the U.S. …

JRB