DETROIT – A Dearborn-based company is accused of illegally operating clothing donation bins and misrepresenting what actually happens to the donated items.
Michigan Attorney General Bill Schuette has filed a cease and desist order against Golden Recyclers, Inc. The filing accuses Golden Recyclers of committing more than 2,000 violations of the Charitable Solicitations Act.
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From the attorney general's office:
Schuette alleges that the Dearborn-based professional fundraiser is illegally operating clothing donation bins and misrepresenting what happens to the donated items. Golden Recyclers currently operates 318 bins throughout Michigan, largely in the Metro Detroit area.
Golden Recyclers operates two differently labeled types of bins, both of which violate the Act. The first type of bin implies that it collects clothes for the charity, Cancer Federation, Inc.; the second type of bin is deceptively labeled with the logo “Mercy” but provides no indication where those donations go. In truth, donation to either bin do not go to charity but to the professional fundraiser, Golden Recyclers.
The Notice of Intended Action alleges 2,594 violations, with maximum penalties of $10,000 per violation. It also orders Golden Recyclers to cease and desist these violations and gives them twenty-one days to resolve the matter or face a civil action in court. Concurrent with the Notice of Intended Action, the Attorney General is also ordering Golden Recyclers to produce information and financial records regarding its operation of the bins.
Background
The Attorney General’s Charitable Trust Section began an investigation following a consumer complaint about the vagueness of the bins labeled “Mercy.” The Attorney General asked both organizations to explain the bins. Cancer Federation responded saying that the “Mercy” bins were unauthorized and that it was ordering Golden Recyclers to cease and desist their operation. However, Golden Recyclers continued operating the bins, as confirmed by photographs from the Attorney Generals’ investigators.
The investigation also revealed that Golden Recyclers was operating a second type of bin labeled with the name of Cancer Federation Inc., but that these bins also violated the Charitable Organizations and Solicitations Act.
Golden Recyclers pays $12,000 a year to Cancer Federation Inc. to use its name under their current contract. Thus, under the contract, all donations placed in the bins go to Golden Recyclers—not Cancer Federation Inc., which is not disclosed on the bins. It is not yet clear what Golden Recyclers does with the donations placed in the bins; however, records obtained by the Attorney General show Golden Recyclers earned gross receipts of $223,000 over a six-month period in 2015. The Attorney General’s office is also reviewing Cancer Federation Inc.’s charitable registration in the state.
This has prompted a consumer alert about clothing donations from Schuette's office -- here it is:
Clothing Donation Bins - Donor Beware
In recent years, clothing donation bins have proliferated across Michigan. Their near omnipresence makes them convenient. But not all of these bins support charity. And even bins that bear a charity's name may not support the charity in the way you think. So before donating your clothes into one of these bins, it's worth learning how these bins are operated.
Bin Operation in General
Many clothing donation bins are operated by for-profit recycling companies. Often, the recycling company agrees to do all the work of maintaining the bin. This usually entails regularly emptying the bin, discarding unusable clothing, and selling the remaining clothing on a per pound basis; in exchange, the charity receives a portion of the proceeds from the clothes. In other instances, a charity may simply license the use of its name to a bin operator in exchange for a cash payment. In still other instances, a charity may actually receive the clothing placed in the bin--perhaps for donation directly to the poor or for resale in the charity's thrift store.
Legal Requirements and Abuses
The operation of clothing donation bins is subject to Michigan's Charitable Organizations and Solicitations Act. Under this law, generally, bin operators must be licensed with the Attorney General and file their contracts with the Attorney General. The law also prohibits misrepresentations and requires certain disclosures.
Of course, the legal requirements for bin operators do not ensure that a particular bin operator is compliant with those requirements. Before donating, donors should review a bin's disclosures. If there are doubts about the accuracy of those disclosures, an inquiry or complaint to the Attorney General could help to allay those doubts; it also may assist the Attorney General in enforcing the requirements for clothing donation bins.
Consumers may contact the Attorney General's Charitable Trust Section at:
Charitable Trust Section
P.O. Box 30214
Lansing, Ml 48909
517-373-1152
Fax: 517-241-7074
Email
Charitable Trust Website
Conclusion
Clothing donation bins can be a worthwhile receptacle for your used clothing. But donors should also understand how these bins operate in general and beware of abuses.
Schuette had this to say:
"Michigan citizens are generous, especially around the holidays. I won’t tolerate companies that exploit that generosity for private gain. Not only does it harm donors, it also harms those charities that play by the rules by diverting donations from their charitable programs -- donations they especially need during the holidays."
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