Charities raise funds (and eyebrows) with payday loan companies
September 17, 2013 | Rebecca Harris | Comments
Easter Seals and the Canadian Diabetes Association are ringing in donations thanks to partnerships with Money Mart and The Cash Store Financial Services, respectively, even though both companies have been hit with lawsuits over their lending practices.
Money Mart recently settled a US$7.5 million lawsuit in California for allegedly charging interest rates that exceed legal limits. And in 2009, Money Mart settled a $100-million class-action suit in Ontario for charging “criminal” interest rates on 4.5 million payday loans over 10 years. In both cases, Money Mart admitted no wrongdoing. In June, the government of Ontario launched a lawsuit against The Cash Store Financial Services Inc. over its lines of credits, which aren’t governed by the Ontario Payday Loans Act. Essentially, the government argues The Cash Store is in the payday loan business and should be subject to the Act.
From a cause-marketing perspective, is aligning a charitable brand with a payday loan company a poor fit? And if money is raised for the cause, does it matter?
“I think charities ought to have high standards and here they are aligning with corporations that don’t,” said Paul Klein, president and founder of Impakt, a Toronto-based consultancy that focuses on social purpose.
“Are charities so desperate for revenue that they’re doing this? I don’t know… But I find the whole idea that [payday loan companies] are raising money to be kind of disturbing in the context of what they do. There’s quite an irony there.”
Despite the lawsuits and bad press, Lisa McKeen, vice-president of Easter Seals Canada, doesn’t think the partnership has had an ill effect on Easter Seals, which has partnered with Money Mart for the past 10 years. The organizations recently wrapped up a summer campaign in which Money Mart customers were asked to support Easter Seals by making a donation to send kids with disabilities to camp.
“They’ve been wonderful partners for us,” she said. “They’ve raised over $2.4 million for kids across the country going to summer camp and having the experience of a lifetime, so at the end of the day, for me, that is what’s most important.”
It’s a similar story for the Canadian Diabetes Association, which is now in its second year of three-year partnership with The Cash Store. Earlier this month, The Cash Store sponsored the Freedom Run for Diabetes Research in 27 communities across the country in support of the Canadian Diabetes Association.
Fred Defina, director of community giving for the Canadian Diabetes Association, said he isn’t concerned about the negative press or people’s perceptions of the company. “Their goal is to raise $7.5 million for diabetes research… They’re supporting diabetes research and that’s what we do as well,” said Defina. “They’re a legally constituted company in Canada and until such time as the government says they’re not, then we have no issue with their support of us.”
On the flip side, the lending companies themselves could be trying to shift public perception about their operations. “Some companies, in an effort to position themselves in a better light, will align with a charity and think that will shift opinion,” said Esther Buchsbaum, managing partner and co-owner of Energi PR in Montreal. “Companies get to position themselves as good corporate citizens and charities get much needed funding. But it’s a slippery slope, as is the case here.”
Money Mart and The Cash Store did not return requests for comment by press time.