Clothing Donation Bin Scam: Michigan Sues 'Deceptive' Texas Company
LANSING (WWJ) - Some of the clothing donation bins in shopping centers and parking lots are deceptive and misleading, according to Michigan's Attorney General.
Bill Schuette has filed a lawsuit against ATRS, a Texas-based company owns and operates 251 clothing donation bins in Michigan, for not sharing more of the proceeds with their intended charities.
The bins state that the Michigan Humane Society "receives 100 percent of the market value of every donation received at this location." But Scheutte says the charity received just 6 percent of total revenue generated last year.
"These bins are deceptive and have misled Michigan residents regarding the true beneficiary of the donated clothes," Schuette said in a statement. "Donors wanted to benefit the Michigan Humane Society—not some business in Texas. Michigan law requires that charitable solicitations be truthful. It's not a lot to ask, and Michigan donors deserve this."
In 2016, the bins made $835,000 in revenue, an average of 34 cents per pound. But ATRS only paid the Michigan Humane Society $49,000, 2 cents per pound, which equals just 6 percent of revenue generated from the bins.
The lawsuit seeks restitution, civil penalties of up to $10,000 per violation, and other relief.
Background
ATRS came to the attention of the Attorney General's Charitable Trust Section during the investigation of another professional fundraiser Golden Recyclers. (In early 2017, Golden Recyclers agreed to pay $35,000 for deceptively operating its clothing donation bins.)
ATRS owns and operates 251 bins throughout Michigan, including in Detroit, Lansing, Jackson, Kalamazoo, Battle Creek, and surrounding areas. ATRS's sole Michigan client is the Michigan Humane Society. By its contract with the Michigan Humane Society, ATRS pays the Michigan Humane Society $.02 per pound for all items donated in the Michigan Humane Society-labeled bins.
As part of its 2016 fundraising license renewal, ATRS submitted a campaign financial statement showing it had collected roughly $50,000 for the Michigan Humane Society, but reporting no campaign costs. In light of ATRS's $.02 per pound contract with the Michigan Humane Society, this campaign report appeared false, so the Attorney General began investigating. The investigation confirmed that ATRS was not disclosing hundreds of thousands of dollars of campaign costs; moreover, the investigation revealed that ATRS's bins included deceptive stickers that misrepresented that 100 percent of the market value of donated items benefited the Michigan Humane Society.
In April 2017, the Attorney General issued a Notice of Intended Action against ATRS and ordering it to cease using the deceptive stickers. Since that time, ATRS has covered up the "100 percent" portion of the sticker, but was not able to agree to a penalty, leading to the present lawsuit.
