USPS Rule Change to Lower Postage for For-Profit Fundraisers
A prospective change in postal regulations soon could open the door to mail solicitations that enrich commercial fundraisers operating under the guise of raising money for charitable groups, nonprofit advocates said last week.
The U.S. Postal Service is expected to publish in the Federal Register this week changes to the cooperative mailing rule, which governs the use of less expensive postal rates for fundraising appeals by nonprofits.
A new exemption would remove the ban on the use of preferred mailing rates by partnerships between nonprofit organizations and for-profit businesses such as direct mailers. The ban was intended to ensure that only nonprofits benefited from the cheaper postal rates, which can shave as much as a dime off the cost of each piece of mail.
The Postal Service says the changes will benefit nonprofit groups that lack the size or in-house expertise to mount successful fundraising campaigns, especially during tough economic times. But advocates for many nonprofit groups said the Postal Service is caving in to pressure from well-connected commercial fundraising firms that see a potentially lucrative new revenue stream.
"The anything-goes exemption will open the floodgates to abuse," said Neal Denton, executive director of the Alliance of Nonprofit Mailers, an association of charitable groups. "Unscrupulous commercial fundraisers, acting in the name of unsophisticated or captive nonprofit organizations, will flood the mails with fundraising solicitations designed primarily to line the fundraisers' own pockets."
Patricia Read, a spokeswoman for Independent Sector, a coalition of more than 700 national philanthropic organizations, said the change could dramatically increase the flow of unwanted mail and undercut the credibility of all nonprofit fundraising appeals.
The change would give rise to fundraising arrangements similar to those common in telemarketing, in which a commercial fundraiser calls to solicit money on behalf of a charity, such as a local police benevolent fund, Read said. Donors often believe their entire contribution goes to the charity, but only a fraction does and the rest is kept by the fundraising company.
"This now opens the door to those situations where 90 percent or more, or a high percentage of the donation, is being retained by the for-profit entity," she said.
In a draft rule published in the Federal Register on May 6, the Postal Service acknowledged the possibility of such abuses. But postal officials wrote that "these social policy concerns are best addressed elsewhere," such as through legislation or state regulations.
The Alliance, Independent Sector and the Direct Marketing Association, a trade group representing nearly 4,700 companies, proposed an alternative rule that would grant nonprofit fundraisers more flexibility, but with safeguards. For example, the nonprofit, and not the commercial partner, would control the mailing list. And the money generated by the solicitation would be deposited in a bank account under the exclusive control of the nonprofit organization.
The Postal Service rejected the suggested changes. "Our conclusion was that we shouldn't be in the business of writing contracts between fundraisers and charitable organizations," said Jerry McKiernan, a Postal Service spokesman.
McKiernan said the agency received comments supporting the original proposed change from 65 organizations, including the National Association of Retired Federal Employees, the Special Olympics of Maryland and the Susan G. Komen Breast Cancer Foundation. Five members of Congress also recorded their support — Sens. Arlen Specter (R-Pa.), Rick Santorum (R-Pa.) and Thomas R. Carper (D-Del.), and Reps. John M. McHugh (R-N.Y.) and Tim Murphy (R-Pa.), he said. Only one person wrote in opposition.
McKiernan said Santorum, Rep. Dan Burton (R-Ind.) and then-Rep. Robert L. Ehrlich Jr. (R-Md.) sponsored legislation last year to force the change.
"They ultimately came to us and said, 'Hey guys, do you really want legislation on this? Why don't you just do it yourselves?' " McKiernan said. "And that's always a better way to go as far as we're concerned. We'd rather write our own rules rather than having Congress write them for us."
Jerry Cerasale, a spokesman for the Direct Marketing Association, said the DMA favors the change because the current rule conflicts with some state laws, hamstringing some nonprofits. He said his group would develop guidelines for its members to try to avert abuses of the revised rule.
Geoff Peters, president of Creative Direct Marketing International, said the Postal Service, which has lost money every year since 1999, was trying to increase mail volume and chase profits. Peters, who helped develop the alternative rule that the agency rejected, said many direct marketers would feel better with more safeguards in place.
"Every time something negative happens, it reflects on us and the whole industry," said Peters, whose Crofton, Md., company has advised nonprofits on fundraising for 30 years. "Donors start asking questions and say, 'Well, maybe I ought to not donate money to charities because look what they do with it.' "
