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Charity and Door-to-Door Clothing Collections

Introduction

1. This is a statement of the results of a Class Inquiry made under section 8 of the Charities Act 1993 into door-to-door clothing collections by charities or in the name of charity.

2. This inquiry report is not specific to any individual charity. It is a generic report that sets out the main issues arising from the relationship between door-to-door clothing collections and charity.

Background

3. Door-to-door collections are a long established practice providing a valuable method of raising funds for charitable purposes.

4. In most instances a permit is required to undertake door-to-door collection for charitable purposes, under the House to House Collections Act 1939. These are usually issued by the relevant Local Government Authority in the area in which the collection(s) is(are) to take place. (Currently, in certain areas, the local police are responsible for issuing licences.)

Some National Charities gain an Order of Exemption under section 3 of the House to House Collections Act 1939, issued by the Home Office, and as a result do not need to apply for collection permits locally. However, these charities should notify the relevant Local Authority of the dates and places they intend to collect.

5. Other legislation also impacts on such collections. For example:

• It is an offence under section 63 of the Charities Act 1992 for a commercial organisation to solicit funds or other property for an institution with a representation that it is a registered charity when it is not;
  
• Commercial companies (other than professional fundraising companies) carrying out door-to-door clothing collections on behalf of, or in support of, one or more named charities are considered to be Commercial Participators. Commercial Participators are defined by the Charities Act 1992 as :
  “any person who :
  (a) carries on for gain a business other than a fundraising business but
  (b) in the course of that business engages in any promotional venture in the course of which it is represented that charitable contributions are to be given to or applied for the benefit of [a charitable] institution.” 
  This legislation requires an appropriate written agreement between a commercial participator and the charity/ies which it supports;
  
• Regulation 7 of The Charitable Institutions (Fund-Raising) Regulations 1994 applies to fundraising by any person who carries on for gain a business other than a fundraising business but, in the course of that business, engages in any promotional venture in the course of which it is represented that charitable contributions are to be applied for charitable, benevolent or philanthropic purposes of any description (rather than for the benefit of one or more particular charitable institutions). Regulation 7 requires representations to be accompanied by a statement clearly indicating :
  (a) the fact that the collection is for a charitable purpose rather than a particular charitable institution(s);
  (b) in general terms, the method by which the proportion of monies to be applied for that charitable purpose is to be determined; and 
  (c) the method by which the division of such monies between different charitable institutions is to be determined;
  
• Under the Misleading Advertising Directives, any advertising which, either in wording or presentation, in any way :
  (a) deceives or is likely to deceive the persons to whom it is addressed or whom it reaches;
  (b) by reason of its deceptive nature, is likely to affect their economic behaviour; (c) or for those reasons, injures or is likely to injure a competitor, 
  is considered to be misleading. 
  The Misleading Advertising Directives are regulated by the Advertising Standards Authority (ASA);
  
• It could be considered fraudulent for a commercial enterprise knowingly to pass itself off as a charity.

6. The Inquiry was opened in October 2002.

7. The Inquiry was closed in March 2003. This report of the Inquiry was subject to delayed publication whilst a number of further enquiries were made that directly relate to the findings. This also allowed consultation with other agencies and the resolution of a number of jurisdictional concerns, clarifying the basis for future regulation of this activity by the Commission. Therefore, the result of the delayed publication of the report is that the Commission has reached a settled position on its future involvement in these matters and wider lessons from the Inquiry can be shared.

Issues

8. The Association of Charity Shops has estimated that misleading and bogus door-to-door clothing collections, which give donors the impression that they are giving to charity, cost the bona fide sector a minimum of £1,000,000 per annum in lost revenue. In 2002, the Association noted the rise in collections by commercial organisations, by ‘bogus’ collectors purporting to be charities and also by local authorities as part of their own recycling initiatives. They state that all of these have contributed to a reduced level of donations to charity shops.

9. The Commission regularly receives complaints and letters of concern from the public and other regulatory agencies regarding door-to-door clothing collections which either directly state that they are in support of charity or that are perceived to give the impression of a charitable or philanthropic purpose.

10. The complaints received by the Charity Commission have a number of recurring themes:

• It is often unclear to the donating public whether door-to-door clothing collections are charitable or commercial and how to distinguish between the two;
• Concern that the impression of charity is being used by commercial door-to-door clothing collectors in order to obtain goods;
• Questions regarding the legitimacy of commercial door-to-door clothing collectors;
• Concerns regarding unauthorised collections;
• Disreputable practices by clothing collection operators affecting public confidence in the charitable sector, where the collection leaflets are perceived as giving the impression that the collection is being undertaken in support of charity;
• Concerns as to whether charities are getting a good deal from any involvement they may have with commercial door-to-door clothing collection operators.

11. We therefore opened an Inquiry to ascertain the level of risk there was that collections in the name of charity were being made by organisations not operating for a charitable purpose and to identify and examine compliance with relevant legislation, including that contained in the Charities Acts. One aim of the Inquiry was to establish the scope of the Charity Commission’s remit to deal with complaints and concerns regarding the activities of companies carrying out door-to-door clothing collections and the jurisdiction of other regulatory authorities. This would be used to inform the Commission’s future advisory and regulatory interest and involvement in such activities.

12. The class for the Inquiry consisted of all those collections within 2 areas (Herts & Beds and Brent & Harrow) at 2 specific times (September and November 2002). These locations were selected as the Commission had information to suggest that clothing collection companies with unclear charitable links were operating in these areas at the time.

13. However, officers also sought to monitor other complaints received by the Commission regarding door-to-door clothing collections during the lifetime of the Inquiry. These very often directly impacted upon the organisations or the regulatory issues examined within the Inquiry.

Methodology

14. At the time of Inquiry, there were 48 holders of Orders of Exemption under the House to House Collections Act. The Commission wrote to the promoters of all of these to determine whether they undertook this method of fundraising and, if so, the volume and value of the clothes they collect. In addition, we asked particularly whether they collected in the areas and at the times selected for specific attention under the Class Inquiry.

15. The Commission also wrote to the Metropolitan Police and to the Local Authority Licensing Departments in Bedfordshire and Hertfordshire, to ascertain whether any licenses had been approved for door-to-door clothing collections in their areas in September and November 2002.

16. In addition, the Commission wrote to 7 clothing collection firms with unclear charitable links to enquire whether there was any charitable or otherwise philanthropic or benevolent purpose to the collections and, if so, to obtain further information.

17. Lastly, during the course of the Inquiry and beyond, the Commission monitored the complaints, concerns and other enquiries it received regarding door-to-door clothing collections.

Findings

18. 24 promoters who held Orders of Exemption responded to the Commission’s correspondence. Of these, 63% did not undertake clothing collection door-to-door and 1 charity (4%) confirmed that they had not collected in the areas and times specific to the Inquiry, but otherwise did not confirm whether they collected clothes on a door-to-door basis.

33% of the charities did undertake door-to-door collections for clothing. However, it was sometimes difficult for charities to provide exact details of the volume and value of the collections due to the manner in which these organisations collate and hold information.

A number of charity officers expressed the view that, although no statistical information was available, there was a feeling that where a commercial collection had operated recently in similar areas there was a decreased yield for the charity. Officers also noted that public confidence plays an important part in achieving the level of donations needed and know from experience that trust can be undermined by the actions of unauthorised collectors.

19. The only collections in the periods and places specifically subject to the Inquiry that the relevant Local Government Authorities and Metropolitan Police were aware of were made by commercial companies not connected to charities that did not require a licence.

20. The Commission received only 2 replies to correspondence sent out to commercial clothing collection companies. One response indicated that the firm concerned had closed in September 2002 and that no further collections were being made, unless someone was using the old leaflets of the company without permission. The other stated that the person we had contacted had resigned from his role as Company Secretary, which he had only taken on to assist people whose English was poor with registering a company in the UK. Both claimed that they had since lost contact with the organisations and neither could provide further information. However, one did indicate that the clothes collected by the organisation of which he was a former officer were sent to Lithuania, from where the leaflets also originated.

21. Commission officers found several causes for concern amongst the door-to-door clothing collection literature examined. In particular it was found that:

• In several instances the leaflets distributed by clothing collection companies did not state that they were a commercial enterprise and the Commission considered the leaflets to misrepresent the relationship between the collection and ‘charity’;
• The leaflets distributed by clothing collection operators often quoted a registered number, but it was regularly not made clear what type of registration this referred to;
• In a number of instances the wording of the leaflets was such that the collection was considered to be a charitable appeal despite being operated as a commercial enterprise. In other instances the wording was considered to be unclear as to whether a charitable appeal was being made and, as a result, potentially misleading;
• In at least 2 cases, leaflets referred to support for a registered charity that was not registered in the UK. The Commission was unable to establish whether such a charity exists and whether any funds are directed to a benevolent organisation as a result of the clothing collections in the UK. However, as this organisation did not have a bank account within the England and Wales, this falls outside the jurisdiction of the Charity Commission. Work undertaken as part of the class inquiry suggested an Eastern European connection. The relevant embassy has indicated that the registered number used is not recognised by them as a registered charity number;
• Charities involved in agreements with commercial clothing collection companies were not always aware of the value of the clothes being collected or the level of profits being made by collection operators over and above the amount passed under the agreement;

However,

• Where collections were operating in accordance with legislation and best practice recommendations, it was a beneficial source of income for many charities.

Outcome of Inquiry

22. In the majority of cases, where the leaflets issued by an organisation appeared to indicate that it was collecting for a charitable purpose but where this appeared not to be the case, or where the fact of the matter could not ascertained, the Commission referred leaflets to the ASA for consideration under the Misleading Advertising Directives.

As a result of these referrals by the Commission and others the ASA adjudicated against the leaflets of a number of door-to-door clothing collection companies. (A list of adjudications can be found on the ASA website: www.asa.org.uk.) Consequently, many organisations have amended their leaflets to state that they are businesses not charities and most no longer claim that they support charitable purposes. The ASA has adjudicated against organisations distributing leaflets which state that they are not charitable collections on the basis that they remain, on balance, misleading to the public. On this basis, the Commission will continue to refer cases to the ASA as appropriate. This should serve to lessen the confusion in the public mind and, consequently, reduce the risk of collections by registered charities being adversely affected by the activities of non-charitable clothing collection firms.

(Any organisation that ignores adjudication by the ASA may be referred by them to the Office of Fair Trading (OFT) or Committee of Advertising Practice (CAP) for sanctions.)

23. The Commission has opened a number of inquiries, under section 8 of the Charities Act 1993, into door-to-door clothing collections on the basis that the wording of the leaflets advertising the collections is such that the collections appear to represent a charitable appeal. Any person holding funds impressed with charitable trusts is a “charity trustee” for the purposes of the Charities Act 1993 and must apply such funds in furtherance of the purposes of those trusts. (Jones v AG [1976]) The Commission would have jurisdiction over such a charity trustee and the charitable funds they are holding. (Final determination on whether a collection constitutes a charity rests with the Court. However, the Commission, as regulator, is entitled to take a view on such matters.)

24. Given the problems of jurisdiction referred to above, the Commission feels that the most effective regulation of this risk to charity is through consumer education. As such, we have undertaken proactive work to raise awareness amongst the public regarding bona fide and bogus door-to-door clothing collections as part of our wider safer giving campaigns. The guidance warns householders across the country to be on their guard against commercial companies that use the impression of charity to obtain clothes that are subsequently sold for profit. If people have any doubts about the legitimacy of organisations dropping bags or leaflets through their letterboxes they should call the Commission’s helpline (0845 300 0218) or contact their local Trading Standards office. We also remind people that they always have the choice to give directly to a charity or to give their unwanted clothes to their local charity shop.

The Commission has also worked with a number of other regulators on additional consumer education programmes and to raise the profile of this issue across the relevant regulatory authorities. The Commission is committed to continuing this work.

25. The Commission continues to evaluate any potentially suspect collection over which it may have jurisdiction. That is, those collections where a recognised UK charity is referred to in the literature or which appear to have created a de facto charity by virtue of the wording used on the leaflets distributed.

26. The Commission has advised the trustees of a number of charities involved with commercial clothing collection companies regarding appropriate written agreements and best practice guidelines.

Wider Lessons

27. The Commission acknowledges the impact of bogus and misleading door-to-door clothing collection activity on the charitable sector. However, in many instances it is not the appropriate authority to regulate, investigate and take enforcement action, where required. The Commission has identified those instances in which it is the appropriate authority to take action, as mentioned in paragraph 25 above. In many instances it is only the promotion of the collection in such a way that it might appear to be a collection for a charitable purpose which impinges upon the regulatory remit of the Charity Commission. The fact of the collection itself, as a commercial operation, is outside the remit of the Commission. Our role as regulator is therefore achieved if and when the advertising is changed to reflect that the collection is a commercial operation. This means, in many instances, the regulation of door-to-door clothing collection falls squarely within the remit of the ASA and not of the Charity Commission in terms of correcting the misleading promotion of the collections. Where this is the case the Commission will either refer the matter to the ASA directly or recommend that the complainant contact the ASA.

28. The Commission will continue to work with partner agencies to safeguard the good name of charity and to protect and regulate collections for charitable purposes.

29. There is no suggestion that door-to-door clothing collection as a method of fundraising is in any way itself suspect. Nor is there any suggestion that any charity using door-to-door clothing collections to collect goods and raise funds should not continue to do so.

30. The Charity Commission works with various organisations across the country to promote its Safer Giving campaign. The main aim of the campaign is to raise public awareness about safe ways to donate to charity and to stamp out fraudulent collections that have nothing to do with genuine good causes. If you are approached by somebody collecting for charity, and you’re not sure whether they are genuine or not, our Safer Giving code provides some tips that may help you feel more comfortable about giving.

The Commission strongly recommends that all collectors should:

• be able to produce a valid local authority or police licence which permits them to carry out the collection. (Note: A small minority of charities currently have a Home Office exemption order which permits them to carry out the collection without a licence. For further details on exemptions please call the Home Office public inquiry desk on 020 7273 4599.);
• wear an ID badge (donors should look out for any ID that looks altered, photocopied or home-made);
• be able to give the charity’s name and registered number and be able to tell you how to contact the charity direct;
• be able to prove that they have the charity’s permission to collect. Collectors from professional fundraising companies and Commercial Participators should be able to produce a copy of a written agreement with the charity. (Thank-you letters and receipts from charities don’t count as permission to collect!);

Genuine collectors should be happy to answer questions and won't mind you checking them out. We want to make sure that donations go to legitimate charities and not fraudsters.

If you are doubtful about a collector:

• contact us to check the charity registration number or discuss any concerns - either via our helpline on 0845 300 0218 or by searching our online charity register;
• contact your local authority or police to check whether the collector has been granted a licence or needs one to collect;
• above all, don’t feel pressurised. You always have the option to send your donation direct to the charity. This may mean going to a little more trouble, but at least you can be sure that your donation will get to where it’s intended.

Last updated: 29 Sep 2005

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