Deception By Omission in Charitable Fundraising – Charity Lawyer Blog

What Is “Deception By Omission” in Nonprofit Fundraising?

The Federal Trade Commission (FTC) regulates deceptive practices in charitable solicitations, including when nonprofits or professional fundraisers fail to disclose material facts. This is known as “deception by omission”: when a charity doesn’t lie, but leaves out information that would influence a donor’s decision to give.

A common example? Failing to disclose that the majority of a donor’s contribution will be spent on fundraising fees, not on programs. Even if the appeal doesn’t make a false statement, it may still be considered deceptive if the omission is material.

Why the FTC Targets High Fundraising Costs

Some charities hire third-party fundraising companies that retain a large percentage, sometimes 70% or more, of the money they raise. While these arrangements are technically legal and may be disclosed on IRS Form 990s, donors are rarely made aware at the point of solicitation.

If a donor believes their full gift is going toward feeding veterans or helping animals, but the reality is that most of it goes to a telemarketer or mail house, the FTC may view this as deceptive through omission. Courts and regulators ask: Would a reasonable donor want to know this before giving?

Real Risk for Professional Fundraisers

The FTC has brought enforcement actions against both nonprofits and professional fundraisers when fundraising language omits critical information. The risk is especially high when:

• A small percentage of revenue is spent on actual charitable programs.
• The charity relies heavily on paid fundraisers.
• Donors are led to believe their gifts go directly to helping people, when most of the money pays for fundraising.

How to Avoid Deceptive Solicitation Practices

Whether you’re a nonprofit executive or professional solicitor, follow these best practices:

• Disclose material facts when fundraising—especially if fundraising costs are unusually high.
• Avoid misleading implications (e.g., suggesting “100% goes to the cause” unless that’s true).
• Review scripts and solicitation materials for FTC compliance.
• Monitor contracts with fundraisers to ensure compliance with state charity regulators.

Even if you’re in full compliance with IRS and state charity registration requirements, you could still violate FTC standards by omission.

Final Thoughts

Donors deserve the truth, not just legally accurate language. If you work with professional fundraisers or run national mail/telemarketing campaigns, review your fundraising disclosures carefully. The FTC’s “deception by omission” standard is a reminder that silence can still be misleading – and that regulators are listening.

Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.