What does the Institute think about pyramid schemes? The Institute strongly advises against charities using pyramid schemes or chain letters. The promotion of such activities should be discouraged in order to protect the legal responsibilities of trustees, fundraising staff and volunteer fundraisers.
Why is the Institute so strongly against the use of chain letters and pyramid schemes? The Institute is particularly concerned that such activities will frequently compromise good fundraising practice on the following counts:
- Potential damage to a charity's reputation;
- Lack of control over the activity;
- Annoyance to current supporters who feel they have already given support, or who feel blackmailed into giving additional support;
- Lack of consideration for others, particularly those who are elderly, living alone, or of a nervous disposition, who may read into chain letters an implied threat of 'bad luck' if the chain is broken.
Even where chain letters are successful in raising money, there are other considerations that must be taken into account:
- If the appeal is for a specific project, and this becomes oversubscribed, the charity needs to consider whether it may be in breach of trust if it fails to use the money for the purpose a donor intended.
- It may be that chain letter donors will receive the same letter two or three times from different people. This may annoy donors by creating unavoidable difficulties.
- It is extremely difficult, if not impossible, to halt a chain letter.
Even where this is possible, to do so may imply that the charity no longer needs any form of support, with obviously damaging consequences.
- Chain letters frequently draw the attention of the press, which may result in bad publicity for the charity and for any fundraiser involved with them.
- Chain letters are 'open ended' - individuals are asked to donate and to pass on to other potential donors the same letter. It is very difficult to supervise chain letter fundraising and to know who is fundraising on behalf of a charity using this technique.
- Charities with a clear policy that states never to agree to this method of fundraising will know that anyone who does so is unauthorised.
- Chain letters can provide exceptional opportunities for malpractice and fraud by giving incorrect payment addresses with little opportunity for recourse either by charities or by donors.