Chicago Tribune reporter Naomi Nix discusses who you're really giving your money to when asked to donate on the street.

Most days, they are easy to spot. Wearing brightly colored vests, the canvassers stand on Chicago sidewalks, quick to pose a question to passers-by:

Do you have a minute for children in the developing world?

What might not be as easy to see is that some of these fundraisers are employed by for-profit companies, which earn millions of dollars each year for persuading strangers to give to charity.

The controversial practice has caught the attention of some regulators and charity watchdogs who worry that paying a middleman for fundraising may be inefficient, and that donors could be misled, swayed by a passionate in-person appeal without understanding who they are talking to and where their money is going.

"People ought to know upfront what portion of their contribution is going to wind up helping the charity," said Daniel Borochoff, president of CharityWatch, which evaluates charities' financial efficiency. "They shouldn't be pulling the wool over the public's eyes."

But nonprofits defend the practice, saying in-person appeals successfully recruit people who have never donated before to become monthly sponsors. Beyond the donations, charities say there is an intangible benefit in getting the word out about their organization.

"It's enabling us to engage with a group of donors that we haven't previously been able to engage with," said Anne Marie Borrego, a spokeswoman for the Red Cross, which hired a for-profit company for a face-to-face fundraising campaign in Chicago in 2011.

Here's how it works: Charities hire companies that station fundraisers on sidewalks, usually to recruit monthly donors. The charities, in turn, typically pay the company a fee for every hour of fundraising or a fee for every donor who signs up. The companies then pay their workers generally $10 to $13 an hour, and sometimes performance bonuses, records show.

Many charities doing this in the United States are taking a fundraising lesson from Europe, where nonprofits have been raising money like that since at least the 1990s. But in the U.K., the trend has also stirred public backlash. The solicitors there have earned the nickname "chuggers," a shortened version of "charity mugger."

In Illinois, state law requires solicitors to say they are paid professional fundraisers. But they are only required to disclose how the company is paid if they are asked about it.

Some charity watchdogs think there should be more transparency.

"There should be no hesitancy on the charity's part to disclose that to the donor," said Sandra Miniutti, vice president of marketing for Charity Navigator, a New Jersey-based charity evaluator.

But Public Outreach Fundraising, which has conducted face-to-face fundraising campaigns in Illinois for the Red Cross, ChildFund International and Mercy Home for Boys & Girls, a social service organization, says such disclosure requirements could be overly burdensome.

"There's only so much information that we can provide in a conversation," said Christopher Peterson, a managing partner of Public Outreach Fundraising. "Ultimately, our role is to recruit monthly donors."

A legal fight

Illinois has long been a legal battleground for regulations regarding professional fundraising.

In 1991 the Illinois attorney general filed a complaint in state court against a for-profit telemarketing company working on behalf of a Vietnam veterans organization, alleging it was committing fraud when it told potential donors that their money went to help veterans but took an 85 percent cut of the donations.

The telemarketers filed a motion to dismiss the fraud claims, arguing that their activities were protected under the First Amendment. The trial court granted the motion, which was later affirmed by the Illinois Appellate Court and the Illinois Supreme Court.

The case went all the way to the U.S. Supreme Court, attracting the attention of dozens of state officials who urged the court to side with Illinois, saying the state needs to be able to protect donors. But charities said a ruling against the telemarketers could hurt their fundraising initiatives, arguing that donors don't always understand that fundraising costs money.

"If you took away the money, it's the same as taking away the speech," said Bill Raney, a lawyer who represented the telemarketing company before the Supreme Court. "You can't regulate fundraising unless it's consistent with the First Amendment."