As the annual holiday shopping and celebratory season approaches, a leading federal financial regulator has released new research detailing how communities of color are being targeted not only by well-known types of predatory lenders, but new forms of lenders. fraud seek to exploit consumers in the throes. of the COVID-19 pandemic.
Published by the Federal Trade Commission (FTC), Serving Communities of Color summarizes the agency’s five-year efforts focused on the financial evils facing communities of color. Since 2016, the FTC has filed more than 25 actions alleging behavior that targeted or had a disproportionate impact on communities of color. Cases challenged illegal practices of auto dealers, for-profit schools, for profit opportunities, student debt relief programs, etc.
Beyond these financial transactions, the report also notes that many payment methods used by black and Latino consumers offer less protections against fraud, such as debit cards, cash, and money orders. While credit card payments offer greater protection to consumers, very few complaints filed with the FTC by people of color have involved this type of payment.
“What has become very clear from research and experience is that fraud, along with certain other business practices, has a disproportionately negative impact on communities of color, compared to white communities.” , indicates the report. “A review of 23 FTC cases shows predominantly black communities are overrepresented in the pool of consumers who have lost money.”
For example, last June, the FTC and the state of Arkansas jointly filed a lawsuit against a scam operation that explicitly appealed to black applicants who were suffering financial hardship as a result of the COVID-19 pandemic. The lawsuit alleged that the “Blessings in No Time” program was in fact a pyramid scheme that falsely promised members returns on investment of up to 800%. The minimum “investment” for the alleged scam required $ 1,400, but some members paid as much as $ 67,700. The Texas-based defendants also falsely assured attendees that they would not lose any money and could opt out at any time with a full refund.
Most recently, on October 15, the FTC ended a jail appeal program that tricked family and friends of incarcerated people with marketing and advertising that promised unlimited calling plans to keep in touch with loved ones while in-person visits were suspended due to COVID-19. Instead, no call time was ever provided. The defendants, inmatecall.com and inmatecallsolutions.com, have posed as companies licensed to provide appeal services to prisons and prisons to bolster the credibility of their misrepresentation. A federal court order now requires all deceived consumers to be informed and prohibits defendants from future activities.
When these financial losses are combined with the effects of a national racial wealth gap which revealed that blacks had only 22 cents for every dollar of wealth held by whites, it becomes clear how deceptive and predatory loans are declining. the ability of black consumers to effectively manage their financial lives. Just as redlining limited where black people could live, today’s predatory loans, like fringe financial services, limit the ability of black communities to build wealth.
For example, about twice as many consumers in predominantly black communities, compared to white consumers, purchased student debt relief programs and payday loans. But the top two complaints black consumers made to the FTC were credit bureaus (21%) and identity theft scams (12.5%). In 2020 alone, the FTC filed or resolved seven debt collection cases against 39 defendants and obtained $ 26 million in judgments for aggrieved consumers.
Other types of predatory and deceptive loans include debt collection, bank loans, and auto sales and finance. The agency also found evidence of healthcare fraud, identity theft, as well as suspected jobs and lucrative opportunities.
For many consumers, buying and financing a car is the second largest consumer transaction, after housing costs.
Much evidence of blatant discrimination against black, Latino and Native American car buyers included false information about claims and contracts and deceptive advertisements in Spanish.
“Research indicates that consumers of color face discrimination in the sale and financing of cars and often pay higher prices as a result,” the report says.
Over the past five years, the FTC has brought multiple enforcement actions against auto dealers for deceptive tactics that include advertised prices that were never available to potential buyers, falsification of financial information in sales, false and / or misleading information and unfair practices.
Identity theft has been discovered in cases where crooks often gain credibility by posing as a government official. For example, a defendant marketed prepaid cards to black and Latino customers, claiming their cards were like Visa or MasterCard.
Instead, consumers couldn’t use the cards or were wasting all the money they loaded into them.
For consumer advocates, these and other recent findings on the financial abuse facing consumers of color deserve even more aggressive enforcement, particularly at the federal level.
“Never in US history have black people and other families of color experienced a level playing field in financial matters,” Ashley Harrington of the Center for Responsible Lending told the House Financial Services Committee this spring. “And the COVID-19 crisis has exacerbated existing disparities. In fact, in many cases, white families will have 5.5 times more savings than black families to financially resist the pandemic. “
There is ample evidence of financial abuse. The nation needs a new calculation to right the wrongs.
Charlene Crowell is a senior member of the Center for Responsible Lending. She can be reached at [email protected] pret.org
