COVID-19 scams target blacks and other colored people


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Just as the annual holiday season of shopping and partying is approaching, a major state financial regulator released a new study detailing how colored communities are being attacked not only by known types of predatory lenders, but also trying new forms of fraud that Consumers in the fight to take advantage of the COVID-19 pandemic.

Issued by the Federal Trade Commission (FTC), “Serving Communities of Color” sums up the agency’s five-year efforts focused on the financial ills imposed on colored communities. Since 2016, the FTC has filed more than 25 lawsuits alleging conduct that either targeted or disproportionately affected color communities. Cases have challenged illegal practices by auto sellers, for-profit schools, money-making opportunities, student debt relief, and more.

In addition to these financial transactions, the report also finds that many of the payment methods used by Black and Latino consumers offer less fraud protection, such as debit cards, cash, and money orders. While credit card payments offer greater consumer protection, very few complaints filed by black people with the FTC have been related to this type of payment.

“Based on research and experience, it has become abundantly clear that fraud, as well as certain other business practices, disproportionately negatively impacts color communities compared to white communities,” the report said. “A study of 23 FTC cases shows that the pool of consumers who have lost money is predominantly overrepresented in black communities.”

In June of this year, for example, the FTC and the state of Arkansas jointly filed a lawsuit against a fraud operation specifically aimed at black applicants in financial distress due to the COVID-19 pandemic. The lawsuit alleged that the “Blessings in no time”Program was, in fact, a pyramid scheme that falsely promised members investment returns of up to 800%. The minimum “investment” of the alleged fraud was $ 1,400, but some members paid up to $ 67,700. The Texas-based defendants also falsely assured attendees that they would lose no money and would be able to withdraw with a full refund at any time.

More recently, on October 15, the FTC stopped a Prison call system Deceived the family and friends of detainees with marketing and advertising promising unlimited minutes of conversation to keep in touch with loved ones while personal visits were suspended due to COVID-19. Instead, a call time was never given. The defendants, inmatecall.com and inmatecallsolutions.com, posed as companies authorized to provide telephone services in prisons and jails to support the credibility of their false claims. A federal court order now requires that all defrauded consumers be notified and prohibits the accused from future activities.

If these financial losses with the effects of a national racial wealth gap That blacks have only 22 cents for every dollar of fortune held by whites shows disturbingly how fraudulent and predatory lending dramatically reduces the ability of black consumers to manage their financial lives effectively.

For example, about twice as many consumers in predominantly black communities compared to white consumers bought student debt relief programs and payday loans. But the two most common complaints from black consumers to the FTC were credit bureaus (21%) and copycat fraud (12.5%). In 2020 alone, the FTC filed or settled seven debt collection proceedings against 39 defendants and obtained $ 26 million in judgments for aggrieved consumers.

Other types of predatory and fraudulent lending include collections, bank loans, and auto sales and financing. The agency also found evidence of healthcare fraud, identity theft, and alleged jobs and money-making opportunities.

For many consumers, buying a car and financing is the second largest consumer transaction – after housing costs. The abundant evidence of blatant discrimination against Black, Latino and Native American car buyers included false information about applications and contracts, and misleading advertisements in Spanish.

“Research shows that color consumers experience discrimination when selling and financing cars and often pay higher prices as a result,” the report said.

Over the past five years, FTC has taken several enforcement actions against car dealers for fraudulent tactics, including advertised prices that were never available to potential buyers, falsified financial information on sales, false and / or misleading information, and unfair practices.

Identity theft has been discovered in cases where fraudsters often gained credibility by impersonating officials. For example, one defendant marketed prepaid cards to Black and Latino customers, claiming their cards were like Visa or MasterCard. Instead, consumers either couldn’t use the cards or lost all of the money they had on them.

For consumer advocates, these and other recent discoveries about financial abuses that color consumers are exposed to deserve even more aggressive enforcement, especially at the federal level.

“Never in the history of the United States has black and other color families seen fair financial conditions,” said the Responsible Lending CenterAshley Harrington’s before the House Financial Services Committee this spring. “And the COVID-19 crisis has exacerbated the existing disparities. In fact, in many cases, white families will have 5.5 times more savings than black families to financially withstand the pandemic. “

The evidence of financial abuse is sufficient. The nation needs a new reckoning to correct the injustice.

Charlene Crowell is a Senior Fellow of the Center for Responsible Lending. She can be reached at [email protected]

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