(Above, Inset: l-r): Monica Vaca, Acting Deputy Director, Bureau of Consumer Protection, FTC; and Rosario Mendez, Attorney, Consumer & Business Education, FTC. (Siliconeer/EMS)

 

A new report has just been released by the Federal Trade Commission (FTC) on ‘How consumer fraud impacts communities of color in the United States.’ The report reveals differences in the way that fraud and other consumer problems affect diverse populations. FTC speakers will also highlight cases brought by the FTC in the last five years where the unlawful conduct either targeted or disproportionately affected communities of color. The speakers for this Ethnic Media Services briefing, held Oct. 22, were Monica Vaca, Acting Deputy Director, Bureau of Consumer Protection, FTC; and Rosario Mendez, Attorney, Consumer & Business Education, FTC.

The Federal Trade Commission is the nation’s consumer protection agency, and their mission is to help all consumers avoid scams and know what their rights are in the marketplace.

The speakers looked at FTC’s progress in the last five years to address disparities and other issues affecting communities of color with a focus on law enforcement, outreach, and research.

“Since 2016, we’ve brought more than 25 actions where we could identify conduct that either specifically targeted or disproportionately impacted communities of color and these are over a broad spectrum of industries, (such as) auto buying, for-profit colleges, prepaid cards, government impersonators, money-making opportunities, and student debt relief,” said Vaca.

Bronx Honda

This was a case alleging discrimination in the sale of cars and other consumer issues, as well, according to the FTC, Bronx Honda and its general manager told its salespeople to charge higher financing markups and fees to African American and Hispanic customers. It was a discrimination case, and they also failed to honor their advertised sales prices. They changed the sales price on paperwork in the middle of the sale without telling the consumer and they double charged people for taxes and fees without their knowledge and finally they told people that they had to pay unnecessary fees to purchase ‘certified pre-owned’ cars that were not required by that program, as a result of that law enforcement case the FTC was able to get $1.5 million in refunds back for people.

Amazon Flex

People from communities of color are over-represented in the gig economy and gig workers do have protections. The FTC has sued companies that fail to deliver what they promise, including Amazon Flex. FTC alleged that in its app and its marketing materials, Amazon advertises the drivers can earn $18-$25 per hour plus 100 percent of customer tips, but according to the FTC’s allegations, during a two-and-a-half-year period, 2016 to 2019, customers thought they were tipping their drivers, not Amazon, but the drivers were left shortchanged. Instead of getting their full tips, the FTC charged that Amazon used those tips to supplement the base pay. The FTC also said that Amazon, despite receiving hundreds of complaints from the drivers, who saw their pay decrease, continued to divert driver’s tips until the FTC notified the company that they were being investigated. In its settlement, Amazon agreed to pay back the tips in full, $61 million, which would be going back to Amazon Flex drivers.

Pyramid Schemes – ‘Blessings in No Time’

The FTC worked against pyramid schemes which sometimes masquerade as something else entirely. In a recent case, the FTC and the state of Arkansas sued the operators of what is called a ‘blessing loom investment’ program. The FTC alleged that the program operated as an illegal pyramid scheme that built tens of millions of dollars from thousands of people and specifically targeted African Americans. It harmed people who were struggling financially during the pandemic. In their joint complaint with the state of Arkansas, the FTC charged that the operators of ‘Blessings in No Time’ lured people into joining their program by falsely promising investment returns as high as 800 percent and some people who joined paid as much as $62,000 to participate. In reality, it was just a pyramid scheme and the vast majority of participants lost their money according to the FTC complaint, ended Vaca.

Mendez talked about an analyst’s research, “He analyzed the reports that come to the Federal Trade Commission through reportfraud.ftc.gov and also from contributors from Attorney General offices, other law enforcement offices that contribute their complaints to our database, the BBB’s, and other organizations. He took that information from all those reports from 2020 and he mapped that against the U.S. Census demographic data to get a sense of who was complaining to us; from what communities; what were they complaining about; That information has given the FTC some insights about who’s reporting and what are they reporting about.

“According the report, people living in majority Latino communities top the report. The top consumer issue they reported to FTC was impersonator scams.

“For people living in majority Black community, the top report was credit bureaus.

“Both majority black and majority Latino communities filed a larger share of reports to the FTC on car buying problems,” said Mendez.
“The black community also had the highest complaints on debt collection and auto-related in bank and lenders issues,” said Mendez.

Different communities reported paying scammers differently. FTC found that majority black and Latino communities reported as paying scammers with cash, with cryptocurrency, with debit cards, and so those all those are payment methods that have less protections. In contrast people living in majority white communities reported paying scammers with credit cards. That’s significant because credit cards do have some protection against transactions that are fraudulent. Debit cards have some protections against unauthorized charges, but all the other methods have very few protections.

As a result, the FTC sees an opportunity to do outreach education and messaging in these communities, to let people know that it does matter how you pay, if something goes wrong.

What’s going on in Asian American communities?

Vaca said that the Asian American community was not reflected as they were not part of the zip codes that were sampled, “When we collect reports from the public about what they’re experiencing in the marketplace, we don’t ask people their race or ethnicity. We don’t actually have that very granular data. Instead, what we have done is we have looked at the zip codes that people have entered as their addresses and those zip codes we then match with Census data and that Census data can tell us whether in that zip code we have a demographic population that constitutes a majority population, so majority white, or majority black, or majority Latino. There were very few zip codes that were majority Asian and so it was not possible to do that same kind of robust analysis that we were able to do with the other communities.”

Vaca said FTC did have some data about some of the consumer protection issues affecting Asian populations and Native American populations.

The top issues FTC has seen were the bogus health products and the auto financing issues.

“During the pandemic we have seen a lot of promoters of these health care sort of bogus health treatments cures related to COVID-19, including some products that were advertised specifically to the Korean and Vietnamese-speaking communities. For example, Qyk Brands was a case that the FTC brought where we allege that the defendants failed to deliver on their promise to quickly ship face masks and sanitizers and other products and we found that they marketed to Vietnamese American communities in the U.S. using Vietnamese language videos. We’ve also sent hundreds of cease-and-desist letters both in the United States and abroad to stop making unsubstantiated claims that products can treat or prevent Covid-19. Those were a couple of cases that we brought.

“Another auto case, Tate’s Auto Group. It was a case we brought against four auto dealerships where the FTC alleged that the defendants falsified people’s income on vehicle financing application. They falsified people’s down payment information on financing applications and contracts, and they marketed deceptive ads that were offering vehicles for sale financing and lease and many of the customers in the Tate’s Auto Group case were citizens of the Navajo Nation, and the dealership frequently ran radio ads and print ads in Navajo media so to reach these communities and many communities of color.

“We work very carefully with some of our trusted partners, including the Navajo Nation Human Rights Commission, which was instrumental in helping us identify this case,” said Vaca.
Asking consumers to be vary, the FTC suggests people read up about consumer education at consumer.ftc.gov. To report an issue, they can use reportfraud.ftc.gov.

Would you say that scams perpetrated by big businesses like Amazon add up to the worst of the scam world, or is it the aggregate of all the smaller scams? Is there any way to make that distinction?

It’s hard to make that distinction. There are so many different scammers out there and what FTC want people to know is to be on the lookout for all of them and not just for the ones that that may be household names. Please be on the lookout for anybody who approaches you frequently. It will sound like somebody you know, a business you trust, and these are the impersonator scams, replied Vaca.

To another question, Vaca said, “While we cannot eradicate all scams, what we can do is inoculate the people in our community from falling prey to scams and we can inoculate them with information. Research has shown that when people know about a specific scam, they are 80 percent less likely, to lose money if they have heard about a scam when it approaches.”

Anti-vaxxers

On the spread of anti-vaccination content, Vaca said, FTC has been very attuned to the claims that people are making. They do that in a number of ways including online surfs, the FTC has identified lots of those types of claims. “To get those claims taken down as fast as we can, we’ve sent out cease-and-desist letters. Stop making those claims immediately and if you don’t stop making those claims, the FTC may take law enforcement action against you. We have sent out hundreds of those letters … stemming the tide of all of this information misinformation is extremely difficult and it causes substantial harm. We see it with COVID, but we see it with all other kinds of health claims as well, where people are pitching cures for diabetes, or cancer, or some something else, actually winding up dissuading people from getting actual treatment that they need. It is particularly egregious, and the harm is particularly pernicious, and those are things that we do we do keep our eye.”

The link between low-income communities and a higher level of scam

Scams target lower income communities and sometimes scammers are opportunistic so they’re going to target you for whatever they think that you need in the moment. We do hear scammers really going after people who have less income, such as impersonating the electric company and saying that you’re behind in your in your payment and your electricity is going to get cut off. They can do that by claiming that they are the IRS and you’re about to get arrested if you don’t pay up right away. They do that by doing awful things like threatening deportation.