Calexico police released this cell phone image of several individuals dressed in personal protective equipment claiming to be offering COVID testing outside a senior apartment complex in the city on April 16, 2020. Believed to be an insurance scam or identity theft ring, police in Calexico and other areas of the county were actively investigating reports at the time. | PHOTO COURTESY OF CALEXICO POLICE DEPARTMENT
While Latino consumers are frequently victims of imposter scams, African Americans mainly report fraud in debt collection through credit bureaus, and Asian Americans are cheated with fake health products.
Across ethnic communities, scams through used car sales and lending agencies have preyed on people in the midst of their financial struggles.
These are some findings in the latest Federal Trade Commission report on how consumer fraud affects communities of color in the United States. During a briefing hosted by Ethnic Media Services, two veteran FTC attorneys explained the cases that in the last five years have led them to sue individuals, organizations, or companies for deceptive and unfair practices.
“Since 2016, we have established 25 law enforcement actions, where we could identify conducts specifically targeting or affecting communities of color in a disproportionate way,” said Monica Vaca, acting deputy director of the FTC Bureau of Consumer Protection. In a year, the federal agency establishes an average of 100 cases that affect thousands of victims.
“These are found in a broad spectrum of industries: auto buying, for-profit colleges, prepaid cards, government impersonators, money-making opportunities, and student debt relief.”
One case brought by the FTC was against the Bronx Honda company for discrimination in the sale of automobiles to African American and Latino customers. The general manager asked the sellers to charge higher financial margins and fees to these consumers which resulted in a sale price change on paperwork without notice, and the collection of taxes and fees from people without their knowledge. “As a result of that law enforcement case, we were able to get $1.5 million back for people,” said Vaca.
In a second case, Amazon was implicated for promising drivers who signed up for its Amazon Flex program that they would get 100 percent of the tips received from customers who placed orders through services such as Prime Now and AmazonFresh. Research shows that communities of color are overrepresented in the gig economy.
“During a two-and-a-half-year period (from 2016 to 2019), customers thought they were tipping their drivers on Amazon, but instead Amazon used those tips to supplement the base pay,” said Vaca. “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 will be going back to drivers.”
In a more recent case the FTC and the state of Arkansas sued the operators of a blessing loom investment program that falsely promised people struggling financially due to the COVID-19 pandemic, that they would receive investment returns of up to 800 percent. The scheme was specifically aimed at thousands of African Americans.
“We happen to be a civil law enforcement agency, which means that we don’t lock people up, but when appropriate, we refer scammers to criminal authorities,” Vaca added. “But we do get money back: 1.66 million people have recovered $160 million (since July 2018).”
Cash and COVID
Another key FTC concern is that most Latinos and African Americans use payment methods that have little or no protection: cash, cryptocurrencies, debit cards, or gift cards, which they use for bank and electronic transfers.
“How you pay can determine how easy it is to get your money back if you are defrauded,” said Rosario Mendez, Attorney at the FTC’s Division of Consumer and Business Education. “In contrast (to communities of color), people who live in majority white communities reported paying scammers with credit cards, and those have some protection against fraudulent transactions.”
This is relevant because the Latino community in particular is targeted by scammers posing as officials from government agencies like the Internal Revenue Service, service providers like Apple, or job search companies like Headhunter, all asking for money in exchange for unfulfilled promises.
During the pandemic, the FTC identified several health promoters offering bogus cures for COVID-19, advertised specifically to the Korean and Vietnamese-speaking communities. “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,” added Mendez, acknowledging that misinformation “is extremely difficult” to fight and it causes “really substantial harm.”
Perpetrators often target their own community and sometimes take on roles as facilitators to “help” people understand, for example, the tax and the immigration system. But others are based offshore and have a bigger network of people collecting money from their victims in the United States, as in the case of the telemarketing fraud, originating from India and the Philippines.
“We do have an international division that has a memorandum of understanding with other countries and facilitates that cooperation to prosecute (foreign criminals),” said Mendez. “When cases cross international boundaries, they tend to become more difficult, but they are not impossible,” she added.
The data in the report comes from reports received in 2020 online at https://reportfraud.ftc.gov/#/ , and from complaints filed with Attorney General’s and law enforcement offices. That information is pooled into a database called the Consumer Sentinel Network, which is shared with 3,000 law enforcement officials nationwide. To establish who was complaining and about what, the reports were mapped against the U.S. Census demographic data.
“While we cannot eradicate all scams, what we can do is inoculate people in our community from falling prey to scams, with information,” added Vaca. “Research has shown that when people know about a specific scam, they are 80 percent less likely to lose their money, so we want to encourage them to share their experiences,” she concluded.