NASHVILLE, TN – The Federal Trade Commission released a 50-page report this month, Serving Communities of Color. The FTC’s Bureau of Consumer Protection analyzed five years of consumer complaints as well as law enforcement actions against unscrupulous businesses.
The FTC found that fraud and other business practices have a disproportionately negative impact on communities of color, as compared to White communities. “The COVID-19 pandemic has only further exposed and exacerbated these disparities,” the report said.
The FTC collected research from other agencies, its own enforcement actions, and from consumer reports filed with the FTC’s Consumer Sentinel Network, which is shared with more than 3,000 law enforcement agencies around the country.
“We don’t lock people up but we do get money back,” said Monica Vaca, Acting Deputy Director, Bureau of Consumer Protection, FTC.
Vaca said the FTC sends thousands of cease and desist letters every year and bring about 25 cases to court but those cases affect millions of people. Last year the FTC returned $107 million to 1.66 million consumers.
“We sue people, organizations, companies that engage in deceptive and unfair practices,” she said.
FTC research shows that certain types of fraud in certain industries not only target but also impact some communities more than others. They include auto buying, for-profit colleges, prepaid cards, government impersonators, money-making opportunities, and student debt relief.
Vaca highlighted three cases they pursued. One was the Bronx Honda case, another was Amazon Flex drivers, and the third was a get rich scheme called “Blessings in No Time”.
In the Bronx Honda case, the manager told salespersons to charge higher markup and financing fees to Latinos and Blacks, and to double charge taxes. The dealership also didn’t sell their cars for the advertised price. “They change the sales price in the paperwork right in the middle of the sale,” Vaca said. The FTC was able to get $1.5 million in refunds back to consumers from the dealer.
Another case involved Amazon Flex drivers. In its app and marketing materials Amazon claimed drivers could make $18-$25/hr. plus 100% of customer tips.
However, FTC discovered that during 2016-2019 when customers thought they were tipping their drivers, Amazon was actually using the tips to supplement the drivers’ base pay. Hundreds of drivers complained that they were getting short-changed but Amazon kept doing it until the FTC notified the company that they were being investigated.
“In its settlement Amazon agreed to pay back the tips in full. Sixty-one million dollars will be going back to Amazon drivers,” Vaca said.
A third case was a variation of a “Sou-Sou” circle—a common method used in the Philippines, Africa, and the Caribbean to raise funds amongst a small group of friends. But “Blessings in No Time” was just a pyramid scheme that bilked tens of millions of dollars from thousands of people.
The scheme “specifically targeted African Americans and it harmed people who were struggling financially during the pandemic”.
”They lured people into their program by falsifying promising returns as high as 800%. Some paid as much as $62,000 to participate but in reality, of course, it was just a pyramid scheme. The vast majority of people lost their money.
These are just some examples. They may not be what you think about when you think of consumer protection but people tell us if they encounter it,” Vaca said.
Rosario Mendez is an attorney for the Division of Consumer & Business Education at the FTC. “Different communities report different issues,” Mendez said.
In Latinx communities the top issue was impersonator scams. For people living in majority Black communities the top issue was credit bureaus.
Mendez said both majority Latinx and majority African American communities reported more problems with car buying, banks and lenders, credit bureaus, and debt collection than White consumers reported.
“Particularly in the Black community you can see that the red line has the largest auto-related and bank and lender issues,” Mendez said. (Insert Report Different Issues here)
How people pay for things can make a big difference when it comes to consumer protection. Paying with a credit card has the highest level of security; debit cards not so much; gift cards and money transfers even less; cash hardly any at all. (See graph)
(Insert pay differently graph here.)
“Different communities reported paying scammers differently,” she said.
People in Black and Latinx communities reported they used payment methods that have few, if any protections.
People living in majority Black and Latinx communities reported paying scammers with cash, crypto currency, with debit cards…all those payments have less protection if any. And in contrast people living in majority White communities reported paying scammers with credit cards,” Mendez said.
She said that was significant because credit cards have some protections. “And that’s significant because credit cards have some protections against transactions that are fraudulent. Debit cards have some protection against unauthorized charges but all the other methods have very few protections,” Mendez said.
Tennessee consumers filed 2.3 million fraud reports with the FTC in 2020. Total consumer losses were estimated at $3.4 billion; the median consumer loss was $306. The top five fraud categories were imposter scams (502,840), online shopping (364,871), Internet services (128,952), prizes and lotteries (116,392), and telephone and mobile services (109,165).
The FTC report, Serving Communities of Color, can be found here: