On October 15, 2021, the Federal Trade Commission (FTC) announced that it had issued a report outlining the impact of fraud on communities of Color (2021 Report). The report follows a 2016 report to Congress (2016 Report) titled “Combating Fraud in African-American and Latino Communities: The FTC’s Comprehensive Strategic Plan.” The 2021 Report provides an update on the FTC’s efforts since the 2016 Report, include a broad view of the types of issues under the FTC’s jurisdiction, and concludes with a road map for moving forward.
In addition to providing research regarding communities of color and a looking forward plan, the 2021 Report focuses on the following three issues:
- FTC enforcement actions. Per the FTC, “Aggressive law enforcement is a key component of the FTC’s efforts to protect communities of color.” This section of the 2021 Report includes details of more than 25 enforcement actions brought by the FTC in the last five years where the unlawful conduct either targeted or disproportionately affected communities of color, broken down into the following segments:
o Automobile Buying Issues
o Student Loan Debt Relief
o Marketing Prepaid Cards
o Government Impersonators
o Marketing for Inmate Services
o Deceptive and Unsubstantiated Advertising Claims
o Jobs and Money-Making Opportunities
o Credit, Background Checks, and Access to Housing
o Payday Loans and Debt Collection
- Outreach and Education Initiatives to communities of color
- FTC Workshops and Industry Studies
The 2021 Report found several critical differences in the way that fraud and other consumer problems affect communities of color. For example, it found that when people reported losing money, those living in majority Black and Latino communities more often reported paying in ways with few, if any, fraud protections such as cash, cryptocurrency, money orders, and debit cards. Those living in majority White communities, by contrast, filed the largest share of their reports about paying with credit cards, which offer more robust fraud protection.
The research also found notable differences in the types of problems people living in majority Black and Latino communities reported to the FTC. There were larger shares of reports about issues with car buying, banks and lenders, credit issues, and debt collection in those communities than in majority White communities.
Another study in the report, which analyzed information gleaned from several FTC cases, showed that in cases involving payday loan applications, student debt relief programs, and specific business opportunities, the most significant number of affected consumers resided in predominantly Black communities.
Per the 2021 Report, the FTC plans to continue to address the issue through:
- Enforcement, including enhancing reporting and investigative resources to better identify conduct that targets or disproportionally impacts communities of color.
- Outreach and Education, by making resources more widely available in multiple formats and languages, seeking out additional trusted sources in communities of color, and expanding the agency’s relationships with ethnic media.
- Research, by increasing systemic review and analysis, focusing trends and disparities, conducting industry studies, and continuing to research and understand the issue
The FTC’s 2021 Report seems to fit right in with the CFPB’s announcement in June 2021 that they plan to look at racial issues. In addition to looking at historic trends and current data, both the FTC and the CFPB will enhance their processes to obtain information, allowing them to better dissect and understand the ongoing issues surrounding race.
ARM industry participants should take note of these reports and the goals of both the FTC and CFPB. While there are no laws, rules, or regulations in place requiring ARM industry participants to gather data and information relative to disparate impacts, it’s certainly worth noting that this issue is on the radar of the regulatory bodies charged with protecting consumers.