The coronavirus crisis has put millions of Americans suddenly out of work, creating an economic crisis we haven’t seen in our lifetimes.
Unfortunately, the economic impact is playing out in a similar trend to what we have seen before: the poorest Americans are getting hit the hardest. Federal Reserve Chairman Jerome Powell himself said that many of the most financially vulnerable among us may never get their jobs back, increasing the financial burden on those who can least afford it.
Economic environments like the one we’re in create a powder keg for payday lenders, ponzi schemes, and other financial scammers looking to capitalize on this financial insecurity.
At the end of 2019, local officials in New York, Kansas, South Dakota, Massachusetts, and Illinois all made public announcements warning consumers to be vigilant of scammers. But the idea that many consumers would only be vulnerable to scammers during the altruistic holiday season seems quaint now. Many are likely in a far more precarious position than they were in December, which makes them a prime target for scammers.
The Explosion Of Predatory Robocalls
Phone scams utilizing robocalls have become a major problem for consumers and regulators in recent years.
The Federal Trade Commission said it received more than 940,000 fraud complaints in 2018, and 69% of the time the scam began with a phone call. According to the commission, the median loss from a phone scam in 2018 was $840, more than double the median loss across all other types of fraud.
A large part of that problem is the prevalence of robocalls—scams in which automated calls spoof a local phone number and pretend to be from a government agency or financial institution. Robocalls have exploded in the last few years, to the point that First Orion, a telecommunications security firm, predicted that nearly 45% of mobile calls in 2019 will have been fraudulent, compared with just 3.7 percent in 2017. Robocall scams were the most common complaint submitted to the FTC in 2018.
In a move that signifies the significant threat of robocalls, the FCC recently moved to seek a record fine from health insurance telemarketers who allegedly made a billion robocalls to residents in Arkansas, Indiana, Michigan, Missouri, North Carolina, Ohio and Texas during the first half of 2019.
Robocall Scam Tactics + Aggressive Call Centers
Obvious as they seem to some, robocalls are effective. As the Wall Street Journal put it, “robocall scams exist because they work.”
But not all of these calls are as random as a scammer from, say, India, posing as the Social Security Administration. Increasingly, high-risk consumers are being targeted by aggressive call centers that appear to offer a lifeline, such as a loan. These companies take advantage of the proliferation of online lending, which has made it easier than ever to find loans with appealing terms. Unfortunately, it’s also made it easier for companies to disguise themselves as legitimate lenders.
Some will have websites that look completely legitimate—complete with personal loan offers—which they use as a net to catch consumer information. Once they get that info, they will often call and harass the individual into getting something else, like bankruptcy services or a debt settlement product.
If you don’t budge on that, another tactic is to transfer you to a different provider that they pretend offers better deals, only for them to continue to pressure you into products that could damage your credit. Even if what these companies are pitching sounds like it will provide short-term financial relief, the high interest rates that often accompany these services can put you even deeper in debt and adversely affect your credit score.
As a general rule of thumb, if you find yourself being besieged by phone calls and emails multiple times a day or for several days from a company claiming to offer a loan that will “help” you, chances are it’s a scam.
Other common scams include those specifically targeting people receiving some sort of government aid—where the scammer will pretend that your benefits will get cut off if you don’t update your information with them—and private lenders targeting consumers with student loan debt from for-profit colleges. According to the YouMail Robocall Index, more than 11 million robocalls regarding student loans were made in May, while more than 6,000 reports involving the three largest student loan providers— Nelnet, AES / FedLoan Servicing, and Navient—were filed to the Consumer Financial Protection Bureau last year, according to NBC News.
While clear guidelines exist for how to deal with scams, there’s only so much an agency or watchdog can do to protect consumers from being scammed. The biggest onus lies on consumers to be smart with who they give information to over the phone.
Federal resources for victims of fraud:
- Victims of phone-based law-enforcement impersonation and other scams should report incidents to the FBI by going to https://www.fbi.gov/tips or calling 1-800-CALL-FBI (225-5324)
- Victims can also report social security scams to https://oig.ssa.gov
- Consumers can also file complaints or report unwanted calls with the Federal Trade Commission and Federal Communications Commission
Photo: Michael Theis