Vulnerable Alabama Residents Are Targets for Fraud

Inside Subprime: May 30, 2019

By Grace Austin

Federal and state officials in Alabama have joined with local consumer advocates to express their concerns over the growing problem of fraud in the state, emphasizing the damage done by unregulated payday loans.

Officials from the Federal Trade Commission, Federal Bureau of Investigation, the Alabama Attorney General’s Office, the Hispanic Interest Coalition of Alabama, the Better Business Bureau and several other agencies talked about their concerns over fraud at a meeting in May 2019.

Alabama residents lose millions to fraud every year, according to the FTC. And while in proportion to overall national fraud loss Alabama fares better than other states, Alabama is one of the poorest states in the country. And the poorest and most vulnerable are often hit by fraud, including the elderly and new immigrants.

During the meeting, a representative from the Alabama Appleseed Center for Law & Justice spoke about the harm being done by an unregulated payday loan industry in the state.

Currently, payday loan firms can charge upward of 400 percent interest on a 14-day loan. And recent efforts to regulate the industry, like a payday loan database enacted in 2015, haven’t kept predatory loan firms from profiting off of vulnerable consumers.

The Appleseed Center recently published a scathing report on the industry in the state, with some tough statistics: more than 200,000 Alabamians used payday loans in 2018 and Alabamians borrowers took out an average of seven payday loans a year. About 1.7 million payday loans were issued in 2018.

Legal Services Alabama spoke about the negative effects of payday loans and the additional fraud and scams around borrowing for car loans. The economically marginalized often turn to alternative, high-risk financial services and loans because of a lack of other mainstream options, and those lenders face little oversight or regulation.

While recent payday loan legislation died in the statehouse this session, some lawmakers and consumer advocates remain committed to regulating the industry in the state.

The BBB executive director said he sees small business owners being victims of scams as they  try to get their companies off the ground. Those bad actors are “persistently preying on poor people who don’t have choices,” Bob Dickerson said.

In addition, the Alabama AG’s Office and the FBI both cautioned about scams targeting the elderly. A well-known scam is for someone to pose as a government agency like the IRS and demand immediate payment to avoid a penalty or jail time. Email scams taking advantage of family connections are still common fraud techniques.

Immigration services fraud has also increased, with lawyers and those posing as lawyers becoming a major issue, said a representative from HICA. Lucia Gaona said immigrants pay too much for bad services, unaware they are being taking advantage of. And unfortunately if the immigration process is mishandled, it can lead to a worse outcome, such as deportation or a years-long delay in the process.

Learn more about payday loans, scams, and cash advances by checking out our city and state financial guides, including Alabama, BirminghamHuntsville, Mobile and Montgomery.