Wallet Warning May 2022
Avoiding Consumer Cons:
An initiative of Shelby County Trustee Regina Morrison Newman.
Wallet Warning – Memphis Leads the State in Scams Reported and Dollars Lost
Our last two monthly Wallet Warnings showed that Shelby County was unfortunately leading the country in the dollars lost to the two scams discussed. Losses in this county represented 20% of the loss nationwide to Lottery/Sweepstakes scams and 24% of the loss nationwide to Government Grant scams. We sensed an unfortunate trend and decided to dig a little deeper with the help of our partners at the Better Business Bureau (BBB). According to the Federal Trade Commission (FTC), 79,012 frauds/scams were reported in Tennessee during 2021. Memphis accounted for 29,208 of those reports. That is a whopping 37% of all frauds reported in our state. And let’s not forget that most people don’t report. The BBB’s best estimate is that only one in 17 people who are victims of a scam or fraud actually make a report. Memphis had more reported scams than the entire state of Arkansas which had 24,176 reports. We’ve been asked why our Wallet Warning awareness program is important; this is why – our community has a target on its back. The BBB’s Scamtracker for the same timeframe shows that Memphis had 2,101 reports resulting in over $900,000 in funds lost. That’s approximately 5% of the nationwide reports and 2% of the total monetary loss. While in the grand scheme of things, it may not seem like much, to those who typically fall victim to the fraud and scams and wind up losing money, it can be financially devastating. This type of loss to folks already teetering on the edge of financial ruin can make them vulnerable to the proliferation of predatory lenders in Shelby County. Did you know that there are over 230 locations in our county that offer payday loans, title loans and other high interest, short term types of borrowing? Shelby County has more of those types of lenders than banks. While most operate within state law, these types of lenders do prey on the poor and working poor in our community. Once a person takes out this type of loan, it is very hard to pay it off. It may seem very attractive to just pay the fees each due date and let the original borrowed amount rollover again. After just four months of doing this, the person who borrowed $400 will have paid back more than they borrowed and still owe the original $400. Why are Shelby Countians more susceptible to scams and fraud and predatory lending? At least, in part, it is because of our high poverty rate. According to the 2021 Poverty Fact Sheet, our poverty is at 24.6%. People who are barely making it are easier prey for a scammer who promises them an unexpected windfall. If that windfall never materializes, they find themselves in need of what they think will be short term help to make ends meet. It is a vicious cycle that is difficult to break. Another contributing reason for our susceptibility is the high number of households that don’t have a mainstream financial relationship (checking or savings account). Based on the most recent figures available, over 100,000 Shelby County households didn’t have a checking or savings account with a bank or credit union. The FDIC’s 2019 How America Banks survey showed that 48% of people in our area who didn’t have a bank account didn’t trust banks and were concerned about “surprise” fees, aka bounced check fees. But you have options. The Bank on Memphis coalition, sponsored by our office, now has eight local financial institutions who offer accounts that cannot be overdrawn or charge those fees. Having a mainstream financial relationship opens up many avenues for people who may need short term money to avoid the predatory lenders. Several credit unions that are a part of our Bank On Memphis efforts offer loans as small as $500. At least one local bank is piloting a payday loan replacement product. A third reason is just lack of education and awareness about the types of scams and fraud that are prevalent in our area. That is one of the reasons we decided to launch Wallet Warnings as a part of our consumer financial protection initiative. Our partners at the BBB work tirelessly to spread the word, and we have joined them. One way you can help is by reporting scams and fraud when you encounter them, whether you are a victim or not. There is no shame in falling victim to these scams/fraud. The shame is if you don’t report it, others will be victims, too. Several gentle reminders of ways to spot scams/fraud and avoid falling victim to them include: 1. Any sweepstakes or government entity will NEVER require you to pay anything to claim your winnings. 2. No financial institution will ever email you and ask you to verify your personal information. They already have it. 3. The IRS and Social Security Administration will NEVER call you and threaten you with being arrested. They communication via the United States Postal Service. 4. Your friend or family member isn’t going to email you asking for bail money or money for some other type of emergency. 5. Check the originating email address. It is usually a dead giveaway because it is NOT from who they say they are. 6. When in doubt, call someone you trust or call the entity that is supposedly reaching out to you by finding a phone number on your own. Don’t call the number in the email. 7. Do not click on any links sent to you via email or social media until you verify that they are legitimate. Call or text the person to see if they actually sent you the link. 8. Last but not least, if it seems too good to be true, it probably is. I hope you continue to find value in our Wallet Warnings. If you have any questions or need any additional information about anything discussed here, please call (901) 222-0206. We are happy to help you avoid scams, fraud and predatory lenders.