Financial predators targeting Latinos

September 26, 2006|By The Seattle Times

SEATTLE -- The car salesman spoke Spanish, sharing the "good news" with customer Teresa Belmont that she was approved for a loan to buy a used Chevy van - at 15 percent interest.

Some car buyers were getting loans for as low as 4 percent at the time. But as a Mexican immigrant with little credit history, 15 percent was the best she could expect, the salesman claimed.

The Puyallup, Wash., woman, a single mother of four who works two jobs, felt she had no other choice. A year later, Belmont learned just how badly she'd been taken.

A rip-off is a rip-off in any language, but swindles aimed at Latino consumers more often find their mark and frequently go unreported.

Hispanic consumers are more than twice as likely to be victims of fraud as non-Hispanic whites, according to a 2004 survey by the Federal Trade Commission.

Low-income consumers, immigrants and refugees of any background are especially vulnerable to fraud, but the sheer size and growth of the Latino population places them at particular risk.

"As that community is growing, they're becoming bigger players in our economic markets," said Scott Kinney, Washington state Department of Financial Institutions' communications director. "They're traditionally `unbanked,' so many mainstream financial literacy efforts miss them."

Belmont's story illustrates some of the perils facing unwary Latino consumers, particularly those unfamiliar with English, their rights as consumers or the standards expected in American business transactions.

A week after she agreed to pay 15 percent interest on her car loan, the dealership called her back in to sign more paperwork, saying the van would be repossessed if she didn't sign. Belmont signed in a hurry, without reading everything, so she could return to her job at a day care center.

For a year, Belmont never missed a payment. One day, she heard a Spanish-language radio program featuring the chief executive of White River Credit Union in Enumclaw, Wash., talking about credit-union outreach to Latinos.

When Belmont showed CEO Linda Kleppe-Olson her car loan papers a few days later, Kleppe-Olson was outraged. Belmont was actually paying 29 percent interest; the dealership nearly doubled her interest rate in the second set of papers. Belmont's $9,000 van was going to cost her more than $16,000 over the life of the loan, despite her having put $2,500 cash down.

"It was unconscionable," Kleppe-Olson said. "I was affronted by the injustice of it."

She helped Belmont, who also works as a housecleaner, to close out the predatory car loan and get a credit-union loan. Today, Belmont pays 8.2 percent interest and nearly has the van paid off.

"Lots of us have no idea the amount we're paying in interest," Belmont said. "Sometimes they know we don't speak English very well, and they take advantage. It takes us a lot of effort to earn the money, but it's so easy to lose it."

Many subprime lenders - those who lend money to borrowers with poor or no credit histories and charge higher rates - seem more welcoming, with Spanish-speaking staff and looser rules about the documents required.

Lack of access to mainstream financial services is at the heart of the problem, said Anna Landa, manager of the Immigrant Financial Justice Project at Columbia Legal Services.

Newcomers often face language barriers. Some don't read English or Spanish, or they lack financial literacy. When something goes wrong, many don't know whom to tell - or even that they have a right to complain.

"Hispanics don't complain much. They rely on people's word that they're honest" and often don't demand written documents, said Uriel Iniguez, executive director of the Washington Commission on Hispanic Affairs.

And for some, their immigration status may keep them from fingering businesses that defraud them.

"They worry about being identified if they call to complain," said Norma Chavez, community outreach liaison with the Washington attorney general's office. "Every consumer has the right to file a complaint. We don't distinguish based on [citizenship status]. They need to know we're not going to inform Homeland Security."

Latino consumer frauds

Anyone can get taken in a swindle, but Latinos may be particularly vulnerable, in part because of language barriers and cultural differences.

Money transmitters

Some are unlicensed, unbonded businesses that promise to wire money to family members in Latin America but then disappear. Others charge high fees to wire money.

Predatory loans

Latinos with little or no credit history or a bad credit rating have a greater likelihood of ending up with high-fee, high-interest loans of all kinds.

Notary publics posing as lawyers

In Mexico, notarios are attorneys. Some U.S. notary publics misrepresent themselves as lawyers to Latino clients.

[FTC Web site. The Federal Trade Commission has a Spanish-language Web site with information about common frauds aimed at Latinos and an online form for filing consumer complaints in Spanish: www.ftc.gov/ojo]

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