Price gouging and usury and fraud, oh my!
Ben Wiseman, director of the Office of Consumer Protection at the Office of the Attorney General for the District of Columbia, joins NCL’s VP of Public Policy, Telecommunications and Fraud John Breyault to talk about the surge of consumer protection issues that have emerged as a result of the COVID-19 pandemic and the crucial role that state attorneys general play in protecting consumers from predatory businesses and scammers.
Price gouging and usury and fraud oh my!
John: Hi everybody. My name is John Breyault. I am the Vice President of Public Policy, Telecommunications and Fraud at the National Consumers League. I also run one of our signature campaigns called fraud.org, which is all about protecting consumers from frauds and scams of all kinds.
And this is why today I think I’m particularly excited to be hosting my very first episode of We Can Do This! Because we are honored to be joined by, what I think one of the best consumer protection leaders in the entire United States, Ben Wiseman. He is the Director of the Office of Consumer Protection and the Office in the Attorney General for the District of Columbia. Ben, thank you for being a part of today’s show and welcome.
Ben: John, thanks so much for having me. It’s really exciting to be here.
John: Great. Well, Ben, I know, as somebody who works on consumer protection, I am certainly a huge fan of the work that, your boss, Karl Racine does, at the Attorney General’s office in the district and the work that all Attorneys Generals do to protect consumers across the country. But your average consumer who’s listening in may not be aware of what Attorneys’ General do to protect them every single day, from your perch in the AGs office. Can you let us know what you and your office and your teammates there do to protect consumers from frauds and scams?
Ben: Absolutely. And first, let me just say thank you for all your work and national consumers league work to protect consumers throughout the country. Really just want to acknowledge all the work that you all do, that aligns very closely to the work that state AGs do across the country. Now, the District’s Office of Consumer Protection, I’m actually going to take you back to 2015 when Attorney General Racine became the first elected Attorney General in the District of Columbia.
And part of his mission and part of his goals was to create a standalone office of consumer protection early on in his tenure. Now the office, has a responsibility as a state AG office to protect and promote the public interest of the 700,000 residents who live here in the District’s Capital, and really the bread and butter of that type of work of the state AG work is consumer protection.
The office was launched in 2015. It started as a small shop, only a few attorneys. I was, I believe the first external hire into the office as an Assistant Attorney General. We now have 15 attorneys, paralegal staff, and investigators working on behalf of the residents of the district. And I think the results show in making this a priority since 2015, when Attorney General Racine took office, we’ve recovered nearly 15 million in relief for consumers.
One million of that is through our consumer mediation program that doesn’t even involve attorneys, it’s investigators who are working to mediate complaints. So, now just to answer your actual question, what do we do in the Office of Consumer Protection? As I view it, we have four main priorities and goals. One is that I just mentioned. We receive and mediate complaints through our mediation program.
This allows consumers who have any types of complaints about businesses that they’re engaged with in the district to call our office. We have a hotline it’s (202) 442-9828, or go online to oag.dc.gov and fill out a consumer complaint form. And we will assign an investigator to work with you and the business to try to reach a resolution to your complaint.
The second priority is we bring enforcement actions under the district’s Consumer Protection Procedures Act. That’s the district’s consumer protection law. We bring cases both locally, individually as the district, but we also join with state AGs across the country to bring larger what are called multi-state actions.
The third priority is we help and draft legislation to help consumers. You may have seen some of that in response to COVID our office was involved in several pieces of legislation that the council pass on an emergency basis to protect consumers, including some very important tenant protections, important debt collection protections.
And then finally our fourth goal is to educate consumers throughout the district through our outreach program. So, we’re doing podcasts like this. We used to go out to senior centers and schools to talk to the community and try to help people understand how they can better protect themselves.
John: That number again, if you’re in the district, to file a complaint is (202) 442-9828. And they can also go on the web to oag.dc.gov. How many complaints are you processing, Ben, how many do you get from consumers? The district, for folks who may be tuning in, who aren’t familiar with the district, we love to say that the DC is a state, it’s not a state, but it has a population in excess of some places, like Wyoming. So, it certainly has all of the trappings of consumer protection needs of citizens in any other state. And so, in DC, I’m sure you’re getting lots of complaints from consumers. How many we’re talking about on average?
Ben: We really actually now are in a very different place than we were four months ago before the COVID crisis hit. So prior, and I can just give you an idea of our annual complaint total, typically we were receiving between, 1,200 and 1,500 complaints a year. Over the past four months, since the COVID crisis started, we’ve received 900 complaints, approximately 600 of those being directly related to COVID.
Essentially what has happened over the short period of time is our complaints have nearly tripled. It’s a time when a lot of people are facing financial difficulties, have questions, are seeing scams in the community, don’t know how to protect themselves, and are having issues with businesses that may have closed down. So, it’s not surprising to us, that there has been such an uptick in complaints, we’ve been prepared for it. And doing our best to work through each of them.
John: It’s interesting. So, at fraud.org, we think a lot about the scammer, trying to get you to send the money to collect a million-dollar prize. Or the people who call you in the middle of the night and claim to be from the IRS and get you to send them a money to avoid getting investigated or something like that.
But your office put out a report earlier this year that really analyzed the complaints that you were getting from district residents. And, I was surprised I had expected to see the kind of scams that we hear a lot about at fraud.org being the top of the list, but they weren’t. The top one that you talked about, or one of the top ones you talked about had to do with health spas, which I found interesting. Can you talk a little bit about that?
Ben: So, the report we put out in May, was a report that looked at the complaints that we’ve received since the onset of the COVID crisis. And, as I mentioned, our complaints nearly tripled, we had complaints, from all areas of the district, but the most complained about industry was health clubs and spas. And, I actually really love this report because we were able to dive into the data and see how things changed over time.
And what we saw, which was consistent with our experience on the ground is immediately as the crisis hit. We were seeing a surge of price, gouging complaints. People were calling regarding stores, over-selling products like bleach and Clorox wipes. And then around April 1st, when people’s memberships to gyms, e.g. were being auto renewed. We had a surge in cancellation and billing complaints, and that’s when we saw a huge spike, if you will, in the health club and spa space as well.
So, these were complaints from consumers who, belong to gyms, were being charged on a monthly basis. And because of the current situation, those gyms had closed and they weren’t able to use those services anymore. And the companies were still charging those consumers and continue to charge them. They were charging cancellation fees and freeze fees. But then also just continuing to charge monthly fees, even though, no consumers could actually use the gyms.
There’s one gym in particular in the district, Washington Sports Club, that we have specifically sent a letter to. With a number of other States we ended up reaching an agreement whereby the company agreed to freeze those memberships for free and provide refunds to consumers that had complained to our office, but that’s where it was really interesting to get into the data because you could see how things were changing on the ground. And it was just really interesting. I encourage folks to take a look at it.
John: But to be clear, these health clubs were required by the Mayor’s office to shut down, to try and control the spread of COVID. You have people, thousands of district residents who have been paying members of these sports clubs, but they can’t go use them. And rather than suspend charging these memberships every month, they kept charging them, even though you couldn’t use the spa. That seems pretty, I don’t know, I’m going to use a nicer word than the one I originally thought here. It seems pretty bold to do that. And think you can get away with it.
Ben: Yes. Let me take a step back. We are in an unprecedented time right now, and we certainly recognize the immense financial strain, both on consumers, but businesses as well. And this was not the circumstances necessarily limited to gyms and spas is where we saw the most complaints. But we’ve heard from people who had membership fees for parking garages, for instance, who no longer were going to work and therefore weren’t able to use their parking spot.
We had complaints from day-care facilities where the day-cares had closed down. People were told to stay at home and could no longer send their kids to day-cares, but they were still being required to pay monthly fees. On the whole, companies were willing to work with consumers. So, I don’t want to present a picture of businesses not making accommodations and trying to find a reasonable middle ground with the consumers that complained to our office.
On the whole, we had a really good working relationship with the business community that did work with us to make sure that although we were recognizing the financial strain of businesses no longer receiving any sources of funds anymore. But also, the consumers who may have lost their jobs were in incredible financial strain couldn’t make these payments anymore and really shouldn’t.
So, that’s where these complaints came in and our mediation team just did a really great job working through these complaints. We have a group of investigators and mediators who are in constant touch with both consumers, as well as the businesses trying to work towards a resolution.
John: Well, it’s interesting, when a lot of these shutdowns started to happen, we started getting inundated with media and consumers calling us, talking to us about consumers who had booked a vacation or a flight or a cruise before everything shut down because of COVID. And then they were trying to get a refund on those and being given the run around about whether or not they’d be able to actually get that refund.
So, for a district resident, who has, say booked a cruise in Florida and they can’t get a refund, is the best place for them to complain would that be to your office, would it be a federal agency, or somewhere else? And would these complaints, you talked about multi-state actions in the past, would those instances lead to the multistate investigation that you talked about?
Ben: So, first yes. Complain to our office. We say we like complaints, so, call us, send us an email, or go online, fill out the complaint form. If it’s not a complaint that we can handle, if it has jurisdiction from some other federal agency, or it will be better handled by another district agency or somewhere else, we’ll refer it for you.
And we’ll make sure that you get to the right place, but please come to us, not only because we think we can help consumers out in most cases. Also, we want to know what consumers are facing, and that really leads into the second part of your question is how do these multi-state actions, how are they generated?
And, one thing that this crisis has brought out has been the collaboration across state AG offices. We often work together through the National Association of Attorneys General and specific working groups where we’re constantly meeting and coordinating on large cases and investigations.
But that has only increased over the past four months. So, there are frequent calls among people in consumer protection offices across the country they are talking about these very things. They are sharing ideas and complaints and solutions to try to better protect consumers moving forward.
John: Well, you talked a little bit earlier about how businesses, this is an unprecedented time, right? I don’t think there are many businesses, at least not the repeatable ones, that are out there trying to figure out how to get one over on consumers during this time. Most of the businesses that I deal with, they’re just interested in how to stay in business and how to survive this time. But unfortunately, there is also this criminal underbelly of scammers who, are active in the best of times, but during this COVID moment, I’ve seen it described as an Eldorado for scam artists.
For example, one of the big things we saw when the stimulus package came out, there was all this news about how everybody’s going to get a $1,200 check in the mail from the U.S. government, which is great because so many people need it. But, as an organization that focuses on fraud, alarm bells were triggering in our head because free money from the government is music to the ears of scammers. And we were really concerned.
And, I think we’ve seen that with scammers trying to take advantage of that, as well as a lot of other scams related to COVID specifically. Besides the price gouging and the membership issues that we’ve talked about, that you talked about in your report, are there any of those scams the out no criminals, that you’re getting complaints about in the AGs office?
Ben: Yes. We are seeing those unfortunately. And, as you suggested, when we hear that there’s going to be a stimulus package, our alarms went off as well. And what we tried to do was focus heavily on outreach. So, before consumers even receive that money, trying to get out information to them, so they could be alert and be aware of those types of scams. But, yeah, we have seen unfortunately these types of scams popping up stimulus payments scams, charity scams, COVID related testing and treatment type of scams.
The FTC has done an excellent job of collecting data from all 50 States. If, you go to their website, you can look at all the different types of scams that have been reported to their offices throughout the country.
And so, it’s unfortunate that people would be taking advantage of a situation like this. We have put out a number of blogs and alerts to consumers in the district. I think going back to as early as February, we were already starting to see COVID related scams and put out a blog, alerting consumers and providing some tips to them.
Each state AG, I think across the country has done a really good job of doing similar outreach to their consumers and making sure that folks are aware of these and on the lookout, folks just have to be very careful. The tips we give often for all the scams are often very similar and don’t provide personal information to someone over the phone or on social media. Be careful with phone calls or emails or texts you receive from people you don’t know. And these scams are probably unfortunately going to continue.
We’re now seeing contact tracing scams, where people are getting scammed, text messages, telling them that they’re involved in some contact tracing events. So, it’s going to continue. This is not a problem that’s going to go away, unfortunately, anytime soon. And I think we’re certainly well prepared for it. And, we’ll be continued to be vigilant about trying to stop these scams.
John: And the work that you all are doing is just so important in educating consumers. And I assume folks can get all those blogs on your website at oag.dc.gov. Are there newsletters or other things that consumers can sign up for?
Ben: You can sign up for consumer alerts on oag.dc.gov, through our newsroom. You can sign up for some of our consumer alerts or the office alerts that will include our consumer protection alerts. We’re also on social media, again, for folks not living in the district, each year state AGs likely also has similar ability to sign up, to receive those types of consumers protection alerts.
John: One of the other things, I think if anybody who has walked through the district or gotten on a bus or taken the Metro recently has probably seen a sign urging you to make sure to participate in the U.S. Census this year. And I know it’s particularly for local governments and municipal governments.
Then certainly for the district government participation in the census is the difference of literally billions of dollars, that flow to all government agencies and programs, but also to support things like the consumer protection work that you do. Unfortunately, we are also seeing a surge of complaints about scams related to the census. Have you seen those kinds of scams or received any complaints?
Ben: We have heard about them. They follow the typical format of a government imposter scam. The ones that we’ve heard about were folks claiming to be from the census and trying to collect personal information to potentially use, to commit identity theft, or potentially commit some other harm against the consumer. So, we have heard about, about those happening, again, it’s just another avenue that scammers are using to try to extract sensitive personal information from folks.
John: This is NCLs podcast but I will take the opportunity since we’re talking about these census scams to plug another great organization, that’s doing amazing work on this. That’s the Identity Theft Resource Center. They offer free help to anybody who’s been a victim of a census scam or any other kind of identity theft scam. And their website is Idtheftcenter.org. And they also operate a toll-free helpline where you can get in person help from folks that number is (888) 400-5530.
So, Ben, one of the things that I wanted to talk about as well, you mentioned at the top of the show, the work that you’re doing on enforcement. At a time when I think so many folks nationwide, as well as in the district are in financial distress due to these COVID related shutdowns. People are wondering how they’re going to make ends meet.
Many folks may be turning to payday loans or other short-term lending to try and put food on the table and make rent that month. Unfortunately, not every lender is what we would consider on the, up and up some would have been considered pretty predatory. I know that your office earlier this year took action against one of those lenders. Can you talk a little bit about that?
Ben: Yes. Absolutely. Earlier this month in June, we filed a lawsuit against a company called Elevate. It was an online lender that was offering fast cash to consumers, through their online platform, but with loans that had interest rates between 99 and 250 percent, the usury or the interest rate caps in the district are 6 percent or 24 percent, depending on the loan itself. And, those are rates, the 99 to 251 are hugely in excess, 40 times the legal limit in the district.
And we alleged that in our complaint that offering loans and selling loans to consumers that these rates violated the district’s interest rate laws. We also alleged that they failed to disclose important information about these products, for one of the products, they didn’t disclose what the actual interest rate was, even though they disclose that to their investors.
We alleged that they falsely stated that their loans would be less expensive than something like a utility reconnection fee. As we note in our complaint, when you break down the numbers, I think you’d have to pay 50 utility reconnection fees in a year and a half in order to exceed the fees that you pay in interest on one of these products. And, we’ve seen these types of products before. They’re very similar, the payday loans, the short-term loans.
And, what often happens is folks fall into a cycle of debt and, although you’re able to potentially get quick cash, it becomes impossible to pay that back. And, individuals have to take out new loans just to pay off the old loans. So, we filed a specific complaint against Elevate. Certainly, during this time where folks are in such financial ruin across the country. It’s even more important that companies are being upfront and truthful to consumers about the products they’re providing, but also the consumers do their due diligence when they’re looking to borrow money.
John: So, let’s say I’m a consumer who took out a loan from one of these online lenders, that I think maybe was violating the district’s cap against usury or abusive interest rates. Can I come to your office and complain about that company? And if I do that, can I potentially be excused from that loan, or at least have some of the loan terms forgiven?
Ben: Yes. So again, if you contact our office at email@example.com and file a complaint it will immediately go into our mediation program, and we will attempt to mediate your one-off complaint and try to reach a resolution like the one you described. But if we aren’t able to get to a resolution, because it is a voluntary program and sometimes businesses don’t want to make an accommodation, even though, we think it’s in the best interest for the consumer.
It still informs our enforcement decisions moving forward. So, if we have a number of complaints about a specific online lender that is engaged in practices that violate the district’s interest rate laws or our consumer protection laws, that will inform our enforcement work moving forward. And that may be a case where, ultimately, we would look to bring a lawsuit against the company where we’ve received a number of complaints. So, all that’s to say is, yes, please do contact our office. It helps us better understand what consumers are facing.
John: Many consumers when they think of payday lenders, they often think of these storefronts where people are offering car title loans, or check cashing or things like that. What we’re seeing now is that a lot of that predatory, payday lending is now migrating online.
We even saw in recent years some of these payday lenders were trying to claim well, we’re based on native American lands. And so, we’re not subject to whatever usury cap a particular state has on this. So, it’s interesting at least to me, to see just the lengths to which these payday loans and payday lenders will go to try and skirt the edges of the law and offer these.
Ben: I think it speaks to consumer protection is moving online and how you mentioned the tribal immunity cases. We had filed a complaint against one of those entities called CashCall, and reach a settlement, that returned a significant amount of money to district residents with the company who was engaged in payday lending in the district in violation of the district’s interest rate caps. And it claimed that because of their relationship with a native American tribe, that they were immune and could continue to do that.
Consumer protection moving online and we saw the same thing with our price gouging complaints. Not only were we seeing the price gouging complains which you’d expect, which is your local stores, your small stores, your corner stores, selling products for increased prices. We also had a number of online complaints, where we saw price gouging on platforms like Amazon and Walmart.
A group of state AGs sent letters to numerous of the online platforms when we’re working with them to combat price gouging on those platforms. But we received a number of complaints from folks who are experiencing what historically been something you experienced at a storefront was now happening online.
John: And, I think that’s not just limited to the district either. Over the past couple of months, I’ve had conversations, with folks in the attorney General’s office just this week in Iowa. And this price gouging complaints from consumers is the number one thing that they’re all hearing about. So, this sounds kind of glib, but the other day I went online looking to see, I wanted to buy yeast because we’re doing more baking because we’re all stuck inside.
And for something that usually costs me a dollar or two at the store, they were going to charge me like 30 bucks plus shipping, to get it sent to my house, which was just, just crazy. And I realized yeast isn’t really a must have a thing the way that, hand sanitizer or toilet paper like that might be. I guess it just goes to show that anytime you’re in a situation where the demand exceeds supply, you’re going to have people who try to take advantage.
Ben: And we received a surge of price, gouging complaints. Some of them have tapered off somewhat as the crisis has gone on, but we received about, I think it was 170 price gouging complaints. We sent 25 cease and desist letters to businesses throughout the district that we had confirmed through investigations were engaged in price gouging. So, unfortunately people are trying to take advantage of the situation and it’s incredibly important that, especially essential goods are available equally for consumers.
John: So, we think about consumers, at NCL, we often think in particular about seniors, as being folks who may be particularly vulnerable, in the best of times, but in a time like, we are right now with COVID where they’re already at higher risk because of their age. Factors like social isolation that we worry about all the time could be especially exacerbated during this time when so many folks are cut off from their support networks.
It’s all over the news, seniors who are in nursing facilities and just can’t see anybody because of the risk there. So, for seniors in particular are there resources that your office or others in the district have that they can go to, if they feel like they’re being taken advantage of, during this crisis?
Ben: Yes. And, under AG Racine’s leadership, we recently formed an elder justice section. So, we have at OAG it’s not within the consumer protection section, although we work extremely close together. We have a new elder justice section, which is focused exclusively on these types of issues that are affecting seniors. Amy Mix leads that section, she’s amazing came from AARPs Legal Counsel for the Elderly. For those of you in DC, that’s a great organization that works with seniors here in the district.
And that section is up and running. So, we are uniquely positioned to try to address these issues for seniors in the district, because we have standalone section with attorneys and investigators prepared to address these types of complaints. This month, we announced, there were, I believe four lawsuits that were filed against family members and home health aide that were allegedly financially exploiting vulnerable adults in the district.
So, yes, you can call our office, if you have any questions or concerns, but also if any seniors experiencing abuse or neglect or exploitation. Or if you are aware of a senior being victimized, you should immediately get help by first filing a report with Adult Protective Services in the district or the Adult Protective Services network in your state and filing a police report, of course. But we are also uniquely situated to try to help seniors, through what is clearly a very challenging and difficult time.
John: Well, Ben, I think that is going to be a note we’re going to have to end our podcast today on. Again, this has been a really amazing opportunity to talk about, what the OAGs office is doing to help district residents. But I think so many of the things that you’ve talked about today are applicable to folks who don’t live in the district.
Your state AGs office is an immensely positive resource that folks can rely on for both enforcement as well as for help with your consumer complaints. But then, on behalf of NCL of our boss, Sally Greenberg, I just wanted to thank you, for making time to be on the podcast today. And please extend our thanks as well to your boss, General Racine for all the amazing work that he’s doing on behalf of consumers in the district and across the country.
Ben: Thanks, John. I’m generally seen as a huge fan and with the historic vote in the house to make DC a State, I just have to note that you mentioned earlier, our population was similar to Wyoming. We actually beat Wyoming and we beat Vermont and I think we’re catching up on the Dakota’s. So, we’re making progress here in the district, but thanks so much for having me and thanks for all the work you do.
John: Thanks a lot, Ben. I appreciate it. And again, I’m John Breyault. We’ve had the pleasure of talking to Ben Wiseman from the Office of Consumer Protection at the DC attorney General’s office. Thanks so much everybody for tuning in and look for another great podcast from us in the weeks ahead.