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By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

Several years ago a lawyer called me who was representing a property owner who had been sued by someone who got injured on the owner’s property.  The owner hadn’t done much maintenance, preventive or corrective, and the injury resulting from that lack of maintenance brought about the lawsuit. In what seemed to me like a desperate attempt to stave off a judgment, the lawyer ordered a book I sold at the time, Preventive Maintenance for Apartment Communities. The book consisted of a list of what maintenance to do when.  Follow that and do the repairs that the inspection reveals, and you have done preventive maintenance, and liability for inadequate repairs disappears. But only sometimes.

Ordering the book likely was the attorney’s effort to show that the property owner had reformed his negligent ways and now took more responsible care of his property. How buying a book after the fact showed lack of negligence passed me by, but I gladly took the order.

It takes very little for a property owner to end up on the paying end of a lawsuit. For want of even a screw, a property investment could be lost.

The damage and lawsuit resulting from a lack of such a little thing as a missing screw can and will bankrupt a property owner.  It falls under the “Constructive Knowledge” principle.  That’s  a legal terms for what a person who applies reasonable care should have known.  For example, suppose on the front door of an apartment building of a door lock was missing a screw so it didn’t properly lock the door. An owner should have known and would be liable for crimes and injuries to tenants resulting from the broken lock. Lawinsider.com explains, “constructive knowledge may be established by circumstantial evidence showing that: (1) ‘the dangerous condition existed for such a length of time that in the exercise of ordinary care, the premises owner should have known of the condition’; or (2) ‘the condition occurred with regularity and was therefore foreseeable.’”

Witness the case in Chicago where 1235 North Shore, LLC and Rick Olsen ended up paying $800,000 because a tenant was sexually assaulted after the assailant accessed the building by walking through three exterior and interior doors after going through a sidewalk metal gate missing a lock. The owner should have known.

Bad guys look for easy marks to do whatever criminal activities they plan to engage in. They try doors and gates to test for broken, unlocked windows, doors without locks, or other easy ways of access so they can come back at a time more convenient to do their dirty work.

How can owners protect themselves?  They make a plan and carry it out.  Many owners, both residential and commercial, don’t deal with repair issues until something breaks and someone complains, relying on complaints for notice that something doesn’t work as it’s supposed to. How much cheaper and better PR it is to do maintenance checks at least every three months and make repairs before the lack of repairs results in problems.

That kind of maintenance has the advantage of preserving the physical integrity of a building, saving money in the long run. Mostly it involves walking around and through the property using a checklist to discover potential problems before they become expensive. The result of preventive maintenance is corrective maintenance.

Corrective maintenance is nothing more than fixing things that are broken or otherwise require attention. Repairing leaky faucets, broken windows, wonky HVAC, and balky locks fall under this category, those same calls you get from tenants saying something needs fixing.

Routine maintenance is the scheduled stuff. (The definitions for it and Preventive Maintenance can be reversed.) Cleaning the gutters once or twice a year, picking up litter in common areas, lawn mowing, parking lot striping, and fence painting all fall under routine maintenance. Most important to survey are items that could be safety and security issues such as broken or non –existent door and gate locks and unlockable, unlocked windows, loose handrails, and broken steps. It cuts down on corrective maintenance costs. But it can be a major budget item, especially if regular maintenance has been ignored until it costs considerably more than replacing a 50-cent screw. In a commercial building, for example, routine maintenance can swallow up 18 percent of the budget, but residential properties may not get the same daily use by numerous people that commercial buildings do.

Why don’t property owners do preventive maintenance and routine maintenance?  The excuses are often such as “I don’t have time,” “It costs too much,” “I just never think about it,” or maybe “that’s what my manager’s supposed to do.” Then why didn’t your manager do it? Vital to remember is that property owners bear responsibility for the acts of their agents and employees. If that agent or employee fails to maintain the property, it’s the owner’s responsibility. Owners can’t absolve themselves of responsibility by blaming someone whose work should have been checked.

Preventive maintenance means spending a little now to save more later.  It has the additional advantages of first, showing tenants you are on the ball, and second, giving you the opportunity to inspect your properties for not just repair issues but tenant issues.  It’s interesting what you see when you notice how and what your tenants are doing, isn’t it? Best of all, it maintains and improves the value of your investment.

Just as important for any work done on a property: document everything, date, time, and work done. Leave nothing to memory. In the event someone sue for an injury on your property, you can provide evidence that you had made any repairs necessary for proper maintenance of your property. No, it won’t always be entirely sufficient proof in a lawsuit, but will contribute to proving lack of culpability.

Take the time, put it on your calendar, and walk around your property with a checklist of things that could require repair.  Wiggle handrails, check the locks, look for leak evidence, both roof and plumbing, and take care of little things before they result in a lost property for want of a screw.

For Want of a Nail

For want of a nail, the shoe was lost.
For want of a shoe, the horse was lost.
For want of a horse, the rider was lost.
For want of a rider, the message was lost.
For want of a message, the battle was lost.
For want of a battle, the kingdom was lost.
And all for the want of a horseshoe nail.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

Eric Fischgrund runs Fisch Tank PR, a PR firm employing 30 people. Clients mailed 15 checks to him that a crook or crooks stole after they had gone through a Postal Service distribution center. The bad guys cashed 10 of them, reported a June 13, 2023, Associated Press article.

The checks were stolen in March, but Fischgrund didn’t become aware of the problem until April after several of his always-on-time clients missed payments. After the Postal Service investigated, Fischgrund recovered 70 percent of the revenue, but some cases remain unresolved as of the time the AP article appeared. The crooks had used one of the techniques check fraudsters use to alter the checks so they could be used for purposes other than what they had been written for. More about those techniques in a moment.

Now Fischgrund asks for electronic payments only. “I think we’ll never go back to asking for checks as an option,” he said.

Mr. Fischgrund’s experience is far from unique. Banks reported around 680,000 check frauds in 2022 to the Financial Crimes Enforcement Network (FinCEN). That’s up from 350,000 in 2021. The US Postal Service also reported some 300,000 complaints of mail theft, more than double the previous year, which may or may not be in addition to the FinCEN numbers. But the Federal Reserve reports that fewer people write checks anymore, the number of checks it collected having dropped 82 percent over the last 30 years.

Crooks have found checks to be an easy mark for fraud. No cyber hacking skills required, just old fashioned thievery and chemistry. David Maimon, an associate professor of Criminal Justice at Georgia State University explains in an article in TheConversation.com, crooks steal mail from personal mail boxes or neighborhood collection boxes using keys they have copied, stolen, or paid as much as $1,000 for on the dark web. Then they wash the ink off the payee and dollar amounts often with nail polish remover and post the altered checks on the dark web for sale for an average each of $175 for personal checks and $250 for business checks payable in untraceable bitcoin. They might also use the check themselves adding a different payee and larger payment amount. “Presto,” free money. The likelihood of getting caught, slim to none. Well, slim, anyway. Last year in Southern California, law enforcement arrested 60 people for committing more than $5 million in check fraud against 750 people.  But, that’s a number that’s hardly a blip on the crook radar compared to the number of check frauds every day.

Banks usually make good on the stolen checks, but sometimes it can take considerable time and in the meantime, the account holder is out the stolen money. But the banks end up the biggest losers.  Statista.com reports that in 2022 financial institutions estimate they lost almost $2 billion to check fraud of one variety or another.

Stolen checks also lay the groundwork for Identity Theft, opening up an avenue to steal victims’ identities as checks provide all the information regarding people’s identities needed to steal an identity. Checks have the name and address of the account holder printed on them, and crooks use that to open bank accounts and apply for loans on behalf of the victims.

Mail theft has reached such proportions that the Postal Service advises people to mail checks from the Post Office itself rather than their own mail boxes or the neighborhood collection boxes. But we have to wonder how that relates to Eric Fischgrund’s checks having been stolen from a post office distribution center. In spite of that, the US Postal Service, reported NPR, has withdrawn funding for postal inspectors, the very people tasked with dealing with mail theft.

The Postal Service’s response? “The U.S. Postal Inspection Service takes seriously its role to safeguard America and will continue to aggressively pursue perpetrators that use the U.S. mail system to further their illegal activity.”

Checks stolen from the Postal Service are just one method of check fraud. David DeNicola writing for Experian describes four types of check fraud in addition to the stolen check-altering method.  Some we recognize from the olden days, others provide a new wrinkle for crooks.

What’s called “paper hanging” takes advantage of the “float.”  The check writer pays for a product or service with a bad check. The recipient deposits the check in good faith and discovers several days later that the check bounced. It takes three days or so for a check to clear the bank, and since banks pay on checks immediately, the bad guy disappears before the check bounces.

Another old standby, “check kiting,” involves using multiple bank accounts. Someone writes a check from Bank C where he has sufficient funds, covers the amount he wrote the check for in his account in Bank W where he doesn’t have sufficient funds. That can go on for several iterations before the kiting scheme runs out of money sources.

“Check washing” I just described above.

“Check cooking,” similar to check washing, involves scanning a stolen check and using software such as Photoshop erasing the payee name and amount, adding a new payee and a much larger amount, and then cashing the Photoshopped check.

Another old standby, “check theft and forgery” involves crooks stealing blank checks, maybe from a mailbox, and forging the signature of the legitimate account holder.

With so many ways to be a bad guy, it’s hard to keep up with all the permutations and combinations crooks use to steal money. Always creative and imaginative, they constantly look for new ways to scam the public.

How to protect ourselves?  One obvious method is don’t write checks; rather, use the electronic pay systems available through banks and companies you do business with. Have people send you money through direct deposits to your bank account. That saves a 65-cent First Class Mail stamp and the nickel or so for the envelope, not to mention the time and effort of going to the Post Office to deposit the mail. Sure, crooks hack into the pay systems of companies, but you are protected because once you make a payment, you get a confirmation. Then even if crooks steal all the money, you have proof you paid.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

By Robert L. Cain, Copyright 2023 Cain Publications, Inc.

Economists predict that the end of the student loan repayment moratorium will have little to no effect on the overall economy. They are probably right. That misses considering the ill effects on individual student-loan borrowers. Adding back a student loan payment on top of other household bills such as credit cards and car loans for millions of borrowers can’t help but affect individual people’s situations.

Doing their best to survive inflation in the face of higher rents and interest rates on credit cards, now many people may have to decide what not to buy and maybe who not to pay that month. Mark Zandi, chief economist at Moody’s Analytics, estimates the average monthly student loan payment at $250, pulling  $5 billion out of the economy every month. Other economists calculate it much higher. Deutsche Bank, for example, says monthly payments will average $305 and yank $14 billion  monthly out of the economy. Who is right? It doesn’t matter. Take billions in spending power away and somebody or something gets less money.

Both the Moody’s or Deutsche Bank prediction drags down consumer spending especially among specific demographics. Millennials and Generations Y and Z, who carry most of the student-loan debt, will have to reallocate an average of 6.5 percent of their incomes to repay their student loans estimates a Collage Group survey of 4,149 people planning on cutting their spending.

Exacerbating potential problems are credit cards with credit-card 30-59 day delinquencies increasing to 8.9 percent in August, according to VantageScore. Many Gen Z and Gen Y consumers  already must rely on credit cards for daily living. MacKinnon says, “When we looked at generational approaches to financial downturns, we found that younger Americans — those more likely to be impacted by student loans — are more likely to buy less apparel, beauty and skin care products and alcohol. They also plan to shift to cheaper brands for groceries and home care like cleaning and laundry.” 

That adjustment would have a minimal effect on businesses that sell groceries and home care products. Retailers who rely on younger consumers for a larger percentage of their business are more at risk. Macy’s, American Eagle Outfitters, Gap, citing a decline in their sales this year, warn that middle and lower-income consumers, who represent a significant percentage of their business, could suck some of the $10 billion monthly out of those companies’ bottom lines if they spend money on student loans instead of with them reports Gariela Barko in July 12, 2023 article in modernretail.co. I know, that doesn’t come even close to the figures from Moody’s and Deutsche Bank, but that’s what those companies claim.

They will probably survive, except maybe Macy’s, already reporting an $84 million business decline year over year, exacerbated even more by a hefty increase in their in-store credit-card delinquencies. All that is unrelated to student loan repayment issues. Losing the business that younger consumers provide could be the proverbial straw on the camel’s back and push them into bankruptcy.

Less able to withstand losing significant business are some small and startup businesses who rely on younger consumers. Serena Rathi, founder of the Indian pantry company Droosh, warns in the modenretail.co article that the return of student loan payments might negatively affect her company’s growth as startups already have to deal with high customer acquisition costs and production costs. She says “This poses a challenge for food brands like Droosh, as we rely on consumer spending. We are adopting new strategies to cater to changing consumer priorities and tighter budgets.”

Especially hard hit will be business that rely on discretionary spending such as restaurants, fast food businesses, and bars. If people stop spending five dollars a day for a cup of coffee at their neighborhood coffee shop, or $25 a week, it provides $100 extra a month that could pay for 40 percent of that average student loan bill of $250. But if 50 percent of their customers did that, it would measurably hurt that store’s income. If half their customers forgo Papa John’s Pizza once a week, in a month saving maybe $80 for themselves, Papa John’s will notice. If they don’t go to Target to buy things they don’t really need, and save who knows how much, Target would survive but earn a lower profit. Stay home on Friday night rather than go to a neighborhood bar and spend $100 on drinks, and save $400 for the month, and the local bar takes a big hit if too many of their customers show such thrift. Should it become a general rule rather than only with the more thrifty, restaurants, McDonalds, Starbucks, and neighborhood bars lose money some enough to force them to shut their doors sending employees into unemployment. Major companies can survive, but small restaurants, mom and pops, neighborhood stores, and local bars face financial peril.

Car loans face even more trouble. The average monthly payment for all borrowers for a new car loan is $725 and $586 for a used car loan. That’s the average for all borrowers. Lower credit scores ramp payments even higher. For example, for borrowers with a FICO score of 600 to 660, a new car payment averages $765 and a used car payment $529, $40 and $13 respectively higher than the overall average, and $35 and $27 respectively higher monthly than for a borrower with a 781 to 850 credit score. What might those folks do when their student loan payments make their car payments unaffordable?

Sixty-plus day delinquent car loan delinquencies stand at almost 7 percent for non-prime borrowers, 300-660 FICO, reports Equifax. Compare that to 4.89 percent a year earlier. Add student-loan repayment to their debt load and the cautionary prospect grows.

Not everyone will be so diligent that they cut way back on discretionary spending. Those of the less diligent group will have to decide who doesn’t get paid that month. The effects ripple out like when a stone drops into the water. If their car is repossessed and they can’t get to work, if their landlord evicts for nonpayment of rent, the ill effects ripple farther and father and unpredictably.

We can only surmise the eventual outcomes for individual student-loan borrowers, for auto finance companies, for rental owners, and for small businesses. In a situation where many people cut back to pay for their student loans, the effects on individuals, landlords, and businesses pose foreseeable problems.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

Why do companies lay people off and who gets the axe when they do?  Knowing that can help determine the better or most qualified applicant.

Companies lay off employees for any number of reasons, but most often it has to do with the cost of employees. Company officials may word it different ways, but layoffs boil down employees costing more than the business is willing to or even able to pay.

We’ll look at the warning signs of imminent layoffs and then what criteria companies use to pick the candidates for layoff.

US News in a February 24, 2023, an article cited a study by LinkedIn and Business Insider of situations that augur layoffs for a company.  

One sign, employees who leave don’t get replaced. Using attrition to cut wages is the easiest and least upsetting for a business and its employees. But if attrition doesn’t do the trick, layoffs could follow.

Second, hiring and spending freezes aim to reduce costs through “belt tightening.” That doesn’t necessarily mean layoffs are coming but merits paying attention to. It might only mean that company officials have looked at the books and just decided they are spending too much for salaries.

Third, and more likely to mean imminent layoffs, budgets shrink and new projects get cancelled. More “belt tightening” could be afoot, with belt tightening requiring layoffs.

Fourth, a merger or acquisition is coming. That often means “surplus” people. Mergers and acquisitions mean the merged companies can have redundant employees, two or more people doing the same job. How they decide who goes in a minute.

Fifth, company executives leave. They find out first about cutbacks in the works, what regular employees may not be privy to.

Sixth, the company already has been laying off employees. If those aren’t enough to bring the company back into the black, more layoffs follow.

Seventh, a company restructures. That might have nothing to do with company health but could entail rethinking job descriptions and pay scales. Not surprisingly, one of the first things in a restructure is determining if they can do without some of the people being restructured .

Eighth, research and development gets cut. Not a promising sign for any business.

Ninth, for some time the company hasn’t been doing as well as it had been revenue-wise. Shoring up profits often means layoffs.

Tenth, to save money, the company farms our work to contractors or other companies. They might also hire consultants to figure out what has been adversely affecting the company’s bottom line. Salaries often come in at the top of the adverse effects list.

Eleventh, a WARN Act notice, something required of every company with more than 100 employees, goes out coming 60 days before actual layoffs begin, a sign layoffs likely are on the horizon.

Twelfth, technological advances, such as increased automation and use of artificial intelligence could mean layoffs. That should come as no surprise to employees if they see new software and machinery installed to do the work they had been doing.

Thirteenth, a company might decide to move overseas or to Mexico, to a country with lower wages.

Almost all these situations are news to be reported in business journals.

Once layoffs begin, assuming the company plans to stay in business and in the country, which employees go first?

The year of the worker, 2021, two years past, and the perks and benefits companies enticed workers with have been thought better of and disappeared with the new year 2022.  Massive layoffs in the tech industry starting or continuing with Netflix, Google, Microsoft, Meta, Zoom, and Amazon are one sign companies are rethinking what they spent to attract employees. Layoff.fyi reports that as of July 20, for example, 201,860 tech employees have lost their jobs. How did those companies and others who began laying off decide who had to go?

Recent hires come at the top of the list, reported businessinsider.com about an analysis by Revelio Labs. Most layoffs affected employees who had worked for the companies an average of 1.2 years. In the Year of the Employee, amid the Great Resignation, in order to attract top employees, companies had to offer so much in wages and benefits that it created an unacceptable pay gap between people recently hired and longtime employees. The pay gap of new hires over existing employees, the analysis found, amounted to seven percent. In some tech companies, the gap could be as large as 20 percent. When the economy and the competition for employees settled down, those recent hires with outsized paychecks were first to go.

Even if they hadn’t been part of that hiring frenzy, other high earners could find themselves with pink slips. Businessinsider.com reported that the average laid-off engineer for example made $86,000 a year while the going rate for engineers was $75,000. Other administrative, sales, and marketing people earning $10,000 more than their counterparts also got shown the door.

Millennials in general found themselves disproportionately at the top of the layoff list. They had been most likely to find new, higher-paying companies to work for during the Great Resignation. They decided that the pay they had been receiving since the 2008 recession made it not worth staying where they were, and they signed on to higher-paying jobs paying more than the existing employees received. Those who stayed with the current employees such as Gen X and baby boomer employees got spared in the layoffs because they had been loyal, as did Gen Z workers who probably didn’t earn enough to attract cost-cutting attention.

Who definitely wasn’t needed when hiring slowed down? Recruiters. Layoffs came, and they went. They couldn’t look busy if the company they worked for didn’t recruit employees.

Interestingly enough, software engineers and coders also found themselves to be targets. They suffered in the most recent job-cutting spree probably because their salaries rose more than other employees during the Great Resignation even if they hadn’t changed companies. And coders, who once bordered on divinity, had been the last laid off, but in this case they suffered the same fate as software engineers.

Who has been safe? Accountants and project managers. They have been spared the axe suffered by some other occupations.

Knowing who is most likely to be laid off might be a determining factor in deciding which qualified applicant to choose. Long-time employees with average salaries likely will be spared in layoffs if the company will remain in business.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

Beth Romaker and her boyfriend Spencer Crawford last January joined the 25 percent of US households that make a budget. They plan to buy a bigger house, get married, and possibly start a family. Problem was they didn’t include student-loan repayment in their budget. Now they’re worried they won’t be able to afford a house. “This is…quite life-altering,” she was reported saying in a USA Today article on June 19. The two owe a combined $42,000 in student loan debt.

Ian Rhodewalt and his wife, Courtney, used the student loan payment moratorium to buy a new refrigerator and oven and a new car after the old one died. Ian “hasn’t done the math yet,” but says the loan payments will probably be tough.

“It was a much-needed reprieve,” Rhodewell was reported as saying in the June 19 USA Today article. Student-loan repayments begin again in September ending that reprieve. Apparently, it comes as a complete surprise to many people who owe on student loans. But surprise or not, they’ll have to start paying again or start paying on a just-obtained loan.

Three issues can affect repayments. First, how the repayments might affect the economy as they eat into the purchasing power of borrowers. Second, how many borrowers won’t know where to send their payments. And third, how those borrowers might be able to get their payments reduced.

Forty-three million student loans, including the 20 million whose loans the president wanted to forgive, amounting to $1.6 trillion in debt await payment. Some 29 percent of borrowers are confident they can repay their loans as opposed to about one third, 34 percent, who say they won’t be able to, reports Investopedia. That’s far from a personal problem because it will mean other debts won’t get paid, credit histories will suffer, and bankruptcies will ensue. The Consumer Finance Protection Board (CFPB) reports that one in five student-loan borrowers, about 8.6 million people, have “risk factors.” Of course, not all of them will fall into debt purgatory, but some will. That will mean car payments won’t be made, credit cards won’t get paid, rents won’t get paid or house payments made, and their abilities to get more credit will suffer as FICO score plummet.

The makings of a problem for the economy exist already. About 8 percent of borrowers already aren’t able to keep up with their credit card payments, car loans, and other debts. And even those people who will be able to afford repaying may be expected to cut back on other expenses, such as entertainment, travel, and eating out.

The effects remain to be seen. It could be that Congress will do something to help alleviate the burden, or the president will sign an executive order delaying payments again. It could also mean that some people will fall into a hole it could take them years to crawl out of, making it difficult to impossible to find a landlord willing to rent to them or an employer willing to hire someone with poor credit.

Second, during the moratorium several of the large loan servicers, those companies that handle the billing and loan-related processes for the Education Department, stopped contracting with the department. As a result, many loans transferred to other servicers. The CFPB reports that that “could complicate the transition to repayment.” Some 40 percent, two in five, borrowers are to begin paying to a new servicer.

Borrowers will first have to find out who their new servicer is. Nate Blanchard, director of financial services at Western Governors University said, “Unless there is a robust proactive and targeted campaign to borrowers, many may be unprepared to restart or begin repayment. The reality of the situation is loan servicers may not have the ability to answer every call, email or chat in a timely manner, which may exacerbate the problem.” Sure, borrowers can go the studentaid.gov to find out who their servicer is, but they have to know their servicer changed.

Many people not only won’t know they have to start paying some new company but also that the moratorium is even over. There may be no way to reach them. So many people in the 18-49 age group, the age group with the most student-loan debt, don’t follow the news. They don’t read newspapers, watch TV news, or get news on the radio. Half of the people get their news from social media, including one-third of them from Facebook and a quarter from YouTube, reports Pew Research. And what they read there might have nothing to do with student loans or they might just skip over those articles. Add to that some young people don’t follow the news at all, regular or social media, and just go about their lives unconcerned with what goes on in the world.

Third, because they don’t follow the news or they get it from sources that might not mention anything about student loan debt, they don’t know that they might be able to get their loan payments lowered. Some borrowers may qualify for payment reductions called Income-drive Repayment through studentaid.gov under the “Repaye plan.” Their website describes it, “Most federal student loans are eligible for at least one income-driven repayment plan. If your income is low enough, your payment could be as low as $0 per month.” Further, they say, “Generally, your payment amount under an income-driven repayment plan is a percentage of your discretionary income. The percentage is different depending on the plan. . . .  Generally 10 percent of your discretionary income, but never more than the 10-year Standard Repayment Plan amount.”

But it takes about 60 days for the government to process any claim, and the claims can be submitted no later than December 31.

At least one-third of student-loan borrowers foresee problems repaying their loans once the moratorium lifts, and the one in eight people already behind on their other debts can already expect serious credit issues. Add to that the fact that many loans have new servicers experiencing the possible inability to reach borrowers or who have insufficient staff to deal with the calls they will get, and the problem exacerbates even more. Finally, just failing to reach borrowers to ensure they know student loan repayments are to begin, may mean a toxic brew of credit problems arises. Possibly student-loan repayments may recommence smoothly everything will work out as well as it can be considering people’s debt loads. But that may be looking at the current situation with rose-tinted glasses.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

Never was there a new technology that scammers didn’t figure out a way to take advantage of to rip off the unwary. Imagine their joy today. Scammers hit the goldmine with Artificial Intelligence. They have come up with ways to scam not possible before, ways they couldn’t have dreamt about five or so years ago. By the time we’ve figured out how to stop them, millions of people and businesses will have been scammed out of billions of dollars.

We’ll look at three different Artificial Intelligence “techniques” scammers use to steal money from the unwary: voice cloning, prompt injection attacks, and phishing.

Voice cloning

Numerous sites on the internet provide apps for cloning anyone’s voice. They market it as having fun with your own voice. For example, deepswap.ai suggests “generating faceswap videos, photos, and GIFs. Over 150 million users make funny face swapping here, including movie role refacing, gender swaps, face memes, etc. Spoof your friends now!” Yes, “spoof your friends.” How about spoofing people into sending you money such as with the notorious “grandparent scam.”

Before voice cloning, they had to just hope a grandparent didn’t know for certain the sound of the voice of his or her grandchild. The scammers would call the grandparent pretending to be a grandchild, usually a grandson, saying he’d been arrested, had been in an automobile accident, or some such and needed bail money right away or he’d be put in jail for who knows how long. They instruct the grandparent to either go to Walmart and buy sufficient gift cards, wire money, transfer it using Zelle or Venmo,  or go to the bank and withdraw money and somebody would come by to pick it up. That last one is the most perilous for scammers, of course, because a suspicious grandparent who spotted the scam could have police waiting for the pickup. With voice cloning, one possible snag had been removed. Scammers can download as little as 10 seconds of someone’s voice from a social media site such as Facebook or Tik Tok, and clone their own cloned voice into the grandson’s. For the unwary, terrified grandparent, it works.

The cost of using voice cloning? Deepswap.ai “premium” service is $9.99 a month or $49.99 for the first year, going up to $99.99 after that. Other sites are just as inexpensive. Cogni.ai advertises a free trial with up to 30 minutes of synthesis time and $20 for four hours.  Others are equally reasonable considering the thousands of dollars scammers will extort from the less-than-suspicious.

Voice cloning works for more than just the grandparent scam. Politics. Considering how much politicians talk, it’s simple to download that voice and have it say anything you want it to. Especially right before an election, imagine the words they could put in a politician’s mouth too late to have the ad or news release cancelled, but not too late for people to believe what they heard the “politician” say.

Businesses aren’t immune, either. Scammers can clone the voice of the owner, CEO, Executive Vice President or some other high-ranking person whom an employee wouldn’t dare disobey or question, and get passwords or other means of accessing company servers. The result could be a ransomware attack or access to company bank accounts.

Injection attacks

These pose equal danger to a business or individual. The example consumeraffairs.com used “You feed an AI chatbot, like the Bing assistant, a prompt, like ‘Hi, can you find me a cheap flight to Madrid in May?’ And Bing finds you a cheap flight.

Enter the hacker looking to slither his way into your convo and pocketbook. He’s already injected a prompt of his own into a website that you happen to have open in a separate tab. No one knows the prompt is there — not you, not the website owner. That rogue code jumps into the Bing chat box like a flea and hijacks your conversation.” Consumer affairs reports that programmers at GitHub engineered a virus to impersonate a Microsoft employee dealing in cheap laptops

Phishing Attacks

Then come the phishing attacks. With Artificial Intelligence software, a scammee doesn’t even have click on a message. As soon as someone visits an infected website, that person’s computer or phone is infected by code that had been injected by a scammer giving him or her access to all the information the unsuspecting person’s computer, bank records, Social Security number, and with the ability to bleed someone’s bank accounts dry. How do they inject that code? Artificial intelligence alters the source code of the website just like in an injection attack. And no one could ever see the code if they looked because the scammer writes the code in white type on a white background. It only takes a few line so even the most wary programmer would think it was just a space in the code, a line break maybe.

Phishing attacks have risen exponentially in the past year or so, showing a 47.2 percent increase since 2022. For some reason, education has been targeted most with an increase of 576 percent since 2022.

How do we protect ourselves? First, trust nothing you see or hear until you verify its accuracy. Second, never, ever send cryptocurrency, buy gift cards, or use some other untraceable method of payment. Third, be wary of voice quality with no background noise. After all, the scammer is alone calling from an empty room, not  police station. Fourth, listen for inconsistencies in the information provided, and ask questions. Several places also suggest using “safe” words that only family members would know. Scammers won’t know them.

Never, ever click on unknown software ads. Go directly to the website of the company by using your search engine to find it. Most of all, be skeptical of anything you find online. For any suspicious call, end it and contact your friend or family member directly or call someone who can confirm any situation. And social media, don’t give away personal information that a scammer can use to dig down and find out more. Scammers depend on believability to fool people, so they’ll use personal information they find about your family, friends, neighborhood, or anything else to lend to their believability.

With the increasingly sophisticated Artificial Intelligent software, scammers are digging in their gold mine and coming up with huge gold nuggets they can use to steal from the unwary or unsophisticated. We need to be more skeptical than ever.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

By Robert L. Cain, Copyright 2023 Cain Publications, Inc.

The Federal Reserve (Fed) builds inflation into our economy. Official Fed inflation policy states that the health of our economy depends on a specific amount of inflation, 2 percent a year the “ideal” figure. That doesn’t seem like much, but run the numbers. With 2 percent inflation every year for 10 years, $1,000 drops in value to $817.07 losing $182.93. Inflation will never be consistent at 2 percent for each of the 10 years, but the Federal Reserve aims to keep that as the average and worries when it gets too high or too low. More about that in a minute.

The Fed enshrined that 2 percent policy in 2012 making it the standard for saving us from monetary disaster. That’s the goal, 2 percent, but why 2 percent?  Explained St. Louis Fed President James Bullard in a January 16, 2019 paper by the St. Louis Fed, “To clarify, this does not mean inflation must be 2 percent in the short term; rather, monetary policy should be set so that inflation moves toward the target over time and, in the absence of unpredictable changes in either supply or demand, would reach 2 percent in the medium term.”

That still doesn’t answer the question. Why not 0 percent, 1 percent, or 3 percent? One of the Fed’s most important mandates along with low unemployment is to maintain stable prices. And 2 percent does that how? One way is by keeping inflation from being “too low.” Jerome Powell, current Fed chairman finds too-low inflation concerning. Too-low inflation can result in deflation, and they just can’t let that happen. Deflation can devastate the economy, they say, because people put off buying or don’t buy at all. If prices drop, people put off purchases waiting for prices to drop further. Thus, if say a 60-inch smart TV’s price drops to $700, people in the market for one might just wait for the price to drop to $650, and when it does, to avoid paying “too much,” wait again until it drops to $600. Spread that through the entire economy and slower sales in all categories can result in businesses laying off workers thus driving up unemployment, Powell warns.

The last time this country went into a “deflationary spiral” occurred in 1954 during the 1953- 1954 Post-Korean War Crisis when prices deflated, going down below zero to a minus-.07 percent. Coincidentally, that also marked the time when the Dow returned after 25 years to its 1929 high. The panicked Fed for the first time in history intervened and initiated a Federal Funds rate of 1.25 percent. Ever since, the Fed has seen to it that the inflation rate never again drops into negative territory.

Why did it pick that 2 percent figure? Not from any research, but just from a side comment by the New Zealand Finance Minister Don Brash in September of 1988. He commented in a TV interview that he thought the maximum inflation target should be 2 percent. Why? he never said. It was just his idea and opinion, supposedly from careful reasoning, but if he had a reason, he never let on what that reason was. Nevertheless, that 2 percent figure stuck in the notions of economists with the Fed and other bastions of economics ever since.

In 1996 becoming unofficial policy and in January 2012 written–in-stone, it still leaves unanswered the question of why that 2 percent figure, or any specific figure. Explanations run the gamut from speculation to monetary policy.

With monetary policy, the reason they most often pulled out in defense, the 2 percent figure gives the Fed room to move the federal funds rate up and down without dropping into negative territory, a territory where banks would have to charge saving account holders to have savings accounts. Sweden’s central bank used them first when in July 2009 the Riksbank cut its overnight deposit rate to -0.25 percent. The European Central Bank (ECB) joined the club in June 2014 when it dropped its deposit rate to -0.1%. Other European countries and Japan have imposed negative interest rates since, resulting in $9.5 trillion worth of government debt carrying negative yields in 2017. That didn’t go over well with governments and savers.

But still, a question still remains, why 2 percent, or even one percent? Apparently there is no concrete reason. It’s just that the Fed decided on that figure because it was as good as anything and some Finance Minister in New Zealand suggested it once in passing.

Far from an accurate measure of the cost of living, the official inflation rate measures prices selectively. The Bureau of Labor Statistics calculates the inflation rate by taking the Personal Consumption Expenditures (PCE) and dividing it by the Gross Domestic Product (GDP). What’s not included in the PCE and thus the inflation figures are food and energy. Thus, food prices might increase by 10 percent and gasoline by 20 percent, for example, and the inflation calculation won’t include those. In February 2023, food prices had increased by 10.2 percent over February 2022’s prices while the official inflation figure measured five percent over the same period.  At the same time, gas prices rose exponentially as we see every time we drive past a gas station. Still those price increases are left out of the official inflation numbers. The reason, claims the Bureau of Labor Statistics: food and gas prices are too volatile,.

In the meantime, inflation affects people’s purchasing power. Some wages have kept up with inflation while others have dragged behind. The big winners, if you can call them that, are low-paying jobs. With labor shortages in leisure, hospitality, and other service industries, employers have resorted to offering higher wages. Industries with higher average pay have done the opposite. For example, the BLS reported in March average pay for new hires fell 9 percent in insurance, 8 percent in real estate, 5 percent in finance, and 15 percent in information, including technology. Employees in other industries have fared even more poorly. Gusto, a payroll processor for small businesses, reports that advertised salaries for Class A truck drivers fell 33 percent, for landscapers 44.5 percent, for customer service specialists 21.3 percent, for surgical nurses 5 percent, and for delivery drivers 4.5 percent.

Overall wages were up 5 percent year over year in March, just keeping up with the rate of inflation that dropped to 5 percent in March. That worries the Fed, which now may decide that they have to keep raising interest rates so wages fall behind inflation once again resulting in higher consumer debt because people have to use credit cards and other debt to pay monthly expenses such as food and gas, items not even included in inflation figures.

Inflation continues while the Federal Reserve keeps raising interest rates, wages can’t keep up because of the rise in interest rates, and inflation means consumer debt creeps up. That 2 percent inflation target looking pretty good in comparison, still eats into our earning power just not so much.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

“I’ve been in constant dispute with the credit bureaus for almost a year now and have yet to get … the inaccurate accounts on my credit report removed. I feel like I am being taken advantage of and have been throughout this whole situation. I’ve been getting ignored for months on top of months and it is leaving me no other choice but to take these matters to court if the issue doesn’t get resolved.”—so wrote a consumer to the Consumer Finance Protection Bureau (CFPB) in June of last year reported by the CFPB in a January 3, 2023 report.

Far from the exception, this consumer reflects ongoing problems with and failures of credit reporting. The credit bureaus, Experian, Transunion, and Equifax receive more complaints than any other industry. It has gotten worse. In 2022, 604, 221 complaints were directed to the CFPB, compared to 307,658 in 2021, an increase of 61 percent year over year. They’re all three guilty. Experian’s complaints jumped 334 percent, Transunion’s 183 percent, and Equifax 24 percent year over year.

Not much, if anything, ever gets resolved. Fewer than two percent of the complaints found relief in 2021, reports the CFPB. Ed Mierzwinski, senior director of the U.S. Public Interest Research Group, said the credit bureaus “have never considered consumers as their customers. They’ve always considered consumers as a nuisance.”

“America’s credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports have errors,” CFPB Director Rohit Chopra wrote in a news release. The credit bureaus make money three ways: selling data to lenders, selling individual credit reports to lenders and individuals, and selling information about individuals consumers’ credit worthiness to marketers who sell such things as credit cards to consumers. As a result, they have little incentive to correct errors because dealing with consumer complaints just costs them money.

The Consumer Data Industry Association (CDIA) replying to the CFPB complaint wrote, “We are reviewing the CFPB report in detail. We agree that responding to legitimate complaints and getting credit reports right are paramount.”

Wait a minute, he said “legitimate consumer complaints.” What exactly to they consider legitimate complaints. For one thing, if someone uses a third-party, such as a credit repair company, to deal with an issue, the credit bureaus think of it as an illegitimate complaint.

Chi Chi Wu, staff attorney at the National Consumer Law Center, said, “If you’re using a credit repair, there’s a good chance the bureaus aren’t going to deal with your dispute at all.” The bureaus’ excuse, “Certain credit repair companies falsely promise consumers they can remove negative, but accurate, information from their credit report and drive activity which inflates complaint numbers and undermines the process of addressing legitimate requests,” the association wrote in an email. A valid point, but that throws all the credit-repair companies into the same vat of crookedness and gives the credit bureaus an excuse to ignore inaccuracies on credit reports.

Still, they promised to “do better.” The bureaus created “online dispute centers” to address their failings, reminiscent of appointing a committee to solve a problem: hold lots of meetings, talk a lot, make lots of plans, make lots of promises, and do nothing substantive.

They say they have begun issuing “more substantive responses” because of the CFPB reports and complaints. What “more substantive” means exactly is subject to who is saying it. The credit bureaus say they’re doing much better while those people stuck in complaint purgatory see no difference.

The three credit bureaus keep credit records on some 200 million consumers. The Brookings Institute reported September 28, 2017 that one in five reports contained a “potentially material error.” Assuming that figure is still accurate, that means of the 200 million credit files, 40 million of them contain errors.

What kinds of errors do you find on credit reports? Many you can spot easily, just by reading your credit report.

Incorrect personal information may be easiest. You name is misspelled or someone with a similar name appears on your credit report. It could also be an incorrect address, birthdate, or Social Security Number.

Incorrect accounts resulting from identity theft resulted in 167,000 people reporting fraudulent credit cards with their information on them. Identity theft can come from hacking or outright theft of personal data.

An authorized user might be shown as the account holder. That would be, for example, when a son or daughter has a card and shows up as the owner.

Other errors could be closed accounts showing as open, duplicate accounts maybe with different names, inaccurate payment history reporting paid off debts showing as late or delinquent, incorrect date of the last payment, the date the account opened, or date of first delinquency (if any), and outdated balance or credit limit information.

When someone complains about an inaccuracy such as an incorrect charge, the bureaus contact the creditor who has 30 day to verify the reported charge. Sometimes they confirm that the charge is legitimate despite the fact that it is paid off. That means the inaccurate record stays on the credit report. Then the consumer has to deal with the creditor to have the error removed. In many cases, good luck with that.

Even worse, the complaint actually gets the inaccurate data removed from the report. Then when the bureaus install a backup of their data, the error can be migrated right back on the credit report. It might stay corrected on one or two of the bureaus’ records but not on a second or third one’s. The purgatory starts all over again.

Eternal vigilance is all that can save us from credit-report purgatory. Checking credit reports for errors and filing complaints to the CFPB when those errors have not been corrected is about the only way to hope to keep credit reports accurate, albeit at a snail’s pace. Can you trust credit reports? If one in five has errors, how can you? Just like any other statement, verify everything and ask for explanations from applicants.

By Robert L. Cain, Copyright 2023, Cain Publications. Inc.

When will it end?  Credit card debt just hit a record high, jumping $60 billion to almost a trillion dollars, $986.5 billion, in the three months ending December 2022.  That goes along with interest rates increasing on that debt, sucking the savings rate people accomplished during the pandemic down to 3.4% from 33%.

That goes along with a jump in household debt of 2.4 percent to almost $17 trillion over the last

three months of 2022 while average credit card rates increased to 21.6 percent, up from 14.5 percent in November 2022 or just 12 percent in August 2012.

The money is running out. Greg Daco, chief economist at EY-Parthenon, wrote in a market commentary on February 22, “for lower-income families, their excess savings have vanished, and they are now dipping into their regular savings and using credit to offset the burden of inflation.”

“They’re out of cash,” Mark Zandi an economist for Moody’s Analytics, said, “They’re turning to debt to try to supplement their income, and they having trouble paying down that debt.”

Greg Daco said in an interview with Vox, “We’re seeing not just an increase in the transitions into delinquency but also an increase in the debt servicing costs because of higher interest rates and because the levels of leverage are rising. And then we’re also seeing banks and financial institutions being more cautious with credit.” Delinquencies will rise and the economy will at least shudder and at worst go into recession, how severely, we can’t predict. Too many factors enter into the picture.

The reason the economy hasn’t crashed and burned under the weight of that debt is that almost no one who wants to work is unemployed.  Most people can still make the minimum payments on their credit cards, keeping their FICO score tolerable.

Adding to that we have the monkey wrenches waiting to be hurled into the economic machines: student loans.  Some student loan borrowers have never had to make a payment nor been expected to.  Those who graduated with student loan debt in 2020, for example, got a reprieve from both Donald Trump and Joe Biden who put the payment moratoriums put in place.

Because they didn’t have to pay on their student loans, millions of people who had borrowed lots of money to go to school, more than $20,000, got pandemic cash in addition to their salaries and could spend all that money on something other than paying down student loans. Now they wait.  The moratorium, extended eight times, may be ending and threatening to make them start paying again, possibly as soon as August.

Thus, that money they’d been using to pay the rent, their car payments, and maybe stash away a little, will need to be used for that debt they ran up in student loans plus their credit cards, car payment, not to mention regular living expenses.

Their hope is that at least some of their debt will be forgiven. Maybe, but probably not.  The Supreme Court has heard arguments against that debt forgiveness and may toss the whole notion of debt forgiveness, squashing any hope of relief for borrowers with government-backed loans. Maybe the moratorium will be continued, and maybe not.  At some point, though, the payments will come due. That student-loan debt of $1.75 trillion will have to begin to be paid, month by month, eating into the incomes of people, some of whom have never had to pay a dime on their loans, and those who have gotten used to not making payments.

Betsy Mayotte of the Institute of Student Loan Advisors tells those folks to avoid spending money.  But when they don’t spend money, that affects national consumer spending, $14.227 trillion in the third quarter of 2022.  Lots of that spending came from credit card sales, those same sales that jumped the debt $60 billion to $986.5 billion.

Ending the moratorium can make living more precarious for those whose incomes barely cover their expenses now.  Already many lower-income people have to use their credit cards just to live, unable to pay them fully at the end of the month. They have to charge highly inflated food to eat and pay for gas to get to work, then have a card balance at the end of the month on which they hope they can make the minimum payment. Add the student loan payments to the mix and creditors, utilities, or landlords, or all three, will not get paid.

What happens when rent, credit card bills, and car payments don’t get made? In a couple of months, debtors won’t have a place to live, won’t have use of their credit cards anymore, or a car to drive in a few months.  Exacerbating the problem: 202 Million new credit accounts opened in the fourth quarter of 2022 mostly from adults 18 to 25 including subprime customers who have FICO scores 600 or lower. Credit card companies have begun marketing to these less-than-prime credit candidates.  Figure, as does Transunion, that delinquency rates will grow.

Incomes haven’t kept pace with inflation. Clarify Capital, a small business lender reported that in the United States, even though the average annual salary increased 31.2 percent from 2010 to May 2021, the average incomes adjusted for inflation dropped 4.5 percent. The labor department keeps saying how consumer spending is great and how it’s pushing the economy upward. But they only mention the raw figures. Never do they factor in how inflation has eaten up the purchasing power of consumers, forcing them to rely on credit cards that eventually they could max out and be unable to make even minimum payments on.

As the delinquencies begin to grow, the ripple will start affecting businesses that won’t have those previously great sales figures propped up by credit sales and negatively affecting the credit card companies that will lose money writing off debts.

Debt crisis? It’s gathering steam, fed by rising prices, stagnant to declining incomes, and late payments. Those with a vested interest in evading the facts say “not yet.” But the signs all foretell a debt debacle.

By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

In 2014, Amazon got itself a new recruiting tool that used artificial intelligence (AI) to recruit employees. “Everyone wanted this holy grail,” an Amazon spokesperson said and Reuters reported. “They literally wanted it to be an engine where I’m going to give you 100 resumes, it will spit out the top five, and we’ll hire those.” It would also mean that every resume would get full attention rather than get cast aside because the person reviewing it was tired, distracted, or didn’t like the applicant’s favorite sports team.

To enable the AI machine to do a proper job of sorting the resumes, Amazon uploaded the resumes submitted to the company for the previous 10 years. They trained the computer models to look for patterns of the qualities that made for a successful employee.

By the next year, 2015, the problem became obvious. Because the vast majority of resumes came from men, the computer penalized any resume that included the words woman or women, such as “women’s rowing team” or “women’s tech club.” It also downgraded any resume from graduates of two all-women colleges. Amazon had left itself wide open for a EEOC complaint.

By the start of 2017, Amazon had disbanded the team because, according to the Reuters article, “executives lost hope for the project.”

Even with this warning in place, Reuters reported, “Some 55 percent of U.S. human resources managers said artificial intelligence, or AI, would be a regular part of their work within the next five years.”

Software companies abound with promises that employers will have the ability to recruit “fairly” and quickly, avoiding biases of HR people who might reject an applicant because of some inconsequential prejudice. But in order to recruit and screen quickly, the computer has to be told what criteria to judge applicants on. Therein lies the rub. Computers do what they’re told, and if you tell them to do something illegal or unethical, they do exactly that, no questions asked because they don’t know about laws and ethics.

The old computer maxim “Garbage in Garbage Out” rules every item of computer output. If, as in Amazon’s case, the computer’s garbage-out criteria dismisses applicants who are members of protected classes, in their case women, the employer ends up on the receiving end of a fair employment complaint or a rental owner of a Fair Housing complaint.

For example, if they tell the computer to only look in certain zip codes for acceptable employees,  that could eliminate any applicant living in a zip code with a primarily minority population. Tell the computer to only look for applicants who attended specific colleges and universities, and

that would most likely eliminate any applicant who graduated from a predominately Black college. Advertise job openings or vacancies only on Facebook, and since Facebook’s users tend to be younger, it could have the effect of eliminating employees more than 40 years old, a protected class.

It has to do with Disparate Impact, which Britannica.com defines as the “judicial theory . . . that allows challenges to employment or educational practices that are nondiscriminatory on their face but have a disproportionately negative effect on members of legally protected groups.” The key is it’s not what you meant; it’s what somebody thinks you might have meant that guides government investigations into illegal hiring and renting processes. You had no intention of illegally discriminating against anyone, but what you told the computer to do was discriminate with a disparate impact on some protected class.

AI can be a useful tool. It comes in three flavors, narrow AI, Generalized AI, and Artificial Super Intelligence.

Narrow or “weak” AI does specific tasks, ones you instruct the computer to do. It could be a robot in a factory, music selection, think Alexa and Siri that is told to find out what you prefer in shopping and music, and a neural network that runs a power grid, for example. Neural networks process information, inspired by how brains’ neural systems process data. Artificial intelligence tries to simulate biological neural networks, so they can be more like a human brain.

Generalized AI emulates the human mind and learns and remembers from what it does and can incorporate what it learned and seem to think on its own. In its infancy now, it promises to become even more “useful” in learning what works and what doesn’t. Faced with an unfamiliar task, it can figure out and remember how to do it most effectively. Designed to be able to learn new tasks and adapt to new situations, generalized AI is meant to be more intelligent than narrow AI and is capable of making decisions and acting autonomously. Examples of generalized AI include facial recognition, autonomous driving, and natural language processing, as well as more complex tasks such as machine learning and deep learning.

Artificial Super Intelligence is maybe in the future. Its current developmental progress, though, resembles a fully loaded freight train picking up speed barreling downhill, all but unstoppable. That would be or will be a machine with intelligence equal to that of humans and a self-awareness giving it the ability to solve problems, learn, and plan for the future. Search for LAMda for details. And think HAL in “2001 Space Odyssey” and Skynet in the “Terminator” movies. The doomsday scenarios have Super AI taking over the world and wiping out humanity.

AI can be a valuable tool to use in screening and recruitment. Presumably, employers and landlords have specific criteria for whom they will accept as employees or tenants. Those need to be programmed into the AI platform so they can quickly qualify or disqualify applications. Chances are you don’t have the training or capabilities yourself, so you will have to employ an AI software company to set it up for you. That’s where the peril lurks. If they set it up so it illegally discriminates against protected classes of people, you are responsible just as you are for the conduct of any contractor such as a carpenter who repairs the front steps on a rental. If the carpenter installs the steps unsafely, it’s your responsibility even though the carpenter did the work. Likewise, if a software company installs an AI recruiting system that discriminates against a protected class, it’s your fault.

How can you tell if the criteria inputted are fair to everyone? Good question. You have to do considerable “what-if” thinking. What if I were a black person? Would I feel as if I could apply for that position? What if I were a single woman? Would I feel as if I could apply to rent that unit? What if I were 45 years old and looking for work? Would I see the ad on Facebook since I don’t use Facebook but my kids do? Would it were that simple.

Amazon stopped using its biased recruiting system because they couldn’t figure a way to make AI recruiting fair even though they have some of the most highly skilled programmers and engineers in the world. You probably don’t have the equivalent programmers. What an employer or rental owner must do is look at lots of what-ifs and think critically about whom their recruiting and screening efforts end up being aimed at. Who might be left out?

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com