[Senate Hearing 110-955]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-955
 
 SHOPPING SMART AND AVOID SCAMS: FINANCIAL LITERACY DURING THE HOLIDAY 
                                 SEASON 

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                   ON

     STEPS CONSUMERS CAN TAKE TO AVOID FINANCIAL SCAMS, PURCHASES, 
CHARITABLE GIVING, AND OTHER FINANCIAL DECISIONS WITH SPECIAL FOCUS ON 
        THOSE THAT ARE MOST PREVALENT DURING THE HOLIDAY SEASON


                               __________

                      THURSDAY, DECEMBER 13, 2007

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs


      Available at: http: //www.access.gpo.gov /congress /senate /
                            senate05sh.html

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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

               CHRISTOPHER J. DODD, Connecticut, Chairman
TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York         WAYNE ALLARD, Colorado
EVAN BAYH, Indiana                   MICHAEL B. ENZI, Wyoming
THOMAS R. CARPER, Delaware           CHUCK HAGEL, Nebraska
ROBERT MENENDEZ, New Jersey          JIM BUNNING, Kentucky
DANIEL K. AKAKA, Hawaii              MIKE CRAPO, Idaho
SHERROD BROWN, Ohio                  JOHN E. SUNUNU, New Hampshire
ROBERT P. CASEY, Pennsylvania        ELIZABETH DOLE, North Carolina
JON TESTER, Montana                  MEL MARTINEZ, Florida

                      Shawn Maher, Staff Director
        William D. Duhnke, Republican Staff Director and Counsel
                       Dawn Ratliff, Chief Clerk
                      Shelvin Simmons, IT Director
                          Jim Crowell, Editor












                            C O N T E N T S

                              ----------                              

                      THURSDAY, DECEMBER 13, 2007

                                                                   Page

Opening statement of Senator Carper..............................     1

Opening statements, comments, or prepared statements of:
    Senator Dole.................................................     3
    Senator Menendez.............................................     4

                               WITNESSES

Karen Tyler, Securities Commissioners, State of North Dakota.....     7
    Prepared statement...........................................    27
Nancy Smith, Chair, Consumer and Livable Communities Committee, 
  AARP National Policy Council...................................     9
    Prepared statement...........................................    37
Julie Cripe, President and CEO, OmniBank, North America..........    10
    Prepared statement...........................................    51
H. Art Taylor, President and CEO, BBB Wise Giving Alliance.......    12
    Prepared statement...........................................    63


 SHOPPING SMART AND AVOID SCAMS: FINANCIAL LITERACY DURING THE HOLIDAY 
                                 SEASON

                              ----------                              


                      THURSDAY, DECEMBER 13, 2007

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:41 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Thomas R. Carper, presiding.

         OPENING STATEMENT OF SENATOR THOMAS R. CARPER

    Senator Carper. The hearing will come to order.
    I am delighted to be here with Senator Dole and all of our 
witnesses and other guests. Thank you for joining us today.
    You and I have sat through a number of hearings together 
and occasionally, and this is going to sound hard for the folks 
who might be here or tuning in around the country, but 
sometimes we sit through hearings and we are not so sure that 
they matter all that much. You may have been through one or two 
of those.
    But this hearing, as much as any that I can recall in 
recent years, not only is it timely, but it is personally 
helpful to me and I suspect to all of us, our staffs, and 
anyone who might be within the sound of our voice. I appreciate 
very much the effort that has gone into preparing for the 
hearing, and we appreciate those of you who have come to 
testify today. Some real good will come out of this hearing, 
and we are thankful for that.
    I write a blog, every week or two I write a blog entry. My 
next blog entry, posted over the weekend, will be on this very 
issue. And hopefully of interest to people.
    So this is an issue and a message that has legs, and we are 
going to make sure that it gets to as many--not just legs, but 
ears and minds across the country. But thank you all so much 
for coming.
    Senators are going to have 5 minutes for their opening 
statements. We have a number of things going on today, some big 
stuff on the floor, as we know, and a number of hearings that 
are going on. So we will be coming in and out. I will try to be 
here throughout, but we are grateful for Senator Dole. We have 
been joined by Senator Menendez and others who may come.
    I am going to ask our witnesses to try to stick to about 5 
minutes, if you can. We will let you go a little bit beyond 
that, but we will rein you in if you go too far. We appreciate 
your consideration.
    After our witnesses' testimony, we are going to have one 
round--as far as I know, probably one round of questions.
    The purpose of our hearing today is to highlight consumer-
friendly tips and advice for this holiday season. This hearing 
is very much timely, as we are still in the midst of holiday 
shopping. At least some people are.
    According to a recent study of our National Association of 
Retailers, I am told only about 10 percent of all consumers 
have completed their holiday shopping by this time. I can 
assure you, I am not among the 10 percent. That means roughly 
90 percent of Americans still have some shopping yet to do. I 
am fully in that area.
    Hopefully, we will talk about some tips that consumers can 
use to make our dollars go further and avoid some of the 
problematic scams that are unfortunately prevalent during this 
time of year, and unfortunately through much of the rest of the 
year, as well.
    Holiday shopping accounts, I am told, for roughly 20 
percent of all annual consumer spending, 20 percent. This year 
it is estimated that Americans will spend about $500 billion 
during the holiday season.
    Many consumers, during this season, will fall victims to 
one of the many scams that are out there. Some of those scams 
involve fraudulent charities or investments, which are often 
specifically targeted to seniors. Roughly 25 percent of 
donations to charity organizations are made during the end of 
the calendar year.
    As I check my mailbox every night when I go home to 
Delaware, they are just crammed with requests for donations, 
actually largely from organizations that I recognize and, 
frankly, want to help. We cannot help them all. My wife 
sometimes, Elizabeth, says I work just so that I can give my 
money to the folks that are asking for donations all the time. 
I wish we could help them all.
    But Americans will donate some $300 billion to charitable 
organizations during the course of this year. And I think 
Americans who are that generous have a right to know whether or 
not a charity is adhering to a reasonable standard. Charities 
have a right to do good and to do well, but consumers need to 
know whether the charity is doing more well than good.
    Also during this time of year, many Americans are making 
end-of-the-year investments. A majority of solicitations are 
legitimate but, as we know, some, unfortunately, are not. We 
will explore some ways today for consumers to make better 
educated decisions in that regard.
    In addition to this being the season of charity, it is also 
a time to give gifts. As people head out to make their 
purchases, there are some tips that can help people save money 
and avoid some common problems, and we will hear about those. 
For example, gift cards are very popular this time of year. 
Consumers are expected to spend almost $25 billion this holiday 
season just on gift cards. And gift cards can be a great 
present because they allow, as we know, consumers the 
flexibility to purchase a gift of their choosing.
    Some gift cards come with expiration dates and with certain 
fees that consumers should be aware of when they are deciding 
whether to purchase a card. In addition, many credit cards 
offer built-in warranty protection. Consumers should be aware 
of these protections when deciding whether or not to purchase 
additional warranties.
    Online shopping has become increasingly popular over the 
years. The FTC estimates that online shopping this year will 
reach about $33 billion in sales. I think it is growing by 
about 20 percent per year, too. The Federal Trade Commission 
and the National Cyber Security Alliance recently issued 10 
tips for holiday shopping online. These tips urge consumers to 
use common sense when choosing a seller and deciding how to pay 
for their purchases.
    I look forward to hearing from our witnesses. I hope we can 
provide some good information to consumers here today.
    I would ask unanimous consent that all statements be 
included in the record. If there is no objection, that will 
occur.
    Let me recognize Senator Dole for being here in light of 
her earlier role. She led a major non-profit, one that I think 
very highly of, the American Red Cross. You could probably sit 
on either side of the dias here today, because you could add a 
lot, and I am sure you will, by your presence here.
    And then, after you have spoken, we will recognize Senator 
Menendez. Thank you, Senator Dole.

              STATEMENT OF SENATOR ELIZABETH DOLE

    Senator Dole. Thank you very much, Mr. Chairman. It is 
always a joy to partner with you.
    You know, ever since my days as Deputy Special Assistant to 
the President for Consumer Affairs--and this is during the 
Nixon Administration--and then the 5 years following on the 
Federal Trade Commission, what we are talking about today has 
been a top priority for me, consumer education, certainly 
improving financial acumen of individuals.
    In fact, Mr. Chairman, back in my days with the White House 
Consumer Office, we prepared a booklet called Consumer 
Education K through 12. One of my jobs was traveling around the 
country getting the schools to accept this material so that 
children even that young could begin to understand more about 
financial literacy.
    I see people in the audience that I have worked with and 
certainly organizations that it has been privilege to be 
involved with for many, many years. And so this is really near 
and dear to my heart, and I am so glad you are here today and 
look forward to working with our witnesses.
    But you know, today there is a particularly pernicious 
practice called identity theft, an all too prevalent problem we 
must continue to deal with. We have dealt with it in this 
Committee, but there is much more to do.
    Identity thieves constantly create new scams to rob hard-
working, law-abiding citizens of their good names, their 
credit, and their security. The stakes could not be higher for 
the families involved.
    As some of you may remember, after last year's holiday 
shopping season, TJX, the parent company of TJ Maxx and 
Marshalls, disclosed that it has experienced a massive data 
breach where the security of its customers' financial 
information was compromised. According to a filing with the 
SEC, beginning in July 2005 and continuing over an 18-month 
period at least 45.7 million credit cards were exposed to 
possible fraud. Imagine that, 45.7 million.
    As this example illustrates, identity theft is often cited 
as one of the fastest growing crimes in the Nation. According 
to a study conducted for the Federal Trade Commission in 2005, 
approximately 8.3 million Americans were victims of identity 
theft, losing an average of $1,882 each.
    Without a doubt, this is an issue that continually needs to 
be front and center on our radar screens. We need to do our 
part to educate people on ways to prevent identity theft and 
inform them of what to do if, heaven forbid, they become a 
victim.
    With regard to financial literacy, I believe clarification 
of credit card agreements is high on the list to benefit 
consumers. There are many well-intentioned laws that require 
credit card companies to fully disclose their policies, on 
rates, on payments, on terms of use. But unfortunately, the 
tangible effect of these laws is often multiple pages of 
single-spaced typing and small font lettering filled with 
sophisticated legal terminology. Who are they trying to fool?
    As I have said before in this Committee, for gosh's sakes, 
you should not have to have a magnifying glass and a lawyer to 
understand a credit card user agreement.
    Some lender companies are now providing consumers with a 
one-page summary of their disclosure information in a format 
similar to the nutrition information displayed on products in 
your local grocery store. This clear, concise presentation is 
easy to read and it is simple to understand. I am going to take 
you back to my early consumer days when clear nutritional 
labeling and unit pricing were our top priorities.
    So we must also continue to require that credit card 
companies provide full disclosure regarding fees, interest 
rates, minimum payments, and privacy statements. It is 
imperative that this information be presented in the most 
consumer friendly manner possible. By providing more easily 
understood applications and monthly statements, card issuers 
can reduce losses due to defaults and also lessen the demand 
for customer service to guide consumers through problems. It is 
a win-win situation.
    As they say, it is a no brainer.
    Again, thank you, Mr. Chairman. It is always a joy to be 
with you, to work with you on so many issues. And I am sorry 
that other commitments are going to require me to leave early, 
but I look forward to hearing the testimony of each of our 
witnesses. Thank you very much.
    Senator Carper. Thank you, Senator.
    And I did not know about your other experiences. You really 
are well qualified for this one. Maybe you should--if you come 
back into the hearing, maybe we will put you out there. Thanks 
very much.
    Senator Menendez.

              STATEMENT OF SENATOR ROBERT MENENDEZ

    Senator Menendez. Thank you, Mr. Chairman.
    Mr. Chairman, you started off by citing the statistics of 
those Americans who have either not shopped or still have not 
fulfilled their shopping requirements. I hope that the Senate 
gets in the spirit very soon of understanding that we are in 
the holiday season and help the economy along the way, and the 
process. I am definitely in the universe of those who can 
benefit from today's panel.
    Let me say that every time, every year around this time, 
Americans are in the spirit of giving. And as a whole they 
spend more and they give more than any other time of the year. 
But as they open up their hearts and their wallets, they also 
open themselves up to the possibility of falling prey to any 
number of consumer pitfalls.
    From terms that are hard to understand, print that is 
difficult to read, deals that sound too good to be true, and 
promises of money back that do not always appear, well-
intentioned shoppers can find themselves confused, mislead, or 
worse.
    As American consumers continue to spend record amounts of 
holiday shopping, those trying to make a quick buck will work 
to stay one step ahead. Some schemes have been around for ages. 
Organizations posing as charities, gift cards that have hidden 
fees or expiration dates, optional warranties that are 
unnecessary are all part of an old theme.
    But those seeking to prey on unsuspecting consumers are 
creative and they usually find a way to reel in their victims. 
So as the predators become savvier, so must we.
    The same principle that holds for any financial 
transaction, whether it be buying a car, getting a home loan, 
or buying your loved ones holiday gifts, it pays to be 
informed. As we know, education is a pivotal piece to 
overcoming holiday scam tactics.
    But I believe we must also work to stay one step ahead so 
that consumers are not left to fend for themselves. Certainly, 
there are steps we can take so that shoppers are not left to 
untangle the web of scams on their own. I think there is more 
that we can do.
    For starters, I think we can ensure the terms on rebates 
are fair and reasonable. Consumers should not have to jump 
through 20 hoops just to get back $50. Rebates can be done in a 
fair and open manner, but too often they become a black hole 
where people send their forms, their UPC symbol, and their 
receipt only to wait.
    The FTC has cracked down on the more egregious players, but 
the fine print keeps getting smaller. At a minimum, consumers 
deserve to have rebates that are fair and reasonable if they 
are being offered in the first place. And I think we need to 
look at legislation that ensure consumers pay the actual post-
rebate price at the register.
    I am also concerned, Mr. Chairman, about this new wave of 
embedded giving, in essence where if you purchase an item, that 
as a result of purchasing that item a certain amount of money 
will be given to a charity along the way. But increasingly--I 
think there were articles today in some of the Nation's leading 
papers that talked about charities that had no idea that their 
name was being used.
    And so it leads to a whole issue of is the charity the one 
that has to go after the entity to make sure that what was 
offered to the public as an enticement to purchase their 
product because they would be, at the same time, doing a 
charitable act by having certain amounts of money, for example, 
go to Make A Wish Foundation or some other entity? Are they the 
ones who have to do the policing to make sure that those 
charitable contributions become a reality?
    This is an increasingly big part of the universe of giving 
today and I think we need to be looking at that.
    So I look forward to hearing from today's witnesses on what 
we can do to prevent unsuspecting consumers from being victims, 
both by improving awareness but also by taking preventative 
steps before consumers have the chance to become victims.
    It is a shopping season in which the time that consumers 
have should be spent on how they can best spend their money on 
their loved ones, not on how to have to avoid the next scam.
    With that, Mr. Chairman, I look forward to the witnesses.
    Senator Carper. Senator Menendez, thank you very, very 
much.
    Let me introduce our witnesses and then we will turn it 
over to--Ms. Tyler, you will be our first lead-off witness, but 
let me just introduce all the witnesses and then turn it over 
to you.
    Karen Tyler, President--that is a nice sounding title--
President of the North American Securities Administrators 
Association. I understand you are from North Dakota? Does the 
wind ever blow in North Dakota?
    Ms. Tyler. Occasionally.
    Senator Carper. Does it get cold? I understand you are from 
North Dakota and the Securities Commissioner there; is that 
correct?
    Ms. Tyler. Yes.
    Senator Carper. Appointed by the Governor. Does he 
pronounce his name Hoeven, John Hoeven?
    Ms. Tyler. John Hoeven.
    Senator Carper. John Hoeven in July of 2001. Ms. Tyler 
oversees the Enforcement, Registration, Corporation Finance and 
Education Divisions of the North Dakota Securities Department. 
Prior to her appointment as Securities Commissioner, she served 
clients in the banking and brokerage sectors of the financial 
services industry for 14 years.
    Nancy Smith, a name that I said, Ms. Smith, a name that has 
been very important to me. My very first campaign treasurer 
when I ran for State Treasurer at the tender age of 29, Nancy 
Smith. It has been a long time since I have seen you, welcome 
back. Think of all that you helped me start all those years 
ago.
    Seriously, this is not the same Nancy Smith, but you 
actually do look alike.
    This Nancy Smith, though, is an attorney with extensive 
knowledge of consumer issues. Nancy's career includes 
assignments with the National Credit Union Administration with 
the U.S. Department of Agriculture's National Appeals Division; 
Federal Crop Insurance Corporation appeals and litigation; and 
advising association executives on policy, development, and 
approaches to proposed law.
    Next, Ms. Julie Cripe. Ms. Cripe, welcome, President and 
CEO of OmniBank. Is that in Houston, Texas?
    Ms. Cripe. Yes.
    Senator Carper. Julie Cripe has been an officer of OmniBank 
since 1979. She is currently Chair--do you call yourself 
Chairman or Chairperson?
    Ms. Cripe. Chair, Chairman, Chairperson. I answer to it 
all.
    Senator Carper. Currently Chair of the Texas Bankers 
Education Foundation, past Chairman of the American Bankers 
Association's Education Foundation, which she is representing 
here today. Welcome.
    And last but not least, H. Art Taylor. When I first looked 
at your name, I ran the H and the Art together and I named you 
Hart. Mr. Taylor, we are happy you are here. President and CEO 
of BBB Wise Giving Alliance. BBB used to be Better Business 
Bureau?
    Mr. Taylor. Yes.
    Senator Carper. Mr. Taylor is President and Chief Executive 
Officer of the BBB Wise Giving Alliance, the organization 
formed by the merger in early 2001 of the National Charities 
Information Bureau and the Council of Better Business Bureaus 
Foundations, which housed the Philanthropic Advisory Service 
Program.
    Your entire statements will be made a part of the record 
and I would ask you to--you can give your entire statement if 
it comes in around 5 minutes. If it does not, I would just ask 
you to summarize it.
    Again, we welcome you and we are happy that you are here 
for what I think is a very important hearing.
    Ms. Tyler.

  STATEMENT OF KAREN TYLER, SECURITIES COMMISSIONER, STATE OF 
                          NORTH DAKOTA

    Ms. Tyler. Thank you, Chairman Carper, Senator Dole, and 
Senator Menendez. Good morning to you all.
    I am Karen Tyler and I am honored to be here today to 
assist you in alerting consumers to the steps that they can 
take to avoid financial scams this holiday season. As Senator 
Menendez stated, criminals do count on people opening not just 
their hearts but also their wallets during the holidays. And 
they do aggressively exploit this spirit of good will.
    This predatory conduct, combined with a convergence of 
financial challenges, including higher energy prices, a 
volatile stock market, lower housing values, and general 
economic unrest, may lead investors to make hasty, ill-informed 
decisions in pursuit of higher returns on their investments.
    NASAA urges investors to be especially vigilant in 
protecting their assets from Internet, telephone and in-person 
promotions for alternative investment products. State 
securities regulators suggest four key defensive actions that 
investors can use to protect themselves and their money from 
financial predators this holiday season.
    First, never give a Social Security number, date of birth, 
or credit card number in response to unsolicited e-mail 
messages or cold callers, no matter how good the sales pitch 
sounds. Financial institutions will never ask their customers 
for such personal information through e-mail. Anyone who 
receives an e-mail that appears to be from a financial 
institution asking for account information should consider it 
to be a fraudulent attempt to obtain personal account data for 
an illegal purpose.
    Second, do not make risky and quick investment decisions 
based upon sales pitches that refer to great deals that will be 
offered for only a short time, or those that purport to offer 
year-end tax advantages. The end of the year is a favorite time 
for criminals to roll out various income tax avoidance schemes.
    Third, even though everyone is pressed for time during the 
holidays, investors should find the time to research any 
investment solicitation and those who offer them before 
considering investing their hard-earned dollars. Ask for and 
read the prospectus of any investment proposal before deciding 
to invest. Just because literature is received, do not assume 
the investment is actually legitimate. And consider whether it 
is a suitable option, given the investor's age, tolerance for 
risk, and overall financial profile.
    And fourth, once a prospectus is read and the investment is 
independently researched, do contact your State securities 
regulator to check the disciplinary background of the broker or 
investment advisor suggesting the investment. State securities 
regulators can also verify whether the product being offered is 
properly registered.
    Investors must also understand that investment 
professionals not only offer different types of services and 
charge for them differently, they have different legal 
obligations to their customers. For example, investment 
advisors are subject to a fiduciary duty. That means they must 
put the interests of their investor ahead of their own at all 
times by providing investment advice and recommendations that 
they view as being in the best interest of their customer.
    I would like to turn now to an unfortunate but very real 
aspect of the holiday season. The holidays can be a lonely time 
for those away from their loved ones, especially many of our 
Nation's seniors. Unscrupulous sales people may exploit this 
fact by inviting seniors to free lunch or dinner financial 
seminars, providing them with an appealing diversion during a 
difficult time of year. But instead of unbiased financial 
education, seminar attendees may be fed a hard sales pitch for 
investment products that are often unsuitable.
    Recently, State securities regulators, the SEC, and FINRA 
released our findings of a year-long examination of 110 free 
meal seminars. Our exam found that while many of these seminars 
were advertised as educational, all were actually sales 
presentations. Half featured exaggerated or misleading 
advertising claims, and 25 percent involved possibly unsuitable 
recommendations. In many cases, the sales person recommends 
that the senior liquidate their existing investments and use 
the proceeds to purchase equity indexed or variable annuities, 
products that are often unsuitable for seniors and often reward 
the seller with very high sales commissions.
    To help investors protect themselves this holiday season 
NASAA today has issued an investor alert offering a series of 
resolutions for safe investing. For example, resolve to 
investigate before you invest. Resolve to make safe investing a 
family affair. And resolve to check out your broker or 
investment advisor before investing.
    In conclusion, while the holidays can be a perilous time 
for investors, my office in North Dakota, my colleague in 
Delaware, Commissioner Jim Ropp, and my colleagues across the 
country, will continue to play an active role in protecting 
investors throughout the year through a nationwide network of 
highly trained, unbiased, non-commercial experts in financial 
services, products, and fraud avoidance.
    I thank the Chairman and each member of the Committee for 
allowing me the opportunity to appear today and I look forward 
to answering any questions you may have and providing 
additional assistance to you in the future.
    Thank you.
    Senator Carper. Ms. Tyler, thank you for excellent 
testimony.
    Ms. Smith, you are recognized. Thank you again for joining 
us.

     STATEMENT OF NANCY SMITH, CHAIR, CONSUMER AND LIVABLE 
      COMMUNITIES COMMITTEE, AARP NATIONAL POLICY COUNCIL

    Ms. Smith. Chairman Carper, Senator Dole, Senator Menendez, 
I am Nancy Smith. I am the Chair of the Consumer and Livable 
Communities Committee of AARP's National Policy Council.
    Thank you for inviting AARP to offer tips on how to shop 
smart and avoid scams during this busy holiday season.
    Fraud, scams, and deceptive practices are crimes that rob 
victims of their assets, their self-esteem, and their economic 
security. The impact of such crimes on older persons can be 
particularly devastating, both emotionally and financially.
    AARP engages in consumer education and outreach year-round 
to help older consumers protect themselves. But such awareness 
is most important at this time of year. Criminals often see 
older people as easy marks for charitable giving scams and 
target them based on a perception that they are more 
vulnerable, as well as more generous donors.
    AARP's website and publications stress the need to protect 
valuable personal information that can be stolen and misused. 
We urge members to be very careful with their credit card and 
personal information. Identity thieves look for opportunities 
to take this information.
    A Federal Trade Commission survey released November 27th 
shows that more than 8 million American adults were victims of 
some form of identity fraud in 2005. Of those victims, 3.2 
million experienced misuse of their existing credit card 
accounts, 3.3 million experienced misuse of non-credit cards, 
and almost 2 million people found that new accounts had been 
opened or other frauds committed using their personal 
identifying information.
    Consumers should protect their credit card information 
whenever they give their card to a store clerk or shop online. 
Holiday online shopping is an attractive option for consumers 
who may be housebound, have limited transportation options, or 
simply want to avoid large crowds. A well-known marketing 
research firm reports that online shopping has increased this 
holiday season by 14.5 percent over last year.
    Consumers can find tips for online shopping at the AARP 
website. These tips are endorsed by the FTC and other consumer 
groups. They help consumers have a secure online shopping 
experience and lower their risk of identity theft. Some of the 
tips are always investigate the seller. Never use part or all 
of your Social Security number as a password. Pay by credit 
card. Keep a record of your transaction. Always turn off your 
computer when you are finished shopping.
    AARP's website constantly updates consumer tips that can 
help eliminate fraud, scams, and theft during the holidays and 
year-round. The AARP Foundation administers a grant funded 
program, the Consumer Fraud Protection Project, that uses peer 
counselors to help potential victims identify fraudulent 
schemes and deceptive practices.
    The project is the result of a success of a 2003 AARP 
Foundation study ``Off the Hook.'' That study found that 
telemarketing fraud is grossly under represented among older 
victims. But we also learned that those who are properly 
counseled by trained peer volunteers are less likely to fall 
victim to fraudulent pitches.
    The project involves seven community-based non-profit 
agencies that recruit and train older volunteers to serve as 
peer counselors. Project volunteers contact known and potential 
fraud victims and alert them to the dangers of telemarketing 
and other fraud. These peer conversations are valuable to 
consumers because they provide an information exchange tailored 
to the consumers' level of interest and understanding.
    Since July 2006, project volunteers have contacted half a 
million older consumers, and over the next 4 years they will 
contact 2.5 million more. Ultimately, the goal of AARP 
telemarketing fraud prevention programs is to equip consumers 
with information, ways to identify possible criminal activity, 
and the ability to avoid becoming a victim.
    In conclusion, Mr. Chairman, AARP commends you for holding 
this hearing. AARP is committed to working with like-minded 
organizations and Government agencies to deter scam artists and 
empower consumers, especially during the holidays. Holiday 
shopping should not be a prime holiday for criminals.
    Thank you.
    Senator Carper. That was great testimony, Ms. Smith. Thank 
you so much. Parts of your testimony, when we come back on the 
Q and A, I think I am just going to ask you almost to reread it 
verbatim. That is just that good.
    Ms. Cripe, you are recognized. Please proceed. Thank you.

 STATEMENT OF JULIE CRIPE, PRESIDENT AND CEO, OMNIBANK, NORTH 
                            AMERICA

    Ms. Cripe. Thank you.
    Mr. Chairman, Senators Dole and Menendez, my name is Julie 
Cripe and I am President and CEO of OmniBank in Houston, Texas. 
OmniBank has $360 million in assets and has been in existence 
for 53 years.
    I am also the immediate past Chairman of the American 
Bankers Association Education Foundation Board and, since 1925, 
the Foundation has supported banker efforts to teach personal 
finance skills in schools and communities across the country.
    The holidays can be a very joyous time. With simple steps 
to remain financially secure, the joy of the season will be 
remembered long after the bills come due in January.
    This morning, I would like to cover a few tips on good 
financial management and avoiding scams. In my written 
statement, I included some tip sheets, four of them. You should 
feel free to use them with your constituents to help them avoid 
financial frostbite when the bills come due in January.
    Senator Carper. Was that financial frostbite?
    [Laughter.]
    Ms. Cripe. The five steps are simple. It is following them 
that is the hard part. But small changes in behavior today can 
lead to a lifetime of good money management.
    Step one, develop a budget. And being realistic is the key. 
Often forgotten are the non-gift expenses, and the gifts to 
ourselves. And that consumers one of every $3 we spend during 
the holidays.
    Step two, make a list and check it twice. Impulse buying 
has a nasty way of ballooning expenditures. Thus, creating a 
gift list and sticking to it can keep spending within the 
budget.
    Step three, shop for bargains. Being rushed or under 
pressure can lead to over spending. Shop around and return the 
impulse purchases if they break the budget.
    Step four, use credit wisely. The balance on your credit 
card should not be a complete surprise when you open the 
statement in January. It often takes longer than people think 
to repay holiday expenditures, so a good rule of thumb is to 
charge only what you can repay fully in 2 months.
    And step five, plan for next year. I cannot emphasize 
enough the importance of savings, not only for holiday 
expenditures but for all the little curves that life throws at 
us. Saving even $5 a week can pay for a lot of gifts without 
using your credit card. And it is also good discipline for 
building up a reserve for emergencies.
    Let me suggest a few additional tips. First, as my 
colleagues have said, identity thieves are always looking for 
ways to steal your personal information. For example, we know 
that fraudsters are calling or e-mailing people to say that 
something has happened to their accounts and the funds will not 
be available unless they verify the account information over 
the phone or on the Internet. Because it is the holiday 
shopping season, people worry about not having access to their 
money and they fall for this scam. The fraudsters would then 
use that account information to move funds out of the bank. So 
never, ever give out personal information online or on the 
phone unless you initiate the contact.
    Also, check your accounts regularly for unauthorized 
transactions and report such charges immediately to the bank or 
the credit card company.
    Second, if someone is having trouble repaying debts, he or 
she should take action immediately and call the bank. Ignoring 
the problem will only make things much worse. Banks are always 
willing to help people, but waiting too long to begin the 
conversation will limit the options that are available.
    Also, be wary of anyone who claims they can fix your credit 
for you. It is likely a scam.
    Mr. Chairman, there is no better time than during the 
holidays to get back to the basics of good money management. 
The ABA Education Foundation is a great source for financial 
education materials published in English and Spanish. And 
because education on the use of credit is so important, our 
foundation has a stand-alone website called Get Smart About 
Credit with tips and links to education materials at many of 
our member banks. Through the efforts of thousands of bankers 
every year and the work of the ABA Education Foundation, we 
hope to make a difference in helping people become more 
financially secure.
    Together, we can make the holidays even brighter. Thank 
you, and happy holidays.
    Senator Carper. Thank you, Ms. Cripe. Terrific testimony. 
Thank you.
    Mr. Taylor, Mr. Art Taylor, Mr. H. Art Taylor, you are on, 
my friend. Thank you.

STATEMENT OF H. ART TAYLOR, PRESIDENT AND CEO, BBB WISE GIVING 
                            ALLIANCE

    Mr. Taylor. Thank you, Senator Carper and Senator Dole and 
Senator Menendez. I appreciate you inviting me to share my 
remarks with you today.
    I actually represent an organization that is very concerned 
about not only the consumer, but also the donor. On the 
consumer side, the Better Business Bureau system operates 129 
affiliates around the country that are places where consumers 
can go to find out information on credible business. There are 
places where consumers can go if they want to know where to go 
to complain about a particular practice. So we are very happy 
that we are able to operate those things.
    In addition to that, the BBBs work very closely with the 
FTC. We publish joint press releases on various things we find. 
We police advertising practices through our national 
advertising review programs. We follow things like poor rebate 
programs and identity theft problems that consumers encounter.
    We have a program that deals with online shopping fraud 
through our BBBOnline program. And we are one of the largest 
institutions that are dealing with problems that people have 
with lemon cars. And so our programs do a lot with that, as 
well.
    On the charity side, I happen to have the good fortune of 
being CEO of the Wise Giving Alliance, which is very concerned 
with charity issues. And we operate a program that evaluates 
1,200 of the Nation's largest charities and the charities that 
people want to know most about.
    I am happy to say that most of those charities meet all of 
our standards. In fact, about 70 percent of the charities meet 
our standards. Unfortunately, and I will say very 
unfortunately, we still find that 30 percent of the 
organizations that we reach out to fail to provide us with 
information. And we think this is something that the Nation 
needs to know about and the country really needs to push 
charities to participate in self-regulatory programs.
    In fact, the Wall Street Journal reported on December 10th 
that charities should do more to make themselves open to the 
public. There were two individuals quoted in that article that 
you should know about. Diana Aviv, head of Independent Sectors, 
which is the organization that is the trade association for 
charities, said that if charities do not participate in self-
regulation programs, essentially they are saying that they 
should behave in any way they want to.
    And Brian Gallagher, Chief Executive Officer of the United 
Way of America said that we get irrational push back from 
charities that are not concerned about participating in self-
regulatory programs. So there is a concern about this issue of 
self-regulation.
    But people ask me all the time, how can we be better 
givers? And so I thought I would come to you today with a few 
tips that we can offer donors on how to be better givers. 
First, donors should try to avoid giving a gift in response to 
excessive pressure. One of the ways to do that is by planning. 
We think it is very important for people to plan their gifts 
throughout the year. Develop a budget, talk to the family about 
the issues that are most important to them, and then take time 
to figure out which charities are best able to accomplish the 
goals they have in mind. We think by planning ahead of time, 
they can avoid being subjected to unscrupulous charity 
behavior.
    We also think that how an individual charity solicits you 
is an important clue to whether that charity is above board or 
not. We find that charities that are above board do not 
generally use telemarketing as a fund-raising technique because 
they know telemarketing is a very expensive form of fund-
raising and that most of that money will end up with the 
telemarketer. In some cases, upwards of 80 to 90 percent of the 
money you give will remain with the telemarketer.
    We also know that good charities do not use spam e-mails on 
the Internet. You are unlikely to get an e-mail from a 
reputable charity, particularly if you have not had any contact 
with them. So avoid responding to Internet e-mails soliciting 
funds.
    We also know that people who come to your door asking for 
your dollars are probably not people you should give to. We 
also know that people should be aware that events that 
charities host, while they can be very good in terms of 
explaining the issues that charities are dealing with, they can 
be costly and people need to know that.
    Someone mentioned earlier today--I think it was you, 
Senator Menendez--that cause-related marketing is increasingly 
an important issue for donors to pay attention to. We have a 
standard that requires charities to make certain disclosures at 
the point of sale so that people know exactly how much of their 
purchase price is actually going to end up with the charity. We 
also think it is important that they know how long these 
campaigns will run, so that when they are buying the product 
they have not purchased it outside of the campaign period and, 
in fact, none of the money will end up with the charity.
    So these are just some of the things that we think people 
should know about. And of course, on our website give.org, 
there are many, many more things that people can do to help 
police themselves so that they can make their gifts more 
effectively.
    Thank you.
    Senator Carper. Well, I cannot remember the last time 
sitting and having a panel of four witnesses come forward and 
every one of them said something that I found was personally 
helpful, and I suspect helpful to everybody in this room and 
anybody else who might be able to follow this hearing. Those 
were just really exceptional testimonies and we thank you for 
them all.
    I would like to start, if I could, with Ms. Tyler. NASAA 
has highlighted problems that are associated with these free 
lunch seminars that you spoke about. I have seen those. When I 
get those in the mail or I hear about them, I think what do 
they serve? Should I take my wife for a date? Just before the 
presentation starts maybe say where are the restrooms, and we 
will slip out and go see a movie.
    What is being done to address any abusive sales practices 
involved annuity products that are facilitated by the free meal 
seminar? Whenever I hear of these free meal seminars, I am 
reminded there is no such thing as a free lunch and maybe it is 
still true.
    Ms. Tyler. Thank you, Chairman Carper. That is precisely 
right. There is no such thing as a free lunch. Our recent exams 
with the SEC and FINRA did show that all of these events are 
designed to sell product. And very often, the products being 
sold are complex, high fee, high commission paying products 
such as variable and equity indexed annuities.
    Securities regulators are placing a special emphasis on 
dealing with these seminars through education efforts, through 
examination of firms that are conducting these types of 
seminars, and then through aggressive enforcement actions when 
we do find wrongdoing.
    So it is really a three-pronged process: exams, 
enforcement, and education.
    Senator Carper. Thank you.
    As a regulator, what are you going to help educate 
investors about safe investing? You just talked to us a little 
bit, but do it again.
    Ms. Tyler. Certainly. Almost all state securities 
regulators do have a financial education division within their 
State agency. Those divisions are staffed by education 
professionals who do develop and disseminate education programs 
in their jurisdictions. All our education programs cover the 
full range of ages, starting with programs for our youngest 
citizens. We get into the school districts and deliver 
financial education in partnership with our teachers.
    For example, in North Dakota every year we do a teacher 
training academy where we bring in 100 teachers and we spend 4 
days educating them on how to deliver financial education to 
their students. And we do it in a way that allows them to 
incorporate financial education into their existing curriculum. 
We need to make it very easy for them to do this. And we think 
that starting with our young people is really an important 
place to start.
    We also, of course, have programs for our working age 
constituents and our seniors, as well. So our programs run the 
full spectrum.
    Just as an example, in the last 12 months, through a little 
over 1,000 different education events, we have reached over 
180,000 investor constituents in our various jurisdictions.
    Senator Carper. In Delaware, if someone had a question, 
wondered about the merits of a particular charity, a group that 
is hosting a luncheon seminar, they can call the Delaware help 
line. There are folks at the other end of the line who answer 
the phone and, through computer-aided prompts and so forth, 
they can help direct an inquirer generally to the right source 
of information.
    In a lot of States have folks who do your job, some 
appointed by the Governors, some by secretaries of states, I 
presume maybe some by the legislatures or by cabinet 
secretaries. I do not know if we have any that are 
independently elected.
    But how would citizens in 50 States be able to find your 
equivalent in their State?
    Ms. Tyler. It is an excellent question and I am glad you 
asked. The State government website portal would lead you to 
the State securities regulators agency.
    Also, through the NASAA website, NASAA.org----
    Senator Carper. NASAA, not N-A-S-A?
    Ms. Tyler. No, the other NASAA, N-A-S-A-A, NASAA.org will 
lead you to a link to every one of our securities regulatory 
jurisdictions.
    Senator Carper. All right, good.
    Tell us what are some of the more prevalent investment 
schemes that are going around today. This will be my last 
question and then I will kick it over to Senator Menendez.
    Ms. Tyler. Thank you. Certainly, the Ponzi scheme 
perpetually recreates itself, whether it is fronted by real 
estate or oil and gas scams or whatever is prevalent in the 
headlines on any given day. The Ponzi scheme structure, whereby 
you are simply taking money from new investors and using it to 
pay what appears to be a return to earlier investors. But most 
of the money goes into the promoters' pockets and typically 
offshore. That is a scam that is--we are perpetually dealing 
with, typically run more so by unregistered individuals.
    In the registered world, we do deal very frequently with 
unsuitable recommendations being made to our investor 
constituents. Again, the complex, high fee, high commission 
paying products that may be unsuitable for investors with 
shorter time horizons or limited tolerance for risk.
    Senator Carper. All right, thanks very much.
    Ms. Smith, we are going to have a second round of questions 
and I will come back and ask a question or two of you, Ms. 
Cripe, and Mr. Taylor.
    But for now, Senator Menendez. Thanks very much.
    Senator Menendez. Thank you, Mr. Chairman. I, too, want to 
thank all of you. You had some pretty good testimony to give 
insights to people and I appreciate that.
    But I would like to turn, and I will open the question to 
those who might want to answer it. But I want to pursue two 
lines of questioning, some that I raised in my opening 
statement. One is about the rebates.
    It seems to me that we have all heard these stories about 
these consumer rebates. I actually went through one just to see 
what the process was like. After 33 years of public service, 
being an attorney, I thought this would be relatively easy. And 
I found hurdle after hurdle to try to achieve--the time and 
effort I put in to get the rebate, I am not quite sure is worth 
the dollar amount.
    But wouldn't you agree that these rebates are pretty 
intentionally complex and, in essence, the companies bet on the 
fact that, in percentage terms, most people will not ultimately 
pursue the rebates or succeed at it? Anyone who wants to 
answer.
    Mr. Taylor. Yes. We find that increasingly companies are 
offering rebates that they realize consumers will never come 
back and respond to, they will never turn in the rebate card. 
In some cases, they tell the consumer that the rebate is not 
even available to them until they have held on to the product 
for a certain period of time, in which case the consumer 
actually forgets about the fact that they have a rebate and 
they never get to the point to which they actually turn the 
rebate in for response.
    I think you are absolutely on to something, and clearly I 
think more should be done to try to encourage companies to 
offer these rebates right away or to simply discount the 
product as they are planning to right away, so that the 
consumers are not left holding on to these certificates that 
they never get anything in return for.
    Senator Menendez. You know, I look at these rebates and if 
you do not have the original copy, if you miss the window of 
opportunity in which to submit it, if you cut out the wrong 
number, if the date does not match up, you are likely to be out 
of luck.
    Mr. Taylor. That is right.
    Senator Menendez. And I do think that consumer, in part, 
are lured to making a purchase that they might think twice 
about. But if I can get $50 back and that product now seems a 
lot more either within my reach or something that I desire but 
maybe could not quite afford, but the $50 makes all the 
difference in the world, then we are bringing a universe of 
consumer to purchase a product that they might otherwise choose 
not to.
    Do you think that would be a fair statement?
    Mr. Taylor. I do, and I think our advice to consumers would 
be to avoid purchasing products that offer rebates that come 
down the road or that entice you to buy something. I think most 
consumers need to understand that today a rebate does not 
really amount to much, and that you should plan on spending the 
amount that you paid for the item minus the rebate, without 
ever actually cashing in on that rebate. Price it according to 
what the price says on the item and not minus that rebate.
    Senator Menendez. I think we could actually--there is 
nothing wrong with luring a consumer legitimately to a product. 
But if that is your intention, then ultimately why not just 
then, once you have lured them to consider purchasing the 
product because of a rebate, give them the rebate at the 
counter instead of subsequently.
    Mr. Taylor. That is right.
    Senator Menendez. So we will have to look at that.
    The other thing I want to talk about is I saw this New York 
Times article today, and I appreciate, Mr. Taylor, you referred 
to the issue that I talked about, embedded giving. It says 
charity share from shopping raises concern. There is a section 
here that is emblematic of what my concern is. ``Sometimes 
charities--'' this is quoting from the article ``--do not even 
know that they are supposed to be receiving donations. For 
instance, some beneficiaries of an embedded giving program in a 
holiday catalog from Barney's New York found out that they were 
listed only after they were contacted by The New York Times. 
The World Wildlife Fund, a major charity that works to preserve 
and protect animals in the environment, was among them. Its 
Senior Vice President was disconcerted to learn that his 
organization was among a number of charities named as 
beneficiaries of items bought from Barney's Have A Green 
Holiday catalog. Unfortunately, just like Barney's shoppers 
were in the dark as to how or if Barney's and the manufacturers 
will fulfill their commitment to donate a portion of the 
proceeds of these projects to WWF.''
    Now that is not to say Barney's will not. I do not know 
that they will or not. I am going to subscribe good intentions 
to them.
    But it seems to me that there should be some standards 
here, at least that--No. 1, that charities should buy into it. 
These charities, whether it be the American Red Cross that our 
colleague chaired for a while, or whether it be the World 
Wildlife Federation or others, they have good name. They have 
credibility. They give people a sense of all right, this is an 
entity that does good work. And to have their names be used 
without their permission, at least as a minimus of standards, 
seems to me to be problematic.
    With your experience, how do you feel about that?
    Mr. Taylor. I totally agree with you, and that is why we 
have established a standard for how charities should deal with 
cause marketing arrangements with businesses. We say that the 
charity should know right up front how much money it is going 
to get from each purchase and there should be a duration stated 
so that the consumer knows also if they are going to be 
purchasing a product after a certain time if the campaign is 
still on, and if there is a maximum or a minimum that a charity 
is going to get over the life of the campaign.
    But this does not deal with the problem that you are 
talking about which is charities, in many cases, do not even 
know that a company has used their name in a cause-related 
marketing approach. And if they do not even know, they cannot 
even go to the company and insist that the company operate in 
accordance with the standards that we have asked them to 
operate with.
    And consumers are sometimes out in the cold because they do 
not know how much will actually go to that particular charity. 
And some businesses like this--I am not going to say Barney's--
but some businesses like this, because they can attach their 
product, in some cases their not very good products, not their 
best products, to a name of a charity that is big.
    The Red Cross is one organization that is used a lot in 
this. I can tell you that they have done an enormous amount to 
clean up the activity in their organization with regard to 
this. They will send out cease and desist to businesses and 
they are an example, I think, of what other charities are going 
to have to begin to do to police this.
    Some charities are actually under pressure because they 
feel that they are going to get a little chunk of money from 
this arrangement. And so they are not as fast to hold the 
companies to a particular standard. But we think that charities 
should be pressured to do it. And in the end, it is going to be 
better for all charity endeavor.
    Senator Menendez. Thank you, Mr. Chairman.
    I look forward to pursuing this so that good tidings does 
not become bah, humbugs.
    [Laughter.]
    Senator Carper. Well said.
    Ms. Smith, Ms. Cripe, Mr. Taylor, a question for you, if 
you can help me with this. I am going to go home tonight and I 
will open up my mailbox, or my wife will have already picked up 
the mail and have it inside. And I will look through--not just 
Christmas cards, there will be a lot of those, I suspect. But I 
will find a whole lot of appeals from charities, a number of 
whom I have supported in the past and some of whom I have not.
    What I do is I set them aside and just before Christmas, 
maybe the weekend before Christmas, go through a huge stack and 
decide which ones I have given to before, we have given to 
before, which ones we will be able to support.
    It would be helpful to know for us, and I suspect maybe for 
other families who set their requests aside for end of year 
giving, to know what portion of the money raised for--dollars 
raised by a particular charity, how much actually goes to 
administration and how much actually goes to whatever cause 
that the charity supports.
    Can you give us some tips on how to make that 
determination?
    Mr. Taylor. I suppose I should try to answer that question 
for you. We have a standard that requires charities to spend no 
more than 35 cents on administration and fund-raising, 35 
percent of everything they spend in a particular year. And 
believe it or not, most charities that we evaluate operate 
within that guideline.
    In fact, what we found is that there are more problems with 
charities that fail to meet other standards. And so the problem 
is not that people are supporting charities that spend too much 
on admin. The problem is that they falsely think that by 
supporting a charity that only spends a little bit on 
administration, that they are actually supporting a good 
charity. In fact, they may not be. And in many cases, they may 
not be. And so----
    Senator Carper. Could you just build on that a little bit?
    Mr. Taylor. Sure. An example is that we find that only 12 
percent of the charities we evaluate operate outside of our 
administrative cost standards. But overall, one-third of all of 
the charities we evaluate do not meet standards. So they may 
not have boards that operate. They may have boards that have 
conflicts of interest. They may be paying their board members. 
They may be lying on their solicitations. There could be any 
number of things that we monitor that these charities are doing 
wrong.
    And yet, if you just follow how much they are spending on 
administrative costs, you will not know that these are things 
going on inside of these organizations.
    And charities are very good at masking their administrative 
costs, which most people do not know. And the tax returns that 
they file, the 990 tax returns, are not very strong in 
requiring that they disclose exactly how much they are spending 
on admin.
    So this is one of the biggest areas I think people are 
getting in trouble over when they are dealing with charities.
    Senator Carper. All right. Thank you for that. Those are 
some good points.
    This will be a question for Ms. Cripe and also for Ms. 
Smith. I noticed that you included in your testimony some 
brochures or really tip sheets with your testimony. I think, 
Ms. Smith, I think you had, in your testimony, tips for online 
shopping that I thought was especially helpful.
    I am just going to go back to your testimony on tips for 
online shopping. Just give it again verbatim. I just thought it 
was just excellent. And then I am going to ask you and Ms. 
Cripe a related question.
    Ms. Smith. Thank you, Senator. The tips include always 
investigate the seller. Never use part or all of your Social 
Security number as a password. Pay by credit card. Keep a 
record of your transaction. And always turn off your computer 
when you have finished shopping.
    Senator Carper. Thank you.
    I wish I could get my son to turn off his computer before 
he goes to school or leaves for the day.
    For Ms. Cripe and for you, Ms. Smith, if you have could go 
back to some of the tips that you shared with us, that would be 
much appreciated.
    Ms. Cripe. Certainly. I think one of the important things 
this time of year are the tips on gift cards, and I will not 
reiterate them all. But be sure that you buy them from a 
reputable source and you look at the fine print to see if there 
is a penalty for not using that card immediately, and to check 
out the fee structure.
    I think most importantly for me, from an educational 
foundation standpoint, is preparing a holiday budget. And that 
includes your charitable giving. As you said, it is so easy to 
want to give to everyone that sounds like it is a good cause, 
but that should be part of the family budget for holidays and 
for all year long. How much of our efforts and, in fact, our 
educational materials that we take into the schools include 
teaching the kids about charitable giving and helping them 
discern what is a good charity and saving a little bit of their 
expenditure always on some charity. So that is a good thing.
    Along the lines of preparing that holiday budget, avoiding 
impulse spending and avoiding those extra costs that we do not 
think about. We think about only gifting during the holiday 
season.
    And really, the financial safety tips are about awareness 
and being alert. I saw someone yesterday here in Washington 
give her credit card and stick it in her pocket. Well, if I had 
been a pickpocket, I would have just sidled up to her and taken 
that right out. I found people leaving their credit cards 
laying around. Many people carry their Social Security numbers 
or their cards in their wallet or their purse. That is not a 
good idea, because if your purse gets stolen or your wallet 
gets stolen, the thief has everything they need then to steal 
your identity.
    So it is very important just to stay alert. It is a simple 
thing.
    Senator Carper. Say that last couple of sentences again.
    Ms. Cripe. I think it is very important this time of the 
year, and always, to stay alert. It is very simple to do that.
    Senator Carper. But go back a couple of sentences before 
that.
    Ms. Cripe. Okay, not carrying the Social Security number in 
your wallet or your purse.
    Senator Carper. That is it.
    Ms. Cripe. You really do not need to carry it around with 
you. There is very little need for that. If someone were to 
take your purse or wallet, they have got your Social Security 
number and your credit card numbers and perhaps your drivers 
license. Then they have everything they need to steal your 
identity, and we do not want that to happen.
    Senator Carper. I see a number of people in the audience 
nodding their heads.
    Ms. Cripe. And please, please, do not write your PIN number 
for your debit or ATM card on the little envelope we give to 
you to keep it in.
    Senator Carper. With respect to debit cards, I understand 
that people are using debit cards in increasing numbers. I have 
also heard--and that is true in our family, as well. I 
understand actually that debit card purchases may exceed credit 
card purchases today, or at least they are pretty close.
    I have heard recently some concerns about security aspects 
of debit cards. I was told be careful when you use your credit 
cards for purchases. Now you are hearing a similar kind of 
concern for debit cards. Can you comment on that at all? Any 
tips for us?
    Ms. Cripe. Yes. Be very careful when you are entering your 
PIN number. You will notice sometimes when you are in a line, 
if you are at a retail store, that people kind of try to inch 
you along. Just put your hand up so they cannot--there are 
shoulder surfers, if you will, that will try to read your 
number as you punch it in. And I could not do it, but they 
apparently are very good at it. And protect that number if you 
are using your PIN code.
    A signature is safer, too. Do not use it if those two 
things are not required.
    And as Ms. Smith said, when you are shopping on the 
Internet, use a credit card. It is much easier to protect 
yourself on the Internet using the credit card versus the debit 
card, and you do not have to--on our tip sheet, we have got 
some ways to tell if a site is secure or not. So that is, 
again, some information that is very important.
    And it is really hard to tell sometimes. But if there are 
encodings, if there are passwords that you need to set up, keep 
those in mind when you are shopping on the Internet or using a 
debit card.
    Senator Carper. Thank you.
    How long have you been doing this, in terms of providing 
advice to folks in these kinds of forums?
    Ms. Cripe. At least 30 years, ever since I have been in 
banking because that is what we do every day.
    Senator Carper. All right. This is a question that I am not 
going to ask it yet, but when we get to the end of the 
hearing--which will be fairly soon--the last question I may ask 
you is just to think back on the advice that you have given us 
here today and, looking back over your years of providing 
useful advice for consumers. And I want to ask each of you to 
give us your single best idea. I am not going to ask for your 
top 10. I am going to ask you for your best tip, particularly 
for this time of year, for consumers. So just be thinking about 
that, if you will.
    Ms. Cripe, looking ahead to the next holiday season, is 
there anything that you want to--actually, looking forward to 
the future, is there anything that you might want to stress for 
consumers to plan, not necessarily for this holiday season but 
for next year?
    Ms. Cripe. It is never too early to start planning for next 
year. Something that I think is hard for all of us to do is a 
forced savings plan. We have the best of intentions but we all 
know that that $5 goes to a cup of coffee versus putting it in 
the bank to save it for the next holiday. Many banks, mine 
included, believe it or not, still have what is called a 
Christmas club or a holiday club, where the consumer gets a 
coupon book and they make a deposit every week. And it's just a 
reminder that they need to put that $5, $10, $25 in so that in 
November they get a check and they can spend more of their 
money with cash versus credit.
    And really, if they start doing it early, they do not even 
really notice it is missing. It is maybe one--the latte effect, 
if you will--one cup of coffee a day. And it will give them a 
nice start on the next holiday season.
    Senator Carper. And do folks do that?
    Ms. Cripe. Yes, they do.
    Senator Carper. Is it a pretty stable business? Is it 
growing? Is it coming down?
    Ms. Cripe. It is probably not a growing business because it 
is something that is more known to those of us who have been 
around a long time and we probably need to find a way to reach 
the kids on that kind of program, which is more of a 
standardized savings program for them because it is a great 
program and it allows people to save money at the holidays.
    The other thing I would add----
    Senator Carper. Let me interrupt. I remember, as a kid 
growing up, how my mom would go to the store and buy something 
on lay-away and she would have to make payments on a regular 
basis until finally, just before Christmas, it would be paid 
off and she would pick it up.
    Ms. Cripe. Right. And this is even better. You are putting 
your money away and then, when you make your list of what you 
want to buy, you have got the money to do it.
    Senator Carper. Good. All right.
    Mr. Taylor, if I could come back to you, what would you say 
is the most important thing that a consumer can do to avoid 
being taken by questionable appeals during the holidays.
    Mr. Taylor. I think it is a mindset, Senator. What we want 
to do is get people to appreciate that they are their best 
defense against an unscrupulous charity. No matter what the IRS 
does or a State charity regulator or watchdog groups can do, we 
are all somewhat limited by what we can do.
    Consumers have to appreciate, donors have to appreciate 
that they would not just go into an automobile storefront and 
buy a car without doing any homework. And you cannot give to a 
charity without doing some investigation. But we do. We get a 
letter in the mail. We like it. And we tend to give right away 
to that charity.
    But that is, I think, the easiest way for us to be taken by 
an unscrupulous charity or, not even as bad as that, give to a 
charity that may not be positioned as well to solve the problem 
that they want solved. There may be another charity out there 
that is better able to address the problem that they want to 
have addressed.
    So I think it is a mindset. People have to understand that 
just because an organization asks them for money, does not mean 
they should give without doing some investigation up front.
    Senator Carper. All right. Are there any kinds of charities 
that come to mind for you that maybe are especially in need 
during the holiday season?
    Mr. Taylor. Well, this year, interestingly, the food banks 
are charities that are under some stress. They will tell you 
some of the reasons for that. But I am understanding that there 
is a need for Americans to support food banks and that there 
are overwhelming numbers of Americans that are going to bed 
hungry every night, especially children. And so this is 
something that I do not think Americans would be comfortable 
with if they knew it. And I know it is something that the food 
banks are trying to get more exposure about.
    Second, I hear that social service organizations could use 
help, organizations that are in the business of helping people 
get homes and, because of so much going on now with the 
mortgage industry, shelter is going to be an important question 
for the country to deal with.
    Senator Carper. My staff and I worked at a food bank 
earlier this month and found it very rewarding. We also got 
colds. It was pretty chilly.
    Mr. Taylor. Well, I hope you did not find a longer line 
this year than you might normally find at the food bank.
    Senator Carper. There is a real economy going on here 
because one of the amendments that I am joining with Senator 
Harkin and Senator Murkowski in offering to the farm bill, 
which is on the floor today, is an amendment dealing with 
school nutrition. They are trying to combat youth obesity. On 
the one hand, we know we are a Nation that is out of shape, we 
are overweight in many cases. And yet, we have folks that are 
still in great need.
    I think part of it is maybe people are just eating the 
wrong kinds of foods, too.
    Ms. Cripe. I am sure you are aware that many of the food 
banks depend on farm bill food products to carry out their 
mission. And a lot of them are very concerned that if the farm 
bill does not go through in the numbers that they are looking 
for, that they are going to have problems feeding people.
    Senator Carper. We also, my staff and I, we only have three 
counties in our State. But we volunteer for the Salvation Army 
kettles. And I must say it is gratifying to see how many people 
dig in. They do not just put in quarters or nickels or dimes. 
They put in real money. And it is very, very gratifying to see 
that.
    I think what I would like to do is just go back to that 
last question that I talked about earlier. This is what we call 
a pitch well telegraphed. But I want to come back and ask you 
to maybe, if you would give us your one best tip. If folks do 
not remember anything else walking out of here, if they have 
been listening or watching the hearing, just one great idea for 
people to keep in mind.
    Ms. Tyler, I am going to ask you to lead us off.
    Ms. Tyler. Thank you, Chairman Carper.
    I would say the single most important thing to do when 
approached with an investment solicitation is ask for written 
information, research the investment opportunity independently, 
and contact your State securities regulator. That contact 
literally may take mere minutes and it can save the investor a 
lifetime of financial hardship if they are subject to an 
investment that is actually a fraud and they do lose all their 
money.
    Their State securities regulator will be able to determine 
if the individual making the solicitation is registered to 
legally do business in your State. And the securities regulator 
will be able to determine if the product being offered is 
appropriately registered to be sold. And those are two key 
factors that an investor should know before making that 
investment decision.
    Senator Carper. And again, I asked this before, but just to 
reiterate it, the best way to find out where you are or your 
counterpart is in other States?
    Ms. Tyler. I would highly recommend utilizing the NASAA 
website.
    Senator Carper. NASAA, and we spell NASAA?
    Ms. Tyler. N-A-S-A-A, NASAA.org.
    Senator Carper. And that stands for?
    Ms. Tyler. North American Securities Administrators 
Association. And that will lead you to a link to the securities 
regulator in your jurisdiction.
    Senator Carper. Good. Thanks very much.
    Nancy Smith.
    Ms. Smith. AARP would say, for consumers of all ages, the 
most important thing is to know who you are dealing with. That 
applies to online, in person, on the telephone, and certainly 
applies to everything we have been talking about here today, to 
purchases, to contributions to charities, to investment 
opportunities. Know who you are dealing with and verify.
    Senator Carper. Good. Thank you.
    Ms. Cripe.
    Ms. Cripe. I would say that the top thing to do this time 
of year, and probably the hardest, is to stop and take a deep 
breath before you do anything, before you make a purchase, 
before you use a debit or credit card, before you give to a 
charity. And that will stop a lot of scams and frauds and allow 
you to ask the question, if you pause before you buy something 
or do something. And if anything looks questionable, there are 
websites. Call your local bank and they will be happy to tell 
you if that sounds like a scam or a fraud. We, more than 
anyone, our job is to worry. And we do not want that to happen 
to you or to any consumer. And we do not mind that extra phone 
call.
    Senator Carper. When folks call the bank, who should they 
ask for?
    Ms. Cripe. They should be able to talk to anyone, because 
our front line people know as much as the chief executive about 
these things and we hear the stories every day as people come 
in. So all tellers, new accounts people, CSRs, whatever your 
particular bank might call them.
    Senator Carper. CSRs?
    Ms. Cripe. Customer service representative, should know how 
to help you or to whom to refer your question.
    Senator Carper. Thank you.
    Mr. Taylor, last word. You are batting cleanup here.
    Mr. Taylor. I believe----
    Senator Carper. I want you to drive this one out of the 
park.
    [Laughter.]
    Mr. Taylor. I think it is important, again, for people to 
realize that they have to defend themselves against charities. 
And they have to be the ones to hold charities accountable. If 
we continue to just give to organizations no matter what 
information they provide us, they will never improve and they 
will never get us to a point where we can count on all the 
charities out there to do the work that we really need them to 
do.
    So it is important, not only when you make a dollar 
contribution, it is important when you make a penny 
contribution, that you do some investigation and make sure that 
you are giving to a legitimate organization that is really 
trying to accomplish a mission.
    Senator Carper. All right. Thank you.
    When I was a State Treasurer, I was the State bond issuing 
officer. And as Governor, I was bond issuing officer for my 
State, and would meet on a fairly regular basis with the major 
rating agencies, including Moody's Investors Service, Standard 
& Poor, Fitch and others.
    And we would have to present our financials, where we are 
raising our money, where it is coming from, how we are spending 
our money, in an effort to try to get a better credit rating.
    I remember when I was elected State Treasurer, and Nancy 
Smith had been my campaign treasurer, Delaware had the worst 
credit rating in the country. We were tied for dead last with 
Puerto Rico. The folks in Puerto Rico were embarrassed with us, 
to be lumped with us. Delaware was the best in 1976, we were 
the best in the country in terms of overestimating revenue and 
underestimating spending. Nobody was as good as us at that.
    [Laughter.]
    All the way up to having the worst credit rating in the 
country. One of my happiest days as Governor was when we earned 
AAA credit ratings across the board, about 20 years later.
    But we had to make--we were scrutinized very closely by the 
rating agencies, as are others who issue debt.
    I wonder, are there entities out there that look at 
charities? You mentioned the importance of not just looking to 
see what percentage of a dollar that a charity raises do they 
actually spend on administration and do they spend on the 
causes that they are espousing, but what kind of other 
practices do they follow? Is there some entity out there that 
is doing this?
    It is really hard. I think of my mom, who is now deceased. 
But my mom, living in Florida in her 70's in her home, and 
being bombarded until we got her on a do not call list down in 
Florida. But there are a lot of people, they are just ill-
equipped to be able to do as you suggested, to depend on 
themselves.
    Mr. Taylor. That is why we have this service, Senator, that 
does that. We take a lot of the guesswork out of it by 
evaluating these 1,200 organizations, the ones that are most in 
front of us, against 20 rigid standards. And we tell people 
right away whether a particular organization meets those 
standards or not. And you can find out in our magazine, because 
we know a lot of seniors, in particular, do not want to go on 
the web. So we provide this free magazine to anyone who wants 
to get it, so that they can see whether these organizations 
meet these standards.
    And we also have our website, give.org----
    Senator Carper. Say that again.
    Mr. Taylor. Give, g-i-v-e, give.org, where you can go and 
get a full report on any one of the 1,200 organizations that we 
evaluate. So what you are talking about is happening. And a lot 
of the local Better Business Bureaus around the country do this 
on a local basis. So we are really trying to cover the 
landscape.
    We are not getting to every charity, of course. But we are 
getting to the ones that people ask us about and we are getting 
to the ones that are most in front of us. And I think that is 
important.
    Senator Carper. When someone--what was it, give.org?
    Mr. Taylor. Give.org, yes.
    Senator Carper. When somebody signs on to give.org, do they 
have to provide their Social Security number to get----
    [Laughter.]
    Senator Carper [continuing]. The information?
    Mr. Taylor. Actually, they do not have to provide any 
information. And you know, in some cases, we lose out because 
we would like to find out more about who is coming to our 
website. But we have a policy, and I think it is a good policy, 
that you can just come. We do not ask you any questions and you 
can remain anonymous, and that is good.
    Senator Carper. All right.
    In closing, we spend a fair amount of attention in Delaware 
on financial literacy. Our State Treasurer, someone who did not 
succeed me but succeeded my successor, who has done a great job 
in focusing attention in our State. A number of State 
treasurers have taken this on as one of their causes, which 
is--for which I strongly commend them.
    As Governor, I presided over school reform in our State, a 
reform that continues to this day, and have done all 50 States. 
Among the things that we did was we established rigorous 
academic standards of what students should know and be able to 
do in math and science and reading and social studies. We 
started requiring tests be given, objective tests, to measure 
student progress toward those standards. We provided for 
accountability for students, for schools, for educators, even 
for parents.
    We hear a lot as we prepare here, probably early next year, 
to take up reauthorization of No Child Left Behind, concerns 
about the States where teachers teach to the test. I say that 
should not be a problem or a concern as long as the tests 
reflect the academic standards of what kids are expected to 
know and be able to do in math and science and English and 
social studies. And as long as the tests are reflective of the 
standards, that is not a bad thing.
    But I think somewhere along the way, as we have put a lot 
of focus on getting ready for the State test in math or science 
or reading or social studies or some other course, that we do 
not have the opportunity, we have not figured out how to link 
for our students educating them, getting them ready for some of 
the challenges that we were just talking about here, to be 
smart investors, to be smart consumers, to be smart donors. We 
have got to find a way to marry the two together so that we can 
make relevant in the world that students are going to live in 
when they graduate how to invest wisely, how to handle their 
money smartly, how to figure out who to give their donations to 
at the end of the year, where to buy a gift card in a way that 
makes sense, whether or not we ought to take advantages of 
these rebates and how to be wise about doing that.
    There has got to be a way to marry it all together so that 
the students can still make progress toward meeting their 
academic standards when they take those tests, but at the same 
time they will come away with skills, not the skills and 
knowledge they need to know to pass a test, to do well on a 
test, but will help them to behave in ways throughout their 
lives that will be to their benefit and that of their families.
    Again, I will finish where I started. Sometimes we have 
hearings around here and I leave and I say well, just check 
that one off. But this has been just a really valuable hearing. 
And personally, I speak for myself and for my colleagues who 
were able to come here, and those who could not. There are 
others who might benefit from our publicizing this and putting 
you in the spotlight today. I am just real grateful to have 
been here and to have heard you.
    I also want to just thank each of you for what you do with 
your lives and for the good that you do with your lives. On 
behalf of all of the people who are going to be helped by your 
testimony here today and by your work who will never have a 
chance to say thank you, I want to say thank you.
    And with that, our hearing is adjourned.
    [Whereupon, at 11:58 a.m., the hearing was adjourned.]
    [Prepared statements supplied for the record follow:]

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