[Senate Hearing 112-764]
[From the U.S. Government Publishing Office]
S. Hrg. 112-764
TAKING CONSUMERS FOR A RIDE:
BUSINESS PRACTICES IN THE HOUSEHOLD GOODS MOVING INDUSTRY
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HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 20, 2012
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
JOHN D. ROCKEFELLER IV, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii KAY BAILEY HUTCHISON, Texas,
JOHN F. KERRY, Massachusetts Ranking
BARBARA BOXER, California OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida JIM DeMINT, South Carolina
MARIA CANTWELL, Washington JOHN THUNE, South Dakota
FRANK R. LAUTENBERG, New Jersey ROGER F. WICKER, Mississippi
MARK PRYOR, Arkansas JOHNNY ISAKSON, Georgia
CLAIRE McCASKILL, Missouri ROY BLUNT, Missouri
AMY KLOBUCHAR, Minnesota JOHN BOOZMAN, Arkansas
TOM UDALL, New Mexico PATRICK J. TOOMEY, Pennsylvania
MARK WARNER, Virginia MARCO RUBIO, Florida
MARK BEGICH, Alaska KELLY AYOTTE, New Hampshire
DEAN HELLER, Nevada
Ellen L. Doneski, Staff Director
James Reid, Deputy Staff Director
John Williams, General Counsel
Richard M. Russell, Republican Staff Director
David Quinalty, Republican Deputy Staff Director
Rebecca Seidel, Republican General Counsel and Chief Investigator
C O N T E N T S
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Page
Hearing held on September 20, 2012............................... 1
Statement of Senator Rockefeller................................. 1
U.S. Senate Committee on Commerce, Science, and Transportation,
Office of Oversight and Investigations, Majority Staff,
``Internet Moving Brokers: A New Consumer Protection Problem in
the Household Goods Industry,'' September 10, 2012............. 3
Statement of Senator Lautenberg.................................. 57
Statement of Senator DeMint...................................... 74
Prepared statement........................................... 76
Statement of Senator Pryor....................................... 79
Witnesses
Hon. Anne S. Ferro, Administrator, Federal Motor Carrier Safety
Administration, U.S. Department of Transportation.............. 37
Prepared statement........................................... 40
Timothy M. Barry, Principal Assistant Inspector General for
Investigations, U.S. Department of Transportation.............. 44
Prepared statement........................................... 46
Reana Kovalcik, Consumer......................................... 52
Prepared statement........................................... 54
Linda Bauer Darr, President and CEO, American Moving and Storage
Association (AMSA)............................................. 58
Prepared statement........................................... 60
Jason M. Romrell, President and Chief Legal Officer, Budget Van
Lines Inc...................................................... 64
Prepared statement........................................... 66
Appendix
Budget Van Lines Response to September 12, 2012 U.S. Senate
Committee on Commerce, Science, and Transportation Staff Report
on ``Internet Moving Brokers''................................. 89
Statement of the UniGroup, Inc. Move Rescue Program.............. 91
Aldo DiSorbo, prepared statement................................. 93
Response to written questions submitted by Hon. Jim DeMint to:
Hon. Anne S. Ferro........................................... 106
Timothy M. Barry............................................. 108
Linda Bauer Darr............................................. 109
Jason M. Romrell............................................. 110
TAKING CONSUMERS FOR A RIDE:
BUSINESS PRACTICES IN THE HOUSEHOLD GOODS MOVING INDUSTRY
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THURSDAY, SEPTEMBER 20, 2012
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m. in room
SR-253, Russell Senate Office Building, Hon. John D.
Rockefeller IV, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV,
U.S. SENATOR FROM WEST VIRGINIA
The Chairman. OK, this hearing will come to order. Senator
DeMint is on the way. Senator Lautenberg, and Senator Udall,
and others will be coming.
We are talking today about what, at least those of us who
have worked on this, consider to be a consumer scam, and we
have--we do a lot of that in this Committee. The nature of the
Committee has changed just a bit, and we really look out for
consumers, whether it is during the healthcare debate or
whatever. We are consumer-friendly.
And, it is a scam that takes advantage of American families
at really one of the most vulnerable times in their lives,
doing something which they will probably only do once or twice
in their entire lives. They load all of their worldly
possessions into a moving truck and move to a place where they
have found a new job, a new opportunity, a new home, or for
whatever reason. But, it does not happen very often in
somebody's life.
Now, long ago, Congress recognized that a household move is
a unique category of interstate commerce, a type of commerce
that requires special consumer protections. American consumers
are using moving companies, as I indicated, only a few times in
their lives, and we should not expect them to understand the
complicated rules governing interstate shipping. That is beyond
the requirements that they have, but not beyond the
requirements that the rest of us have.
And, even if they do their homework before they hire a
moving company, consumers do not understand all of the fine
print on the paperwork, the bill of lading. We've got a lot of
fine print around here, and it is very effective, and can move
through, and it is used for lots of different reasons, most of
them not particularly helpful, primarily because people do not
read them, do not want to read them, cannot read them, do not
read them. It does not matter. And, the bill of lading there
has to sign as their possessions are loaded on to a moving
truck.
It is an ugly fact that there are some moving companies in
this country that are willing to take advantage of consumers'
lack of information and experience. Easy to do.
Ms. Kovalcik, you will be talking to us about that.
And, one of our witnesses, and in fact, Reana Kovalcik, is
going to tell us how dishonest moving companies can turn the,
already distressful circumstance of a household move, which is,
in fact, exactly that, into a full scale personal disaster.
This Committee and others in Congress have been aware of
the problems of the moving industry for many years. On several
occasions, we have written laws that we hoped would put an end
to these abusive practices. It is easy to write laws. Actually,
it is sort of hard these days to write laws or get them passed,
but even if we do, it is very hard to stop practices which are
not the majority of moving, because the majority of moving is
handled in a proper way, and the minority is not, but the
minority is enough so that we want to concentrate on that.
So, just a few months ago, in fact, in the Surface
Transportation Authority law, called MAP-21--I have never
really quite figured out why it is called MAP-21, but it really
does not matter. That is what is called. And, we struggled
mightily over that bill, for a long time, and finally got a
bipartisan consensus and passed it, and we adopted some new,
important consumer protections that Senator Lautenberg, who
will be here shortly, and others worked very hard to develop.
We thought we were doing trying to do the right thing.
Other groups were also working to clean up the moving
industry. Our witness from the Department of Transportation
Inspector General's Office, Mr. Timothy Barry--Mr. Barry is
right there--is going to tell us about the great work that he
does, well the work that you do is, when you tell us, we will
think is probably great, with law enforcement agencies across
the country to track down and prosecute moving companies that
defraud customers.
And this, for a small interruption, is something that
interests me a lot. We are talking about crime here. We are
talking about crime. And, we are talking about scarce
resources. We are talking about attorneys general in the states
that just do not think that they have the time for this, and
you can go down through all kinds of people who might or could
be paying attention to this, but, for the most part, they do
not. It is an interstate commerce matter, pure and simple. AGs
could go after it, but the feds can do it most effectively, I
think.
So, the question is to track down and to prosecute moving
companies that defraud customers, not those who do not. You
know, not those who have a proper bill of lading, and it is
understood, and it has been read, and people have looked over
the inventory, and had a chance to see all of that.
But, let us be honest. These efforts are not succeeding to
put an end to the abuses, and hence, this hearing again today.
A new Commerce Committee staff report that I released
today, and I ask you now as a consent to release it, and I
grant myself that honor.
[The information referred to follows:]
Table of Contents
Executive Summary
I. Background
A. Overview of the Household Goods Moving Industry
B. Estimates and Transport
1. Estimates
2. Delivery
C. Common Abuses and Congressional Responses
D. Criminal Enforcement Actions
E. Consumer Complaints
II. The Committee's Review of Consumer Complaints
III. Internet Moving Brokers and Their Impact on Consumers
A. Internet Searches Direct Consumers to Internet Moving Brokers
B. Consumer Confusion about Brokers' Role
1. Misleading Websites
2. Company Names Lead to Confusion
3. Use of Multiple Companies and Frequent Name Changes
C. Broker ``Deposits'' and Fees
D. Price Increases
E. Hostage Situations
IV. Examples of Moves Booked by Internet Moving Brokers
V. Conclusion
Exhibits
Exhibit 1: Examples of ``Deposits''
Executive Summary
Each year, an estimated 1.6 million Americans use the services of
household goods carriers and brokers to assist them with interstate
moves. While most consumers appear to have a positive experience with
the companies they hire, a significant number continue to complain
about the business practices of certain moving companies. These
consumers describe a ``bait and switch'' scheme where a moving company
agrees to move their goods for one price, but then dramatically
increases its charges after it has taken physical possession of the
consumers' property. In some cases, the moving company will refuse to
deliver consumers' goods at their new home unless they pay these
exorbitant extra charges, a practice commonly referred to as holding
customers' goods ``hostage.''
In the fall of 2011, Chairman Rockefeller directed Committee staff
to open an investigation to determine why consumers continue to
complain about troubling experiences with their moving companies. After
carefully reviewing five years of consumer complaints filed with the
Federal Motor Carrier Safety Administration (FMCSA), the investigation
focused on a small group of moving companies that generated
disproportionately large numbers of consumer complaints. In particular,
the investigation examined the troubling practices of a small group of
household good brokers, companies that arrange household moves, but do
not actually perform them.
While policymaking and enforcement efforts have traditionally
focused on the business practices of household goods carriers, the
companies that transport consumers' property to their new homes, the
investigation has found that moving brokers are creating the conditions
that lead to many of the complaints that consumers make about
interstate moves.
Committee staff interviewed dozens of the moving brokers' former
customers, reviewed hundreds of consumer complaints, and reviewed
thousands of the companies' customer files. The evidence obtained
through the investigation showed that the practices of certain types of
moving brokers regularly harm consumers. The key findings of the
Committee's investigation are:
The moving brokers that have the most complaints filed with the
FMCSA employed similar business practices and relied heavily on
the Internet to generate business. Consumers who used the
brokers that generated the most complaints filed with the FMCSA
described very consistent scenarios. The consumers went online
to shop for moving services and through an Internet search,
usually conducted via a search engine, the consumers identified
and contacted an ``Internet moving broker.'' Frequently, the
business names used by the brokers were often very similar to
well-known, reputable brand names, like United Van Lines or
Budget Truck Rental.
The business practices that Internet moving brokers use to find
customers, provide estimates, and arrange moves regularly
confuse consumers. Committee staff has interviewed dozens of
the Internet moving brokers' former customers who repeatedly
stated that they were not made aware that they were hiring a
broker, and that they were surprised when an entirely different
company arrived on the day of their move. Consumer complaints
obtained by the Committee also regularly showed that consumers
were not made aware they were hiring a broker, rather than a
carrier. The websites for Internet moving brokers often failed
to clearly disclose the fact that they are merely brokers and
that they do not play a role in the interstate moves that
consumers are undertaking.
Internet moving brokers have their customers pay ``deposits''
that are nothing more than their fees. Internet moving brokers
provided information to the Committee that showed they labeled
their broker fees, which sometimes amounted to thousands of
dollars, as ``deposits.'' Consumers repeatedly stated that they
were not aware these ``deposits'' were not dedicated to the
payment of their actual moves. Customers of Internet moving
brokers frequently paid thousands of dollars in ``deposits'' to
the Internet moving brokers and these ``deposits'' were never
shared with the carriers performing the moves. Consequently,
before the consumers' belongings were placed on trucks, they
had already paid hundreds--and sometimes thousands--of dollars,
to companies that played no role in the actual moves.
Internet moving brokers never do on-site visits to catalog
consumers' belongings and determine the price estimates.
Without conducting visual inspections of the consumers' goods
the brokers gave the consumers an estimated price for the
moves. The brokers' estimates were usually significantly lower
than the prices quoted by other moving companies that conducted
on-site visits.
The ``binding estimates'' that Internet moving brokers provided
to their customers frequently provided no price certainty.
Although the purpose of a ``binding estimate'' is to provide
price certainty for a consumer undertaking an interstate move,
consumers who booked their moves through Internet moving
brokers often experienced significant price increases for their
moves after the moves had begun. Committee staff found multiple
examples of price increases for thousands of dollars with very
little justification for the increases.
Internet moving brokers create the conditions for harmful
moving experiences. To convince consumers to do business with
them, Internet moving brokers frequently provided very low
estimates to consumers. Because Internet moving brokers also
routinely took substantial fees, labeled as ``deposits,'' many
carriers inevitably attempted to make up the difference by
increasing the price once the moves began.
Internet moving brokers should be aware their practices are
harming consumers. Committee staff found a significant amount
of evidence suggesting that Internet moving brokers should be
aware that their practices are harming consumers. Their former
customers frequently complained to them about terrible moving
experiences, including significant price increases and carriers
holding their goods hostage.
As more Americans feel comfortable arranging their household moves
online, Internet-based moving brokers will have more opportunities to
harm consumers. Policymakers, regulators, and law enforcement officials
will need to spend more time understanding how Internet moving brokers
operate and how they are changing the household goods industry.
I. Background
A. Overview of the Household Goods Moving Industry
All moves that occur within the United States are either intrastate
or interstate. An intrastate move is within one state and never crosses
state lines. These moves are regulated, if at all, by the state in
which the move occurs and the cost is generally determined on a per-
hour basis.\1\ Interstate moves cross at least one state line and are
regulated by federal law. The cost of an interstate move is typically
based upon the weight of the goods to be shipped and the distance
travelled.\2\ Until 1995, the interstate moving industry was regulated
by the Interstate Commerce Commission. Today, it is regulated by the
Federal Motor Carrier Safety Administration (FMCSA), a division of the
Department of Transportation.
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\1\ American Moving and Storage Association, Make a Smart Move,
Consumer Handbook: A Practical Guide to Interstate Moving (2007) at
1(online at www.moving.org).
\2\ Some interstate movers will charge based upon volume, or the
cubic feet that goods fill in the truck. FMCSA requires that all
interstate moves with a non-binding estimate be based upon the actual
weight of the shipment. The regulations require that the shipment be
weighed on a certified scale and weight tickets be provided to the
shipper to substantiate the final charges. 49 C.F.R. Sec. 375.507.
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The interstate household goods moving industry is comprised of
three players: individual shippers, household goods motor carriers, and
household goods moving brokers.
Shippers An individual shipper is a person who is paying to move
household goods.\3\ Shippers are the consumers of the household goods
moving industry.\4\ They employ the services of either a carrier or
broker to arrange their shipments.
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\3\ 49 U.S.C.A. Sec. 13102(13); 49 C.F.R. Sec. 365.105.
\4\ The terms ``consumers'' and ``shippers'' will be used
interchangeably throughout this report.
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Carriers A household goods motor carrier transports household
goods. Carriers also regularly offer additional services to consumers,
including providing estimates, packing household goods, and loading and
unloading household goods.\5\ Companies operating as carriers range
from national moving companies and their local agents, such as United
Van Lines, Mayflower Transit, and North American Van Lines, to smaller
independent moving companies. The national moving companies, or van
lines, ``handle dispatching, shipment routing and monitoring, paperwork
processing, and claims settlement'' and rely upon their local agents to
facilitate the moves.\6\ The local agents are full-service moving and
storage companies that are either owned by a van line or are
independently owned and operated, but affiliated with a van line. The
independent moving companies are also full-service moving and storage
companies, but have no affiliation with the national moving companies.
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\5\ 49 U.S.C.A. Sec. 13102(12).
\6\ The Moving and Storage Industry in the U.S. Economy:
Facilitating Economic Growth by Making Residential Mobility Easier,
Creating Opportunities for Small Businesses, and Stimulating Other
Industries throughout the Economy, Robert Damuth, Vice President,
Nathan Associates Inc. (Oct. 8, 2008) at 6 (online at http://
www.promover.org/files/msi/msi_report.pdf).
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Brokers Household goods moving brokers provide moving estimates and
coordinate moves between a shipper and carrier.\7\ Brokers often do not
own trucks and do not perform any moving services. Brokers charge
shippers a fee to provide an estimate and locate a carrier who will
pick up and transport the shippers' goods. Over the past decade, the
increased use of the Internet by consumers has increased the presence
and use of Internet moving brokers, which will be discussed further
below.
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\7\ According to the regulations, a household goods broker means a
person, other than a motor carrier or an employee or bona fide agent of
a motor carrier, that as a principal or agent sells, offers for sale,
negotiates for, or holds itself out by solicitation, advertisement, or
otherwise as selling, providing, or arranging for, transportation of
household goods by motor carrier for compensation. 49 C.F.R.
Sec. 371.103.
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To operate as either a carrier or broker a company must register
and apply for operating authority with the FMCSA. To register as a
household goods motor carrier, federal law requires a company to meet
the following requirements:
It must offer shippers an arbitration process through which
they can resolve disputes over charges and damage claims;
It must publish its rates in a tariff and make this tariff
available to its shipper customers;
It must be familiar with and observe federal consumer
protection laws that apply to household goods moving; and
It must disclose any business or family relationships with
other carriers, freight forwarders, or brokers.\8\
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\8\ 49 U.S.C.A. Sec. 13902(a)(2).
Provisions included within the new surface transportation law (MAP-
21) will impose additional requirements on carriers applying for
operating authority, including passing an examination intending to
ensure that they understand all applicable federal consumer protection
laws and that they will comply with them.\9\
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\9\ Moving Ahead for Progress in the 21st Century (MAP-21), Pub. L.
No. 112-141 (July 6, 2012).
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B. Estimates and Transport
For a shipper planning an interstate move, the two most important
phases of the move are the estimate, which is provided by the broker or
carrier, and the actual transport of the shipper's household goods,
which is solely provided by carriers. Congress has passed laws that
govern the interactions between shippers, brokers, and carriers during
these two phases in order to protect the rights of all parties. In
creating rules for these interactions, Congress has specifically noted
the vulnerabilities of shippers in interstate moves. For example, in
passing the Household Goods Transportation Act of 1980, the House
Committee on Public Works and Transportation noted:
[S]hippers usually move only once or twice in their lives and,
consequently, lack a thorough understanding of the industry and
sufficient clout to negotiate with it. Their situation is made
more vulnerable by the fact that the moves involve all of their
personal possessions, which often are of a fragile nature.\10\
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\10\ House Committee on Public Works and Transportation, Household
Goods Transportation Act of 1980, 96th Cong., at 2 (1980) (H. Rept. No.
96-1372).
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1. Estimates
FMCSA requires movers to prepare written cost estimates for every
shipment. Both carriers and brokers are authorized to provide
estimates. If a broker is providing an estimate on behalf of a carrier,
the broker must have a written agreement with the carrier whereby the
carrier agrees to accept and honor that estimate.\11\ Every estimate
must be signed by both the carrier or broker and the shipper, and a
dated copy must be provided to the shipper.\12\
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\11\ 49 C.F.R. Sec. 371.115 and 49 C.F.R. Sec. 375.409.
\12\ 49 C.F.R Sec. 375.401.
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Estimates can be either ``binding'' or ``non-binding.'' A binding
estimate is ``an agreement made in advance with [an] individual
shipper. It guarantees the total cost of the move based upon the
quantities and services shown on [the] estimate . . .'' \13\ In 1980,
Congress created the authority for binding estimates in order to
provide the shipper with ``price certainty'' for moving costs.\14\ A
House Committee report explained its reasoning for supporting the
creation of binding estimates:
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\13\ 49 C.F.R Sec. 375.401(b)(1).
\14\ House Committee on Public Works and Transportation, Household
Goods Transportation Act of 1980, 96th Cong., at 7 (1980) (Report No.
96-1372).
An estimate is a price quote for performance of transportation
services by a household goods carrier. Under existing law, an
estimate is based upon an assessment of the weight of the
shipment, plus other incidents of the service, such as distance
and the amount of accessorial work that is to be performed. The
estimate is not binding. The actual charge for the
transportation service is based on the actual weight of the
shipment and the cost for that weight. Therefore, if a
household goods carrier gives a consumer an estimate of $1,200
for its service, and after weighing the shipment, the charge is
$1,800, the carrier must charge the shipper $1,800. This
requirement has resulted in a great deal of consumer
dissatisfaction. In order to address this problem, these
subsections create a foundation for written binding
estimates.\15\
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\15\ Id.
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With the new provision, the Committee report explained that:
[A] carrier may give a written binding estimate of $1,200, and
regardless of the weight of the shipment, the carrier can
charge the consumer the quoted price of $1,200. The benefit to
the shipper is that he or she achieves price certainty. . .
\16\
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\16\ Id. at 2.
As will be discussed further below, the written binding estimates that
some Internet moving brokers are giving to shippers do not appear to be
providing the ``price certainty'' for shippers that Congress envisioned
when it passed legislation on written binding estimates in 1980.
In contrast to a binding estimate, a non-binding estimate is merely
an approximation of the cost. The final price is based upon ``the
actual weight of the individual shipper's shipment'' \17\ and will be
determined after the shipment has been loaded and weighed. For all non-
binding estimates, the carrier is required to weigh the shipment prior
to assessing any charges due. The carrier must be able to furnish
weight tickets to the shipper to substantiate the charges and provide
the shipper an opportunity to observe the weighing of the goods.\18\
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\17\ 49 C.F.R Sec. 375.401(b)(2).
\18\ 49 C.F.R Sec. 375.513; 49 C.F.R. Sec. 375.519 .
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To provide either a binding or non-binding estimate, a carrier or
broker is required to conduct a physical survey of the goods to be
moved if the goods are located within 50 miles of the carrier, broker,
or their agent. If the goods to be shipped are located more than 50
miles away, or the shipper waives this requirement in writing, then an
estimate can be based upon an inventory provided over the telephone or
the Internet.\19\
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\19\ 49 U.S.C.A. Sec. 14104; 49 C.F.R. Sec. 375.401(a).
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While estimates via the telephone and the Internet are allowed
under current law, both the Better Business Bureau (BBB) and the
American Moving and Storage Association (AMSA) advise consumers to get
multiple estimates based upon in-home visual inspections of their
goods. Estimates based upon a physical survey of the goods to be moved
are more accurate. The Better Business Bureau instructs consumers to
``get at least three in-home estimates,'' and warns consumers that,
``[n]o legitimate mover will offer to give you a firm estimate on-line
or over the telephone.'' \20\ In an article written to explain the
interstate moving process, AMSA warns consumers that ``if a mover you
are considering refuses to provide you with an in-home estimate and
tells you he can provide an accurate estimate over the phone without
ever seeing your home and your furniture--you may want to choose
another mover.'' \21\ The major van lines provide the majority of their
estimates based upon a visual inspection of the goods to be shipped.
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\20\ Better Business Bureau, May is National Moving Month: BBB
Advice for A Smooth Move (May 1, 2012).
\21\ American Moving and Storage Association, Make a Smart Move,
Consumer Handbook: A Practical Guide to Interstate Moving (2007) at 5
(online at www.moving.org) (emphasis omitted).
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2. Delivery
Federal regulations also outline how carriers are to be paid and
when they must relinquish possession of shippers' goods in interstate
moves. Upon delivery, a carrier is required to relinquish possession of
shippers' household goods upon payment of 100 percent of the charges
contained in a binding estimate or 110 percent of the charges contained
in a non-binding estimate. Carriers can charge shippers the amount that
is in excess of the 110 percent, so long as it is charged after 30
days.\22\
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\22\ 49 U.S.C.A. Sec. 13707(b)(3)(A); 49 C.F.R.
Sec. 375.403(a)(10); 49 C.F.R. Sec. 375.405(b)(10).
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These rules do not apply to any ``post-contract services''
requested by the shipper after the contract of service has been
executed.\23\ This provision allows carriers to include additional
charges, such as fees for packing services and materials, shuttle
services, and fees for walking distances exceeding 75 feet, at the time
of delivery. Charges for ``post-contract services'' can be collected by
the carrier at the time of delivery prior to unloading the shippers'
goods.
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\23\ 49 U.S.C.A. Sec. 13707(b)(3)(C).
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While carriers are permitted to charge for additional services that
are requested by shippers or are necessary to complete the move, these
charges need to be agreed upon prior to loading goods onto the truck.
Federal regulations require that, if additional services are necessary
or requested by the shipper, the carrier must negotiate a revised
estimate prior to loading any goods onto the truck. If the shipper and
carrier have not agreed upon a new estimate, and the carrier begins
loading goods onto the truck, the carrier has reaffirmed the original
estimate and therefore cannot demand payment for the additional
services at the time of delivery.\24\ If additional services are
necessary after the goods are in transit, then the services need to be
agreed upon before the carrier performs those services. Charges for any
additional services not agreed upon prior to loading or performance may
be charged to the shipper after 30 days.\25\
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\24\ 49 C.F.R. Sec. 375.403(a)(7).
\25\ 49 C.F.R. Sec. 375.403(a)(8).
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Each carrier is required to establish an arbitration program
available for shippers to resolve disputes about loss, damage, and
disputes over whether additional carrier charges must be paid. Federal
regulations provide very specific guidelines for what elements the
arbitration program must include.\26\
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\26\ 49 C.F.R. Sec. 375.211.
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C. Common Abuses and Congressional Responses
For years, shippers have complained about dramatic, unexpected
price increases while their belongings are in transit during interstate
moves. And in more egregious cases, shippers have complained that
carriers have held their belongings ``hostage,'' until they pay
additional fees that sometimes total thousands of dollars. These abuses
are well-known and over the past several decades, Congress has
repeatedly passed legislation to address them.
In 2005, Congress included provisions in the Safe, Accountable,
Flexible, Efficient Transportation Equity Act: A Legacy for Users
(SAFETEA-LU) aimed at protecting consumers from abusive practices
within the household goods moving industry.\27\ In addition to creating
civil and criminal penalties and stricter licensing requirements for
carriers, the legislation included a grant of authority to the states
to enforce federal consumer protection law against interstate movers.
These provisions allowed the State Attorneys General and other state
regulatory agencies to enforce the federal consumer protection laws.
Despite early praise for this measure, no State Attorneys General or
state regulatory agency has used this grant of authority to bring a
case against an interstate mover.\28\
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\27\ Safe, Accountable, Flexible, Efficient Transportation Equity
Act: A Legacy for Users (SAFETEA-LU), Pub. L. No. 109-59,
Sec. Sec. 4201-4216 (Aug. 10, 2005).
\28\ In 2009, the Government Accountability Office conducted a
survey of State Attorneys General and state regulatory agencies to see
why the offices were not utilizing the powers given to them in SAFETEA-
LU. Some of the reasons expressed were that federal remedies do not
benefit the states, the penalties were insufficient, and the inability
to bring cases in state court. Government Accountability Office,
Household Goods Moving Industry, Progress Has Been Made in Enforcement,
but Increased Focus on Consumer Protection is Needed (Oct. 2009) at 13
(GAO-10-38).
---------------------------------------------------------------------------
In 2006, almost one year after the passage of SAFETEA-LU, the
Senate Commerce Committee held a hearing focused on fraud in the moving
industry.\29\ Witnesses at the hearing highlighted the frequency of
situations in which consumers received low estimates, only to have the
price increase dramatically once the consumers' household goods had
been picked up by the moving company. Testimony suggested that
``rogue'' movers that operate without licenses and frequently change
names to avoid detection were primarily responsible for holding
consumers' goods hostage and that an increase in the use of the
Internet had worsened the problem. When describing cases investigated
by the Department of Transportation, Office of the Inspector General,
Acting Inspector General Todd J. Zinser stated:
---------------------------------------------------------------------------
\29\ Senate Committee on Commerce, Science, and Transportation,
Subcommittee on Surface Transportation and Merchant Marine
Infrastructure, Safety, and Security, Hearing on Protecting Consumers
from Fraudulent Practices in the Moving Industry, 109th Cong. (May 4,
2006) (S. Hrg. 109-529).
Prior to the advent of the Internet, operators. . .relied
primarily on advertising through telephone directories,
newspapers, and direct mail. The Internet has broadened the
market, and for unscrupulous movers, this enables them to lure
customers well beyond their local area.\30\
---------------------------------------------------------------------------
\30\ Id. at 6 (Prepared statement of Department of Transportation
Acting Inspector General, Todd J. Zinzer).
The Government Accountability Office (GAO) has issued two reports,
in 2007 and 2009, examining the state of consumer protection in the
moving industry. In these reports, GAO found that FMCSA had made
progress in implementing the consumer protection initiatives specified
in SAFETEA-LU, but these improvements had been slow and were still not
adequately protecting consumers from abusive practices within the
industry. The 2007 report highlighted that the practice of moving
companies' holding household goods hostage while demanding excessive
fees was still a problem, made worse by consumers' lack of familiarity
---------------------------------------------------------------------------
with the process and the growth of the Internet. The report provided:
Consumers today use the Internet to shop and compare prices for
many products and services, including moving services. But
because consumers may only contract for moving services once or
twice in their lifetime, they may not know how to identify a
legitimate mover. Some federal and state officials told us that
interstate movers who advertise on the Internet are a
significant source of consumer complaints.\31\
---------------------------------------------------------------------------
\31\ Government Accountability Office, Consumer Protection: Some
Improvements in Federal Oversight of Household Goods Moving Industry
Since 2001, but More Action Needed to Better Protect Individual
Consumers (May 2007) at 20 (GAO-07-586).
As will be discussed below, despite the attention devoted to this issue
following the passage of SAFETEA-LU, consumer complaints about the
moving industry have continued to increase.
On July 6, 2012, President Obama signed the Moving Ahead for
Progress in the 21st Century Act (MAP-21) into law.\32\ MAP-21 also
included additional requirements for registration of household goods
motor carriers. Specifically, beginning in 2014, applicants will be
required to successfully pass an examination to demonstrate knowledge
and intent to comply with applicable federal laws relating to consumer
protection and will be subject to a consumer protection standards
review within the first 18 months of operations.
---------------------------------------------------------------------------
\32\ Moving Ahead for Progress in the 21st Century (MAP-21), Pub.
L. No. 112-141 (July 6, 2012).
---------------------------------------------------------------------------
In addition to these registration requirements, MAP-21 included two
initiatives intended to provide assistance and remedies for consumers.
For shippers who find themselves in a situation where a carrier is
holding their goods hostage, a provision in MAP-21 will permit all or a
portion of any civil penalties collected from the carrier to be
assigned to the aggrieved shipper. Additionally, the new law gives the
Secretary of Transportation the authority to order the return of a
shipper's goods, following notice to the carrier and an opportunity for
a proceeding.
D. Criminal Enforcement Actions
As Congress has worked to strengthen consumer protections for
household goods shippers, the Department of Transportation Inspector
General's (DOT OIG) office and other law enforcement agencies have been
pursuing criminal cases against moving companies that overcharge and
hold their customers' goods hostage. The fact patterns in these cases
are often very similar to the consumer complaints Committee staff
reviewed during this investigation.
For example, in June 2000, the DOT OIG announced that a U.S.
District Court in California had sentenced three individuals for mail
and wire fraud conspiracy, in connection with a household moving
extortion scam involving multiple moving companies in New York,
Florida, and California, that attempted to defraud up to 875
consumers.\33\ As part of the scheme, the defendants--who operated
through companies named North American Moving, United Interstate
Movers, Strong and Gentle Moving Company, Prime Moving and Storage, and
AAA Moving Systems--would hold consumers' household goods as ransom
unless the victims agreed to pay huge extra amounts of money. Two men
were each sentenced to 33 months in jail and ordered to pay almost
$485,000 to their victims; a third individual was fined $5,000 and
ordered to pay $14,600 in restitution.\34\
---------------------------------------------------------------------------
\33\ See DOT OIG, Press Release, Three Sentenced in Moving Scam
Involving Up to 875 Possible Victims (June 26, 2000) (online at http://
www.oig.dot.gov/library-item/3091).
\34\ Id.
---------------------------------------------------------------------------
In 2001 and 2002, the DOT OIG announced a series of criminal
actions as part of a two-year investigation into a household moving
scam that defrauded 259 victims and cost at least $1.5 million.\35\ As
part of the scheme, the owner and employees of All American Van Lines
in Pembroke Park, Florida, induced victims to contract for moving and
shipping services and subsequently charged higher ``hidden costs''
associated with the shipment of their goods. The defendants then held
the goods as ransom and, in some cases, never returned the victims'
belongings. Three defendants, who were former employees, were sentenced
to jail terms of 12 to 20 months and ordered to pay restitution ranging
from $5,914 to $780,543. The former president and owner was ordered to
pay $2.5 million in restitution and sentenced to 40 months in
prison.\36\
---------------------------------------------------------------------------
\35\ See DOT OIG, Press Release, Former Moving Company Employees
Jailed in Fraud Case (Apr. 9, 2002) (online at http://www.oig.dot.gov/
library-item/2958); DOT OIG, Press Release, Moving Company Owner Jailed
for Defrauding 259 People (July 13, 2001) (online at http://
www.oig.dot.gov/library-item/2845); DOT OIG, Press Release, Four All
American Van Lines Company Employees Jailed (July 13, 2001) (online at
http://www.oig.dot.gov/library-item/3092); DOT OIG, Press Release,
Foreman of Household Goods Moving Company Jailed (May 11, 2001) (online
at http://www.oig.dot.gov/library-item/2825).
\36\ See DOT OIG, Press Release, Former Moving Company Employees
Jailed in Fraud Case (Apr. 9, 2002) (online at http://www.oig.dot.gov/
library-item/2958); DOT OIG, Press Release, Moving Company Owner Jailed
for Defrauding 259 People (July 13, 2001) (online at http://
www.oig.dot.gov/library-item/2845); DOT OIG, Press Release, Four All
American Van Lines Company Employees Jailed (July 13, 2001) (online at
http://www.oig.dot.gov/library-item/3092); DOT OIG, Press Release,
Foreman of Household Goods Moving Company Jailed (May 11, 2001) (online
at http://www.oig.dot.gov/library-item/2825).
---------------------------------------------------------------------------
The DOT OIG, along with the FBI and FMCSA, conducted an
investigation into household goods moving fraud that in 2003 resulted
in the convictions of three Brooklyn movers operating under four
different names.\37\ According to press reports, ``the business was a
racket; its modus operandi was to win customers with low estimates, and
then, once the goods were on the truck, to demand up to four times as
much. If customers balked at paying, the movers locked their belongings
in a warehouse and demanded even greater sums.'' \38\ The defendants
were able to extort over $400,000 from more than 100 victims. As part
of the sentence, two of the defendants were required to pay more than
$1.4 million in fines and each serve more than 12 \1/2\ years in
prison.
---------------------------------------------------------------------------
\37\ See DOT OIG, Press Release, Three Brooklyn Movers Fined $1.4
Million for Extortion Scheme (Oct. 16, 2003) (online at http://
www.oig.dot.gov/library-item/3162); DOT OIG, Press Release, Brooklyn
Jury Convicts Three Household Movers for Defrauding Public (May 9,
2003) (online at http://www.oig.dot.gov/library-item/3127); DOT OIG,
Press Release, Three Operators of Household Moving Companies Arrested
in Extortion Scheme (Feb. 20, 2002) (online at http://www.oig.dot.gov/
library-item/2940).
\38\ Andy Newman, Movers Convicted of Fraud; Held Clients' Goods
Hostage, N.Y. Times (May 10, 2003) (online at http://www.nytimes.com/
2003/05/10/nyregion/movers-convicted-of-fraud-held-clients-goods-
hostage.html).
---------------------------------------------------------------------------
The DOT OIG also conducted an investigation with the FBI and FMSCA
into a fraud by numerous moving companies that netted $1.8 million from
over 1,000 victims during the course of a two-year conspiracy.\39\ The
investigation resulted in charges being brought against 16 companies
and 74 individuals, with numerous defendants paying restitution and
serving time in prison. Defendant Yair Molol, the owner and president
of four moving companies at issue, was sentenced to 12 \1/2\ years in
prison and was ordered to forfeit his interest in numerous assets,
including his residence as well as accounts totaling more than
$115,000. According to the DOT OIG:
---------------------------------------------------------------------------
\39\ See, e.g., DOT OIG, Press Release, President of moving
companies involved in moving scheme sentenced to 12.5 years in prison
(Jan. 31, 2005) (online at http://www.oig.dot.gov/library-item/3307);
DOT OIG, Press Release, Moving Company Employees Fined $1.1 Million and
Sentenced to Prison for Extorting Money From Customers (Dec. 30, 2003)
(online at http://www.oig.dot.gov/library-item/3178); DOT OIG, Press
Release, One Florida Mover Jailed, Another Pleads Guilty in Household
Goods Moving Case (Sep. 26, 2003) (online at http://www.oig.dot.gov/
library-item/3158); DOT OIG, Press Release, Miami Household Goods
Movers Plead Guilty to Defrauding Public (Aug. 8, 2003) (online at
http://www.oig.dot.gov/library-item/3147); DOT OIG, Press Release, 57
Arrested to Date in Florida Household Movers Case (Apr. 3, 2003)
(online at http://www.oig.dot.gov/library-item/3116).
Malol provided low moving estimates to customers to induce them
to hire the companies to move their goods. Once customers
retained the company, the company's employees arrived at
customers' homes, packed customers' belongings in a moving
truck, and rushed customers through the paperwork, causing them
to sign blank or incomplete bills of lading and other
documents, and failing to inform them of the total price of the
move. Once the customers' goods were loaded onto the moving
truck, employees fraudulently inflated the total price of the
move, often by thousands of dollars, claiming that customers'
goods occupied more cubic feet than had been originally
estimated and by overcharging the customers for packing
materials. When contacted by customers requesting the delivery
of their goods, Malol demanded full payment of the inflated
price before delivery of the goods. In many cases, Malol and
Tafuri-Vakin ignored customers' repeated complaints about the
inflated price and/or provided false information to customers
about the delivery of their goods. When customers refused to
pay the inflated price, company employees arranged to warehouse
customers' goods and refused to divulge the location of the
goods to customers. Employees threatened to sell or auction off
customers' household goods and personal items if payment was
not received within a certain period of time. In some cases,
Majesty Moving and Storage, America's Best Movers, My Best
Movers, and Apollo Van Lines refused to adequately compensate
customers for any damaged or undelivered items.\40\
---------------------------------------------------------------------------
\40\ DOT OIG, Press Release, President of moving companies involved
in moving scheme sentenced to 12.5 years in prison (Jan. 31, 2005)
(online at http://www.oig.dot.gov/library-item/3307).
In 2005, following a DOT OIG investigation, a U.S. District Court
in Washington sentenced four defendants to jail for a scheme to defraud
conducted through Nationwide Moving Systems, LLC, that involved more
than 50 victims and profited Nationwide over $1 million.\41\ The scheme
was to provide ``low-ball'' moving estimates and later charge large
amounts of money, often after having held consumers' possessions
hostage. The defendants were sentenced to jail terms ranging from
fifteen months to seven years, and were ordered to pay restitution
totally more than $670,000.\42\
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\41\ DOT OIG, Press Release, Owner and Two Foremen of Interstate
Moving Company Ordered to Pay $670,000 in Restitution to Victims of
Household Goods Moving Scam (Sep. 2, 2005) (online at http://
www.oig.dot.gov/library-item/3386); DOT OIG, Press Release, Interstate
Moving Company Employee Sentenced to Jail in Household Goods (HHG) Case
Involving Over $1 Million Loss (Jan. 6, 2005) (online at http://
www.oig.dot.gov/library-item/3296).
\42\ DOT OIG, Press Release, Owner and Two Foremen of Interstate
Moving Company Ordered to Pay $670,000 in Restitution to Victims of
Household Goods Moving Scam (Sep. 2, 2005) (online at http://
www.oig.dot.gov/library-item/3386); DOT OIG, Press Release, Interstate
Moving Company Employee Sentenced to Jail in Household Goods (HHG) Case
Involving Over $1 Million Loss (Jan. 6, 2005) (online at http://
www.oig.dot.gov/library-item/3296).
---------------------------------------------------------------------------
Although most of these criminal investigations have focused on
carrier misconduct, recently DOT OIG announced criminal actions against
a moving broker as well.\43\ A series of criminal actions in San Jose,
California, have focused on National Moving Network (``NMN''), a moving
broker. According to a court transcript in which an NMN employee,
Matthew Sandomir, pled guilty to the charge of theft from an interstate
shipment, the scheme went as follows:
---------------------------------------------------------------------------
\43\ DOT OIG, Press Release, Former Moving Company Estimator
Sentenced for His Role in a Household Goods Scheme (May 25, 2012)
(online at http://www.oig.dot.gov/library-item/5828); DOT OIG, Press
Release, Former San Jose Moving Company Employee Sentenced for Her Role
in a ``Low-ball'' Estimate Household Goods Scheme (Apr. 30, 2012)
(online at http://www.oig.dot.gov/library-item/5887); DOT OIG, Press
Release, Florida Moving Brokerage Sales Representative Sentenced to 3
Years Probation and Ordered to Pay $30,000 in Restitution in Household
Goods Extortion Scheme (Nov. 26, 2008) (online at http://
www.oig.dot.gov/library-item/3670).
The evidence would show that while working at [NMN], Mr.
Sandomir learned that it was a regular part of [NMN]'s business
to purposely provide fraudulently low bids to customers--or
estimates. And the sales representatives were motivated to
provide these artificial and fraudulently low quotes to
customers because they received commissions in connection with
the number of bids and were encouraged by management to move as
many bids as possible and also encouraged, and in many ways
directed, to provide arduously low bids to get more business.
It would be a part of the evidence that there were discussions
with management on the manner in which to manipulate the
bidding process to make sure that customers received these low
bids and that this topic was discussed among the estimators and
also among management at NMN. It would also be part of the
evidence that there was knowledge that AY Transport, which was
a moving company that got a large--or a significant number of
the moves booked by [NMN], habitually and systemically demanded
amounts of up to two and three and four times the amounts of
these bids as a part of the scheme, and that the consequence to
the consumer was they were being told they had to pay these
extortionately significantly greater fees, and if they didn't
pay these larger fees, they would never get their goods
back.\44\
---------------------------------------------------------------------------
\44\ Matthew Sandomir Guilty Plea, United States v. Ezyani, et al.,
No. 5:07-cr-00788 (N.D. Cal. May 14, 2008) (Doc. 206).
As a result of the investigation, Mr. Sandomir and a number of
defendants were sentenced to probation and have paid thousands of
dollars in restitution.
E. Consumer Complaints
In spite of these legislative and enforcement efforts, thousands of
consumers continue to complain every year about their interstate moves
to FMCSA, the BBB, local and state agencies, and various consumer
complaint websites. Since 2005, FMCSA has reported receiving nearly
10,000 complaints about shipments being held hostage and price
increases or overcharges.\45\ The numbers of complaints have risen in
recent years. In 2011 alone, FMCSA received 2,851 consumer complaints
about moving companies, up from 2,440 in 2010.\46\ Similarly, in 2011,
the Better Business Bureau received more than 9,000 complaints about
moving companies,\47\ which was an increase over 2010.
---------------------------------------------------------------------------
\45\ FMCSA reports that between January 1, 2005 and October 1, 2011
they received 19,453 complaints. Approximately half of these complaints
were about hostage shipments and charge disputes. Federal Motor Carrier
Safety Administration Production (Oct. 21, 2011).
\46\ U.S. Department of Transportation, FMCSA Helps Consumers
``Protect Your Move'' with Moving Company Checklist: Checklist offers
helpful tips during busiest moving season of the year (May 23, 2012).
\47\ Better Business Bureau, Protect Your Move and Yourself During
National Moving Month (May 22, 2012).
---------------------------------------------------------------------------
II. The Committee's Review of Consumer Complaints
In 2011, Chairman Rockefeller directed Committee staff to open an
investigation to better understand why consumers continue to complain
about troubling experiences with their moving companies. In October
2011, Chairman Rockefeller and Senator Lautenberg wrote a letter to
FMCSA requesting the agency's consumer complaint data. Over the next
several months, Committee staff analyzed these complaints to gain a
better understanding of how frequently consumers complained to the
agency about their moves, the types of complaints consumers made about
their moves, and the moving companies named in the complaints.
The consumer complaint information that the FMCSA provided to the
Committee showed that, since 2005, complaints related to hostage
household goods situations and disputes over price increases accounted
for almost 50 percent of the complaints that the agency received.\48\
Complaints related to hostage situations and price increases were among
the most frequently reported complaints from consumers. Since 2005, the
agency has received over 4,000 complaints about hostage household goods
situations and over 5,000 complaints about price increases.\49\ The
average number of complaints for price increases across all 1,164
companies that generated at least one complaint was 5.44.\50\ The
average number of hostage complaints was 3.22.\51\
---------------------------------------------------------------------------
\48\ Federal Motor Carrier Safety Administration Production (Oct.
21, 2011).
\49\ Id.
\50\ Federal Motor Carrier Safety Administration Complaint Data
(Oct. 20, 2011) (FMCSA Doc. Attachment 2.2).
\51\ Id.
---------------------------------------------------------------------------
The data showed that a small group of companies generated
complaints about price increases and hostage situations at a much
higher rate than the rest of the industry. The number of complaints
against these companies was out of proportion to their size. As a
result of this analysis, the Committee staff narrowed the scope of the
investigation to focus on two carriers (Able Moving, Inc. and Best
Price Moving and Storage) and two brokers (Nationwide Relocation
Services and Budget Van Lines) whose complaint volumes were
significantly higher than other moving companies. The practices of
these companies produced more complaints than even the largest national
van lines, as seen in Figure I below.\52\
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\52\ Committee staff analyzed the Federal Motor Carrier Safety
Administration data for the largest moving companies with over 1,000
trucks. Committee staff found that the four companies investigated had
three times the number of hostage household goods complaints and nearly
twice as many complaints for issues related to estimates and final
charges when compared to the largest national moving companies.
In the course of its review of FMCSA consumer complaints, Committee
staff learned that the owner of Nationwide Relocation Services, Aldo
DiSorbo, owns and operates several broker companies, all of which use
the same business model and offer the same services as Nationwide
Relocation Services.\53\ For the purposes of its investigation,
Committee staff analyzed Mr. DiSorbo's broker companies as a single
entity, and will be referred to in this report as the ``DiSorbo Broker
Companies.'' As a group, the DiSorbo Broker Companies had extremely
elevated levels of consumer complaints about price increases and
hostage situations, as seen in Figure II below.
---------------------------------------------------------------------------
\53\ The broker companies identified as being owned and operated by
Aldo DiSorbo include Nationwide Relocation Services, United States Van
Lines Relocation Division, All State Van Lines Relocation, American Van
Lines, Inc. d/b/a American Van Lines of California, Colonial Van Lines
Relocation Division, and Patriot Van Lines. Mr. DiSorbo also owns and
operates several companies licensed as carriers. The carriers
identified are United States Van Lines, Inc., States Van Lines, B and E
Movers d/b/a Moving Squad, Inc., We-Haul, Inc., and All Coast
Transporters, Inc.
In December 2011, Chairman Rockefeller wrote letters to request
information from these companies to determine why their practices led
to high levels of complaints with the FMSCA. The letters asked the
companies to provide information and documents about the number of
customer complaints they had received, their process for responding to
customer complaints, their process for creating estimates, and the
training materials they provide to their employees.
During this investigation, Committee staff has reviewed tens of
thousands of pages of documents related to practices in the moving
industry, including agreements between carriers and brokers, training
and customer service manuals, estimates, and other documents provided
directly to customers. Committee staff also reviewed thousands of
documents related to consumer complaints and interviewed dozens of
consumers who used the services of those companies investigated.
III. Internet Moving Brokers and Their Impact on Consumers
The consumer complaints reviewed by Committee staff and the records
produced by the companies that received information requests from
Chairman Rockefeller show a strikingly similar pattern. These materials
show that the business practices that Budget Van Lines, the DiSorbo
Broker Companies, and other moving brokers use to find customers,
provide estimates, and arrange moves regularly mislead and confuse
consumers. While policymakers and law enforcement officials have
traditionally focused their consumer protection efforts on household
goods carriers, the evidence reviewed during this investigation shows
that specific types of moving brokers are responsible for many of the
complaints that consumers have reported to FMCSA, BBB, or other
consumer protection organizations in recent years.
A large number of consumer complaints about moving brokers that
Committee staff reviewed during this investigation follow the same
basic fact pattern:
A consumer begins planning a move and goes online to shop
for moving services. Through this Internet search, usually
conducted via a search engine, the consumer identifies and
contacts a moving broker. The broker often has a business name
that is similar to a well-known, reputable brand name.
Without conducting a visual inspection of the consumer's
goods or disclosing to the consumer that it will not be
performing the actual move, the broker gives the consumer an
estimate price for the move, which is often described to the
consumer as a ``binding estimate.'' The broker's estimate is
usually significantly lower than the price quoted by other
moving companies.
The consumer makes a payment to the broker that is described
as a ``deposit,'' but is actually a fee kept by the broker. The
broker then turns over the consumer's move to a household goods
carrier. Typically, the consumer is not made aware that a
company other than the broker will be conducting their move.
On moving day, a household goods carrier unknown to the
consumer shows up to perform the move. During or after the
loading of the goods, the carrier asks the consumer to sign new
paperwork and claims that the broker's estimate was too low,
sometimes by thousands of dollars. The consumer must decide
whether to pay the new fees, or risk having the carrier hold
the goods ``hostage.''
Because the moving brokers that employ these practices each rely
heavily on the Internet to generate customer leads and find new
customers, they are referenced throughout the remainder of the report
as ``Internet moving brokers.''
A. Internet Searches Direct Consumers to Internet Moving Brokers
Consumers who have complained about the business practices of
Internet moving brokers almost always report that they initially found
the companies by entering general terms related to household moving
into an Internet search engine. In spite of the many complaints
consumers have lodged against them, some Internet moving brokers--in
particular, the DiSorbo Broker Companies--continue to rank well in
Internet search results, often landing on the first page of consumers'
search results.
According to one of the leading ``Search Engine Optimization''
industry analysts, ``the major engines typically interpret importance
as popularity--the more popular a site, page or document, the more
valuable the information contained therein must be.'' \54\ Although
each search engine uses proprietary technology to determine rankings, a
core principle is that the more links to a website, particularly from
other trusted websites or sources, the higher the ranking.
---------------------------------------------------------------------------
\54\ SEOmoz, The Beginners Guide to SEO, at http://www.seomoz.org/
beginners-guide-to-seo (last updated May 22, 2012).
---------------------------------------------------------------------------
Websites operated by or on behalf of the DiSorbo Broker Companies
use questionable website and linking strategies that appear to be
intended to enhance the companies' search engine rankings. For example,
Mr. DiSorbo operates movingcost.com, a company that purports to provide
consumers information about ``the most qualified and professional
relocation experts in the industry.'' \55\ The operators of this
website have attempted to increase its popularity by embedding text
that includes hyperlinks to www.movingcost.com in tens of thousands of
other websites. In many instances, these linked websites are college
newspapers and student organizations--like the Cornell Gymnastics Club
and the Yale Democrats--or they are irrelevant link directories such as
``Muscle-Body Links.'' While these links have little or no relevance to
the content of the websites in which they are embedded, they help
increase movingcost.com's popularity with search engines, making it
more likely that consumers will find the page during an Internet
search.
---------------------------------------------------------------------------
\55\ Movingcost.com, Homepage (online at www.movingcost.com) (last
visited on Sep. 19, 2012).
---------------------------------------------------------------------------
Once at the website, www.movingcost.com appears to be a legitimate
tool for consumers to locate reputable moving companies. The homepage
includes links to social media and a section on ``Moving Tips.'' Upon
closer review, however, the site is little more than a tool for DiSorbo
Brokers Companies to attract Internet customers. The site's ``Featured
Movers''--Moving Squad, MBM Moving Systems, American Van Lines, and
Nationwide Relocation Services--are all companies owned by Mr. DiSorbo
or his family members.\56\
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\56\ American Van Lines, Inc. is owned by Anthony DiSorbo. See
Florida Department of State, Division of Corporations Record for
American Van Lines, Inc. (Doc. No. P95000065434). The President of MBM
Moving is Anna DiSorbo, MBM Moving Systems, Our Mission (online at
www.mbmmove.com/our_mission.php) (last visited on Sep. 18, 2012).
---------------------------------------------------------------------------
B. Consumer Confusion about Brokers' Role
Consumers frequently complained they were confused about the role
that Internet moving brokers would play in their moves. Consumers
expressed frustration that (1) they did not learn that a different
company would actually be handling their move until the company arrived
to pick up their household goods, and (2) the companies' names were
confusing.
Committee staff spoke with dozens of former customers of Budget Van
Lines and the Disorbo Broker Companies to better understand their
experiences with the companies. During Committee staff interviews,
former customers of each company repeatedly stated that they were not
aware that they were hiring a broker, and that had they been made
aware, they would have chosen to work with a carrier directly instead.
For the DiSorbo Broker Companies specifically, of the dozens of
customers that Committee staff interviewed, more than 75 percent
reported not being made aware that the company was a broker until a
different company arrived to pick up their household goods.
Customers of both Budget Van Lines and the DiSorbo Broker Companies
repeatedly expressed similar sentiments in complaints filed with the
Better Business Bureau and the FMCSA.
An American Van Lines of California customer from Arizona
wrote in a complaint to the BBB that she ``[w]as never told
that they broker out their business, if I would've [sic] known,
I NEVER would have gone with them.'' \57\
---------------------------------------------------------------------------
\57\ Better Business Bureau, Complaint, Case No. 8846810 (Dec. 22,
2011) (DiSorbo Doc. DBC 002078).
A customer of Patriot Van Lines wrote, ``[i]n our many
conversations, he NEVER mentioned that PVL would not be the
actual movers. I completed research on PVL to read reviews and
check their BBB status. I had no idea there was another moving
company involved until days before my furniture was to be
picked up and therefore did not have an opportunity to research
that company.'' \58\
---------------------------------------------------------------------------
\58\ Better Business Bureau, Complaint Activity Report, Case No.
90116133 (Sep. 1, 2011) (DiSorbo Doc. DBC 002493).
A California customer of Nationwide Relocation Services
wrote, ``I eventually found out that they were a brokerage
service and was enraged, but at this point I had no choice.''
\59\
---------------------------------------------------------------------------
\59\ Better Business Bureau, Complaint Activity Report, Case No.
90080915 (Jan. 4, 2011) (DiSorbo Doc. DBC 002304).
Still another customer wrote, ``I feel that [United States
Van Lines] misrepresented their service, it was not clear from
their website or speaking with their estimator that USVL was a
broker and not actually the carrier.'' \60\
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\60\ Customer Complaint to Federal Motor Carrier Safety
Administration (Feb. 1, 2011) (DiSorbo Doc. DMC 000337).
In a complaint to the FMCSA, a Budget Van Lines customer
wrote that she ``was not informed by budget van line that
another carrier would handle my household good[s].'' \61\
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\61\ Customer Complaint to Federal Motor Carrier Safety
Administration (Dec. 7, 2009) (Budget Doc. Exhibit 5--000206).
Despite regulations that require brokers to disclose their status
as brokers, customers repeatedly reported that they were not made aware
that the companies they were dealing with were brokers and not carriers
with the capability of conducting their moves.
Federal regulations mandate that ``[a] broker shall not, directly
or indirectly, represent its operations to be that of a carrier. Any
advertising shall show the broker status of an operation.'' \62\ The
regulations provide specific direction for how a broker must notify
customers of their broker status, stating:
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\62\ 49 C.F.R. Sec. 371.7(b).
You must prominently display in your advertisements and
Internet website(s) your status as a household goods broker and
the statement that you will not transport an individual
shipper's household goods, but that you will arrange for the
transportation of the household goods by an FMCSA-authorized
household goods motor carrier, whose charges will be determined
by its published tariff.\63\
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\63\ 49 C.F.R. Sec. 371.107(c).
Despite federal regulations designed to prevent consumer confusion
between brokers and carriers, consumers do not understand the
distinction. Broker companies are advertising themselves and their
services in ways that are confusing consumers.
1. Misleading Websites
Websites for the DiSorbo Broker Companies and Budget Van Lines
often portray themselves as full service moving companies seeking to
service a consumer's move from initial estimate to final delivery of
goods. The websites of these companies often fail to clearly disclose
the fact that the companies will likely never move a consumer's goods
but instead act as a broker and contract with a carrier to complete the
move.
In those cases where a website does use the word ``broker,''
companies like Patriot Van Lines and Colonial Van Lines Relocation
Division often did so in ways that could potentially be overlooked by
consumers. Consumers are often required to check the fine print of a
website instead of being told up front of the companies' role as a
broker.
For example, on the website for Patriot Van Lines, the statement
that the company is a broker is left off the front page and found
elsewhere on the site, in the ``About Us'' section. The Patriot Van
Lines website also includes the statement, ``[o]ur commitment to
sterling moving help has made us one of the nation's most reputable
moving companies,'' in the same section.\64\ While ``moving company''
is not a defined term, this term is generally associated with carriers,
not brokers. Patriot Van Lines, which is one of the many DiSorbo Broker
Companies, is registered with the FMCSA as a broker.
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\64\ Patriot Van Lines, About Us (online at http://
patriotvanlines.com/about) (last visited Aug. 28, 2012).
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On Budget Van Lines' home page, the company's acknowledgement that
it is a household goods broker is written in fine print underneath the
prominently displayed company name. While at the same time the company
more prominently advertises, ``We provide our customers with Full
Service Moving at Self-Service Rates.'' \65\
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\65\ Budget Van Lines, Homepage (online at www.budgetvanlines.com)
at 70 (last visited Sep. 19, 2012).
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2. Company Names Lead to Confusion
AMSA has reported that one of the trademarks of a problematic
moving company is that it uses names that are similar to well-known
companies. A recent report written about the current state of the
moving industry, states:
. . . [R]ogue operators are unique, and they have benefitted
from emergence of the Internet. Rogues prey on consumers who
seek the lowest cost service. They often fail to register as
required with the U.S. Department of Transportation and state
departments of transportation. Their practices include using a
name and mark similar to those of a reputable company, offering
low-price services only to hold the consumer's goods captive
until consumers pay a higher price, and changing the name of
their business once consumer complaints result in a lowering of
the company's rating with the Better Business Bureau.\66\
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\66\ The Moving and Storage Industry in the U.S. Economy:
Overcoming the Challenges of the Great Recession, Robert Damuth,
Economist and Principal Consultant, Nathan Associates Inc. (Apr. 5,
2012) (online at http://www.promover.org/files/msi/msi_report.pdf).
While the broker companies analyzed in this investigation are not
considered to be ``rogue'' operators because they are registered and
licensed with FMCSA, many of their marketing techniques appear to be
very similar to those used to describe the activities of ``rogue''
operators. Both Budget Van Lines and many of the DiSorbo Broker
Companies use names similar to well-known companies in the moving and
transportation industry.
Repeatedly, consumers reported that they believed the brokers to be
different well-known companies, and that is what caused them to choose
the broker. For example, during one conversation with a customer of
Budget Van Lines, the customer stated that she chose Budget Van Lines
because they are a ``recognizable name'' and ``you see the trucks
everywhere,'' so she felt more comfortable using them than a ``mom and
pop'' company.\67\ Another customer reported that the sales person
reinforced her assumption that they were a well-known company. She
alleged that the sales person told her, ``you know our big trucks that
you see, well sometimes those have space so we are able to fill that
space with your stuff.'' \68\ She went on to say that she would have
never used them had she understood that they were a broker, but instead
would have called the carrier directly. The trucks with ``Budget'' on
their paneling belong to Budget Truck Rental, LLC, a completely
different company that is not affiliated with Budget Van Lines in any
fashion. Budget Van Lines informed the Committee that it operates
solely as a broker and not a motor carrier, and its registration with
FMCSA is as a broker only and lists that Budget Van Lines owns no
trucks.\69\
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\67\ Committee staff interview with Budget Van Lines customer (Mar.
8, 2012).
\68\ Committee staff interview with Budget Van Lines customer (Mar.
15, 2012).
\69\ Federal Motor Carrier Safety Administration, Company Snapshot
for Budget Van Lines (accessed Sep. 19, 2012); Letter from Jason M.
Romrell, President and Chief Legal Officer, Budget Van Lines, to
Chairman John D. Rockefeller IV (Jan. 27, 2012).
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Similarly, customers of the DiSorbo Broker Companies reported that
they too were led to believe that the companies were affiliated with
more well-known companies. One customer of United States Van Lines
reported that throughout the estimate process the estimator continually
referred to the company as ``United Van Lines.'' He believed that he
was dealing with United Van Lines and that, coupled with the fact that
they had the lowest estimate, is why he chose them.\70\
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\70\ Committee staff interview with United States Van Lines
Customer (Mar. 6, 2012).
---------------------------------------------------------------------------
This confusion on the part of the consumer is not unknown to the
companies. In a note provided by Budget Van Lines, a Budget Van Lines
representative wrote, ``she though[t] we were affiliated with Budget
Truck Rental . . . Hmmmmm.'' \71\ In another note, a Budget Van Lines
representative reported being yelled at by a customer who told him that
``she was mislead [sic] not knowing we were a broker and we should'nt
[sic] be using the name budget. . .'' \72\
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\71\ Budget Van Lines Representative Notes, Job No. 938325 (Nov. 9,
2011) (Budget Doc. Exhibit 3-B 330623).
\72\ Budget Van Lines Representative Notes, Job No. 899649 (Aug.
18, 2011) (Budget Doc. Exhibit 3-B 282564).
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3. Use of Multiple Companies and Frequent Name Changes
Mr. DiSorbo owns and operates several different companies, both
brokers and carriers, under different names. Committee staff has seen
evidence that suggests all of his broker companies are run out of the
same office in Florida, despite having different addresses listed on
the websites and with the FMCSA. For example, Colonial Van Lines
Relocation Division is registered with FMCSA as being located in
Indianapolis, Indiana.\73\ However, the website lists the same address
in Margate, Florida, that Mr. DiSorbo uses to run several other
brokerage companies.\74\ Similarly, American Van Lines Relocation
Division lists a San Francisco, California address with FMCSA, but the
Margate, Florida address on its website.\75\ Patriot Van Lines lists a
Richmond, Virginia address with FMCSA, but the Margate, Florida address
on the company's filing with the Florida Secretary of State.\76\
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\73\ Federal Motor Carrier Safety Administration, Licensing and
Insurance Information for Colonial Van Lines Relocation Division
(accessed Sep. 11, 2012).
\74\ Colonial Van Lines Relocation Division, Homepage (online at
www.colonialvanlinesrelo.com) (last visited Aug. 29, 2012).
\75\ Federal Motor Carrier Safety Administration, Licensing and
Insurance Information for American Van Lines Relocation Division, Inc.
(accessed Sep. 11, 2012); American Van Lines Relocation Division
Homepage (last visited on Sep. 11, 2012) (online at www.americanvan
linesrelo.com).
\76\ Federal Motor Carrier Safety Administration, Licensing and
Insurance Information for Patriot Van Lines (accessed Sep. 11, 2012);
Florida Department of State, Division of Corporations Record for
Patriot Van Lines, Inc. (Doc. No. P02000042793).
---------------------------------------------------------------------------
In addition to operating several companies that all offer the same
services, these companies change names often. For example:
On January 20, 2012, Brown Van Lines changed its name to
Colonial Van Lines. This name change was accompanied by a
letter from Aldo DiSorbo's Executive Assistant acknowledging
that Brown Van Lines, Inc., Colonial Van Lines, Inc., Colonial
Van Lines, LLC, and Colonial Van Lines Relocation Division,
Inc. are all owned by the same incorporators.\77\
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\77\ Florida Department of State, Division of Corporations Record
for Colonial Van Lines, Inc. (Doc. No. P03000044519).
On January 14, 2000, Mr. DiSorbo incorporated Moving Cost,
Inc. On September 16, 2009, the name was changed to United
States Van Lines Relocation Division, Inc. On July 20, 2012,
the name was changed to All State Van Lines Relocation,
Inc.\78\
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\78\ Florida Department of State, Division of Corporations Record
for All State Van Lines Relocation, Inc. (Doc. No. P00000005128).
On August 7, 2012, United States Van Lines changed its name
to States Van Lines.\79\
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\79\ Florida Department of State, Division of Corporations Record
for States Van Lines, Inc. (Doc. No. P03000045335).
On November 14, 2002, Mr. DiSorbo incorporated GG Moving,
Inc. On December 5, 2002, the name was changed to Golden Gloves
Moving and Storage, Inc. On April 9, 2010, the name was changed
to Champion Moving and Storage. Finally, on May 28, 2010, the
name was changed to Moving Squad Inc. of Fort Lauderdale.\80\
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\80\ Florida Department of State, Division of Corporations Record
for Moving Squad Inc. of Fort Lauderdale (Doc. No. P02000121957).
On February 24, 2005, We Haul Moving Inc., changed its name
to WeHaul International, Inc. On May 3, 2011, WeHaul
International, Inc. changed its name to Patriot Van Lines,
Inc.\81\
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\81\ Florida Department of State, Division of Corporations Record
for Patriot Van Lines, Inc. (Doc. No. P02000042793).
Customers appear to be unaware of the relationships between the
various companies, and the DiSorbo companies appear to make efforts to
conceal these relationships. In several examples provided to the
Committee, in moves where a DiSorbo Broker Company brokers the job to a
carrier also owned by DiSorbo, the companies' responses to consumers
who have complained attempt to disguise the relationship. For example,
a customer who moved from Colorado to Texas complained to FMCSA that
she received a binding estimate from American Van Lines of California
for $2,290.60.\82\ When the carrier, Moving Squad, arrived to deliver
her goods, he was provided a new price of $3,311.75.\83\ In Moving
Squad's response to FMCSA it wrote:
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\82\ Customer Complaint to Federal Motor Carrier Safety
Administration, Complaint No. 100048054 (Apr. 12, 2011) (DiSorbo Doc.
DMC 000279-000280).
\83\ Id.
Our company was contracted to provide coordinated relocation
services to [customer] for her move from Colorado to Texas. . .
. [Customer]'s estimate was prepared by American Van Lines of
California; a moving broker.\84\
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\84\ Response from Moving Squad to Federal Motor Carrier Safety
Administration (DiSorbo Doc. DMC 000281).
Both American Van Lines of California and Moving Squad are owned and
operated by Aldo DiSorbo, yet this fact was apparently not disclosed to
the customer.
C. Broker ``Deposits'' and Fees
Both Budget Van Lines and the DiSorbo Broker Companies collect a
deposit at the time of arranging the move. These deposits are collected
up front, prior to performing any moving services. These ``deposits''
are actually the fee that the consumer pays to the broker for its
services. According to AMSA:
Professional movers generally don't require a deposit before
moving you, and if they do it is generally just a small ``good
faith'' deposit. However, some scam movers or Internet brokers
frequently require a large deposit. So, if a mover you are
considering requires you to pay a big deposit to ``hold your
dates'' or to insure ``prompt service'' you may want to choose
another mover.\85\
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\85\ American Moving and Storage Association, Make a Smart Move,
Consumer Handbook: A Practical Guide to Interstate Moving (2007) at 5
(online at www.moving.org) (emphasis omitted).
Committee staff found examples of ``deposits'' paid to broker
companies that were well over a thousand dollars. These ``deposits,''
which were nothing more than fees that went directly to the brokers,
were not shared with carriers. Consequently, before any of the
consumers' items had been picked up, they had often paid hundreds--
sometimes thousands--of dollars to an Internet moving broker. These
substantial fees likely contribute to the price increases during the
move process, which are discussed further below, as the amount of money
left over for the carrier is likely not enough for the expense of the
move.
Budget Van Lines charges each customer a booking fee, the amount of
which is up to the discretion of the Budget employee arranging the
move. In training materials provided to its employees, Budget Van Lines
defines a booking fee as:
[O]ur fee which we charge the customer as a broker for using
our service. The booking fee is in addition to the percentage
charge (our cut) for the total job. . .Note, as a sales person
you are able to increase this fee if the customer is willing to
pay it but it should never be below $195.'' \86\
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\86\ Budget Van Lines, Estimate Guidelines, Version 4.0 (Oct. 31,
2011) (Budget Doc. Exhibit 4--000072).
In addition to the booking fee, Budget Van Lines collects 25 percent of
the initial estimated price as a ``deposit.'' Budget Van Lines
explained to the Committee that it ``charges customers who sign
estimates and book moves a `booking fee,' separately itemized on the
estimate, and a deposit for the transportation services as quoted in
the estimate. This deposit is equal to the broker fee or commission.''
\87\ The payment for this charge is collected at the time of booking.
The remainder of the estimate is due to the carrier at the time of
delivery.
---------------------------------------------------------------------------
\87\ Letter from Jason M. Romrell, President and Chief Legal
Officer, Budget Van Lines, to Chairman John D. Rockefeller IV (Jan. 27,
2012).
---------------------------------------------------------------------------
The DiSorbo Broker Companies also charge a sizeable ``deposit'' at
the time of booking.\88\ The DiSorbo Broker Companies call these
initial payments ``deposits,'' but none of the money actually goes to
the carrier as a deposit on the move. This deposit is collected by the
DiSorbo Broker Companies as their fee for performing the services of
providing an estimate and attempting to locate a carrier. The DiSorbo
companies explained that ``the deposit fees paid to the broker to
secure the move is the only portion of the total customer payments that
the broker companies receive. All charges and monies paid for the move
after the deposits are received by the moving company.'' \89\
---------------------------------------------------------------------------
\88\ Exhibit I includes examples of deposits paid by customers to
several DiSorbo Broker Companies.
\89\ DiSorbo Broker Companies response to Chairman John D.
Rockefeller IV Dec. 19, 2011 letter (Jan. 27, 2012).
---------------------------------------------------------------------------
In addition, the DiSorbo Broker Companies have what they call a
``Quality Assurance Department'' that contacts customers a few days
prior to the move. Many former customers have complained that, at this
point in the process, the cost of their move is increased and an
additional deposit is due to the broker. DiSorbo Broker Companies
described the Quality Assurance process, stating:
Approximately 5 to 7 days before the move, the DiSorbo Broker
Companies' Quality Assurance Department calls and emails the
customer to again confirm the customer's property list, the
move dates, and to review the estimate with the customer for
accuracy. The DiSorbo Broker Companies take this extra step to
alleviate any potential confusion on the customers' end that
may result from the customer receiving multiple estimates,
which occurs when a customer changes their move plans after the
initial estimate.\90\
---------------------------------------------------------------------------
\90\ Id.
Former customers describe the Quality Assurance process
differently. Customers routinely complained that, at this point in the
move, a new, much higher estimate is generated, resulting in the
requirement of an additional ``deposit'' for the shipper to pay.
This quality assurance process causes two problems for shippers.
First, shippers are contributing more money to what they believe to be
a ``deposit,'' when it is in fact nothing more than additional broker
fees. Second, these calls too often occur once it is too late for the
shipper to cancel and be refunded the original deposit paid. Therefore,
the shipper has a choice to either accept the new estimate and pay the
additional deposit or cancel and forfeit the money already paid.\91\
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\91\ The DiSorbo Broker Companies will not refund any deposits paid
unless notice is received ``at least 5 business days (Saturdays,
Sundays and Holidays not included) prior to the pack or load date.''
Copy of United States Van Lines Relocation Division estimate (DiSorbo
Doc. DBC 004581).
---------------------------------------------------------------------------
D. Price Increases
Committee staff found abundant evidence showing that consumers who
used Internet moving brokers for their moves repeatedly faced price
increases after carriers arrived at their residence or after their
belongings were loaded onto carriers' trucks. These price increases
were often dramatic. Numerous examples in documents provided to the
Committee showed increases over $3,000, and they happened even though
the consumer had received a ``binding estimate'' from the Internet
moving broker.
However, when Chairman Rockefeller asked Internet moving brokers
for information about price increases, the companies claimed they had
none. Both Budget Van Lines and the various companies owned by Mr.
DiSorbo responded that they do not keep track of what happens to the
price once the move is transferred to a carrier. Budget Van Lines
responded:
Budget Van Lines conducted no interstate moves; it operates
solely as a broker, not a motor carrier. It has no data
available in its files that would allow it to calculate the
number of interstate moves it arranged that resulted in price
changes to the original estimates. The underlying motor
carriers do not normally inform Budget Van Lines when the
prices or freight charges listed in the original estimates are
subsequently adjusted.\92\
---------------------------------------------------------------------------
\92\ Letter from Jason M. Romrell, President and Chief Legal
Officer, Budget Van Lines, to Chairman John D. Rockefeller IV (Jan. 27,
2012).
Similarly, the DiSorbo Broker Companies responded that ``[t]he fact
that the DiSorbo Broker Companies do not link their fees to the moving
companies' final cost means that the DiSorbo Broker Companies are not
given comprehensive records of price variations between the initial
estimate and the final move price.'' \93\
---------------------------------------------------------------------------
\93\ DiSorbo Broker Companies response to Chairman John D.
Rockefeller IV Dec. 19, 2011 letter (Jan. 27, 2012).
---------------------------------------------------------------------------
Because neither of the broker companies could answer the question
of how often the cost of their customers' moves increases after
carriers arrive, Committee staff found alternative methods to determine
what was happening to the price once the moves were transferred from
Internet moving brokers to carriers.
Bills of Lading
Committee staff reviewed over 1,000 customer files produced by Able
Moving and Best Price Moving and Storage. The customer files contained
bills of lading, which showed shippers' original estimates and the
price they actually paid for the moves. The majority of the estimates
for these moves appeared to be performed by Internet moving brokers and
a significant percentage of the estimates were ``binding estimates.''
In 90 percent of the moves, the bills of lading showed that the
shippers experienced a price increase. In 35 percent of the moves,
shippers experienced a price increase greater than $500 and in 15
percent of the moves consumers experienced a price increase greater
than $1,000.
Company Logs
The Internet broker companies informed the Committee that there are
two instances in which a broker could become aware of price changes
after the carrier arrived: (1) if a customer complains directly to the
broker about a change in the price or to another agency that is then
forwarded to the broker for a response, or (2) if a carrier alerts them
to the price increase.\94\ Both of these scenarios are generally
recorded by the companies in notes that accompany each customer file.
Committee staff reviewed thousands of pages of documents that included
these notes. This review showed that a large number of customers are
calling the broker companies to complain about price increases.
---------------------------------------------------------------------------
\94\ DiSorbo Broker Companies response to Chairman John D.
Rockefeller IV Dec. 19, 2011 letter (Jan. 27, 2012); Letter from Jason
M. Romrell, President and Chief Legal Officer, Budget Van Lines, to
Chairman John D. Rockefeller IV (Jan. 27, 2012).
---------------------------------------------------------------------------
Budget Van Lines provided copies of estimates that included
employee notes about activity on the file. In 2011, at a minimum, at
least 1,400 customers contacted Budget Van Lines to complain about an
increase in the cost above the estimate or to question additional
charges being added by the carrier.\95\ This equates to approximately
four customer calls each day about price increases. Examples from the
call log notes include:
---------------------------------------------------------------------------
\95\ The calculation of 1,400 customer contacts likely
underrepresents the total number of calls that Budget Van Lines
received about price increases or to question additional charges in
2011. The call logs are maintained by Budget Van Lines employees;
accuracy depends upon the specific employee who is handling the call
and requires that the employee make a note in the file that the
customer called as well as the reason for the call.
``Customer wife called stated that weight is over by 10,000
pounds and is gonna cost another 6,000 dollars . . .'' \96\
---------------------------------------------------------------------------
\96\ Budget Van Lines Ticket Log (Job #884608) (Aug. 8, 2011)
(Budget Doc. Exhibit 3-B 270920).
``Cust upset that he came in over weight . . . says our
system was off [b]y 20 percent doesn't feel like he should have
to pay for that weight . . . advise cust system not perfect but
he is responsible for additional weight and he must pay
carrier.'' \97\
---------------------------------------------------------------------------
\97\ Budget Van Lines Ticket Log (Job #885329) (Aug. 4, 2011)
(Budget Doc. Exhibit 3-B 271523).
The DiSorbo Broker Companies provided the Committee with a smaller
sampling of similar notes, yet they too showed frequent calls from
customers about price increases. The notes reviewed were representative
of approximately 484 completed moves. The call logs showed that almost
25 percent of those customers called to complain about an increase in
the price of their moves once the carriers arrived.
Customer Interviews
Throughout the investigation, Committee staff interviewed dozens of
consumers who had used the services of the companies from whom Chairman
Rockefeller had requested information.\98\ In interviews with dozens of
customers of Budget Van Lines and the DiSorbo Broker Companies, all but
four reported that the price increased at some point after the carrier
arrived for pick-up.\99\
---------------------------------------------------------------------------
\98\ Committee staff called hundreds of customers of the four
companies investigated. The customers contacted were selected from the
customer files provided by the companies without regard for whether it
appeared that the customers had encountered a price increase. As
discussed earlier in Section C, the information provided by Budget Van
Lines and the DiSorbo Broker Companies gave no indication whether the
customer experienced a price increase.
\99\ Of the four that did not report a price increase, one customer
cancelled the move prior to pick-up, forfeiting the deposit paid after
reading negative reviews online. One customer reported that no carrier
ever showed up to pick up his goods, so his deposit money was returned.
Two customers had estimates that were based upon a minimum weight. The
consumers who alleged that they had a minimum weight requirement
reported moving far less weight than the minimum but still paid for the
minimum weight.
---------------------------------------------------------------------------
Customers of the moving carriers also reported increases in price.
Able Moving did not arrange any interstate moves directly during the
time period examined by the Committee. All of Able Moving's interstate
moves were arranged by a broker.\100\ Every customer of Able Moving
that Committee staff interviewed reported having the price increased by
Able Moving.
---------------------------------------------------------------------------
\100\ Letter from Rory K. McGinty, Counsel to Able Moving, Inc., to
Chairman John D. Rockefeller IV (Feb. 3, 2012).
---------------------------------------------------------------------------
Unlike Able Moving, Best Price Moving and Storage arranges some
interstate moves directly and also receives some from brokers.\101\
Several customers of Best Price Moving and Storage reported that the
price either did not increase or did not increase significantly. These
customers reported that they did not use the services of an Internet-
based broker, but rather worked directly with Best Price Moving and
Storage.
---------------------------------------------------------------------------
\101\ Letter from Elliot S. Berke, Counsel to Best Price Moving and
Storage, Inc., to Chairman John D. Rockefeller IV (Jan. 26, 2012).
---------------------------------------------------------------------------
Best Price Moving and Storage was unable to recreate complete
moving files for the Committee that included whether each move was
arranged by Best Price directly or through a broker. However, based
upon customers' best recollections of which company arranged their
moves, it appears that those customers who worked directly with Best
Price Moving and Storage reported having a better experience and less
often reported price increases than those customers who arranged the
move through a broker who then transferred the move to Best Price
Moving and Storage.
E. Hostage Situations
Price increases that occur late in the moving process, especially
after pick-up has occurred, force consumers to make difficult
decisions. Consumers can either agree to pay the inflated fees, whether
they are justified or not, or refuse and face the possibility that the
carriers will not return their household goods and hold their goods
``hostage.''
Committee staff obtained numerous examples of consumers who faced
hostage situations due to price increases late in the process. In one
example, a Budget Van Lines customer from Missouri complained that she
had a non-binding estimate from Budget Van Lines for $1,799 to move her
mother's furniture. However, ``when they arrived they demanded more
than twice the agreed upon price. When she did not have it they drove
off with her furniture and [she] was not informed who had the items
until 5 months later when they demanded three times the agreed upon
price.'' \102\ Budget's documents showed that the customer's original
estimate was for 3,150 pounds, and the carrier alleged that she
actually had 5,920 pounds.\103\
---------------------------------------------------------------------------
\102\ Better Business Bureau Complaint (Apr. 19, 2010) (Budget Doc.
Exhibit 2-h 000053).
\103\ Budget Van Lines Binding Estimate (Dec. 12, 2010) (Budget
Doc. Exhibit 2-h 000054).
---------------------------------------------------------------------------
Another customer hired American Van Lines of California for a move
from Missouri to New York. American Van Lines of California then
brokered the move to Able Moving, Inc. The customer was provided an
estimate of $1,346.67 to move 2,000 pounds. The customer paid a deposit
of $560.66 to American Van Lines of California, leaving a balance of
$786.01 due upon delivery. Two days after pick-up, ``a representative
from [American Van Lines] left a message on [his] cellphone stating
that [the] total for the move was $1,400.40 . . . When we reached the
carrier the next morning, they claimed that our shipment was 800 pounds
overweight (despite our having given them less to move than on the
original agreement with AVL).'' \104\ After Able Moving arrived for
delivery, they refused to deliver the customer's belongings unless he
paid the additional money. The customer stated:
---------------------------------------------------------------------------
\104\ Customer Complaint to Federal Motor Carrier Safety
Administration, Complaint No. 100037676 (Nov. 7, 2009) (produced by
Able Moving without Bates Number).
. . . When we couldn't immediately pay them the additional
$614.39, they said they were going to put our possessions in
storage, and that we'd have to pay them $350 (then $325, then
$250, then $350 again) to release it, and that we'd have to
arrange to move it ourselves because they would not
redeliver.\105\
---------------------------------------------------------------------------
\105\ Id.
As of the date of the complaint, the customer had still not received
their goods.
In these situations, the absolute worst case scenario is when the
shippers are unable to acquire the necessary funds to get their
possessions back, and the carrier resorts to auctioning them off. In
one example, a Budget Van Lines customer from Idaho complained to the
FMCSA, stating:
Budget Van Lines brokered Executive Relocation. Executive
Relocation is holding my, and my 3 year old's personal effects
hostage. Our estimate from Budget was $1400, now Budget Van
Lines and Executive Relocation want $9400. Neither Budget, nor
Executive Relocation will provide me with any disclosures or
documents as to how they went from a quote of $1400 to now
$9400--I have requested this paperwork in writing to them,
twice and there is no response from either company. Executive
Relocation is telling me that if we do not pay them this $9400
that in 90 days they will SELL ALL OF OUR BELONGINGS! Please
help?? \106\
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\106\ Consumer Complaint to Federal Motor Carrier Safety
Administration, National Consumer Complaint Database (Jan. 20, 2011)
(Budget Doc. Exhibit 5 000696).
Documents show that the original binding estimate provided by Budget
Van Lines was for $1,399 to move 1,000 pounds.\107\ The customer paid
$571 to Budget Van Lines as a deposit. At pick-up, the customer paid an
additional $414. Once the carrier had picked up her belongings, she was
informed that the carrier was charging her for 7,020 pounds, instead of
the 1,000 pounds that Budget Van Lines had estimated.\108\ The customer
was unable to come up with the increased fees at delivery, so her
belongings were placed in storage. The call logs provide that ``all
[customer] has is $2200, may be able to get up to $2400 and that's all
she has to work with.'' \109\ The carrier refused to deliver for $2400,
requiring at least $3,000 to deliver. After many months of negotiating,
a Budget Van Lines representative wrote, ``this is between customer and
carrier, customer has paid nothing to date with the exception of pick
up amount, that is it since December, nothing more we can do, closed.''
\110\ It is unclear from the documents whether this customer ever
received her household goods.
---------------------------------------------------------------------------
\107\ Budget Van Lines Binding Estimate (Nov. 13, 2010) (Budget
Doc. Exhibit 5 000698).
\108\ Budget Van Lines Agent Log (Feb. 7, 2011) (Budget Doc.
Exhibit 5 000706).
\109\ Budget Van Lines Agent Log (Feb. 9, 2011) (Budget Doc.
Exhibit 5 000706).
\110\ Budget Van Lines Agent Log (May 13, 2011) (Budget Doc.
Exhibit 5 000700).
---------------------------------------------------------------------------
Similarly, a Nationwide Relocation Services customer moving from
Colorado to Florida spent nearly five months negotiating with the
carrier to deliver. The customer was given an original binding estimate
for $3,332.85. She paid an initial deposit of $1,585.73, leaving a
balance of $1,747.12.\111\ After pick-up, the carrier advised that the
``final weight of her goods was an additional 2,035 pounds above the
original estimate.'' \112\ The customer was also charged for $1,220
worth of additional packing services, increasing the amount due at
delivery by $1,877.52.\113\ The customer objected to this increase and
alleged that the carrier made her sign blank documents. The customer
was unable to pay the increased fees, and the carrier placed her goods
in storage.
---------------------------------------------------------------------------
\111\ Nationwide Relocation Services Estimate for Service for Job
No. 6376147-01-R1 (Jan. 14, 2011) (DiSorbo Doc. DBC 002370-002374).
\112\ Nationwide Relocation Services response to Florida Department
of Agriculture and Consumer Services (Mar. 8, 2011) (DiSorbo Doc. DBC
002376).
\113\ Nationwide Relocation Services Customer Logs (Jan. 17, 2011)
(DiSorbo Doc. DBC 002394).
---------------------------------------------------------------------------
After several months of unsuccessful negotiations, on March 9,
2011, the carrier sent the customer an auction notice.\114\ After many
more months of haggling with the carrier and Nationwide Relocation
Services, the carrier agreed to deliver her goods for $2,500. The
customer's goods were finally delivered on June 4, 2011.\115\ However,
the customer alleged that the carrier demanded an additional $500 at
the time of delivery.\116\
---------------------------------------------------------------------------
\114\ Nationwide Relocation Services Customer Logs (Mar. 9, 2011)
(DiSorbo Doc. DBC 002388).
\115\ Nationwide Relocation Services Customer Logs (June 4, 2011)
(DiSorbo Doc. DBC 002381).
\116\ Nationwide Relocation Services Customer Logs (June 6, 2011)
(DiSorbo Doc. DBC 002381).
---------------------------------------------------------------------------
More often than not, based upon the information reviewed by the
Committee and the interviews Committee staff conducted, consumers will
pay the price increases, rather than face a hostage situation. As one
customer explained, ``[t]he carrier refused to unload belongings unless
I paid, but did not hold the belongings for more than one day, as I
paid the balance.'' \117\ The customer reported paying ``roughly $825
more than the original estimate.'' \118\
---------------------------------------------------------------------------
\117\ Customer Complaint to Federal Motor Carrier Safety
Administration (June 1, 2009) (Budget Doc. Exhibit 5 000135).
\118\ Customer Complaint to Federal Motor Carrier Safety
Administration (June 1, 2009) (Budget Doc. Exhibit 5 000136).
---------------------------------------------------------------------------
IV. Examples of Moves Booked By Internet Moving Brokers
Through the investigation, Committee staff accumulated hundreds of
examples from consumers that demonstrated the flaws and dangers in the
business practices used by Internet moving brokers. The following are a
few of those examples. Each example illustrates the experiences of
shippers who had relied upon Internet moving brokers and their
interstate moving partners for their interstate moves. For each of
these consumer stories, there are very likely thousands that are
similar to them. Committee staff made dozens of calls at random to the
companies' former customers and heard similar stories frequently.
Joyce Gonzalez--Miami, Florida.\119\ To plan for her move from
Detroit, Michigan, to Florida, Ms. Gonzalez selected Budget Van Lines
after searching online for a good deal. She was quoted a price of $900
plus a $250 booking fee. She paid $475 as a deposit. She was unaware
that Budget Van Lines was a broker. A few days past her original
scheduled moving date, a single mover arrived and loaded her belongings
into a Uhaul truck; he told her that there was an issue with the truck
and that her belongings would be reloaded into a larger truck later.
---------------------------------------------------------------------------
\119\ Committee staff interview with Joyce Gonzales (Sept. 4,
2012); Joyce Gonzales Complaint to Federal Motor Carrier Safety
Administration (Mar. 8, 2011) (Budget Doc. Exhibit 5--000903-000904).
---------------------------------------------------------------------------
On the day of delivery, Ms. Gonzalez received a phone call from the
movers stating that they were around the corner and would need almost
$1,700 in cash. When she questioned the price increase, the movers
stated that it was due to the increased weight of her move. It was only
at this point that Ms. Gonzalez learned that Able Moving, Inc. was her
carrier, not Budget Van Lines. When she indicated that she did not have
the cash, they left with all of her property.
She was told that her belongings would be placed in storage and
that until she wired the $1,691 balance, she could neither learn the
location of her property nor retrieve it; once she paid this amount,
she would receive the key in the mail and learn the location of her
belongings. When Ms. Gonzalez asked Able Movers to meet her at a weigh
station to understand the price increase, she was told that she must
first wire the remaining balance. At one point, Ms. Gonzalez said the
movers threatened to take her belongings to Chicago and charge her
$4,000 to have it shipped back to Florida.
Ms. Gonzalez repeatedly attempted to contact Budget Van Lines and
Able Moving and locate her belongings. At each point, she was told that
she must first wire $1,691 to Able Moving before she could learn where
her property was being held. Months after her items were taken, Ms.
Gonzalez received a call from a local storage company near Lake Wales,
Florida. She was told that her belongings had been sold at auction, but
the company would hold her personal papers--such as financial
documents--until she could retrieve them. Unfortunately, she was unable
to ever get what remained of her belongings.
According to Ms. Gonzalez, she lost everything--including family
photos and all of her children's belongings. She also learned that Able
Moving had continued to seek a wire transfer for $1,691 even after her
property had been sold at auction. Ms. Gonzalez said, ``They are just
trying to rip people off that don't have it.''
Katie Blick White--San Diego, California.\120\ Mrs. White attempted
to find a local moving company to handle her family's move from
Wichita, Kansas, but none could handle a move to California. She then
began searching for a national company online, and ultimately selected
United States Van Lines because it provided the lowest quote and the
estimator made her feel comfortable. The estimator repeatedly told her
that ``he was a professional'' and that ``he always over-estimates the
price so in the end you'll pay less.'' Mrs. White signed a contract
with the company dated December 24, 2010, which gave a $2,578.41
estimate for moving an estimated weight of 4,032 pounds; she requested
a move date of January 15 or 16 and paid $810.59 as a deposit.
---------------------------------------------------------------------------
\120\ Committee staff interview with Katie Blick White (Feb. 24,
2012); E-mail from Katie Blick White to Committee Staff (Feb. 24,
2012); United States Van Lines Relocation Division Estimate (Dec. 24,
2010) (DiSorbo Doc. DBC 001398-001406).
---------------------------------------------------------------------------
On the afternoon of January 11, 2011, Mrs. White returned a call to
the Quality Assurance department to review the inventory list again.
She was told at this point that United States Van Lines had
``drastically underestimated'' her box count; the new estimated charges
were increased to approximately $4,900 to cover 6,692 pounds. Mrs.
White allowed them to charge an additional $1,486.14 for her deposit.
After discussing it further with her husband, later that evening Mrs.
White emailed the company and indicated that she would not be signing
the new paperwork, that she would like to cancel the move, and that she
was within the five-day window to do so and expected a full refund.
On January 12, 2011, United States Van Lines contacted her and,
after several discussions, provided a new estimate of $3,539.32. Mrs.
White said, ``I called QA [Quality Assurance] supervisor [at United
States Van Lines] back and told her that we would move with the $3,539
seeing as it was our last resort since we were scheduled to move 3 days
later. She sent me to another dept to give yet another deposit, and
told me that the previous 2 deposits would be credited back to my
card.'' Mrs. White received a $1,155.50 refund to account for her
adjusted revised estimate.
On January 15, 2011, movers from Sirena Moving arrived and
determined that the weight of the household goods was 3,048 pounds more
than the revised estimated weight. Ultimately, Mrs. White's move cost
$5,039.68--approximately $1,500 more than her revised estimate from
three days earlier.
Holly Root--Middleburg, Florida.\121\ In October 2011, Holly Root
contacted Budget Van Lines to move her possessions from two storage
lockers in Minnesota to her home in Florida. At the time of the call,
Ms. Root was given a quote of $3,500 for 7,000 pounds, with a rate of
39 cents per pound for any amount over the initial weight. In order to
secure the move date, she paid a deposit of $1,108.25 to Budget. On the
day of her move, Ms. Root met the movers at her storage lockers in
Minnesota and they loaded all of her possessions onto the moving
trucks. Once they had finished, she said:
---------------------------------------------------------------------------
\121\ Committee staff telephone interview with Holly Root (Jan. 31,
2012); E-mail from Holly Root to Committee staff (Feb. 8, 2012); Budget
Van Lines Estimate and Customer Call Log (Budget Doc. Exhibit 3-B
326670-326713); Holly Root Complaint to Better Business Bureau (Dec.
30, 2011) (Budget Doc. Exhibit 2-h 000426-432).
The storage business was now closed and the storage units I had
were now locked up with the storage units [sic] locks. Then one
of the movers said ``this is way more than 7000 pounds.'' Then
he approached me with a contract he just wrote up for his
company, including Budgets [sic] prices. I could hardly read
it. It was dark by this time, I told him it was hard to see in
---------------------------------------------------------------------------
the dark!
At this point, she was presented with a new contract from Moving
Central--a company she had previously never heard of--for $8,649, more
than double the original quote. When Ms. Root asked what would happen
if she did not sign the new contract, the movers said ``we will unload
everything right here.'' Ms. Root called Budget multiple times but
received no assistance. At that point, Ms. Root signed the contract
with Moving Central and used her credit card to pay an additional
$4,000 deposit with $3032.63 due upon delivery.
Ms. Root continued to call Budget to complain about the additional
charges and her experience. She said:
I would continue to call and call Budget and they said we'll
have to call the carrier, they would put me on hold, sometimes
for long periods of time or even disconnect me or give me the
run around the [sic] with the same responses, I would ask to
speak to a Manager and they would tell me they are in a
meeting, then either put me on hold again, hang up and I never
got any calls returned. They acted like nothing [was] wrong, it
was me. They acted as if they were not even hearing me.
Despite numerous calls to both Budget and Moving Central, weeks and
months went by without delivery of Ms. Root's possessions. ``Neither
company would take responsibility as they held my property hostage.''
Moving Central began to threaten to sell Ms. Root's possession at
auction if she did not pay the additional amount. Ultimately, Ms. Root
was able to negotiate with Moving Central and have her items delivered,
although some items are still missing.
Mark and Julie Malenda--Erie, Pennsylvania.\122\ In November 2011,
after searching online for a moving company, Mrs. Malenda worked with
United States Van Lines Relocation Division to arrange the family's
move from Nevada to Pennsylvania. She spent a considerable amount of
time on the phone with the company providing a detailed inventory of
items to be moved. Ultimately, Mr. Malenda signed a contract to move
approximately 230 items with an estimated weight of 11,182 pounds on
November 17 or 18; he was told this was a binding estimate not to
exceed the price.
---------------------------------------------------------------------------
\122\ Committee staff telephone interview with Mark Malenda (Aug.
10, 2012); Better Business Bureau, Complaint Activity Report, Case No.
90127175 (Nov. 28, 2011) (DiSorbo Doc. DBC 002716-002718).
---------------------------------------------------------------------------
On November 19, American Van Lines arrived and told Mrs. Malenda
that the weight would likely be over the estimated weight. According to
Mrs. Malenda, the movers ``had me sign an invoice which I did because
he refused to load our belongings so we would lose our deposit and have
to find a new mover one day later than we were supposed to be moved in
the first place.'' Over the course of several days and through multiple
phone calls, Mrs. Malenda was informed that the weight was more than
2,400 pounds over the original estimate and that she owed approximately
$4,800. Mrs. Malenda informed United States Van Lines Relocation
Division that she only had $3,600. The company said it would reduce her
bill by $400 if it received the remaining balance by the following day,
otherwise ``they would put our belongings in storage and give us the
address and keys when we could pay the full amount plus the storage
fees.'' After numerous unsuccessful calls with the company, Mrs.
Malenda ultimately paid $4,000 to receive her family's belongings--
which included the remains of her youngest son. According to Mrs.
Malenda:
This company is not interested in providing any of the customer
service they promised when we chose them. We were led to
believe they were their own company only to find out through
this fiasco that they are a brokerage firm. The actual company
that has our things on it's [sic] van is American Van Lines.
United States Van Lines Relocation Division's response to the BBB
provided that ``Mrs. Malenda was informed in writing of [their] role
pertaining to her move.'' But it is not clear whether she was ever made
aware that the company who was holding her belongings was owned by the
brother of Aldo DiSorbo, the owner of United States Van Lines
Relocation Division.
Alan Vangen--Rio, Wisconsin.\123\ In preparation for his family's
move, Mr. Vangen obtained bids from four companies, and United States
Van Lines was the lowest bid. On February 16, 2011, he was given a
$5,482.39 binding estimate, not to exceed the price, to move 233 items
weighing 13,289 pounds. Mr. Vangen paid a $2,335.94 deposit on his
credit card. On March 11, 2011, a representative of United States Van
Lines contacted Mr. Vangen to review his inventory; Mr. Vangen added
two items to the move--a stroller and a plastic highchair--and counted
the total number of boxes to be moved, which was still significantly
less than the total on the original estimate. Yet these changes
resulted in an increased estimate amount of $6,095.89 to move 257 items
weighing 13,892 pounds, resulting in $406.78 in additional charges on
his credit card. He owed $3,353.17 when his items arrived. According to
Mr. Vangen:
---------------------------------------------------------------------------
\123\ Committee staff telephone interview with Alan Vangen (Aug.
10, 2012); Better Business Bureau, Complaint Activity Report, Case No.
90092866 (Mar. 25, 2011) (DiSorbo Doc. DBC 002757); United States Van
Lines Response to Better Business Bureau Complaint and Accompanying
Customer Call Log Notes (Feb. 28, 2012) (DiSorbo Doc. DBC 002758--
002761).
This didn't make a lot of sense with adding two small items,
and still being under their initial estimate in total boxes--
they raised the price. From what I understand now, but they
never told me. Once you change any part of the initial order
the ``binding estimate not to exceed price'' vanishes and you
will now have to pay full tariff rates. Not one word was said
---------------------------------------------------------------------------
about this.
When Mr. Vangen arrived in Wisconsin with his family on March 17,
United States Van Lines informed him that he would have to pay the
movers, Roma Movers, $4,424.75 in cash instead of the original
$3,353.17. He was told that if he did not pay this amount, all of his
belongings would be placed in storage. However, Mr. Vangen had only
arranged to have $3,400 available based on his estimate. ``The drivers
were steadfast and refused to due [sic] anything until I gave them the
additional $1024.75 in cash. I had no choice, so the bank after hearing
my situation agreed to cash a personal check for cash so I could give
it to the drivers.'' Ultimately, Mr. Vangen paid $7,166.97 for the move
instead of the original $5,482.39 estimate. According to Mr. Vangen,
``What is the point of a contract or estimate if they are going to miss
it by so much or not abide by it at all?''
Adam Martin--Phoenix, Arizona.\124\ On June 1, 2012, Mr. Martin
obtained a $2,856 binding estimate from Budget Van Lines to move his
belongings from Fort Wayne, Indiana to Phoenix, Arizona, and paid a
$714 deposit to schedule the move. In addition, he was charged a $278
booking fee by Budget Van Lines. Mr. Martin requested a pickup date of
June 8 or 9. Mr. Martin paid $1,070 at the time of pickup, and per the
agreement the remaining $1,072 balance was due in full at the time of
the delivery.
---------------------------------------------------------------------------
\124\ Committee staff telephone interview with Gary Martin (June
12, 2012); E-mail from Gary Martin to Committee staff and accompanying
documents (June 12, 2012).
---------------------------------------------------------------------------
On June 11, Mr. Martin's carrier, Moving Central, Inc., arrived and
determined that the estimated cost of the move would be $6,159.10. Once
the carrier had loaded all of his belongings onto the truck he was told
that he had more items than were listed on the inventory and would need
to sign a new agreement. Under the new agreement, Mr. Martin owed
$4,375.10 at the time of delivery--almost four times the cost of the
original estimate. Since Mr. Martin did not have the amount demanded at
the time of delivery, he is making payments until he pays off the total
balance.
Matthew and Danielle Buhler--Las Cruces, New Mexico.\125\ Ms.
Buhler's husband was offered a job that required the family to move
from North Carolina to New Mexico in three weeks. United States Van
Lines gave her a binding estimate of $3,411.74 to move an estimated
5,441 pounds; Ms. Buhler originally planned to use a different company,
but United States Van Lines matched that estimate. Ms. Buhler paid
$956.32 as a ``binding estimate fee'' to schedule the move for
September 26. ``They did not advise us until after we gave the deposit
that it could take 3 weeks to deliver our stuff.'' United States Van
Lines never explained that they were a broker.
---------------------------------------------------------------------------
\125\ Committee staff telephone interview with Danielle Buhler
(Aug. 9, 2012); Better Business Bureau, Complaint Activity Report, Case
No. 90122099 (Oct. 17, 2011) (DiSorbo Doc. DMC 000410-000411); United
States Van Lines Response to Better Business Bureau Complaint and
Accompanying Documents (Nov. 17, 2011) (DiSorbo Doc. DMC 000412-
000422).
---------------------------------------------------------------------------
On September 27--one day after the move was scheduled to occur--MBM
Moving Systems, LLC, arrived and determined that the items weighed
approximately 9,200 pounds, which increased the estimate to $5,285.26.
Throughout the move, Ms. Buhler attempted to contact United States Van
Lines, but her phone calls were not returned. Ms. Buhler's items
arrived on October 17 and were significantly damaged. According to Ms.
Buhler:
I see now that it doesn't matter what they promise you because they
know the contract is not really binding and they can charge you
whatever they want. After everything happened I researched this company
and have found that I am not the only person that they did this to. My
only fault is not researching them more in the beginning, but we were
in a hurry and the rep I spoke with seemed very knowledgeable and
friendly. Lo and behold I could not get in touch with her at all once
we were on the hook. It just goes straight to the manager's voice mail
and NO one calls you back.
Richard Selinfreund--Terre Haute, Indiana.\126\ On July 16, 2012,
Mr. Selinfreund signed a contract with Colonial Van Lines estimating
his family's move at $4,896.24; he paid an initial deposit of $2,023
with a pick-up date of July 30, 2012 and an estimated delivery date
between August 3 and August 11. On July 27, only a few days before the
scheduled move, a Colonial employee demanded an additional $2,024
payment or the movers would not come. Mr. Selinfreund paid the
additional amount.
---------------------------------------------------------------------------
\126\ Committee staff telephone interview with Richard Selinfreund
(Aug. 20, 2012); E-mail from Richard Selinfreund to Committee staff
(Aug. 20, 2012).
---------------------------------------------------------------------------
On July 30, the day of the scheduled move, Mr. Selinfreund was
contacted by Colonial, informed that the truck would not be arriving on
time, and offered $350 if he could wait until August 4. However, Mr.
Selinfreund explained that he could not wait because he had to be out
of the home before August 1 pursuant to the contract for sale and to
avoid paying an extra month on his mortgage.
On August 1, Colonial Van Lines promised him that a van would
arrive that afternoon or, at the latest, the next day. Mr. Selinfreund
was told that he would need approximately $1,900 for the movers. On
August 2, the carrier--United Distribution Van Lines--arrived and
demanded over $3,000 to complete the move; when Mr. Selinfreund
disagreed, the movers drove away. Mr. Selinfreund spoke with Colonial
Van Lines, and a Colonial employee informed him that United
Distribution would return the next day for the previously agreed upon
$1,900. On August 3, United Distribution returned and loaded some of
the items, taking $1,900 but still demanding over $3,000 to load the
remaining belongings. Ultimately, Mr. Selinfreund was forced to
personally rent a truck and hire local labor to load his remaining
belongings.
At this point, Mr. Selinfreund was left with no choice but to make
his $2,700 mortgage payment for the month of August. Furthermore,
because he was unable to move out by the originally agreed upon date
and the final walk through could not occur, the contract to purchase
his home expired on July 31 and was no longer in effect.
On August 13, he called Colonial Van Lines to determine when his
shipment would arrive. On August 18, United Distribution informed him
that the delivery would arrive the next day, but Mr. Selinfreund would
need to pay an additional $6,526.45 for extra weight and additional
services. On August 20, United Distribution called again and indicated
that the total move had in fact cost $10,678.80--more than twice the
original estimate--and that, based on his previous deposits, Mr.
Selinfreund owed $4,705.25. Ultimately, Mr. Selinfreund was able to
negotiate with United Distribution and have his items delivered.
Edgar Ibarra--St. Augustine, Florida.\127\ Mr. Ibarra began
searching online to find movers to handle his relocation from Volo,
Illinois, to St. Augustine, Florida. He spoke with a few companies and,
on July 15, 2011, ultimately chose Budget Van Lines because it gave the
cheapest estimate--$1,955--and seemed like a larger company that would
be concerned about reputation. Mr. Ibarra paid $683.75, which included
a $195 booking fee, to reserve the move.
---------------------------------------------------------------------------
\127\ Committee staff telephone interview (Sept. 4, 2012); Edgar
Ibarra complaint to the Federal Motor Carrier Safety Administration
(Aug. 26, 2011) (Budget Doc. Exhibit 5--001441-001442); Budget Van
Lines Estimate and Customer Call Logs and accompanying documents
(Budget Doc. Exhibit 5--001443-001468).
---------------------------------------------------------------------------
He was not aware that Budget Van Lines was a broker until after he
paid the initial fee. A few days before his August 2011 move, he
learned that Able Moving Inc. would be his carrier. On August 14, 2011,
Able Moving packed Mr. Ibarra's belongings, and Mr. Ibarra paid
$733.13, with the remainder of approximately $700 due at the time of
delivery. Approximately one week later, the driver for Able Moving
called Mr. Ibarra to arrange for delivery of the items and indicated
that Mr. Ibarra owed approximately $1,650. This included approximately
$600 in additional packing expenses that had not previously been
disclosed to Mr. Ibarra. When Mr. Ibarra requested paperwork from Able
Moving, he received documents that he believes Able Moving altered
after he signed them in order to increase the price.
When Mr. Ibarra stated that he only owed $700 more and would not
pay the additional money, Able Moving put his belongings in storage and
refused to release them until he wired funds. Mr. Ibarra was not told
where his items were, and despite numerous calls to both Able Moving
and Budget Van Lines, he received no assistance. Mr. Ibarra contacted
FMCSA on August 26, 2011 to complain and, with the agency's assistance,
ultimately paid $928.12 on September 4, 2011 and received his items.
V. Conclusion
Despite continuous legislative and enforcement efforts, thousands
of consumers continue to complain every year that moving companies give
them low estimates, but then increase the cost dramatically once the
move is underway. In recent years, the rise of the use of the Internet
by consumers to locate a mover has increased the presence of Internet
moving brokers. Many of the business practices used by Internet moving
brokers appear to be problematic for consumers and lead to a
significant number of consumer complaints. As the household goods
moving industry continues to evolve, policymakers, regulators, and law
enforcement officials will need to put more effort into understanding
the role of Internet moving brokers and the impact that these practices
are having on consumers.
The Chairman. It is very nice. It will make you a little
angry when you read it. It is not that long. Ms. Kovalcik, you
can do it on the train ride back. You are taking the train back
to Brooklyn?
Ms. Kovalcik. Yes.
The Chairman. You are? OK. Well, I will give you my copy.
The fact of the matter is that, in spite of the fact that
we have new rules and regulations, that the number of
defrauding cases has increased in the last several years, and
the overcharges have increased, hostage situations, that is
when you are held hostage and the truck just says, ``All right,
well, that so called bill of lading,'' which I will get into in
a minute, ``which you did over the Internet or over the
telephone does not mean a thing to me, and so we are going to
have a new bill of lading, and you got to sign it, and if you
do not sign it, well, by golly, I am just going to hold your
furniture and all of your moving goods hostage, and there is
not anything you can do about it.''
One of the reasons that moving scams are not going away is
that dishonest companies are getting better at using the
Internet. Some moving brokers--brokers, remember that--have
figured out how to use the Internet to lure customers into a
bait and switch game. Here is how it works.
Internet moving brokers sign up consumers by offering them
low, so-called binding statements for their moves. Now, these
brokers do not own any trucks. They are not moving companies.
They are brokers. But, they do not tell you that. They do not
say, ``Oh, we do not have any trucks. We are just a broker, and
then somebody will turn up at your place, but we do not know
who it is going to be.''
They are not upfront with their customers at all. On the
day of their moves, many customers learn for the first time
that an entirely differently named company will be moving their
possessions, and that will always be a company that they have
never heard of, and the sketchy companies that show up on
consumers' moving day routinely jack up the price of the moves
after they have loaded all the consumers' worldly possessions
in the back of their trucks.
Now, to their credit, which I am loathed to give them any
of, they do, presumably, look out to see what is going to be
moved, and how heavy it is, and how much there is, and how
valuable it is, and all the rest of it, because they have to
put a price on it. But, to this point, they have not done that,
but then they quickly do after they pack it up.
The bill of lading, which Ms. Kovalcik has been worrying
about, just disappears from the face of the Earth. It is a
nothing. It is an absolute nothing. And, she is handed a new
bill and a new piece of paper to sign. If she does not sign
that piece of paper, which probably doubles or triples the
amount of money that she will be required to pay, they may
drive the truck for a couple of blocks, and just park it in
some parking lot, and they hold all the moving goods hostage.
Now, this is not going to cure our problems with Iran, or
with the Soviet Union, or with China, or anything else, but
that is not what we are here for. We are here to try and help
out people like Ms. Kovalcik who have been through these
horrible experiences.
So, again, the consumers have received so-called binding
estimates from somebody who comes to them through the Internet
or over a telephone, and hereby, who by definition, has
absolutely no idea what is in the consumer's house, whether
there is a lot, whether it is valuable, whether they are all
antiques, whether they all come from the Baroque period,
whether they are modern, whether there were a lot of them,
whether there were a little of them. They have no idea. But,
they quote a price, and it is always a low price, always a low
price, because low prices are nice things to have, if, in fact,
it turns out that way.
But, they do not see Ms. Kovalcik. They do not have any
experience with her. They do not see her house. They do not see
her goods. They do not see what they are saying they are going
to do. And then, they give themselves names, and we will get
into that. And, they give themselves names which are
suspiciously like moving companies. In other words, the broker
who has no trucks, probably has a car to get to work, but no
trucks, no moving capacity, but they give themselves a moving
van-like name. So, what is Ms. Kovalcik meant to do?
She believes, in fact, that they are going to move her
stuff, and she has no reason, she signs a bill of lading, it is
a low price, and she is happy about that. And then, this
totally different company, who she has never heard of, comes
in, has not been told about that company, and then she gets
scalded.
That makes this Committee very angry, and it makes us very
ambitious to make sure, Mr. Barry, that more people go to jail.
I mean, it is nice to have the Better Business Bureau sort of
downgrade your rating, but frankly, that really does not help
Ms. Kovalcik very much, does it? It is when people go to jail
that the signal is given in the industry that they better be
careful because people are watching.
So, today, we are going to--and this is nothing more than
extortion, and then these nice moving companies that come in,
after they take Ms. Kovalcik's--all of her worldly goods, they
threaten the consumer and say, ``You are never going to see
your things again, unless you agree to pay us thousands of
dollars in additional charges.'' That is extortion.
They have the goods. They have made her sign something. She
suddenly is getting very nervous, and then they threaten her.
And, what is she going to do? Tell them to unload it? No, they
are not going to do that, because they have got a scam going.
So, today we are going to learn more about how Internet
moving brokers and their moving carrier partners are causing
substantial harm to consumers all across America.
Now, these companies are not only hurting consumers, they
are also damaging the reputation of the moving industry, which
we do not want, because the vast majority of moving companies
follow the law and give customers good service at a fair price.
But, not Ms. Kovalcik, and she is representative of so many
people.
So, we need to redouble our efforts to end these abuses,
whether that means improving consumer protection, consumer
education--it is sort of like these ads that you are seeing on
television now, ``Wait a little bit.'' In other words, do not
text when you are driving. You can wait. You can wait. You can
die, or you can wait. And, if you have an accident, you kind of
remember that, and you do not do it again. Well, these moving
companies and these brokers need to have an accident so that
they do not do these kinds of things in the future.
We need to give our regulators and law enforcement agencies
more authority, and we have to give them more resources which
is easy to say and hard to do these days, when we are facing a
fiscal cliff. But, we are going to fight mightily on this
Committee to get adequate resources to some of those who are
before us. We need to put these companies out of business.
And, we are going to keep doing our part in this Committee.
We will continue working to improve Federal policy, and when we
find information indicating potential criminal activities by
these companies, we will share it with the Department of
Justice, the Dot Inspector General, any other appropriate
authority. These abuses have to end.
Now, let me read our witnesses. Great, I got my coffee.
One is the Honorable Anne Ferro, and you are there, and you
are the Administrator of the Federal Motor Carrier Safety
Administration, the acronym of which is very hard to pronounce.
So, you have to know all five words, or four words, or whatever
it is.
Mr. Timothy Barry, who is the Principal Assistant Inspector
General for Investigations for the Department of Transportation
Office of the Inspector General. That makes him a powerful guy,
a powerful guy.
Ms. Reana Kovalcik, she is from New York, she has traveled
to D.C. to, as it says here, ``share her moving experience with
this Committee.'' Now, I take that as a literal statement,
``moving,'' but it can be taken in both ways. I mean, she has
been through--you will have to tell us when you give your
testimony what you went through and how you felt about all
this.
Ms. Linda Darr, who is President and CEO of the American
Moving and Storage Association. And, we want to protect your
reputation.
And, Mr. Jason Romrell. Mr. Romrell is President and Chief
Legal Officer of Budget Van Lines, which turns out to be one of
the van lines that turned up.
OK, I would like to call on Anne Ferro first for your
testimony. And, I apologize for the lack of colleagues, but
this is the last day we are going to be in session, and so, all
kinds of things are going on, but I want at least three or four
people that are going to be here.
STATEMENT OF HON. ANNE S. FERRO, ADMINISTRATOR,
FEDERAL MOTOR CARRIER SAFETY ADMINISTRATION, U.S. DEPARTMENT OF
TRANSPORTATION
Ms. Ferro. Well, Mr. Chairman, thank you very much for the
opportunity to join this panel today and discuss with the
Committee the business practices of the household goods
industry, and the role of the Federal Motor Carrier Safety
Administration in that process of weeding out, detecting and
prosecuting the deceitful practices that you described in your
opening remarks.
The FMCSA's primary mission is to reduce truck-and bus-
related crashes and fatalities. Our primary mission is safety.
But, we also are absolutely committed and dedicated to improve
consumer protections in the moving industry as part of our
mandate and part of something we totally embrace. We know how
vulnerable----
The Chairman. It is part of your law.
Ms. Ferro. Part of our law, yes sir. Thank you. We know how
vulnerable some consumers feel and how vulnerable they actually
are when their personal property is held hostage by a household
goods carrier. And, we can constantly work to enforce the
commercial rules, educate consumers, leverage partnerships, and
take action against unsafe and unscrupulous moving companies
and brokers.
The FMCSA's commercial oversight structure is based on a
peer relationship between shipper and moving company. In which
case, in this case the shipper is a consumer. The relationship
works best both when the shipper and the moving company are
commercial entities, because both are accustomed to commercial
operating requirements and civil dispute procedures.
Homeowners and renters are at a disadvantage in this
relationship because they may not be aware of the rights, the
responsibilities, the obligations of that moving company.
A great example of this is the very fact that rogue movers
rarely prey upon office relocation activities. An office move
negotiation generally takes place between business peers.
Currently, of the 525,000 motor carriers that we oversee,
that we regulate, just over 4,000 are registered moving
companies. Out of the 21,000 brokers we regulate, just about
500 are household goods brokers. And, of the approximately
18,000 safety compliance reviews that we carry out on the
industries we regulate each year, about 600 are conducted on
household goods moving companies and expanding now to brokers.
Our household goods oversight strategy is driven by four
actions, much of which you actually identified in your
testimony--detect, investigate, prosecute, and educate.
Those strategies start with the detection piece. From the
outset, we scrutinize applicants for household goods operating
authority, a process that we call vetting, a process we use on
household good and passenger carrier applicant side to attempt
to identify and prevent reincarnated carriers, or those that
create a new identity to avoid our enforcement actions, and
come back into a business, avoid being shut down by
reincarnating, to weed those out.
Since we began this vetting process in 2009, we have
reviewed and received almost 3,700 applications for household
goods authority, and we have vetted out about 30 percent of
those, that either were rejected by virtual of the content and
nature of the applicant, or were actually withdrawn because of
the additional information we requested and they never followed
through.
We also operate a national consumer complaint data base,
where consumers can file complaints against unsafe and
unscrupulous companies, including moving companies and brokers.
This year, in 2012, we received about 2,300 complaints. Roughly
20 to 25 percent are the hostage load complaints that you
described.
We will use this data, we do use this data, combined with
our safety analysis, to go after the worst offenders. We create
a top 100 list, and when we prosecute and find a very tough
case, we work with the Inspector General's office to carry it
through to that criminal prosecution and jail time every chance
the Inspector General can achieve that.
We work very hard to get the bad operators out of business,
and we do that in large part through partnerships, with Federal
agencies like the Inspector General, with help and guidance
from the Federal Trade Commission, and in developing stronger
partnerships with our state law enforcement and public utility
commissions. It is an effort that has evolved over time since
SAFETEA-LU. We now have three states that have specifically
signed MOU's, with trained officers to begin household goods
compliance reviews early next year, and we have five other
states in the wings. These states become our force multiplier
in attacking this problem of deceitful practices.
MAP-21 has provided some outstanding new authority for us.
It authorizes us specifically to require testing of a household
goods applicant before they get their authority, a follow up
commercial review within their first 18 months of authority. It
provides and allows for us to assign as restitution to the
consumer a portion of the penalty, a portion or all of the
penalty, that we levy against the carrier or that shipper, or I
should say mover, that has committed violations. These
additional authorities absolutely will help us crack down on
hostage good situations and on the deceitful practices.
We also want to be sure that all consumers have the
resources they need to get a professional move. We have
protectyourmove.gov. This is a website that we have absolutely
improved over time to be a tremendous resource for consumers to
look at, and educate a consumer as a protected consumer, and we
are working very hard with other partners in the industry,
private and public, to get the word out on protectyourmove.gov.
The Chairman. So protectyourmove.gov?
Ms. Ferro. Precisely.
The Chairman. I would much rather be reading that then a
lot of these political, you know, Internet things you can dial
into so they can get money from you.
Ms. Ferro. Thank you for that endorsement.
The Chairman. To try and help people.
Ms. Ferro. Thank you for that, and it is very helpful. Two
very simple tools right there in addition to lots of
information, a simple checklist of things to do before you
select a mover and a very clear checklist of things you want to
do to prevent being caught by a fraudulent mover.
So, we are absolutely committed, our team at FMCSA, and our
investigators across the country that are specific to household
goods investigations, and their partners. We are committed to
pursuing through investigation, committed for pursuing through
enforcement action and partnering with other agencies to
prosecute those entities that are committing fraudulent
practices against consumers, and ensuring the consumers have
the tools they need to protect their moves. So, Mr. Chairman,
thank you again for that time, and I look forward to the
questions.
[The prepared statement of Ms. Ferro follows:]
Prepared Statement of Hon. Anne S. Ferro, Administrator, Federal Motor
Carrier Safety Administration, U.S. Department of Transportation
Mr. Chairman, Senator DeMint, and members of the Committee, thank
you for the opportunity to appear before you today to discuss the
business practices in the household goods moving industry. The Federal
Motor Carrier Safety Administration (FMCSA) takes very seriously its
responsibilities to help protect consumers that utilize the services of
the moving industry through its Household Goods Program, which is why
we continue to educate consumers, build partnerships with States and
other Federal agencies, and take necessary enforcement action on unsafe
and non-compliant moving companies.
The primary mission of the FMCSA is to reduce crashes, injuries and
fatalities involving large trucks and buses. FMCSA's 1,100 employees
are responsible for monitoring the safety performance of over 525,000
active motor carriers, of which approximately 4,000 transport household
goods. Additionally, the Agency is responsible for ensuring the
compliance of over 21,000 brokers to the Agency's safety and consumer
protection rules. Of these brokers, approximately 500 are household
goods brokers. Each year, the Agency performs compliance reviews on
about two percent of the motor carrier industry, which is about 16,000
compliance reviews per year. About 400 of these compliance reviews are
performed on household good carriers, which is about ten percent of the
household good carrier population each year.
Over the last ten years, the Agency has expanded its household
goods program by establishing strategic partnerships with States and
other Federal agencies, implementing a vetting program to catch
unscrupulous carriers, and conducting enforcement actions on egregious
offenders. Over time, FMCSA became aware that there were an increasing
number of moving-related websites hosted by household goods brokers
engaging in unfair business practices.
The Safe, Accountable, Flexible, Efficient Transportation Equity
Act: A Legacy for Users (SAFETEA-LU) directed the Agency to require a
broker to provide shippers with specific information whenever it has
contact with a shipper or potential shipper. The Agency included these
requirements as part of the ``Brokers of Household Goods Transportation
by Motor Vehicle'' final rule that became effective on January 28,
2011. This rule helps ensure that individual shippers who arrange for
transportation of household goods through brokers receive necessary
information regarding their rights and responsibilities in connection
with interstate household goods moves. The rule requires all household
goods brokers to: (1) provide customers with full disclosure that they
are not motor carriers; (2) provide customers with the same ``rights
and responsibilities'' documents that household goods motor carriers
are required to provide; (3) display a U.S. Department of
Transportation (USDOT) number on their advertisements and Internet
websites; and (4) obtain a surety bond or trust fund of $25,000.
Core Priorities
The FMCSA has a number of initiatives and programs underway aimed
at achieving our core safety and compliance mission. We have three
goals that are the strategic framework and focus of our efforts and
resources:
1. Raise the safety bar to enter the industry;
2. Require operators to maintain high safety standards to remain in
the industry; and
3. Remove high-risk operators from our roads and highways.
Raise the Safety Bar
In April 2009, FMCSA implemented a vetting program to thoroughly
review applications from household goods motor carriers, brokers, and
freight forwarders before granting operating authority. The vetting
process is an in-depth investigation of the applicant to determine if
it is a reincarnated carrier, broker, or freight forwarder, or has
affiliations with unsafe or non-compliant entities. The Agency compares
information about the applicant to data in our Motor Carrier Management
Information System, which contains an overall company profile, in
addition to information on the safety fitness of commercial motor
carriers and hazardous material shippers subject to the Federal Motor
Carrier Safety and Commercial Regulations (FMCSRs & FMCCRs) and the
Hazardous Materials Regulations (HMRs). It then investigates any red
flags in new applications that may indicate an unscrupulous or unsafe
carrier is attempting to reincarnate, or begin operations under another
name. Since the inception of the program, the Agency has vetted and
approved more than 2,400 applications of the more than 3,700
applications it has received. Of the remaining applications,
approximately 700 were rejected and 500 were withdrawn.
The new surface transportation reauthorization law, Moving Ahead
for Progress in the 21st Century (MAP-21), sets forth requirements that
greatly improve the standard for entry into the industry. MAP-21
directs the Secretary of Transportation to issue distinctive
registration numbers to a person for each authority they request to
provide transportation or services such as brokering or freight
forwarding. MAP-21 also increases the level of financial responsibility
necessary to be registered as a broker, from $10,000 in surety bonds or
other financial instruments to $75,000 in order to help address claims
from failure to pay freight charges under a contract or agreement.
Household goods motor carriers will also be required to successfully
pass an examination to demonstrate knowledge of safety and consumer
protection regulations before entering the industry.
Maintain High Standards
At FMCSA, we have implemented a multi-layered approach to improving
the safety of commercial motor vehicles involved in transporting
household goods across State lines, while also ensuring protection
against moving fraud and abuses. The main components of our efforts to
maintain high standards in the household goods industry are the
National Consumer Complaint Database (NCCDB), the Top 100 Household
Goods Prioritization list, and our hostage goods resolution program.
The NCCDB maintains complaint information regarding movers and
passenger carriers. Complaints can be filed in one of two ways: (1) by
calling our toll free hotline, and (2) by filing the complaint
electronically on our Protect Your Move website.\1\ The NCCDB database
is an important tool to assist our enforcement partners combating rogue
household goods motor carriers.
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\1\ https://www.protectyourmove.gov/.
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The FMCSA began capturing complaint data in Fiscal Year (FY) 2002
and received 1,973 complaints in that year. The complaints peaked in FY
2005 with 3,583 and they numbered 2,851 in calendar year 2011. While we
track our progress in reducing complaints, we recognize that it is
probable that complaints will increase as we increase our efforts to
educate and outreach to consumers.
The Agency's household goods working group, which includes Federal
and State enforcement officials, has established an informal
``Contributing Partner'' effort to assist our State enforcement
partners in accessing the NCCDB to view or enter complaint data on
motor carriers and brokers.
Remove Unsafe Operators
FMCSA has developed a number of enforcement tools to crack down on
those carriers that violate the FMCSRs and the FMCCRs. We have
implemented authority to remove from service motor carriers deemed to
be unfit or declared an imminent hazard as part of our core safety
program. Most recently, we expanded our efforts and established
guidance and procedures to revoke the operating authority of motor
carriers and brokers that continually violate the safety and/or
consumer protection regulations. To combat the problem of hostage
loads, we have put into place procedures to revoke the operating
authority of those found to have committed violations. Finally, FMCSA
is providing public notice this week alerting the household goods
industry of our enforcement efforts to suspend or revoke operating
authority when carriers either demonstrate a pattern of violating the
commercial regulations or hold consumers' goods hostage.
Investigations of Motor Carriers and Brokers
FMCSA is well aware of the four motor carriers and brokers that are
at the heart of your Committee's investigation. The Agency conducted a
compliance review on Budget Van Lines in January 2011. While this
investigation did not result in an enforcement action against Budget
Van Lines, it did lead to an investigation of a series of household
goods carriers working in concert with Budget Van Lines that were
noncompliant with the household goods regulations. This investigation
led the Agency to carriers in California, Florida, Georgia, Maryland,
New Jersey, and New York and resulted in enforcement actions for
violations of the household goods regulations on eleven motor carriers.
Based on complaints that we received, the Agency has also
investigated Able Moving, Inc., and Best Price Moving and Storage, Inc.
Able Moving's investigation resulted in an enforcement action for non-
compliance with safety regulations while the investigation for Best
Price Moving and Storage resulted in no enforcement actions. While Able
and Best Price have been on the Agency's Top 100 Prioritization list in
the past, currently, there is not enough data to place them on the list
as a priority investigation. A preliminary review of Nationwide
Relocation shows that the company started as a broker and then acquired
motor carriers, many with records of non-compliance. The Agency is
currently determining next steps, as a major investigation such as this
requires FMCSA to balance this task with its core safety mission for a
significant period of time.
Top 100 Carrier List
As discussed above, the Top 100 Household Goods Carrier list
utilizes data from both our Safety Measurement System (SMS) and the
NCCDB to rank household goods carriers according to their risk of
commercial regulatory non-compliance.
The SMS utilizes violation data from roadside inspections and
investigations, as well as crash data, to identify those carriers with
the highest risk of crashes and compliance problems. This tool is the
primary mechanism for FMCSA to prioritize carriers for safety
interventions. The data in SMS, when linked with the complaints in the
NCCDB, allow us to identify the 100 household goods carriers with the
most significant safety and compliance problems to most effectively
utilize our limited resources. These carriers are then targeted for
reviews and enforcement, as appropriate.
In FY 2011, FMCSA conducted over 500 investigations of household
goods carriers, resulting in approximately 200 enforcement cases. The
Top 100 list in itself yielded an enforcement rate of nearly 50 percent
clearly showing its effectiveness as a tool to help the Agency focus
its limited resources on the most egregious of household goods motor
carriers.
Hostage Loads
The FMCSA is also working hard to combat the problem of household
goods carriers holding consumers goods and demanding additional
payment. These situations, known as ``hostage loads,'' are particularly
egregious offenses on the consumer. Many consumers unwittingly fall
prey to unscrupulous motor carriers who take advantage and exploit the
consumer. Consumers also often hire moving companies with the lowest
estimate, instead of confirming that the company is safe and has a good
customer service record.
Consumers are often unaware of the regulatory requirements that are
in place to protect them. Despite an increased focus in outreach, too
many times consumers fall victim to rogue operators who are willing to
disregard regulations. FMCSA attempts to address each and every hostage
load complaint with some level of investigation which could include a
full onsite investigation when necessary.
MAP-21 provided the Agency with important new tools to combat
problems of hostage goods situations. Beginning October 1, 2012, FMCSA
will have the authority to require the return of hostage goods loads to
consumers and may also direct a portion of a civil penalty to reimburse
consumers for their financial losses. FMCSA is beginning to implement
these new authorities and believes they will provide further strength
to our household goods program.
Reincarnated or Chameleon Carriers
It is a common practice in the motor carrier industry for some
motor carriers to establish a new identity once FMCSA shuts the company
down because it is not fit, willing, or able to comply with applicable
safety regulations. The practice of reincarnating to avoid negative
safety performance history or enforcement action causes an unacceptable
risk of harm to the public because it hinders the Agency's ability to
enforce Federal safety regulations and carry out its safety mission. A
recent amendment to the Agency's Rules of Practice, effective May 29,
2012, provided procedures for the Agency to issue out-of-service orders
and/or record consolidation orders when carriers are deemed to be
reincarnated or affiliated companies that have been created to evade
complying with an FMCSA order or a regulatory requirement, paying a
civil penalty, or responding to an enforcement action to avoid being
linked with a negative enforcement history.
The issue of reincarnated carriers among the household goods
industry has become an increasing challenge. A recent investigation
revealed a household goods motor carrier that was affiliated with
several other entities that were all controlled by the same corporate
officials. For each of these affiliated businesses, the NCCDB revealed
numerous complaints. In an effort to address these types of issues,
FMCSA is pursuing the affiliated motor carriers and it is considering
the feasibility of suspending their operating authority.
Broker Activities
On January 28, 2011, FMCSA's new requirements pertaining to brokers
who arrange for the transportation of household goods in interstate or
foreign commerce went into effect. The rule requires, among other
things, that when the Unified Registration System final rule becomes
effective, all household goods brokers display a USDOT number on their
advertisements and Internet websites. In an effort to facilitate this
requirement in advance of the full compliance date, the Agency has
already issued USDOT numbers internally to all brokers in the database.
The rule also provided regulatory authority to address many of the
concerns that we commonly face with problematic or unethical brokers.
For example, brokers are required to clearly state that they are not a
motor carrier in their advertisements. This has been a consistent
problem because unscrupulous brokers are aware that consumers prefer to
deal with the motor carrier directly.
MAP-21 sets forth requirements for higher standards for compliance
and gives the Agency additional tools for enforcement. It increases the
registration requirements and directs the Secretary of Transportation
to issue distinctive registration numbers to motor carriers, brokers,
or freight forwarders. It prohibits a motor carrier from brokering
transportation services from other motor carriers unless the motor
carrier is also a registered broker. MAP-21 also provides effective
periods for registration and requires a broker or freight forwarder to
provide a minimum financial security of $75,000 dollars and to evaluate
if that amount is sufficient every 5 years.
Outreach
Another layer in our multifaceted approach to increasing safety and
consumer protection is the implementation of an aggressive outreach
program. The cornerstone of this effort is the ``Protect Your Move''
website, which serves as a first line defense to protect the consumer.
The site contains a wealth of information for consumers to use while
planning a move as well as a variety of consumer protection bulletins,
``The Moving Fraud Protection Checklist,'' and a public service
announcement. FMCSA recognizes that those hiring moving companies are a
diverse group--college graduates venturing into new careers, employees
changing jobs, or individuals who are moving during retirement. The
website targets materials for all these groups. Public awareness of the
Protect Your Move website is building. During the first 9 months of FY
2012 (October 1 through June 30, 2012), there were over 6,300,000
website hits compared to approximately 3,600,000 during the same period
in FY 2011. This represents a 74 percent increase. We understand that
moving is a stressful time, and our goal at FMCSA is to ensure that the
consumer is protected to the fullest extent.
The website also includes links to the NCCDB so that consumers can
research registration status and complaint history of household goods
motor carriers and brokers before hiring them. This database allows the
consumer to review and examine the motor carrier's safety and complaint
data. Other features on the website include: (1) a regulatory webpage
for our enforcement partners and industry with appropriate Federal
regulations and statutes; (2) a State and local government resource
webpage offering information to the consumer whose problems are beyond
FMCSA's jurisdiction; and (3) a summary of the new broker requirements.
Partnerships
To combat the problem of unsafe and rogue moving companies, FMCSA
is constantly reaching out to Federal, State, and local law enforcement
agencies to develop partnerships to enhance enforcement and combat
consumer fraud.
As a result of discussions with the Government Accountability
Office, FMCSA reviewed the Federal Trade Commission's (FTC) approach to
consumer protection and is making changes in the interstate household
goods consumer protection efforts to clearly articulate the
Department's goal of ensuring consumer protection within its mission.
These discussions led to the proposed sharing of FTC's investigative
database, the ``Consumer Sentinel Complaints Database.'' FMCSA also
reviewed FTC's enforcement strategies and implemented collaborative
efforts to provide outreach to inform consumers who contact FTC on
household goods moving fraud.
A second relationship was forged with the Federal Maritime
Commission (FMC) and a formal memorandum of understanding to formalize
collaboration efforts on enforcement activities combating household
goods fraud and unscrupulous motor carrier operations. This partnership
allows FMCSA to be involved in enforcement on international movements
of household goods. While this partnership is new, the Agency is
eagerly pursuing opportunities to fight rogue motor carriers with the
support of FMC.
Another Federal collaboration to combat fraudulent motor carrier
operations is with the Office of the Inspector General (OIG). The OIG
has been given access to FMCSA's complaint databases, and they are
using the data to target motor carriers with numerous complaints of
fraud. To date, the OIG has completed several investigations on motor
carriers with fraudulent activities. The OIG recently used data from
the NCCDB to conduct an investigation and indict a large motor carrier
operation. Through our collaborative efforts, FMCSA assisted in the
criminal case by providing expert testimony during the trial.
FMCSA also has an aggressive campaign to solicit full State law
enforcement partners to work directly with FMCSA to enforce Federal
commercial regulations within their jurisdictions. To facilitate this
effort, FMCSA has provided numerous training opportunities to States
that are interested in receiving household goods enforcement training.
To date, Louisiana, Ohio, Indiana, California, New Jersey, Michigan,
South Carolina, and Texas have received training on household goods
enforcement. Of those States trained, Louisiana, Ohio, and Texas have
signed memorandums of agreements--becoming full enforcement partners
with FMCSA. As a result, each of these States may conduct household
goods compliance reviews on interstate motor carriers. In accordance
with the provisions of SAFETEA-LU, they will have the ability to retain
the financial penalties from any pending enforcement action.
Household Goods Working Group
As outlined in SAFETEA-LU, the Agency established a working group
of State attorneys general, State consumer protection administrators,
and Federal and local law enforcement officials to enhance the Federal-
State partnership on issues involving the interstate transportation of
household goods. The statute further required that the working group
make legislative and regulatory recommendations to the Secretary
concerning enforcement efforts. The workgroup identified three priority
areas for enhanced outreach coordination:
1. General Communication and Information Sharing;
2. Information Sharing Related to Federal Laws and Regulations; and
3. Enforcement-Specific Communication and Information Sharing.
To fully implement these goals, the Agency is continually engaging
the enforcement community and providing updated regulatory, legal, and
investigative information. As mentioned earlier, FMCSA has provided
State Partners and Contributing Partners access to the NCCDB through
the ``Protect Your Move'' website. The database allows partners to view
household goods enforcement information that can benefit their
investigations.
The FMCSA has issued a call for all States to become contributing
household goods enforcement partners, which allows them access to the
NCCDB to directly input complaints from consumers related to interstate
moves.
Conclusion
Thank you for the opportunity to appear before you today. Over the
last few years, FMCSA has made significant progress in executing its
commercial enforcement program. We have a good program with limited
resources. The goal of our dedicated staff and partners is to protect
consumers and protect the highways. We are continuing to build on these
successes and enhancing the program through data-driven decision
making. We look forward to executing the provisions in MAP-21 that
increase FMCSA's ability to raise the safety bar to enter the industry,
require operators to maintain high safety and ethical standards to
remain in the industry, and to allow FMCSA to remove high-risk
operators from our roads and highways.
The Chairman. So do I, and thank you very, very much.
Ms. Ferro. Thank you.
The Chairman. Mr. Timothy Barry. We are very formal around
here, we cannot call you by your first name or anything, okay.
STATEMENT OF TIMOTHY M. BARRY, PRINCIPAL ASSISTANT
INSPECTOR GENERAL FOR INVESTIGATIONS,
U.S. DEPARTMENT OF TRANSPORTATION
Mr. Barry. Thank you. Good morning, Chairman Rockefeller,
and good morning, Senator Lautenberg.
Thank you for the opportunity to testify on our efforts to
combat household goods fraud. While we have found that the vast
majority of the Nation's household goods carriers are honest
hardworking professionals, there are dishonest companies who
operate with the sole purpose of illegally making as much money
as they can from unsuspecting consumers. These companies not
only afflict financial and emotional pain on their victims, but
they also give the moving industry a black eye.
My testimony today will focus on our experiences in
investigating household goods fraud. In conducting these
criminal investigations we have partnered with Federal and
state law enforcement agencies, as well as FMCSA, with the hope
of prosecuting as many of these rogue movers and brokers as
possible.
OIG criminal investigations send a strong deterrent message
to violators who consider civil penalties simply a cost of
doing business. We currently have 1,400 open investigations
involving companies operating under 108 different names, with
more than 3,800 potential victims, and losses amounting to
approximately $1.9 million in fraud.
The Chairman. I am interrupting, but the 108 different
names, does that refer to the moving company that shows up, or
is that the broker that does not show up?
Mr. Barry. The moving companies.
The Chairman. Moving company, OK.
Mr. Barry. Through our investigations, we have seen that
these rogue companies do not discriminate in who they prey
upon. Victims come from all walks of life and from most states
throughout the country.
Their stories are fairly consistent. They search the
Internet to find the least expensive moving company, they
receive an estimate without anyone coming to their residence to
inventory their goods, then on moving day, they are asked to
sign a number of blank documents before any packing or moving
begins. After their belongings have been loaded and driven
away, they receive a call, telling them the price of the move
is significantly more than originally quoted. We have seen
inflated prices that exceed 500 percent of the original
estimate.
Whether consumers deal directly with a mover or broker, the
outcome is the same. Customers are told they can either pay the
increased charges or their possessions will be sold at auction.
The financial loss to our victims can be devastating. However,
there is no dollar amount for the duress they feel in knowing
that their worldly possessions may never be returned.
In our continuous efforts to fight household goods fraud,
in March 2011, we launched Operation Boxed Up, a proactive
initiative aimed at identifying unscrupulous movers.
By analyzing information provided by FMCSA, we identified
the most egregious allegations of fraud and initiated a number
of investigations. To date, our efforts have led to nine
indictments, seven arrests, and eight search warrants.
These cases always have a very personal element to them. In
one investigation, an elderly couple relocating from Colorado
to Nevada contacted a moving company they found on the
Internet, and received a quote of $1,340. On the moving day,
while the movers removed the contents of their home, the
husband was asked to sign blank documents that according to the
mover gave them permission to move his household goods. When he
tried to ask questions about the forms, he was told they would
go over the paperwork later. After the contents of their home
were on the truck and driven away, he was told the cost of the
move would now be $7,400.
Included in their property, now being held hostage was his
wife's wheelchair. When he asked about retrieving the
wheelchair the owner of the rogue moving company stated, ``You
are not getting it, period.'' We later found out that the owner
tried to sell the victims wheelchair, and he was also using
some of the victim's personal items in his business.
To raise public awareness of these schemes we operate an
OIG hotline to receive allegations of fraud. In addition to
filing a complaint with the OIG, consumers may also file
complaints with FMCSA, the Better Business Bureau, and their
State Attorney General's office.
In closing, I want to assure you that protecting the
American consumer from these greed-based schemes remains an OIG
investigative priority, and that we will continue to work with
Congress, the department, and other law enforcement partners,
to identify and prosecute to the full extent of the law these
rogue household goods movers.
Mr. Chairman, this concludes my prepared statement, I will
be happy to address any questions you or other members of the
Committee may have.
[The prepared statement of Mr. Barry follows:]
Prepared Statement of Timothy M. Barry, Principal Assistant Inspector
General for Investigations, U.S. Department of Transportation
Mr. Chairman and Members of the Committee:
Thank you for the opportunity to testify on criminal fraud in the
residential moving industry. We have investigated allegations of fraud
in this area for over a decade and have found that while the vast
majority of interstate household goods carriers are honest, there are
dishonest companies and individuals who operate at the fringe of the
industry and victimize the public. They do so with the sole purpose of
illegally making as much money as they can from unsuspecting consumers
by breaking the law and Federal regulations. We last testified before
this Committee in May 2006 \1\ and highlighted the problem of fraud
perpetrated by rogue household goods moving companies. We appreciate
this opportunity to update the Committee on our investigative work.
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\1\ OIG Testimony Number CC-2006-044, ``Household Goods Moving
Fraud,'' May 4, 2006. OIG investigative summaries and testimonies are
available on our website: www.oig.dot.gov.
---------------------------------------------------------------------------
My testimony today will focus on our (1) household goods (HHG)
fraud investigations, (2) proactive initiative ``Operation Boxed Up,''
and (3) efforts to educate the public about HHG fraud. My statement is
based on our completed and ongoing investigative work.
In Summary
Since 2006, we have opened 36 HHG fraud investigations. We
currently have 14 investigations open involving companies operating
under 108 different names, with more than 3,800 potential victims,
amounting to around $1.9 million in fraud. The criminal conduct we have
targeted through our investigations consists of holding a customer's
household goods hostage while demanding significantly larger sums of
money than originally quoted. In March 2011, we launched a national
fraud project to proactively identify the most egregious consumer
complaints involving hostage loads against HHG carriers and brokers. We
focus, in particular, on groups of carriers and brokers that illicitly
engage in hostage fraud schemes. In addition to filing a complaint
through our agency Hotline,\2\ available on our website, consumers can
file complaints about improper HHG activities with the Federal Motor
Carrier Safety Administration (FMCSA), the Better Business Bureau, and
their State Attorney General's office.
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\2\ The OIG's 24-7 Hotline number is 1-800-424-9071. Complaint
forms and HHG fraud information for consumers are also available on our
website under the Household Goods Movers portal.
---------------------------------------------------------------------------
Background
The Office of Inspector General (OIG) Office of Investigations (OI)
conducts criminal, civil, and administrative investigations of
allegations of fraud, waste, and abuse within the Department, its
programs, and grantees. OI's investigative work is accomplished by
criminal investigators assigned to regional offices around the country.
Investigations are opened based on OIG priorities and procedures and in
consideration of prosecutorial guidelines that the local United States
Attorneys have established.
OI has four investigative priority areas:
Transportation safety investigations typically involve parties
that violate criminal laws relating to the Department's
statutes and regulations. These investigations include matters
involving aviation safety, motor carrier safety, and hazardous
materials.
Grant and procurement fraud investigations involve allegations
of bribery and corruption, bid rigging, false claims, labor and
materials over-charging, disadvantaged business enterprise
fraud, and product substitution in connection with the
Department's annual expenditure of nearly $64 billion on direct
procurements and projects funded through grants.
Employee integrity investigations address a wide range of
violations involving Department employees. These include time
and attendance/travel voucher fraud, misuse of government
property or funds, conflict of interest, ethics violations, and
prohibited personnel violations.
Consumer and workforce fraud protection investigations help to
protect American consumers and workers from fraud in connection
with FMCSA regulatory programs, including household goods
movers as well as shippers and cargo freight forwarders. Though
FMCSA is responsible for the civil enforcement of the consumer
protection and economic regulations governing the interstate
transportation of household goods, OIG investigations--and
resultant prosecutions--are separate from, but complement,
FMCSA's regulatory enforcement programs. The availability of
criminal sanctions sends a strong deterrent message to
violators who consider regulatory/civil penalties simply a cost
of doing business.
OIG Is Investigating Household Goods Hostage Fraud Complaints
Combating HHG fraud is an OIG investigative priority. Our
investigations have targeted suspect HHG brokers and HHG carriers that
hold customers' household goods hostage while demanding significantly
larger sums of money than are legally permissible and much greater than
the original quotes made to their customers. To carry out these crimes,
perpetrators engage in illegal activity that includes extortion,
conspiracy, wire fraud, mail fraud, money laundering, and falsification
of bills of lading and shipment weight documents.
Our HHG criminal investigations are often conducted with Federal,
State, and local law enforcement partners and with the assistance of
FMCSA. The vast majority of the allegations against rogue HHG companies
we investigate have come from FMCSA and our own proactive efforts to
uncover these illegal and deceptive business practices. Several of our
investigations have included the use of concealed recording equipment
to monitor communications between victims and the owners and employees
of unscrupulous carriers. We have also used undercover law enforcement
personnel to pose as consumers. These investigative techniques have
enabled us to identify and prosecute numerous violators. Despite these
efforts, we continue to receive hundreds of complaints each year of
allegations of HHG fraud.
The Fraud Scheme
Like most Americans, the victims are interested in getting the most
for their money and frequently search the Internet to help them find
the least expensive moving company. Though many of our cases involve
the customer directly interfacing with the HHG carrier, some involve
the use of unscrupulous brokers.
After finding a company on the Internet, the initial contact with
the company--either an HHG broker or HHG carrier--is typically by
telephone or e-mail. Almost universally, the rogue company provides a
quote without conducting a physical survey to get the best estimate of
what it will cost to move the customer's belongings. Instead, the types
of quotes customers receive can vary; they may be given a verbal quote
or a written, binding quote that most often contains significant
details, in small print, about the quotes and services provided. The
impact of HHG fraud can be felt across the United States, as shown in
figure 1 on the next page.
Broker: Our investigations have shown that the dishonest broker,
with full knowledge, provides customers a low-ball estimate knowing the
carrier will grossly inflate it once the goods are loaded on the truck.
The broker will frequently keep a fee for booking the move usually
obtained in the form of a deposit, taken from the customer up front.
Because these brokers have companies that they frequently book loads
for, they are familiar with their schemes and often receive phone calls
from angry customers from whom the carrier is trying to extort
additional money in exchange for releasing the HHGs.
Carrier: Once a carrier has received the brokered load and the
hectic moving day arrives, the illicit moving company driver or foreman
will aggressively attempt to compel the customer to sign a number of
blank documents before any actual packing or moving begins. Our
investigative work has shown that these blank forms are most typically
revocations of prior agreements or estimates and contain revised
estimates. Instead of deceptively compelling customers to sign blank
forms, the driver or foreman should advise the customer before the move
starts that the estimate is wrong and renegotiate a new estimate, as
required by regulation.
Figure 1. States Impacted by HHG Fraud
Source: OIG Investigative Data
After the rogue moving company has the customer's belongings,
someone from the moving company will tell the customer that there were
more household goods than the customer had told the company estimator
about. They may also tell customers that the weight of their belongings
was far greater than estimated and/or that large quantities of packing
materials were necessary. All of which caused the price of the move to
be significantly more than the originally quoted price. This
information is always provided before the customers' belongings are
unloaded at their new residence. In most cases, victims are told about
the price increase immediately after the goods are loaded on the truck
or within a day or two after the goods have been driven away. Sometimes
the customer is not informed until the driver arrives at the new
residence. The victim is presented with the blank documents they signed
before the goods were loaded onto the moving trucks, which are now
filled out with the inflated price on them. The documents will also
have the customer's signature, which indicates agreement to the price
increases on the day the belongings were loaded on the moving truck. In
nearly every situation, victims are told they can either pay the price
or incur additional costs for storage, and if they fail to pay, their
possessions, including the family's mementos, will be sold at auction.
This form of extortion is one of the most heinous frauds we see.
Let me share with you several particularly egregious cases.
Egregious Case Examples
Santa Clara Investigation: Working with the Santa Clara District
Attorney's Office, Monterey County District Attorney's Office, the
Alameda County District Attorney's Office, and the Federal Bureau of
Investigation (FBI) we participated in three interstate undercover
operations to ferret out HHG moving companies with numerous complaints
against them for holding customers' goods hostage until illegally
inflated charges were paid. In one case, an undercover agent arranged
for a move from Nevada to California and received a telephone quote of
$1,461. After the goods were loaded, the undercover agent was informed
that the move would cost $3,138, more than twice the original quote. Of
the $1,677 in overages, $900 was for packing materials. In this case,
felony complaints were filed in Santa Clara County, California, against
the 10 individuals associated with the 4 targeted HHG carriers. Four of
the defendants are fugitives, five are awaiting adjudication, and one
pleaded guilty and was sentenced to 4 years of probation.
Kasprowicz Investigation: Our investigations of HHG fraud also led
to the prosecution of Lester C. Kasprowicz of Oregon, who was notorious
for giving misleading or false estimates and holding customers' goods
hostage until the customer paid the inflated amount.\3\ For example, a
U.S. Navy officer contacted one of Kasprowicz's companies, which she
found on the Internet, to arrange for a move from Oregon to Hawaii,
where she was transferred after a tour of duty in Iraq. Once she was in
Hawaii, after her belongings were loaded on the moving truck and taken
away, she contacted the moving company about delivery and was told that
she should send a money order for the full balance of her move after
which her goods would be delivered. Shortly after mailing the money
order for $2,131--the quote she received over the telephone--the moving
company told her that due to the weight of her goods, the price of her
move had increased an additional $3,246, and she needed to send that
amount before her goods would be delivered. She subsequently mailed
them the additional money.
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\3\ Kasprowicz was previously prosecuted for operating over a dozen
rogue HHG moving companies and violated Federal and State Permanent
Injunction Orders prohibiting him from doing business in the household
goods arena.
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Three months after her initial move, she received one of the two
pallets of household goods from DHX, a company Kasprowicz had
contracted with to actually ship her goods. However, Kasprowicz had
never paid DHX for the shipment so she was unable to get the rest of
her belongings until she settled the balance of the unpaid bill. Our
investigation identified a total of seven victims who were collectively
defrauded out of $9,691. Kasprowicz was convicted on mail fraud charges
in connection with his HHG fraud scheme and sentenced to 33 months in
prison, 5 years of supervised release, and payment of $9,691 in
restitution.
AY Transport (Carrier) and National Moving Network (Broker)
Investigation: Our HHG investigations also led to the indictment of 14
individuals associated with AY Transport, Inc.\4\ and National Moving
Network (NMN) \5\ in U.S. District Court, San Jose, California, on
charges of extortion and fraud upon consumers in residential moves.
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\4\ Also known as Progressive Van Lines and Midwest Relocation
Services.
\5\ AY Transport was a moving company based in San Jose,
California; NMN was a moving broker in Miami, Florida.
---------------------------------------------------------------------------
In this case, NMN brokered moves for other moving carriers and
customarily provided fraudulently low quotes over the telephone to
customers. NMN management often held meetings with sales
representatives to discuss ways to manipulate the bidding process to
ensure customers received these low quotes and agreed to do business
with the company. Because sales representatives received commission
based on the number of quotes accepted by customers, they actively
participated in providing the fraudulently low quotes. In addition to
providing customers with artificial and fraudulently low quotes, it was
common knowledge among the sales representatives that the majority of
the business was directed to AY Transport. The sales reps were aware
that once AY Transport took possession of the customers' household
goods, they habitually and systemically demanded amounts up to four
times over NMN's original quote.
In one such move, a family found NMN on the Internet and contacted
them to arrange a move from California to Alabama, a relocation made
necessary due to a new job. After describing the contents of his home,
the customer received a telephone quote of $1,400 and gave NMN a $500
deposit. On moving day, AY Transport showed up and took possession of
the family's household goods, and the customer paid the driver around
$900. After arriving in Alabama, he called NMN numerous times to
arrange delivery of his possessions. Eventually, he spoke to an AY
Transport employee who told him that if he wanted his goods delivered
he needed to pay an additional $1,600 to cover costs associated with
extra boxes, fuel, delivery fee, and storage, which, ironically, the
employee said was necessary because the company could not get in touch
with him to arrange delivery. Because AY Transport was holding the
family's possessions hostage, the victim's children and pregnant wife
had to sleep on the floor. The victim was forced to pay the additional
fees and had to drive 4 hours to retrieve the family's goods himself.
To date, our investigation of AY Transport and NMN has uncovered
over 1,000 victims with a loss of just over $1 million. Thus far, 9 of
the 14 defendants have pleaded guilty, 1 has accepted a pre-trial
diversion, and 3 are fugitives. One defendant recently went to trial,
but the jury was unable to reach a verdict. Of those defendants who
have pleaded guilty, five have been sentenced and ordered to pay
restitution of over $32,000.
OIG's ``Operation Boxed Up'' Aggressively Targets Complicit HHG
Carriers and Brokers
In recognizing the significant, negative impact that rogue HHG
motor carriers and brokers can have on our Nation's consumers and
workforce, our office developed a strategy to focus our investigative
resources in this area of fraud. In March 2011, we launched ``Operation
Boxed Up,'' a proactive, cooperative initiative aimed at removing
unscrupulous HHG movers before they further victimize American
consumers. By analyzing databases from FMCSA's HHG regulatory program,
we identified the most egregious hostage load complaints consumers
filed against HHG carriers and brokers. We focused, in particular, on
groups of interrelated carriers and brokers engaged in hostage fraud
schemes.
When we formally kicked off Operation Boxed Up, we held a joint
training session with FMCSA, emphasizing the importance of OIG-FMSCA
cooperation to target those who prey on the trust of unsuspecting
consumers. The training was a venue for information sharing, with FMCSA
speaking in detail about how a moving company typically perpetrates
household goods fraud and the information available to the OIG through
FMCSA's databases. OIG agents talked about recent successful
investigations of fraudulent movers. Staff from both agencies learned a
lot about their mutual capabilities and expertise relating to HHG
fraud.
Approximately half of our open HHG investigations are from our
Operation Boxed Up data analysis project. Through this initiative we
have executed eight search warrants and made seven arrests. Further,
nine individuals have been indicted in connection with these fraud
schemes. Our investigations continue to identify unscrupulous
fraudsters who prey on individuals unfamiliar with the moving industry
rules and regulations.
Cases identified through Operation Boxed Up include the following:
Operation Boxed Up Case Examples
New York Search and Arrest Warrants: We executed a Federal search
warrant and arrested three officials of companies that had a pattern of
providing customers at or below market value estimates and then
substantially increasing them after the contents of the customers'
homes were loaded on the companies' trucks. Specifically, the company
officials provided customers a verbal quote of $2,000 to $3,000, then
raised the costs several thousand dollars, demanding full payment prior
to delivery; if payment was not received, they threatened to auction
off the property.
In one such case, a customer was quoted a price of $1,056 for a
move from North Carolina to Texas based on an itemized list that she
prepared and e-mailed per the company's instructions and an approximate
weight of 2,000 pounds. The customer was also told that she would
receive 25 large packing boxes for free if she hired the company. She
subsequently agreed to the terms of the quotation and provided a small
credit card deposit to the company.
However, on the day of the move, after her household goods were
loaded on the truck, she was told that the cost of the move would
increase to over $5,700 based on cubic feet. In response, the victim
demanded the company representatives unload and put the items back in
her house. The representatives then told her that the price would
likely decrease once her household goods were weighed. Feeling backed
into a corner, she allowed the company to drive away with her
possessions. Ultimately, the price did not decrease and the victim's
credit card was charged over $5,700.
During our investigation into this company and its many victims,
OIG agents used electronic monitoring equipment, which captured company
representatives telling victims that if they failed to pay additional
charges, their goods would be auctioned.
FMCSA has received over 100 complaints against the subjects of this
investigation. The potential fraud amount is as high as $250,000.
Colorado Indictments: Another Operation Boxed Up investigation led
to the indictment of the owners and two employees of two related moving
companies on charges associated with hostage HHG schemes designed to
unjustly enrich the owners of the companies. This scheme involved HHG
brokers (or companies representing themselves as HHG brokers) luring
customers by offering extremely low moving estimates, transferring the
brokered loads to the unscrupulous carrier or one of its affiliates,
and taking possession of customers' household goods. The mover would
then significantly increase the price and withhold delivery of the
household goods until the customers paid the fraudulently inflated
price. In addition, customers were threatened that if they refused to
pay, their household goods would be auctioned.
In one such case, an elderly couple relocating from Colorado to
Nevada because of the wife's poor health contacted a trucking company,
found on the Internet, which acted as an HHG broker but was not
registered with FMCSA as either an HHG broker or carrier. The customer
was provided a $1,340 estimate and paid a $260 deposit. On moving day,
while the movers started moving the contents of his home, an employee
of the moving company had the customer sign documents that ``gave them
permission to move his household goods.'' When the customer tried to
ask questions about the forms, the mover told him they would go over
the paperwork later. After his property was loaded on the truck, the
mover provided copies of some of the signed documents but many,
including a Revised Written Estimate, were blank.
Later that day, after the contents of the his home had been loaded
on the truck and driven away, he was told that the cost of the move
would now be around $7,400--more than a 500-percent increase. Included
in the goods being held hostage was the customer's wife's wheelchair,
which the owners of the HHG carrier flat out refused to release, saying
``you are not getting it, period'' or any of the other property until
the extortionate revised cost of the move was paid. We later found out
that the owner of the moving company was using this victim's computer
and his flat screen television in the business.
OIG's investigation of these complicit companies has identified 36
victims to date, with an approximate loss of around $126,000.
Texas Indictments: Another Operation Boxed Up investigation led to
the indictment of three individuals posing as legitimate moving
companies on State of Texas deceptive practices charges. Between May
2009 and January 2012, the three engaged in a number of typical hostage
HHG fraud schemes designed to unjustly enrich themselves.
In one case, a single mother of two young children, was quoted a
price of $39 per hour for an intrastate moving job that ended up taking
just less than the agreed to minimum of 3 hours. When the movers
arrived at the customer's new home, she was told she owed $3,908 in
cash; $3,000 of the charge was for bubble wrap. Because she did not
have the cash, everything the mover loaded in the truck has yet to be
returned.
In another case, a customer was told an intrastate moving job would
cost approximately $400. After the contents of his home were loaded on
the truck, the customer was told he would have to pay $5,000 to get his
possessions back. The victim still has not received his goods.
The investigation has revealed a total of 46 individuals that have
been defrauded by this group, with a total fraud amount of $244,206.
OIG Has Raised Public Awareness
Based on our experience working HHG fraud investigations, we have
identified the following red flag indicators for consumers.
The company's website has no local address and no
information about its FMCSA registration or insurance.
When you call the mover, the telephone is answered with a
generic ``Movers'' or ``Moving Company,'' rather than the
company's name.
The mover does not offer or agree to an onsite inspection of
your household goods, gives an estimate over the telephone or
Internet--sight unseen--and does not provide you with either a
``binding'' or ``non-binding'' written estimate. These
estimates will often sound too good to be true, and they
usually are.
The mover does not provide you with a copy of ``Your Rights
and Responsibilities When You Move,'' \6\ a booklet movers are
required by Federal regulations to supply to their customers in
the planning stages of interstate moves.
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\6\ https://www.protectyourmove.gov/consumer/awareness/rights/
rights.htm.
The moving company demands cash or a large deposit before
the move.
On moving day, a rental truck arrives rather than a company
owned or marked fleet truck.
On moving day, the moving truck driver or foreman will try
to get you to sign blank documents before beginning to load
your goods. Never sign blank forms, and read what you sign.
Conclusion
In closing, I want to assure you that we remain committed to
protecting the American consumer from these greed-based schemes by
continuing to work with Congress, the Department, and other law
enforcement partners to identify, investigate, and prosecute rogue HHG
movers to the fullest extent of the law.
In the very near future, OIG will unveil a `most wanted' Web page
that will identify defendants charged with transportation-related
crimes (including hostage goods fraud) and who have fled the court's
jurisdiction and/or the United States, rather than face prosecution or
serve a sentence. Similar to FBI's list of most wanted, we encourage
the public not to attempt to apprehend any of these individuals, rather
they should notify us with information they have which might help bring
these fugitives to justice.
Mr. Chairman, this concludes my prepared statement. I will be happy
to address any questions you or other Members of the Committee may
have.
The Chairman. Thank you very, very much.
And, we now go to Reana Kovalcik.
STATEMENT OF REANA KOVALCIK, CONSUMER
Ms. Kovalcik. Thank you, Chairman Rockefeller and Senator
Lautenberg, for inviting me to speak today about movers and
brokers who engage in these fraudulent practices.
My name is Reana Kovalcik, and I am originally from
Chicago, and now living in New York. I am 28 years old and I
work for a non-profit organization in New York City.
In March 2010, my boyfriend, Ross Heron, and I began a
process of arranging a move from Chicago to New York. At the
time, I was already living in New York, having moved in
September 2009, to attend graduate school. In March 2010, Ross
was able to join me, and begin moving the remainder of our
apartment, mostly our large goods.
When we began the search for a mover, price was the most
important factor. Ross was still completing his graduate degree
and I was only working part-time in New York City. In our
previous moving experiences, which we had many, we had always
rented our own truck, and hired movers to load and unload us.
It was a simple process which we felt pretty comfortable.
This is our first time moving between states however, and
we were not familiar with the process of interstate moving or
the companies who undertook interstate moves.
Using online search engines and a moving company search
site called vanline.com, we looked for companies that are based
in Chicago that could do an out of state move for us, and
compared the prices. All of the companies, whether it be an
online form or over the phone, asked how many rooms we had, and
roughly the size and the weight of our belongings.
We received quotes from four companies, ranging from $950
to $2,000. The most expensive was an in-person quote, given
after a site visit, the only one who gave a site visit. We also
priced out the cost of moving ourselves, via U-Haul, which was
roughly $876 for the truck alone.
After assessing all of the quotes, we decided that $950 was
still more than we wanted to pay and that we would move
ourselves with the U-Haul rental truck. We gave our response to
all four companies. Only World Wide Van Lines responded with a
new offer, offering $898, approximately $100 less than their
original quote of $999.
Since we would have to deal with finding people to help us
in both Chicago and New York and making a cross-country move in
the truck ourselves, if we did the U-Haul option, we decided to
go with World Wide Van Lines. We paid World Wide an original
deposit of $198.95 online with our credit card, and scheduled
the move for April 10, 2010. The remainder of the payment was
to be paid when our items were delivered to our new apartment
in New York City.
At no point in our correspondence with World Wide did they
indicate that they were a broker. It was also not outlined in
any of the materials or e-mails we exchanged with them. It was
not until the movers on moving day were over five hours late
for the original loading time that we finally reached World
Wide over the phone, who then told us that they would not be
moving us, but a company called Able Moving was supposed to
arrive.
Had Able Moving been part of our original search, we would
never have selected them. A cursory Internet search of their
name brings up terrible reviews across several rating agencies.
However, since we had virtually no say in who was moving us,
having thought we were contracting with World Wide, we accepted
that this company was going to be doing our physical moving.
Once the Able Movers arrived, our belongings were loaded
into their truck, having them pre-packed by us. Ross was given
and signed a bill of lading, which confirmed the original
estimate given to us by World Wide, and left a space for any
moving materials needed, of which we used none, because we
packed everything in advance. The guaranteed delivery date
given to us by Able was Wednesday, April 14, 2010.
After our move date had come and gone with no contact from
or ability to contact Able Moving, we finally received a call
from an Able representative on Thursday, April 15, telling us
that our belongings would not be delivered until Saturday,
April 17, and that we now owed $2,000. Able claimed that we
were being charged for packing materials, of which we had not
used any, and for the additional weight of the truck. Although
we asked for a re-weigh, which we had determined we were
legally entitled too, we were never provided with the actual
weight of our items.
We attempted to reason with Able and negotiate the delivery
of our belongings, but were met only the verbal abuse and
demands for the money. We finally consented to pay the $2,000
upon delivery, the Able movers showed up in an unmarked truck,
supposedly containing our belongings, on April 18, 2010. The
movers demanded cash on delivery, but were unable to provide us
with contracts or any new documents that justified this new
amount.
When we first were notified by Able of the new charges, we
had contacted the police for advice. They suggested we call
them when the movers arrive in case there were any problems.
Because the movers had brought no new documentation and were
being extremely hostile, we called the police. Before they
arrived however, the movers took off in the truck with our
belongings.
The story takes many twists and turns from there, which I
have included in my longer, full-length statement for the
Committee. In the end we had to pay $2,434 in ransom payments
to Able Moving to negotiate the release of our belongings, a
majority of which we eventually found to be lost or stolen,
totaling roughly $10,000 in loss and damages.
Factoring in the cost of our original deposit with World
Wide, and the cost for us to rent another truck, and then hire
new movers to help us unload, what was supposed to be an $898
dollar move, cost us roughly $3,000 in fees and over $10,000 in
loss and damages.
While it took over 3 months from our belonging to be moved
from Chicago to New York, this ordeal has stretched out over 3
years, since I am here today. We filed paperwork with every
agency we could think of, including the Federal Department of
Transportation, the Illinois Attorney General, the Chicago
Department of Business Affairs and Consumer Protection and the
U.S. Department of Justice. I did do my homework.
To date, only the Chicago Department of Business Affairs
has pursued our case. After an October 13, 2010 hearing at
which I testified, they ruled that Able Moving was responsible
for $34,040 in fraudulent business practice fines, and $3,332
in restitution to Ross and myself. However, the Chicago
Department of Business Affairs was never able to collect from
Able Moving, and we have yet to receive any compensation from
the case. We were finally able to recover $3,770 through our
renters insurance, but this cannot replace many of the
sentimental items we lost, and does not come close to the
$10,000 in total damages.
Throughout this process, I have been continually surprised
and disappointed at the lack of legal recourse we have had. The
police did not want to help us, and mostly the other agencies
or offices we contacted were not willing or not able to assist
us.
If it had not been for my experience working in local
government, we might never have had traction with the Chicago
Department of Business Affairs. Because I had the necessary
knowledge to realize the importance of filing complaints with
all of the aforementioned agencies, I stand before you today to
relay this story. However, it is my personal opinion, as I have
sought out and spoken to other victims of this type of fraud,
there are countless other people who did not have this
knowledge and whose stories likely remain unreported.
Thank you. [The prepared statement of Ms. Kovalcik
follows:]
Prepared Statement of Reana Kovalcik, Consumer
Thank you, Chairman Rockefeller, Ranking Member Hutchison, and
Senator DeMint for inviting me to speak with you today about my
experience with moving carriers and brokers who engage in fraudulent
business practices, changing agreed upon rates and in some cases, like
mine, holding goods hostage and extorting exorbitant fees for their
return. My name is Reana Kovalcik and I am originally from Chicago, now
living in New York City. I am 28 years old and work for a non-profit
organization focusing on curbing childhood obesity.
In March of 2010 my boyfriend, Ross Heran, and I began the process
of arranging a move from Chicago to New York City. At the time, I was
already living in New York, having moved in September of 2009 to begin
graduate school. In March 2010, Ross was able to join me and move the
remainder of our apartment. When we began the search for movers, price
was the most important factor. Ross was still completing his graduate
degree in Digital Cinema, and I was only working part time in New York.
In our previous moving experiences we had always rented our own truck
and hired movers only to load and unload; it was a relatively simple
process and one with which we felt comfortable. This was our first time
moving between states, and we were not familiar with the companies who
undertook interstate moves or the process of an interstate move. Using
online search engines and a moving company search site called
Vanline.com, we looked for companies that were based in Chicago that
could do an out of state move and compared their prices. All of the
companies, whether via online form or phone conversation, asked how
many rooms we had and roughly the size and weight of our belongings. We
received quotes from four companies. The quotes ranged from $950 to
$2,000. The most expensive was an in-person quote given after a site
visit. We had also priced out the cost of moving ourselves via U-Haul,
which was roughly $876 for the truck alone.
After assessing all of the quotes, we decided that $950 was still
more than we wanted to pay, and that we would move ourselves with a U-
Haul rental truck. We gave our response to all four companies. Only
World Wide Van Lines responded with a new offer, offering $898,
approximately $100 less than their original estimate of $999. Since we
would have to deal with finding people to help us both in Chicago and
NYC as well as making the cross-country drive in the truck if we went
with the U-Haul option, we decided to go with World Wide Van Lines. We
paid World Wide an original deposit of $198.95 online with our credit
card and scheduled the move for April 10, 2010. The remainder of the
payment was to be paid when our items were delivered to our new
apartment in NYC. At no point in our correspondence with World Wide did
they indicate to us that they were a broker. It was also not outlined
in any of the materials or e-mails we exchanged with them. It wasn't
until the movers were over 5 hours late for the original loading time
that we reached World Wide over the phone, who then told us that they
would not be moving us, but that a company called Able Moving would be.
Had Able Moving been part of our original search for companies, we
would never have selected them. A cursory Internet search of their name
brings up terrible reviews on several rating agencies. However, since
we had virtually no say in who was moving us, having thought we were
contracting with World Wide for the move, we accepted that this was the
company who would be doing the physical moving. After the Able movers
finally arrived at our apartment, World Wide was no longer in the
picture and things began to fall apart.
Once the Able movers finally arrived, our belongings were loaded
into their truck, having been pre-packed by us. Ross was given and
signed a Bill of Lading, which confirmed the original estimate amount
given to us by World Wide and left space for any additional moving
supplies needed--of which we used none. The ``guaranteed delivery
date'' given to us by Able Moving was Wednesday April 14, 2010. After
our move date had come and gone and with no contact from or ability to
contact Able Moving, we finally received a call from a Ms. Tracie
Terman (Able Representative), on Thursday, April 15 telling us that our
belongings wouldn't be delivered until Saturday, April 17 and that we
now owed $2,000. Able claimed that we were being charged for packing
materials, of which we used none, and for the additional weight of the
truck. Although we asked for a reweigh of the truck, to which we had
determined we were legally entitled, we were never provided with the
actual weight of our items. We attempted to reason with Able and
negotiate the delivery of our belongings, but were met only with verbal
abuse and demands for the money.
When we finally consented to pay the $2,000 upon delivery, the Able
movers arrived in an unmarked truck, supposedly containing our
belongings, on April 18, 2010. The movers demanded cash on delivery,
but were unable to provide us with contracts that justified the new
amounts. When we were first notified by Able of the new charges we had
contacted the police for advice, who suggested that we call them when
the movers arrived in case there were any problems. Because the movers
had brought no new documentation and were being extremely hostile, we
called the police. Before they arrived, however, the movers took off in
the truck with our belongings. Worried that we would never find our
belongings again, Ross attempted to follow the vehicle to ascertain the
location to which our items would be taken. Although the Brooklyn
police called the drivers, were able to speak with them and instructed
them to return to the house, they never did so. The drivers drove
around New York City for several hours and then into New Jersey.
The drivers were pulled over in Little Falls, New Jersey after Ross
called 911 and reported the license plates. The officer on the scene
spoke with the truck drivers and instructed them to give Ross the
location of the storage unit where we could pick up our things. They
told police they would do so, and told us they would be taking our
things to a facility in Pennsylvania and that Able would contact us
with the storage location. We then arranged with Ross' family to meet
us in Pennsylvania so that they could help us load the storage unit.
However, after we had already arrived in Pennsylvania, we were informed
by the Able representative that the location had been a false one and
that our things would be in storage in an undisclosed location until we
wired money into their bank account.
Not willing to wire the money to a company we had by then realized
was running a scam, we requested that our family lawyer (Matt Kovalcik)
deliver the demanded amount to Able so that we could obtain our things.
We acquiesced to paying this amount, seeing no other recourse, so that
we could receive our belongings and pursue legal action against Able
afterward. When Mr. Kovalcik attempted to deliver the check in person,
we discovered that Able has no physical presence in Chicago, although
they claim to be a Chicago-based business. Their advertised address,
730 W Lake Street, is only a mailbox. Several other addresses we found
for the business proved to be residential units. During this time we
had also been working with the local Chicago Alderman, Scott
Waguespack, in whose district one of the Able addresses was located.
Alderman Waguespack was able to confirm that the secondary address we
had found for Able was a condo building.
Since Able had again ceased taking our calls, I attempted to reach
them by calling from a new number so we could ascertain just where the
company Able Moving LLC was located. The Able representative answered
the call from the unrecognized number and disclosed to me (without at
the time knowing my name or relationship to Mr. Heran) that there was
in fact no actual company in existence in Chicago. She told me that all
Able employees work from home and that she operates the company from
her home in Naperville, IL. At this point in time we began working with
Alderman Waguespack to file a case against Able with the Chicago
Department of Business and Consumer Affairs for fraudulent business
practices. Eventually our lawyer, Matt Kovalcik, was able to convince
the Able representative to meet in person on April 21, 2010 so that we
could deliver the demanded amount and receive the location where our
belongings were being held. Mr. Kovalcik, and my mother, Juliana
Kovalcik, met the Able representative in Aurora, Illinois and gave her
a money order for $2,434.34 in exchange for the address and storage key
where our belongings where being held, which turned out to be a Public
Storage facility in New Jersey.
Upon receiving the storage key a few days later in the mail from my
mother, Ross and I had to rent another moving truck and drive to New
Jersey to load our things. After opening the storage unit we found that
our things had been smashed and thrown together; almost all of our
furniture had been destroyed beyond repair. Several other items were
also damaged or destroyed including framed artwork. We found that Able
had removed the protective packaging in which we had wrapped our
furniture and that many of our boxes had been opened and the contents
thrown into boxes labeled Able Moving, LLC. We also found several empty
boxes, which were full of our protective packing material that they had
stripped off. We believe the items were repackaged to justify the
fraudulent copy of our Bill of Lading, which our lawyer was given
during the money exchange.
The contracts, copies of which are included in my supplemental
materials, were filled in with additional charges after Mr. Heran had
signed them. Since we never received an original, a carbon copy, or
even a scanned copy (until much later) we were unable to effectively
fight the charges. What you may note, even from the scanned copy, is
that Mr. Heran's signature is clearly in a pen type that does not match
the rest of the document, while the date was filled in by another
party. None of the materials charged on the scanned contract were on
the original contract signed by Mr. Heran.
After unpacking our things and assessing our damages from the New
Jersey facility we realized that many of our things are missing still
missing. After several calls and e-mails again to the Able
representative, we finally reached her and were told that ``12 or 13''
of our boxes never left Chicago. The Able representative claimed on the
phone that these items would be returned to us without charge. On April
29 we were told via e-mail that the items would arrive within a week,
on May 5 we received another e-mail saying the items were still five
days out. Later that week we finally received our second shipment of
goods, in another unmarked truck. These boxes were also damaged and as
we unpacked them we confirmed that a large quantity were still missing,
with many of our most expensive goods stolen.
In our final assessment we estimate that approximately $10,000 of
goods were missing/stolen, or damaged beyond use, in addition to the
many sentimental items that were damaged or missing. Although it took
over three months for our belongings to be delivered, this ordeal has
stretched out over almost three years. We filed paperwork with every
agency we could think of, the Federal Department of Transportation, the
Illinois Attorney General, the Chicago Department of Business Affairs
and Consumer Protection, and the Department of Justice. To date only
the Chicago Department of Business Affairs has pursued our case, and
after an October 13, 2010 hearing, at which I testified, they ruled
that Able was responsible for $34,040 in fines and $3,332.00 in
restitution to Ross and me. However, the Chicago Department of Business
Affairs was never able to collect from Able Moving and we have yet to
receive any compensation from the case. We were finally able to recover
$3,770.63 through our renter's insurance, but this can't replace many
of the sentimental items that were lost.
Throughout this process I have been continually surprised and
disappointed at the lack of legal recourse we have had. The police did
not want to help us and most of the other offices or agencies that we
contacted were not willing or able to assist us. If it hadn't been for
my experience working in local government we might never have had any
traction with the Chicago Department of Business Affairs. Because I had
the necessary knowledge to realize the importance of filing complaints
with all the aforementioned agencies, I stand before you today to relay
this story. However, it is my personal opinion, as I have sought out
and spoken to other victims of this type of fraud, that there are
countless other victims who did not have this knowledge and whose
stories likely remain unreported.
The Chairman. Well that was both a moving experience, and a
moving experience.
Before I go to you Ms. Darr, Senator Lautenberg has really,
really been good on this subject, and he was detained. Would
you object if he had an opening statement to make?
Ms. Darr. No sir.
The Chairman. Thank you.
Senator Lautenberg.
STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY
Senator Lautenberg. That is putting a vice on me. Thank you
very much, Mr. Chairman, and thank you Ms. Darr.
I listened with interest of course, but amazement as well,
because at a moving moment in a family's life, there is always
some confusion, there is often all kinds of emotional things,
and for these companies to take advantage of people at that
time is just something that ought not to be ignored.
I do not know whether, Ms. Ferro, whether these complaints
are frequent. Have we identified the movers who are most
frequently cited? Because, there are things we can do out of
your department that maybe should have a form that gets filled
out and certified before--and not certified, that gets to be
cumbersome, but at least there in writing.
And, also it would be a good idea for the perspective
victims to be a little cagey and say, ``I want you to know, Mr.
So and So, that I am recording our discussion, or I will insist
on a duplicate being sent over that I can send on to the
appropriate people,'' to at least start letting these guys know
that you are not just going to sit there and take it.
Every year, 35 million Americans move to a new home. Many
of these families need help moving their household goods, and
so they hire a moving company. The companies are often
entrusted with the families' most treasured possessions. So, we
expect them to be professional, do their jobs, honestly.
Most movers are honest, but this Committee's investigation
has revealed that enough are not, that it warrants our
attention. Unscrupulous movers devise ways to cheat
unsuspecting customers. The most common obviously is for
companies to give a lowball estimate for the cost of the move,
and then after they have got the families' property, as we have
heard from you, Ms. Kovalcik, you were chasing your property
around town, or around states. It could not have been very
pleasant.
So, once they have your property in their possession, then
the demands I guess get more rigid and more defiant, and the
fact they hold a families property hostage, everything from
valuables, to priceless keepsakes.
The Committee investigation found that some Internet moving
brokers, the middle men that connect consumers and moving
companies, make a bad problem even worse. These Internet
brokers are misleading customers by giving impossibly low
estimates, tacking on, and you have confirmed it, all three of
you, tacking on hidden fees and leaving customers with no
options when the moving company demands more money. They are
serious problems.
There have been more than 10,000 complaints from consumers,
since 2005. These complaints tell the story of families left
without access to their possessions, with goods that are lost
or damaged, or with thousands of dollars extra in fees, and who
knows what items might be missing at a moment of delivery that
you cannot find a place where suddenly they were no longer
available.
So, to better protect consumers, I was proud to author
provisions in the recently passed Surface Transportation Bill,
with the help of the Chairman, to require the return of the
consumers goods, permit penalties collected from the companies
to be given to consumers, and add new requirements for brokers.
Unfortunately, bad actors will always seek a way to exploit
the system. So, we have got to continue to adapt, stay one step
ahead of them, and let them know we are interested. There ought
to be some kind of a telltale place that people can go, and
just get a little bit of information about beware or be
careful, if moving this is what you have got to be aware of.
So, thank you all, and I look forward to hearing the rest of
our witnesses.
Mr. Chairman, I thank you very much for that.
The Chairman. Thank you, Senator Lautenberg.
And, Ms. Kovalcik you should know that he represents the
state of New Jersey, which is not far off. I do not think he is
going to give you his telephone number, but you got a friend in
the neighborhood.
Senator Lautenberg. I did not like the fact that this one
outfit took the goods to New Jersey, and that is not a very
good reputation to have going to New Jersey, the most crowded
state in the country, you may see your goods there. Thanks, Mr.
Chairman.
The Chairman. I want to thank Ms. Darr for being patient,
and I appreciate it, and we appreciate your testimony.
STATEMENT OF LINDA BAUER DARR, PRESIDENT AND CEO, AMERICAN
MOVING AND STORAGE ASSOCIATION (AMSA)
Ms. Darr. Thank you, Chairman Rockefeller, and thank you,
Senator Lautenberg. I am pleased to be here today to testify on
behalf of the American Moving and Storage Association
concerning consumer abuses by criminals posing as legitimate
movers. We do not call them movers; we call them rogues.
Although the vast majority of interstate household goods
moves are performed without major incident rogues can, and do,
take advantage of their unique position of trust to rob
consumers. When this occurs, the harm to consumers can be
substantial.
I would like to focus on what AMSA is doing to combat this
problem and what we think should be done by Congress and the
FMCSA. AMSA is the National Trade Association for the moving
and storage industry representing more than 4,200 interstate
moving and storage companies, local movers, international
movers, industry suppliers, and state associations.
AMSA is taking proactive and effective action to help
protect the public by ensuring that its members adhere to a
strong code of conduct. Under AMSA's ProMover Program, we
annually review performance of our members and terminate the
membership of companies that engage in repeated violations of
our code of ethics, or the FMCSA/STB regulations, or that have
a pattern of unresolved consumer complaints. We are so serious
about this that we expelled over 200 members in the first year
of our ProMover Program.
Another valuable consumer protection program, MoveRescue,
was initiated by an AMSA member, Unigroup, in 2003. MoveRescue
provides free advice and assistance to consumers having
problems with household goods moves. Many of these callers have
been victimized and need immediate assistance to recover their
wrongfully held possessions. The program features an
educational website, toll-free nationwide hotline staffed by
knowledgeable representatives, and access to a nationwide
network of pro bono transportation attorneys familiar with
household goods moving laws.
AMSA and its members will continue efforts to promote
legitimate movers and to weed out rogues, but a strong Federal
regulatory effort is essential to deal effectively with the
problem. AMSA's household goods consumer protection proposal
for the recently enacted MAP-21 was intended to give FMCSA
adequate authority and needed resources.
That proposal consisted of: (1) stricter entry standards to
screen out applicants who are not qualified or unwilling to
provide satisfactory customer service; (2) enhanced enforcement
through hiring additional household goods compliance
inspectors; (3) creation of a joint industry/federal consumer
assistance program, possibly patterned after MoveRescue, to
provide real-time consumer relief; and (4) improved and
simplified consumer education materials and practices as
recommended by an expert advisory panel, including educators.
The Committee's ``Commercial Motor Vehicle Safety
Enforcement Act'' and the Senate-passed version of MAP-21
included most of the elements of AMSA's consumer protection
proposal. Unfortunately, the final version of MAP-21
essentially only contained the entry provisions.
Much of AMSA's proposal was based on GAO reviews and
recommendations concerning FMCSA's household goods efforts. GAO
specifically cited a lack of household goods inspectors, noting
that the agency only increased the number of inspectors from
two to eight, between 2001 and 2007. There are approximately
7,000 registered interstate movers and 800,000 interstate
household goods moves annually. Yet today, there are only ten
full time FMCSA household goods inspectors. The old ICC had
regulatory responsibility over household goods movers, and
before its termination in the mid-1990s, I believe ICC had a
household goods team that included well over 100 inspectors.
Effective enforcement of household goods consumer
protections will require additional ``cops on the beat.''
AMSA's proposal calling for additional FMCSA household goods
inspectors is still needed, we believe. More needs to be done
on enforcement by hiring household goods inspectors, and by
creating a joint consumer assistance program, and we must do a
better job of consumer education. AMSA will continue to press
for these missing pieces of the puzzle.
Thank you for the opportunity to comment, and I would be
happy to answer any questions you might have.
[The prepared statement of Ms. Darr follows:]
Prepared Statement of Linda Bauer Darr, President and Chief Executive
Officer, American Moving and Storage Association (AMSA)
The American Moving and Storage Association (``AMSA'') is pleased
to make this statement on consumer abuses by unscrupulous rogue groups
posing as legitimate household goods movers and brokers. AMSA
congratulates the Committee for focusing on this important consumer
protection issue, and we are pleased to join you in the fight against
rogue operators that harm consumers and our industry.
AMSA is the national trade association for the moving and storage
industry. AMSA represents more than 4,200 members, including interstate
moving and storage companies, local movers, international movers,
industry suppliers and state moving associations.
The household goods moving and storage industry has a unique and
profound impact on consumers. The industry consists of 7,000 companies
operating at 13,900 locations, and executing approximately 800,000
interstate household goods moves annually. Beyond the numbers, though,
is the fact that these moves involve consumers entrusting most or all
of their possessions, to professional movers for safe transportation
and delivery over hundreds or thousands of miles.
Although the vast majority of these moves are performed without
significant problems, there is a rogue element inserting itself into
the marketplace that takes advantage of their unique position of trust
to rob consumers. According to the GAO, the Department of
Transportation receives approximately 3,000 consumer complaints related
to household goods movers annually, some involving egregious offenses.
There are also additional complaints reported elsewhere, such as with
AMSA, BBB and various other consumer complaint websites. While the
number of complaints is statistically small when compared to the total
number of moves performed without incident, when problems arise they
can be substantial for consumers.
The Committee's investigation leading up to this hearing
underscores the seriousness of the problem. That investigation focused
on four companies that had a combined total of 109 complaints
documented by MoveRescue, a program discussed in more detail later in
my testimony. The most serious of the complaints involved holding
shipments hostage, while other complaints primarily involve disputed
charges, delivery delays and damaged shipments.
AMSA believes that ensuring a strong, compliant household goods
moving industry is available to household goods consumers is one way to
continue to combat the ongoing problem of criminals preying on those
consumers. AMSA has taken effective action to help protect the public
by drawing sharp distinctions between the legitimate moving industry
and the criminals merely posing as movers. One way that AMSA does this
is to ensure that its members adhere to a strong code of conduct. Under
AMSA's recently launched ProMoversm program, AMSA moving
company members must agree to comply with AMSA's stringent Code of
Ethics, FMCSA/STB regulations, and other relevant business standards.
Upon compliance with these standards, the moving companies are then
certified as ProMovers by AMSA. AMSA annually monitors performance of
its members and terminates the membership of operators who engage in
repeated or egregious violations of the Code of Ethics, the FMCSA/STB
regulations, or has a pattern of unresolved consumer complaints. As an
example of the seriousness of our intent, we kicked out over 200
members in the first year of the ProMover program.
In fact, AMSA terminated the membership of Budget Van Lines, one of
the companies identified for investigation by the Commerce Committee.
That termination, which occurred prior to the Committee's
investigation, was made because of consumer complaints and the
company's low Better Business Bureau rating.
AMSA will continue to take action on its own to promote ethical
conduct by household goods movers in order to distinguish its members
from the criminal element imposing itself on our industry. However,
AMSA believes that a strong Federal regulatory effort is also essential
to deal effectively with the problem of criminals posing as household
goods movers.
Responding to a request from this Committee, the GAO undertook an
examination of regulation of the household goods industry and how the
changes in rules enacted in SAFETEA-LU, enacted in 2005, impacted the
effectiveness of that regulation. In its report to the Committee
entitled, Household Goods Moving Industry: Progress Has Been Made in
Enforcement, But Increased Focus on Consumer Protection Is Needed
(October, 2009) GAO found generally that the FMCSA had made limited
progress in dealing with household goods consumer abuses, and that the
SAFETEA-LU changes had little impact on that progress. GAO made
recommendations for improvements in four categories of consumer
protection--enforcement; establishing and maintaining partnerships;
consumer education; and enhanced data collection regarding consumer
complaints.
The GAO report, along with the experience of AMSA and its members,
were the building blocks for AMSA's consumer protection legislative
proposal for the Federal transportation program reauthorization bill.
Unfortunately, only a portion of AMSA's household goods consumer
protection proposal was included in the recently enacted MAP-21. We
still believe that our proposal provides the best possible path to
meaningful reduction in household goods consumer abuses. AMSA's
proposal has three components:
Entry
All applicants for new household goods authority would be required
to pass a written proficiency examination demonstrating their
understanding of, and ability to comply with, FMCSA's household goods
consumer protection regulations, would be required to show compliance
with tariff filing requirements, and also impose increased levels of
financial responsibility and filing fees. After meeting these
requirements, applicants would be granted provisional registration,
which would only become final after the registrant passes an FMCSA
consumer protection audit demonstrating that it is conducting its
business in compliance with the FMCSA household goods regulations and
has not had a pattern of substantiated customer service complaints
filed against it based on regulatory violations.
Enforcement
FMCSA would be directed to strengthen its enforcement approach in
three areas and would be given the resources needed to do so. These
three areas are: 1) carrying out consumer protection audits required
for new operators and, where warranted, existing operators; 2) the
hiring of additional Federal household goods compliance inspectors with
more focus on civil penalty and authority revocation cases where there
are repeated and/or serious consumer protection violations; and 3)
establishment of a new joint federal/private sector program based on
the existing industry Move Rescue program, through which consumers can
get advice and assistance, particularly in household goods hostage
situations.
MoveRescue has performed a uniquely beneficial role in protecting
consumers. Started in 2003 by UniGroup, Inc., parent company of
licensed movers United Van Lines and Mayflower Transit, MoveRescue
provides free advice and assistance to consumers needing help or
information concerning household goods moves. Many of these callers
have been victimized by criminals posing as movers and need immediate
assistance to recover their wrongfully withheld household goods. The
program features an educational website, toll-free hotline staffed with
knowledgeable representatives, and access to a network of
transportation attorneys, who make their services available on a pro
bono basis. In extreme cases of hostage goods or abandonment,
MoveRescue works with agents for United and Mayflower to ``rescue''
shipments and return the goods to their rightful owners. MoveRescue
also coordinates informally with FMCSA to support the agency's
enforcement efforts. AMSA's proposal would enhance that partnership by
establishing a clear, formal role for FMCSA, devoting more resources to
the effort and making the program truly nationwide in coverage,
involving more licensed, legitimate movers, providing expanded
marketing and greater awareness by consumers, and giving consumers
real-time, immediate help and advice from customer assistance
specialists during a difficult and stressful time.
Education
Movers are required to provide consumers with specific guidance on
their rights and responsibilities according to Federal law. We support
the concept, but the process and primary document are complex, lengthy
(60 pages), and often outdated. Consumers just don't read the
educational material. Therefore, we propose that FMCSA be directed to
convene a panel of education experts, industry personnel, and consumer
advocates to develop recommendations on how to make the consumer
educational effort more understandable and user-friendly.
The Senate Commerce Committee's transportation reauthorization bill
incorporated many of these proposals, and they were included in the
Senate passed version of MAP-21:
Applicants for new household goods operating authority are
required to demonstrate, through passage of a proficiency exam,
the ability to comply with household goods consumer protection
regulations, estimating, consumers' rights, and options for
limitations of liability for loss and damage.
If applicant successfully completes the application and
testing, it gets operating authority, but must undergo an FMCSA
consumer protection review within 18 months and is subject to
authority revocation if the results are unsatisfactory.
FMCSA is required to implement a Joint Assistance Program to
educate HHG consumers, assist consumers with timely resolution
of hostage situations, and improve implementation, monitoring,
coordination of Federal/State enforcement activities; FMCSA may
partner with one or more HHG motor carrier industry groups to
carry out the program.
Civil penalties assessed by the Secretary may be paid to
aggrieved shipper in hostage situations. Secretary may order,
after notice and opportunity for hearing, that hostage goods be
returned to shipper. Secretary may withhold or reduce civil
penalties as part of a settlement agreement.
FMCSA is directed to convene a task force of education
experts, industry personnel, and consumer experts to make
recommendations regarding condensing and simplifying existing
consumer protection information into a format that can be
easily used by a consumer and the use of state-of-the-art
education techniques/technologies, including the Internet.
The entry provisions and part of the enforcement provisions of the
Senate bill were the only parts to make it into the enacted version of
MAP-21. Applicants for household goods authority are required to pass a
household goods consumer protection proficiency examination, in
addition to the safety examination required of all applicants.
Successful household goods applicants are required to undergo a
consumer protection standards review within 18 months of beginning
operations.
MAP-21 also gave FMCSA the authority, after an opportunity for
notice and proceeding, to order a person holding a household goods
shipment hostage to return the shipment to an aggrieved shipper.
Finally, MAP-21 gives FMCSA the authority to assign all or a portion of
a civil penalty to an aggrieved household goods shipper and to withhold
all or part of imposition of a civil penalty, presumably as a
bargaining tool to resolve ongoing hostage shipment cases.
We strongly support the tougher entry requirements, and while the
enforcement provisions can be useful tools for FMCSA, we continue to
believe that the implementation of a comprehensive joint assistance
program, and adding additional household goods compliance inspectors
would be a better approach, and provide more timely assistance and
potential relief to victimized consumers. We also think that the
enhancement of consumer education contemplated by the Senate bill is
important. Hopefully, these provisions can be added in the next
authorization bill. AMSA will certainly continue to press for them.
It is important to emphasize that the provisions contained in
AMSA's proposal and in MAP-21 are of limited benefit if FMCSA does not
have the resources to implement them effectively, and to enforce
compliance with household goods consumer protections. FMCSA does its
best with available resources and, as GAO noted, has made enforcement
improvements, but FMCSA simply does not have what it needs to do the
job right. Effective enforcement of household goods consumer
protections will require additional ``cops on the beat'' . . .
household goods compliance inspectors. Despite increased efforts and
commitment, FMCSA still only has a handful of household goods
inspectors, yet there are thousands of registered movers and who knows
how many rogues operating in the household goods moving marketplace
without the appropriate authority. AMSA's proposal called for $3
million annually to hire additional FMCSA household goods inspectors.
We continue to believe that this is needed, at a minimum. We recognize
that the FMCSA budget is limited and the trucking industry is large,
but we also believe that the consumer protection and personal safety
aspects of the moving industry warrant special attention. We are not
moving widgets or working with experienced shippers, so the margin for
``mischief'' is large and must be addressed.
There are two other related household goods enforcement issues that
need to be addressed. The first concerns enforcement of FMCSA's new
household goods broker rules. Legitimate brokers can perform an
important function as intermediaries between consumers and reputable
movers, if consumers are adequately educated about brokers' role in the
moving process. But in the Internet age, unscrupulous brokers can
easily engage in deceptive practices such as not making it clear to
consumers that they are not movers, inaccurate estimates and the use of
unauthorized household goods carriers. In 2011, FMCSA addressed these
practices by adopting regulations containing a number of important,
common sense protections advocated by AMSA.
These rules essentially require that brokers provide the same
consumer protection information as required of household goods movers
and they focus on transparency, ending bogus estimates and unauthorized
carrier abuses. Among the most important protections are requirements
that a broker arrange for household goods moves to be performed by
licensed household goods carriers, with whom the broker has a written
agreement; that estimates be based on the carrier's published tariff;
that such estimates be based on physical surveys if the shipments are
within 50 miles of the carrier's place of business, or the physical
survey must be waived by the consumer in writing; and that broker
Internet sites include prominent disclosures about the brokers' role
and the names of FMCSA authorized household goods carriers with whom
the broker has a written agreement.
These are important new protections, but they are only beneficial
to the public if they are effectively enforced. AMSA believes that it
is important that FMCSA have a focused household goods enforcement
program for monitoring and enforcing these rules, and that Congress
provide sufficient resources to support the enforcement program.
Container companies that act as household goods movers are a good
example of the widespread non-compliance with household goods broker
regulations. It is reported that some container companies may be
operating as household goods brokers, but are marketing themselves as
household goods movers and contracting with freight carriers to haul
the containers. These companies do not have household goods broker
authority and often do not comply with the relevant household goods
broker rules.
A second area of concern is that some freight carriers are moving
household goods shipments for consumers across state lines while
attempting to evade regulation as household goods movers. These freight
carriers are relying on the so-called ``Limited Service Exclusion''
that excludes carriers from the definition of ``Household Goods Motor
Carrier'' if such carriers do not provide certain services, such as
packing and loading, to their customers. However, there are reports
that these carriers do, in fact, offer or supply packing and loading
services through providers believed to be operating as their apparent
or actual agents, while not registering with FMCSA as household goods
motor carriers, or complying with that agency's household goods
consumer protection regulations.
The consequence of these reported practices is that interstate
household goods shippers using these services are being denied
important consumer protections. They do not have protections ensuring
accurate estimates based on published tariffs of licensed household
goods movers, relevant consumer protection information, timely and full
performance by licensed household goods movers, and adequate remedies
for non-compliance that are otherwise available to household goods
shippers using authorized household goods carriers or brokers. AMSA has
brought this issue to FMCSA's attention and urged FMCSA to investigate
these suspected violations and enforce the regulations appropriately.
In conclusion, AMSA and its members will continue to do everything
we can to eliminate the consumer abuses caused by criminals posing as
household goods movers, to distinguish those bad actors from
legitimate, licensed movers, and to hold hard-working, legitimate
companies accountable for compliance with the law. AMSA knows that
FMCSA is committed to enforcing its household goods broker and consumer
protection regulations, but it needs adequate resources to be
effective. AMSA appreciates what the Committee has done to give AMSA
the tools that it needs and to shine a light on the abuses that must be
stopped. AMSA looks forward to working with the Committee and FMCSA to
give all shippers of household goods the protection they deserve.
I am happy to answer any questions members of the Committee might
have.
The Chairman. That you very much, Ms. Darr.
And, Mr. Romrell, I am glad that you are here and I want to
praise you for being here, because you are the only broker so
to speak who agreed to come, and you deserve credit for that. I
may not agree with everything you have done, but you are here,
and you did not have to be, you could have just turned us down
flat, and you did not, and you subject yourself to questions,
and so I respect you for that.
STATEMENT OF JASON M. ROMRELL, PRESIDENT AND CHIEF LEGAL
OFFICER, BUDGET VAN LINES INC.
Mr. Romrell. Thank you, Mr. Chairman. Thank you.
Mr. Chairman, members of the Committee, I am Jason Romrell.
I serve as President and Chief Legal Officer of Budget Van
Lines. We are a federally licensed household goods
transportation broker located in Los Angeles, California. We
are one of the Nation's largest household goods transportation
brokers, having arranged tens of thousands of moves and
currently employing about 100 people.
We appreciate the Committee's interest in household goods
transportation. We have been open and cooperating with the
Committee over the last 9 months and have provided over 500,000
pages of documents.
We have been operating with FMCSA authority as a broker
since 2005 under the same business entity and the same name.
Brokering is a common business model in many industries. It
helps consumers save time and money. We provide consumers easy
access to more transportation options, lower costs, and time
savings. We help carriers operate more efficiently, helping
them connect with customers and giving them a way to fill
returned trips on partial loads.
Without legitimate brokers, consumers in more rural areas
and small towns may not be able to find a carrier when they
need one, consumers everywhere might have fewer choices, prices
would likely increase, and many independent carriers would
probably be out of business.
It is important to note that we are not the motor carrier.
Mr. Chairman, as you mentioned we do not provide the actual
transportation, we do not own trucks, but we do have required
contractual relationships with carriers who are adequately
licensed and insured.
Our home page on our website references our role as a
broker, what I believe, very clearly, and we also have an
introduction video that explains on our home page how our
business model operates. In addition, our estimates reference
our position as a broker over ten times in very clear, plain
language. It is not something we hide, because we know we
provide a value to consumers.
I would like to explain how we provide consumers with
estimates, since this has been part of the Committee's focus.
Our trained and knowledgeable sales representatives explain to
the customer our role as a broker and how the estimate process
works. We then conduct a telephone survey to obtain an
inventory of the customer's household goods and other services
they require. This discussion can last up to two hours,
depending on the size of the inventory, questions that are
asked, and the explanation of the entire process.
Our sales representatives then provide consumers with a
written binding or non-binding estimate, depending on their
preference, and 60 percent of our consumers choose a non-
binding estimate.
Budget's policy is to be open and transparent with
consumers. In our documents and our conversations with
prospects, we strive to explain the moving process thoroughly
and in layman's terms to help customers avoid or minimize
additional charges, and we encourage them to be as accurate as
possible when they are creating an inventory of items to be
moved.
For example, we recently revised our inventory software to
ensure that inventories that we prepare are more comprehensive
and easier for the customer to accurately complete. We do not
earn, and our sales representatives do not receive a
commission, for additional or adjusted charges assessed by the
carrier at pickup or delivery, even when the carrier and the
customer agree to a revised estimate.
We care about doing business with integrity. We have
implemented numerous internal procedures beyond what is
required by law to provide accurate estimates and to improve
the customer experience. We conduct extensive training for our
sales representatives, we have a quality assurance department
that reviews each estimate for obvious errors, we prohibit
estimates based on volume to avoid potential abuse in the
packing and loading process, and we do not incentivize under
estimating. More importantly, we have a robust carrier
selection process.
A software system that we created checks, each day, the
Federal licensing status and the safety record of every motor
carrier in our network, to make sure they have not been placed
out of service with the FMCSA. Before signing a carrier to our
network, we look at the history of prior ownership and
affiliations, service credit and complaint histories, claims
resolution process and other important business information.
We also provide carriers with our own quality control
guidelines, a checklist to help them conduct business in
compliance with the Federal regulations, and to help them avoid
or reduce consumer complaints. The only thing the law requires
us to do is make sure the carrier is licensed.
We do not tolerate hostage situations, and we believe
carriers who engage in these situations should have their
licenses revoked and should be subject to civil and criminal
penalties. True hostage situations are not good for the
industry, they are not good for our business, and they are
terrible situations for consumers.
The nature of the industry is a difficult one, and
consumers want, and the law requires, written estimates, and
these contribute to some of the pricing concerns that are
raised by the Committee. But we continue to do our part to
improve our processes.
My heart goes out to Ms. Kovalcik. She had a traumatizing
experience. And, I am a consumer just like I am a broker. I am
sympathetic to that, and no one should have to go through that
situation.
I appreciate the opportunity, Mr. Chairman, to be here to
testify because we want to be part of the solution. We do not
want to be contributing to the problems. So, I welcome any
questions the Committee may have.
[The prepared statement of Mr. Romrell follows:]
Prepared Statement of Jason M. Romrell, President and Chief Legal
Officer, Budget Van Lines Inc.
Thank you Chairman Rockefeller, Ranking Member Hutchison, Senator
DeMint and other members of the Committee for the invitation to testify
today. My name is Jason Romrell and I serve as President and Chief
Legal Officer for Budget Van Lines, a federally licensed, independent
household goods transportation broker headquartered in Los Angeles,
California. We have been operating as a federally licensed broker under
the name Budget Van Lines continuously since 2005. We are one of the
Nation's largest household goods transportation brokers. We broker
approximately 10,000 moves annually and employ approximately 100
people. We take care of our people, providing decent wages, medical
insurance coverage and other benefits. As stated in our mission
statement, we strive to be the country's best moving broker by working
with quality carriers that take care of our customers and their
property, by delivering exceptional customer service throughout the
entire moving process. We treat our customers and our employees the way
we treat our family and friends.
We appreciate the Committee's interest in household goods
transportation, ensuring such moves occur safely, efficiently and
fairly and exploring ways to improve the experience for consumers. We
have been open and cooperatively working with the Committee over the
last nine months and have provided the Committee over 500,000 pages of
documents to assist in its investigation of the household goods
transportation industry.
Let me take a moment to explain what household goods transportation
brokers do, as it is often misunderstood. As you know, brokering is a
common business model in many industries, from travel to insurance
sales to the groceries on the supermarket shelves. Brokering is an
effective and common business model because it increases options and
saves businesses and consumers time and money. In the interstate moving
industry, brokers like us arrange transportation services between
customers and qualified household goods motor carriers. We help
customers in a variety of ways, by providing easy access to more
transportation options, lower costs and time savings. We help customers
navigate a host of complicated and often unfamiliar decisions that must
be made when arranging an interstate move. At the same time, we help
federally licensed household goods motor carriers operate more
efficiently by reducing their marketing costs and helping them connect
with customers. We save motor carriers money and time by taking
inventories and working with customers through the initial sales cycle.
We also help motor carriers operate in a difficult economy by giving
them a way to fill empty space on return trips and to fill partial
loads. The services we provide create a win-win situation for both
consumers and household goods motor carriers.
It is important to note that we are not a motor carrier; that is,
we do not provide the actual transportation for a shipper's household
goods. Acting as a broker, we are not allowed under Federal regulations
to own, operate or control the motor carriers to whom we broker jobs.
We have contractual relationships with household goods motor carriers
that are adequately insured and that the Federal Motor Carrier Safety
Administration (FMCSA) has granted a license to transport household
goods, and these are the only motor carriers we use for moving our
customers' shipments. Our company's website and documents very clearly
state that we are a federally licensed household goods transportation
broker and not a motor carrier. Our website's homepage includes a short
video explaining exactly how we help consumers arrange moves. We comply
with the many Federal requirements applicable to household goods
transportation brokers, including registration with the FMCSA,
obtaining process agents, securing appropriate bonding, and using only
properly licensed household goods motor carriers to provide
transportation.
It is also noteworthy that our volume has seen significant growth
almost every year since 2005, which we attribute to operating our
company with a high level of integrity, referrals from past customers
and our ability to provide consumers with a variety of quality,
reliable motor carriers offering very competitive prices.
Let me explain how household goods brokers provide customers with
estimates for interstate moves, since this has been a major focus of
the Committee's inquiry. Under Federal regulations, we may provide
customers with written binding or non-binding estimates showing the
anticipated cost of a move. Whether it's binding or non-binding is the
customer's choice. The estimates must be based on either a telephone or
a physical survey of the customer's household goods. A physical survey
is required if the goods are located within a 50-mile radius of the
motor carrier's or agent's location unless the customer has waived the
physical survey requirement in writing.
What normally happens when a potential customer contacts us is that
the potential customer will fill out a request for a moving quote, then
one of our trained and knowledgeable sales representatives will follow
up, explaining our role as a broker and how the estimates work
(including the binding versus non-binding estimate options). We then
conduct a telephone survey to obtain an inventory of the prospect's
household goods and other services that are requested or required. This
process involves a detailed discussion with the prospect that can last
up to two hours depending on the size of the shipment, including time
answering questions, explaining the process, reviewing the customer's
unique situation and creating the inventory.
We recently revised our sales process to include a more detailed
inventory process. Our sales representative walks the prospect (over
the phone) through their home room-by-room. As each room is
inventoried, the prospective shipper can more easily account for all
household goods and is more likely not to skip any rooms. For example,
the sales representative can walk the customer through the ``Living
Room'', then through ``Billy's Room'', then through ``Amy's Room'' and
so on. After the inventory is complete, industry standard figures are
used to assign prescribed weights to the various household goods for
arriving at an estimated total shipment weight. Our sales
representative then provides a written binding or nonbinding estimate,
consistent with applicable Federal regulations, to the prospect based
on carrier rates for the estimated shipment weight, the distance
between origin and destination, as well as additional and accessorial
services to be provided. The written estimate includes all inventory
items with the same room-by-room headings, making it easier for
prospects to review the inventory to ensure more accuracy. We do not
perform physical (on-site) surveys, regardless of the carrier scheduled
to do the move. Physical survey waivers are included in all our
estimates and must be executed and returned to us prior to our
acceptance of the job.
It might be helpful to explain the differences between nonbinding
and binding estimates, as this is an aspect of the household goods
moving industry that is often unknown or misunderstood. A nonbinding
estimate is an estimate of the total cost of the move based upon the
estimated weight or estimated volume of the customer's shipment, the
services requested, and the carrier's tariff-based rates, but it is
only an estimate. The final cost of a move done pursuant to a
nonbinding estimate may be higher or lower as determined by the actual
weight (or if requested by the shipper, the actual volume) of the
household goods. While the final price of a nonbinding estimate can
vary dramatically from the estimated price, Federal regulations state
that the customer does not have to pay more than 110 percent of the
estimated amount at delivery. This is known as the ``110 percent
rule.''
However, the 110 percent rule does not apply to additional charges
not appearing on the nonbinding estimate where: one, the customer
requests additional services after the goods are loaded, or two,
additional services are required that were not reasonably contemplated
in the estimate (for example, required use of a smaller ``shuttle
truck'' to reach the final destination where a larger moving truck will
not fit). Also, if the shipper's actual household goods end up not
matching the inventory contained in the nonbinding estimate, Federal
regulations allow the motor carrier to prepare a revised estimate for
the shipper's consideration, which then must be in writing and signed
by the shipper before loading the shipper's household goods. The
shipper is not required to accept a revised estimate and may cancel the
move. Likewise, the motor carrier may agree to accept and transport the
shipment under the terms of the original estimate.
A customer may want a nonbinding estimate for many reasons. They
may not, for example, want to go through the time-consuming process of
completing a detailed inventory, or they may be unsure of the actual
pieces or quantity they will end up moving (as would occur if a
customer plans to have a garage sale to get rid of many items before a
move or they have unknown items in storage), or they are unsure of the
number of boxes they may have once their items are packed. The
nonbinding estimate provides the customer with a general idea of the
cost of the move, but the actual cost is determined at or before
delivery based on the shipment's actual weight or volume.
A binding estimate is an agreement between the customer and the
motor carrier that sets the cost of the move based upon a precise
inventory and listing of services to be provided. Customers may opt for
a binding estimate if they are certain of the amount of goods and
number of boxes to be moved. Federal regulations provide that the
customer does not have to pay more than the binding estimate amount at
delivery to receive his or her goods at destination. However, Federal
regulations allow the motor carrier to collect fees for additional
services requested by the shipper after loading that were not on the
estimate, or for services that were not reasonably contemplated when
the estimate was prepared and are needed in order to complete delivery.
As with the nonbinding estimate, if the shipper's actual household
goods do not match the binding estimate's inventory, Federal
regulations allow the motor carrier to prepare a revised estimate for
the shipper's consideration before loading the shipper's household
goods. The shipper is not required to accept a revised estimate and may
cancel the move. Likewise, the motor carrier may agree to accept and
transport the shipment under the terms of the original estimate.
Budget's companywide policy is to be open and transparent with
customers. In our documents and in our conversations with prospects, we
strive to explain the moving process thoroughly and in layman's terms
and help customers avoid or minimize additional charges by encouraging
them to be as accurate as possible when creating an inventory of the
items to be moved. We do not earn and our sales personnel do not
receive a commission on additional or adjusted charges assessed by the
motor carrier at pick-up or delivery, even when the carrier and the
customer agree to a revised estimate. Therefore, there is no incentive
whatsoever to underestimate the cost of a particular job.
Budget cares deeply about doing business with integrity. With that
in mind, we have implemented numerous internal programs and procedures
above and beyond what is required by law to provide accurate estimates
and improve the experience of residential customers booking moves with
us. We conduct extensive initial and ongoing training with our sales
representatives to ensure they are knowledgeable and up-to-date on the
moving industry, the applicable regulations and with our internal
processes. We strive to train our employees properly and completely so
they can better describe the moving experience to prospective
customers, explain different estimate options and respond accurately
and in plain English to customers' questions.
We also created a Quality Assurance Department that reviews every
estimate before it is sent to a carrier, looking for obvious errors and
flagging estimates that do not meet quality assurance standards. Sales
calls may be recorded to help us quickly identify sales representatives
who potentially may cause problems or those who need additional
training. We do not permit our sales representatives to estimate jobs
based on volume, but only on weight, to avoid the potential abuse of
volume-based jobs by motor carriers in the packing and loading process.
We forbid sales representatives from underestimating jobs. When a job
goes wrong and we provide financial remedies to our customers, our
sales representatives do not earn a commission on those jobs.
We have a well-paid large customer service department that answers
customers' questions before, during and after a move, and acts as a
liaison between the customer and the motor carrier. We do everything in
our power to help customers through the moving process, including
helping customers deal with the occasional motor carrier the customer
believes failed to perform professionally or follow applicable
regulations.
Our carrier selection and retention process is selective and goes
above and beyond what is required by law. Since 2005 we have terminated
relationships with over 580 motor carriers for various reasons,
including a lack of quality customer service and regulatory
noncompliance. We created our own software system that checks the
Federal licensing status of every motor carrier in our network each day
to ensure they have not been placed out of service by the Federal Motor
Carrier Safety Administration. If we find a carrier out of service, we
suspend all jobs to that carrier immediately and will not book jobs for
that carrier until they are back in good standing with the FMCSA.
Before signing a carrier to our network, we consider the history of
prior ownership, prior affiliations with other companies, service
history, credit history, complaint history, claims-resolution processes
and other important business information and practices. Because safety
is also important to us, we also check the carrier's FMCSA Compliance,
Safety and Accountability (CSA) score and will refuse or subsequently
drop a motor carrier if the carrier's CSA score suggests serious
ongoing concerns. In fact, the same software program we designed to
check every carrier's licensing status on a daily basis also checks
every carrier's safety ratings so carriers who are deemed
``unsatisfactory'' by the FMCSA are flagged for immediate review and
disqualification in our system.
If we discover a motor carrier that exhibits an ongoing pattern of
unprofessional performance or that fails to comply with Federal
regulations, we will suspend or terminate that carrier from our
network. We also provide motor carriers with our own Quality Control
Guidelines, a checklist of issues to help them conduct business in
compliance with the Federal regulations, and to help them avoid or
reduce customer complaints. As you can see, we go well beyond our legal
requirements. The only thing the law requires we do is to check that a
carrier is licensed and insured.
Our records indicate that approximately 40 percent of the estimates
we prepare are binding and 60 percent of our estimates are nonbinding.
Customers are free to select whichever estimate type fits their needs.
When a motor carrier takes a job based on a nonbinding estimate, it is
highly likely that the job will result in a final price that is
different from the estimated price. This is the case whether the
estimate was supplied by a broker or the carrier itself. The reason for
this is that the final charges are calculated from the actual weight or
volume of the shipment. For weight-based moves, the final weight of the
shipment is obtained using weight tickets from certified commercial
scales. If the actual scaled weight of the shipment is off by even one
pound from the original estimated weight (a virtual certainty), then
under a nonbinding estimate scenario, the motor carrier is obligated
under its tariff to charge the customer for the extra weight. However,
under the 110 percent rule, the motor carrier cannot collect more than
110 percent of the amount from the nonbinding estimate at delivery.
Motor carriers are not required by Federal regulations to, and as a
matter of practice generally do not, provide us information on price
increases (from the original estimate) that occur at the beginning or
end of a customer's move. However, in an effort to be cooperative with
the Committee, our evaluation of customer complaints on file gives us
an indication that approximately 15-25 percent of our nonbinding
estimates result in a price increase to the customer beyond the 110
percent rule. Reasons for these price increases vary. Budget Van Lines
agrees that unfair and unexpected price increases in the household
goods transportation industry can sometimes create situations where
consumers are treated unfairly. Changes to the regulatory scheme should
be considered if such changes could reduce the frequency of customer
complaints where the price of a move based on a nonbinding estimate
increases above 110 percent.
While we have spent considerable time and effort improving our
internal processes, admittedly we still can and continually strive to
do better. We routinely evaluate and reevaluate every aspect of our
operations and continue to make refinements to our operations. Within
the last two years, we have revised and improved our estimates for more
clarity, striving for estimates in plain-English and with no confusing
legal fine print. We have implemented better and more consistent
training of our sales and customer service teams, which continues to be
an ongoing activity. Even though our customer service department is a
demanding, challenging job, we offer competitive wages and full
medical, dental and vision benefits to customer service employees. Our
QA department screens each and every estimate for obvious errors and
omissions and helps us continually evaluate performance of our sales
representatives and focus ongoing training where it is needed most. We
are constantly on the lookout for quality carriers to add to our
network of licensed motor carriers. We are diligent in working with
carriers, helping them appreciate quality customer service, providing
them with regulatory updates, and encouraging them to embrace not just
regulatory compliance but best practices.
It is no secret the household goods transportation industry is a
difficult industry. The tasks of assembling, packing, lifting,
stacking, storing, reloading, unloading, lifting, unpacking and
reassembling used furniture and other household goods is physically
demanding both on the laborers as well as on the property being moved.
In most cases, the movers (the people actually loading the truck) are
not the same people who prepared the estimate, so whether it comes from
a broker or a carrier, from a telephone or in-person survey, price
changes and adjustments are not that unusual. In fact, they are common.
And it is not just the household goods moving industry where price
adjustments happen.
The nature of the moving industry, and customers' desire for
written estimates, are factors that contribute to the pricing concerns
raised by this Committee. We continue to do our part to improve our
processes and our customers' experiences, but there may be industry-
wide solutions worth considering. Our proposals and suggestions include
the following:
Requirements for Brokers and Carriers:
Consider whether to require brokers to provide estimates based
only on weight, since shipments moved pursuant to volume-based
estimates can be manipulated upward by carriers in the packing
and loading process;
Require brokers and carriers to send the shipper's survey-based
inventory to customers separate from all other paperwork, along
with a simple explanation that the inventory is the basis for
the estimate and any changes to the inventory may result in a
revised estimate and additional fees on the day of the move;
Require motor carriers to price overages based on the price-
per-pound quoted in the estimate instead of allowing the motor
carrier to use a higher price-per-pound, even if that higher
rate is allowed under the motor carrier's tariff.
Require brokers and carriers to notify customers that they may
review and revise their estimate's inventory of items up to 48
hours before the scheduled pick-up time, giving customers time
to see how such changes will affect the estimated cost;
Prohibit brokers, motor carriers and their employees from
profiting from price adjustments before, during or after a move
that do not meet regulatory requirements (in such cases, the
FMCSA could ``claw-back'' those profits and return them to the
consumer, along with other appropriate penalties assessed
against the offending entity);
Require brokers and carriers to publish on their websites,
visible to consumers, the percentage of their loads booked
during a specified period that resulted in a known price
increase, the range of those increases, and average or median
increases (similar to airlines reporting their percentage of
on-time departures);
In relation to the above suggestion, also require motor
carriers using a broker to book jobs to promptly provide the
broker with data regarding price increases;
Mandate the inclusion of a prominent warning on the Bill of
Lading and on any revised written estimate above the shipper's
signature lines warning shippers not to sign documents with any
blanks (except those blanks that are necessary to be blank and
are authorized by Federal regulations);
Require brokers and carriers to report to the FMCSA and display
on their websites the number of household goods shipments they
booked/carried each month, so consumers are able to evaluate
complaint ratios versus gross complaint numbers posted by the
FMCSA (a broker or carrier with 10,000 jobs and 200 complaints
may be providing far better service than a broker or carrier
with 1,000 jobs and 40 complaints);
Federal Motor Carrier Safety Administration:
Require the FMCSA to focus more attention on the enforcement of
household goods brokers and carriers;
Require the FMCSA to create a short, easily readable, summary
consumer education document with key information necessary for
consumers to make informed decisions when considering
interstate moves;
Require the FMCSA to create a more accessible, user-friendly
online resource where shippers can evaluate brokers' and
carriers' performance and job histories, including the previous
suggestion that brokers and carriers report total jobs booked/
carried so complaint ratios can be provided to consumers with
accuracy and reliability;
Encourage or require more expeditious, responsive, and
aggressive license revocation processes for brokers and
carriers who clearly violate Federal regulations, thereby
protecting consumers from rogue movers and automatically
preventing brokers from using rogue movers;
Encourage the FMCSA to create standard volume measurements for
common household items, thereby bringing some uniformity to the
inventory process;
Require the FMCSA to deny licensing to individuals or
businesses who have been implicated in regulatory violations
previously, including the transfer or sale of existing
businesses already licensed, if the new owners have an adverse
or negative history in the moving industry;
Related to the preceding point, because we believe that many
rouge movers giving the moving industry a bad name are run by
individuals who pay others to take record-ownership of the
company to circumvent close FMCSA scrutiny and to obtain or
retain carrier authority (straw-man strategies), require the
FMCSA to conduct interviews of new applicants or restrict the
free transfer of motor carrier authority already assigned to an
existing company, thereby reducing or eliminating straw-man
strategies.
If the FMCSA cannot or will not engage in faster and more
aggressive license revocations, require the FMCSA to share with brokers
its data on motor carriers so brokers can ensure they are not working
with known problem-carriers.
We are aware that the Committee has been looking not only at post-
estimate price increases but also at alleged ``hostage'' situations,
where a carrier holds a consumer's goods until the consumer pays fees
in excess of the agreed-upon estimate. Budget does not tolerate true
hostage situations and believes that motor carriers engaging in true
hostage situations should have their licenses revoked and be subjected
to civil and criminal penalties. True hostage situations are not good
for consumers or the household goods transportation industry.
If we become aware of an alleged hostage situation involving one of
our customers, we endeavor to engage directly with the motor carrier
and use our influence to encourage the carrier to make things right
with the customer by delivering the customer's goods as promised in the
applicable estimate and to comply with Federal regulations. Motor
carriers that show a clear disregard for Federal regulations by
willingly and knowingly creating true hostage situations are terminated
from our network and will be reported to the FMCSA.
Nevertheless, we have encountered instances where alleged hostage
situations were determined, after careful investigation, to be cases of
honest misunderstandings between the parties. For example, when the
goods to be moved or the services necessary to carry out the move are
more than originally estimated, customers often sign a revised estimate
before the carrier loads their property, agreeing to the additional
charges. This scenario is permitted by Federal regulation allowing
motor carriers to make necessary adjustments when a shipper's situation
has changed.
In cases where a customer refuses to pay additional charges
pursuant to a signed revised written estimate, and subsequently lodges
a complaint with us, we step in and endeavor to help the customer
understand the estimate, the regulations and the circumstances
warranting the additional charges. No matter what we do or say, we do
not control the motor carrier, which is why more aggressive and prompt
enforcement by the FMCSA would benefit brokers and consumers alike.
Regardless of the circumstances, we strive to have motor carriers in
our network deliver our customers' goods without further delay and have
those carriers paid the appropriate, lawful amount due them. From our
analysis of complaints filed against us, only a few hostage allegations
turned out to be true hostage situations.
Thank you for the opportunity to testify today and we look forward
to working with the Committee on ways to improve the household goods
customer experience. I welcome any questions you may have.
The Chairman. I thank you, very much for that. And, we will
go to questions now.
The Ranking Member, Senator DeMint, from the state of South
Carolina, said that he might have a few comments to make when
he question time came up which should be right after mine, and
so we will eagerly await that.
Let me start with Ms. Kovalcik, and this is about the whole
binding estimates, and non-binding, and all of that. Congress
has been fighting household moving fraud for a very, very long
time.
Back in 1980, we decided that moving companies should be
able to give consumers binding estimates. That means that the
moving company and the customer have to agree on a price before
goods get loaded onto a truck. Once the goods are on the truck
the price is again final, but that is not the way it is working
in the cases that we have been reviewing, and certainly in
yours. Moving companies are loading the goods in the trucks and
then jacking up the price on consumers.
So, let me ask you these questions. You reached a written
agreement with a company called World Wide Van Lines to pay
$900 for your move, from Chicago to New York, right?
Ms. Kovalcik. Yes.
The Chairman. Yes, OK. But then, the company that moved
your goods, Able Moving, charged you $2,434 for your move, is
that correct?
Ms. Kovalcik. Yes.
The Chairman. What was Able Moving's answer when you asked,
if you did, why they were demanding more money?
Ms. Kovalcik. They originally told us that the weight of
the truck was heavier than anticipated, and they also----
The Chairman. The weight of the truck?
Ms. Kovalcik. The weight of our goods, yes, in the truck.
The Chairman. In the truck, okay.
Ms. Kovalcik. And that we were being charged for packing
materials. But, our original bill of lading, we did sign one,
but there were nothing filled out because we had not used
anything. Also, it was not crossed out. So, it was filled out
later.
The Chairman. Is there anything I might ask, either Ms.
Ferro or Mr. Barry, that says that you cannot pack yourself for
moving?
Ms. Ferro. No, the consumer is absolutely at liberty to
pack their own goods and to indicate that to the moving company
they contract with. There are no prohibitions.
The Chairman. In both of your experiences, that has not
provided a problem, like people packing ineptly so that things
became a shambles on a truck?
Mr. Barry. No, that has not been an issue.
The Chairman. OK. So, you packed your own services, and
your goods, and I guess you should not have done that, but you
did, and that would be the responsible thing to do, and you
sound like a pretty organized person to me. So, that does not
surprise me that you did it.
So, Able Moving charged you more than three times what you
were expecting to pay them, and their reason was they packed
your goods, but you packed them yourself, and the answer to
that is, yes. Many consumers would not be able to come up with
that much money on the spot. I would say most consumers would
not be able to come up with that kind of money on the spot. So,
what was the deal with you? How were you affected by that?
Ms. Kovalcik. Well, I have the exact date in my full-length
statement, but we actually had quite a long time to come up
with the money because there was quite a long process of chase
involved. On the Saturday they arrived, which was about 6 days
late, we had planned to call the police, and see a new
contract, and sort of see what happened. We did not have the
money when they arrived. We agreed to pay the money over the
phone but we did not have the money.
It turned out that we did not need to pay the money because
they then engaged in an interstate chase with our things. So,
we did not turn over the money then. We turned over the money
weeks later when we had, sort of, a hostage exchange. We
exchanged a money order for a key to an undisclosed storage
unit in New Jersey. So, we had several weeks, but we did have
to borrow money from my family and then we paid.
The Chairman. Borrow from your parents?
Ms. Kovalcik. Yes.
The Chairman. Mr. Romrell, is it in the order of things,
either rules, regulations, common practice, and I will ask this
of Ms. Darr also, that when you call them and you said that you
sometimes spend 2 hours asking them what it is they have to
pack, but you are still calling them, or maybe it is over the
Internet. So, it is sort of hard to judge.
Now my question to you is, it does not seem to be possible
to figure out what to charge somebody without actually seeing
what it is that they are packing. Now, that is even harder if
they have already done the packing, like Ms. Kovalcik did, and
therefore you cannot see, you can only see boxes, cardboard
boxes, or whatever. So, I do not understand that.
Why do you have to call them to offer them a price? And,
you said you spent 2 hours on the phone with one example that
you gave. I do not know that that is a common thing. I doubt it
is. But then, did you go pick out the moving company?
Mr. Romrell. Mr. Chairman, to give one of our prospects, an
accurate idea of the cost of their move, an accurate estimate,
we do have to go through the inventory process. There are
problems with in-home estimates, just like there are problems
with telephone estimates. You have to have three things that
come together at the same time.
The person who is taking the estimate has to be properly
trained, and they have to gather the right amount of
information. Whether it is over the phone or whether it is
person, the person doing the estimate has to know what they are
doing.
The second issue is the consumer has to be cooperative in
fully disclosing everything that is there. Even on an in-home
estimate, if they had a storage shed they forgot to mention, or
they have something in the garage and the estimator did not go
into the garage, you can have the same sorts of problems.
The third issue is the carrier. Even with in-home estimates
as with telephone estimates, when the carrier shows up the
person loading the truck is not the same person that did the
estimate. They can look at the property to be moved and say,
this does not match, and that is often where pricing issues
come up. The person loading the truck may be incentivized by
the carrier to say, ``Hey, if you collect extra money, you get
a commission from that,'' or maybe it is a great carrier and a
great employee, and they just see things differently than the
estimator.
So, our goal is to walk everyone that we talk to through a
very detailed inventory over the phone, and the system we set
up is to say, ``OK, let's go to your living room,'' we type it
into our computer and say, ``What is in your living room?'' and
we label that for them. But, we go through every piece of
property they have. And, then we go to Billy's room, and we
label that.
So, after we have walked through the entire house, the
entire inventory with our prospect, we send them a written
estimate that has this information detailed and labeled the way
we walked through it with them. So they can look through the
list and say that, ``Billy's room, I forgot the bunk bed,'' or,
``Why isn't my desk in the den listed here,'' and then we can
make additions or corrections if we need to.
But, when we do our job right, and the customer is helpful
with us and cooperative, we prepare very good estimates, and we
strive to do that because we want to prevent these types of
issues from coming up.
The Chairman. I thank you. My time is 3 minutes over.
Senator Lautenberg and Senator Pryor can note that, and duly
punish me. But, I wanted to get that answer out of you, and I
also want to pursue that with you, but Ranking Member Senator
DeMint, I call upon him.
STATEMENT OF HON. JIM DeMINT,
U.S. SENATOR FROM SOUTH CAROLINA
Senator DeMint. Thank you Mr. Chairman and I would ask
consent that my opening statement be in the record. No
objection, right?
The Chairman. No, not at all.
Senator DeMint. OK, thank you very much. I apologize for
being late. I appreciate all of you being here.
We all know that America has a very unique economy, and
that our citizens are very mobile. The ability to move around
the country and take better jobs is critical to improving our
way of life, and our opportunities as families. And so, the
moving industry is very important to everyone. Even to those of
us who are not moving, it is very important.
I have known that as an employer myself, being able to move
people in from other states. But, even when everything goes
perfectly moving is a very stressful experience. And when
things start to break down, it can become a nightmare as
explained today.
What we need to know is what we can do about the problems.
I have gotten a sense from what has been said today that this
is not a matter of us needing more laws, but more enforcement
of our laws. Would our Federal agencies folks agree with that?
Is this a matter of enforcement, or does this Committee need to
consider new legislation?
Ms. Ferro. Thank you, Ranking Member DeMint. Anne Ferro
here.
I would reinforce that the Committee took some very
positive steps in the authorizing language you incorporated
into MAP-21 and, specifically, in providing additional
authorities to demand hostage loads be released, to allow for a
sharing of the fines and penalties against a mover with the
actual consumer, and to require a level of screening at the
beginning before someone even gets their authority. You
provided some strong additional authorities.
I would say some further support for partners, our Federal
and state partners that are carrying out additional work
leveraging, kind of that force multiplier, and I would say
again this Committee played a leadership role, Senator
Lautenberg in particular, in incorporating into the original
authorization proposal some additional grant support for state
prosecution.
Thank you.
Senator DeMint. Mr. Barry?
Mr. Barry. I would agree with what Ms. Ferro stated. For
us, the ability to prosecute and investigate these rogue movers
is what we do. So, when we have the ability to work with our
Federal and state law enforcement partners it does act as a
force multiplier, it gives us an ability to bring more of our
cases to the U.S. attorneys' offices, and I think that it does
act as a strong deterrent within the industry.
Senator DeMint. So, I just want to make sure that I am
clear. There is nothing in the law that is holding you back
from prosecuting the violators of fraud in this industry. It is
just a matter of needing to multiply the force and effect
cooperation networks with the states.
Do you feel that the industry itself, the industry
association that Ms. Darr represents, is doing enough? I know
there are a lot of industries who do things with encouraging
best practices. A lot of them are involved with a lot of
voluntary enforcement of their members, when things are not
going right. Is the industry itself, the big players, doing
enough to root out the ones who are the bad actors?
Ms. Ferro. Senator, the industry, the reputable movers,
both at the state and the national level, have been very strong
advocates for pursuing and prosecuting rogue operations. At the
same time, it is from a Federal enforcement perspective. Our
agency, the Federal Motor Carrier Safety Administration, has
to, and does, demonstrate the commitment to detect, and pursue,
and prosecute those rogue companies.
And so, together I think it is a great deal of effort. Is
it ever enough? I think we all are really driven to continue
pursuing that.
Senator DeMint. If a consumer finds herself in the trouble
that Ms. Kovalcik did, how do they know who to call for help to
get their goods released? Did you have any idea what to do? Did
you just call the local police? What happens?
Ms. Kovalcik. The very first instance, when the moving
company arrived with the higher estimate, we did call the
police, in part because the movers were being extremely
hostile, but I do have experience in local government. So, I
started pulling up every agency I needed to talk to. I think
from the statements given there is probably even more had I
been even more savvy, but I went through the attorney general,
I went through the department of justice, I went through the
Federal Bureau of Transportation, I went to everything and
filled out everything and submitted forms to everything that I
could think of, so.
Senator DeMint. I know I am about out of time, but I would
like to ask the industry a question. It would seem like on
every contract, whether you are a broker or a mover actually
with the trucks, that it should have a number to call if there
is a problem, whether it be a Federal agency or someone in the
association, so that if this occurs, very quickly the right
people could get this, that you would not have to go through
local law enforcement and find out who else to call. Does that
exist now here, you know, like, how is my driving, call 1-800
on a truck? I mean, how do we do that for the consumer when
something goes wrong that they know who to call?
Ms. Darr. That is an interesting concept, the 1-800, how is
my driving, in the moving industry is not a bad idea, and we do
not have that. I mentioned earlier, Senator, the America Moving
and Storage Association is promoting a program called the
ProMover Program, and that is why I am taking the opportunity
now to put my folder in front of you and talk about how we
certify our movers and try to make sure they are doing the
right thing.
Part of that program is working with the Department of
Transportation to make sure that the companies coming into the
industry and the companies that we promote are solid and abide
by the law.
In terms of who you are able to call, one program that we
mentioned earlier is MoveRescue, and that is a program that is
primarily run through Unigroup, one of our member companies,
and they employ their system of agents, lawyers that are
familiar with transportation law, they have a partnership with
FMCSA, and they do have a 1-800 hotline number, but I would say
that the movers that are displaying that number are likely to
be within that Unigroup family of agents. That is not an
industry-wide program it is limited to Mayflower and United
which are Unigroup companies.
Senator DeMint. I would just hope the industry could have
some kind of a good housekeeping seal that was on every
contract, that if something goes wrong there was someone to
call, and if that seal is not there you should not move with
them.
Just a quick comment from you, Mr. Romrell. Can we improve
the consumer's ability to get to the right people quickly to
resolve these hostage situations?
Mr. Romrell. Thank you, Senator DeMint. One of the benefits
of working with a credible broker who respects their position
as a broker is they can help the consumer know how to do those
things. So, having a phone number to call is great, but I
personally, I have talked to consumers who have been in
dramatic situations, and I have contacted the FMCSA for them.
So, my pitch to our customers and our carriers is always the
same, if you are following the regulations, great. If you are
not, we are going to report you. If there is bad conduct and
bad actors, we do not want them in the industry.
Senator DeMint. One last comment. I think this is a system
that has to work quickly. Because if you are in a house with no
furniture and a new job, you are likely to pay the ransom in
order to get your furniture. So, I would just encourage whether
it is on the Federal side, the industry side, that we have to
have instant response so that someone would feel the heat
immediately if they are trying to take advantage of a consumer.
And, if the industry can do that then it is less likely we will
try to come in with more laws and tell you what to do.
Thank you for the extra time, Mr. Chairman.
[The prepared statement of Senator DeMint follows:]
Prepared Statement of Hon. Jim DeMint, U.S. Senator from South Carolina
Thank you, Mr. Chairman. I know you care deeply about consumer
protection and I appreciate your perseverance in drawing attention to
these issues.
A vital component of our exceptional and unique American experience
has always been the mobility of our citizens. This mobility has driven
our tremendous economic growth and contributed to our recoveries in the
past. In short, the freedom of movement we have in America is a great
attribute of our nation.
At the individual level, however, moving is rarely an easy
experience--especially when the relocation is to a distant place across
state lines. Even when everything goes well, moving is a particularly
stressful event, both emotionally and financially.
When things go poorly, however, these already stressful events can
quickly become outright nightmares. And when the things that go poorly
include fraud and theft, the government has a responsibility to protect
the citizens it serves.
Technology, specifically the Internet, provides tremendous
opportunity for entrepreneurs and established businesses to offer more
choice for consumers, and this is evident in the household goods moving
industry. This choice, in turn, empowers consumers.
Unfortunately, but not surprisingly, criminal and unethical
opportunists also benefit from this same advance of technology. The
Internet can make it easier for bad actors to enjoy a measure of
anonymity and the ability to appear respectable or perhaps even as
something they are not.
Mr. Chairman, I hope this hearing and your report allow us all to
learn more about the intersection of our mobile citizenry and the
challenges and benefits provided to them by the interstate moving
industry. I look forward to hearing about how our government agencies
(particularly the FMCSA, DOT, and DOJ) use existing laws and their
regulatory authority to address illegal behavior that harms consumers.
The unfortunate truth is that experiences like Ms. Kovalcik's will
likely continue as long as people move. Opportunists will continue to
break and ignore laws and regulations, and adequate enforcement is the
only deterrent. What we can do here today, at least, is highlight the
need for more consumer education and awareness, and encourage our law
enforcement to use the tools Congress has given them.
That seems like a worthwhile use of a Thursday morning, Mr.
Chairman. Thank you.
The Chairman. Thank you, Senator. Appreciate it. I am going
to call on Senator Lautenberg.
Senator Lautenberg. Thanks, Mr. Chairman.
The Chairman. But, then I want say that after that, I am
going to call on Senator Pryor, and all should be aware that he
is Chairman of our Consumer Subcommittee, a trained lawyer,
from Arkansas, and knows all the tricks.
Senator Lautenberg.
Senator Lautenberg. Before we get to the hard bitten
Senator from Arkansas, the fellow from New Jersey will take
over for just a few soft minutes.
And, one of the questions that looms in my view is the
brokerage relationship to the industry, and you know, when I
look at Mr. Romrell's testimony, you said that your company
makes every effort to adjust for that to provide consumers with
quality, reliable service, and you say that most complaints are
mere misunderstanding?
That is a pretty accusatory thing suggesting that, well,
more people want to make trouble than be serviced properly, but
the investigation has shown that your company has had a
disproportionate share of complaints, as many as 20 times more
than the average company. Now, how is it possible that
misunderstandings are responsible for this huge number in
disparity in complaints?
Mr. Romrell. Thank you, Senator Lautenberg. I think part of
the problem with the statistics is they are not ratio-based,
and that is something that I have talked to everyone in the
industry that I can about. The FMCSA, the Better Business
Bureau, AMSA, they never, when this investigation started or
after, they never asked how much volume we do.
We have complaints, and my statement in the testimony is
not to minimize those. Some complaints are misunderstandings.
Legitimate issues with the customer are serious issues. But
here is what I look at, is the ratio of complaints to the
volume of business that we do. Two really important things I
look at, are the BBB and the FMCSA complaints, and our ratio of
complaints is very low.
Now, how can you compare us to other industry actors, if
you do not know what their ratio is? So we have raw data that
does not tie to the volume that you do, and that would be a
very useful piece of information for consumers and for brokers
to say, ``What is your ratio of complaints so we know how you
stack up apples to apples?''
The other issue, Senator Lautenberg, is that we work with
consumers who are budget conscious consumers on a COD basis.
So, we do not--we try to, and we do some office moves, but we
do not do a lot of corporate relocations, and we do not do a
lot of military moves. So, the COD business in general, I think
Ms. Darr might agree, is a more problematic industry segment.
Senator Lautenberg. But the fact you may be handling a
larger volume would suggest to me that you should be better at
the supervision of the business, and not readily compared to
much smaller operations who have less of a number of
complaints.
I want to ask you this, Ms. Darr, do you have any idea how
much of the business is initiated by brokers?
Ms. Darr. I do not have that exact number, but I do have to
say that Mr. Romrell has made an excellent point, that brokers
do step in and help out some of the independent movers. Most of
the moving industry is represented by agents of van lines, so
they do not necessarily rely on the brokers as much as the
smaller independent movers do. So, I would say the bulk of his
clients, I guess if you will, were smaller independent movers,
and they are a significant force in the industry. We probably
have about a 1,000 independent movers that are members of the
American Moving and Storage Association.
Senator Lautenberg. It seems odd that an industry where the
transactions are relatively small, that there is such, and I
have got to say it, kind of a cloud that hangs over things.
Because, once they got you, they got you. And Ms. Kovalcik, you
have become an expert in having been gotten there, that you had
to chase your goods around the states.
But, the American Moving and Storage Association, DOT
Inspector General, said that consumers should avoid moving
companies and their brokers that require substantial fees or
deposits, but I am not sure that that makes a lot of sense. I
mean, if the truck is going to show up, you got a crew assigned
to it and so forth, I think there is a responsibility, to be
honest, with the purveyor.
So, have you seen a lot? And, Ms. Ferro, I do not know
whether you are into this kind of detail. But, of situations
where brokers have misused the concept of deposits to defraud
people, is that something you run into quite a bit?
Ms. Ferro. We have certainly seen in the arena of broker
practices a level of, sort of, freedom of operation if you
will, that is now getting better contained by virtual of a
broker rule that was put in place early last year. A consumer
does not have to put a deposit down to achieve a full, strong,
sound estimate from a reputable mover. That is point number
one.
And, under the new rule that is in place, brokers must
disclose, first and foremost, as Mr. Romrell indicated, that
they are not a mover themselves, they must disclose the moving
companies they are working with, they must disclose the DOT
number that they are operating under as well as the moving
companies they are working with, and they must provide the
consumer, the consumer's rights and responsibilities.
We have seen--you asked earlier whether there is a resource
where a consumer can file a complaint. We operate a National
Consumer Complaint data base, and receive on average anywhere
from 2,500 to 3,000 complaints a year, about 20 percent are
hostage loads complaints, they may be packing complaints, or
overcharging complaints. But, we have seen an uptick in broker
complaints in the past two years, and it could very well be
because of the increased focus on brokers and the opportunity
for brokers to utilize that Internet kind of no fixed address
concept more.
But, we feel very strongly about taking those, that we use
that National Consumer Complaint database to formulate our top
100 list. Again, our strategy is to detect, investigate,
prosecute and educate consumers, and so we use that complaint
database combined with our safety database to create a top 100
list, and pursue enforcement action and reviews of those
carries.
We have--the terminology I will use may not be appropriate,
but we have a higher rate of return on that top 100 list than
we do through our standard compliance reviews. We pursue
enforcement action against about 50 percent of the entities,
and this is our top 100 list for household goods movers. We
have now adjusted the algorithm to provide a better focus on
brokers as well, since they do not have those physical assets.
Senator Lautenberg. Mr. Romrell, once you have entered into
the transaction, a transaction, you become responsible for the
whole process, and as such, you have, I assume, investigate
complaints that you get. Do you try to come down with an
adjudication on these things? Have you talked to the company
and say, ``Hey, if you do not cut that out, we are not going to
be handling your business?'' Do you have a responsibility and
do you exercise it, to make these companies behave more
appropriately?
Mr. Romrell. I appreciate the question, Senator Lautenberg,
and the short answer is yes. Sorry, I did not have my
microphone on, but yes, we do what I would call our own
compliance review every time we get a complaint, and we keep
track of that information so we know which of the carriers in
our network are showing up more often than others. If we have a
system or a pattern of complaints, or bad behavior, that
carrier is out of our network. And, since we started doing
business in 2005, we have removed hundreds and hundreds of
carriers from our network, some because they went out of
service, which we drop immediately, and we know the day they
are out of service we drop them, but some just do not provide
the right level of service. So, we are always looking for
better carriers, but we do not keep the bad actors.
Senator Lautenberg. Mr. Chairman, thanks very much for
having this hearing. I would ask that we keep the record open
there. Lots of questions that come into mind as we review this.
The Chairman. I would say so. Yes, we will. Senator Pryor.
STATEMENT OF HON. MARK PRYOR,
U.S. SENATOR FROM ARKANSAS
Senator Pryor. Thank you Mr. Chairman, and thank you for
doing this hearing it is very important, it is good to have
everybody here today. Thank you for coming. Administrator
Ferro, it is always good to see you, and thank you for being
here.
I have a question for really both of you and Mr. Barry to
start with. And, I will stipulate to the fact that your
employees work hard, that they work as efficiently as possible,
as smartly as possible, but I also guess that with about 7,000
movers around the country doing about 800,000 moves a year,
interstate moves a year, that you probably are not able to get
to, you know, a very high percentage of the complaints and
really spend the amount of time you would like to on those, and
you all mentioned this state prosecution aspect, and really the
first question I have is, do most states have sufficient laws
on the books to prosecute some of this wrongdoing, or is it
really a matter of resources at the state and local level?
Mr. Barry. Senator, we actually have some ongoing work with
state prosecutors. We find that their laws are adequate for us
to move forward with these investigations, and our experiences
have been this, when we go and talk to the U.S. Attorney's
office, and we find that we just cannot get the cases
prosecuted through those offices, and we go to a district
attorney's office, or a state attorney general's office, we
have been welcomed, we have been given resources, and we have
had successful prosecutions. So, from our limited number of
cases, it has been a good experience.
Ms. Ferro. Senator Pryor, if I might jump in on the getting
to the larger group of states across the country, an area of
strong interest by us, and this Committee has demonstrated it
in their reauthorization recommendations last year, is to
provide resources either through our standard grant program, to
reinforce to states and states attorney general's offices, the
value of prosecuting these cases.
They find, if they prosecute, the fines general do not go
back to their specific efforts to prosecute this kind of
consumer protection and identifying resources. I think again,
this Committee identified our mix of grant programs as a
potential resource that was not adopted in the final MAP-21.
But, we work through a Federal-state working group to
expand both the knowledge and expertise among the states and
their attorney general's offices as well, specifically about
household goods moving prosecution or enforcement, and we have
a specific fraud working group that is just the enforcement
agencies at the state and Federal level, to again identify and
pursue specific strategies that we found in cases.
We have three states now with whom we have full MOUs, that
are going to begin doing compliance reviews enforcing cases on
interstate household goods movers beginning early next year,
and we have got another five states in the wings ready to
pursue that. We have also improved the resources for them from
an education perspective, and understanding of the regulations,
and an access to resources. Those are kind of the three
barriers they have identified that we are all working to
overcome for that fourth multiplier.
Senator Pryor. Good. Well, thank you for that.
Mr. Romrell, let me ask a follow-up on Senator Lautenberg's
question a few moments ago where he was talking about
basically, when you have a problem with a carrier, what do you
do? And, if I understood your answer correctly, you talked
about if there is a pattern of a problem with this carrier you
take him out of your system. But, why do you not have zero
tolerance? Why is it not that if you have one problem, that you
look at, and you realize it is a problem with the carrier, it
is not a misunderstanding, but it is a problem and they are not
doing right, why do you not take them out of your system right
then?
Mr. Romrell. Thank you, Senator Pryor. There are some
things that we have as a zero tolerance policy, but it really
depends on the situation, and it is one of the challenges in
the moving industry, and the way the regulations are written.
Carriers have some leeway, whether it is through a broker or
their own estimator, to make changes to the estimate when they
show up, and that is where I mentioned in my written testimony
there are some misunderstandings between customers and
carriers.
So, even if a customer complains, in some cases it is not a
regulatory violation, and it is not a bad action on the case of
the carrier. Sometimes it is just a misunderstanding. So, we
have to look at the situation and assess it.
If we have a carrier that is a bad actor--and I am not
sitting here saying we do great every time, all the time. We
strive too, but we make mistakes. But, when we do see those bad
actors, then we have to contact the carrier the minute that
report comes in. The minute the complaint comes in, we are on
the phone with the carrier saying, ``What is your side of the
story? Tell us what happened.''
Right, or wrong, we push them with our influence, which is
all we have, to make the situation right for the customer. We
are in an awkward situation because all we really have is for
leverage is our relationship with the carrier. So, we push
them, and sometimes we will actually pay the carrier off to
deliver goods, and then we will deal with the carrier after the
customer has been taken care of. So, it is really a case-by-
case evaluation that we go through.
Senator Pryor. I think the better--not telling you how to
run your business, but I think the better policy is the old
adage that is the customer is always right and more of a zero
tolerance standard, unless it is justifiable for some reason,
clearly justifiable for some reason with your carrier. I think
you would be a lot better off, and I also think you would play
a role in reducing a lot of the fraud and the problems around
the country. To me, that would be you taking responsibility and
taking the proper steps.
Mr. Chairman, let me, if I may, just pursue one more very
short line of questions.
Mr. Romrell, in your opening statement, you talked about
how you are a broker, and that you made it clear that you are a
broker to the consumer. Now, I have a little advantage here. I
am a lawyer, and I used to be the attorney general. So, we
spent a lot of time in consumer law. So, the way I look at
something may not always be the way the general public sees it.
But, when I look at your website, which I have a copy of
here, I think your website is misleading, at least in a couple
of ways, and I just would like to get your comments on it.
First, I would say that, even though you say you make it
clear that you are a broker, I do not think the website makes
it that clear, and also, I think that you never, at least not
that I could see on the website, you never really explain what
that means to be a broker. You know, you do not clearly explain
that, at least not that I can find, that you are really an
intermediary between--now, it may be somewhere in the fine
print, but it was not obvious to me when I read through it
here.
And, that, I think, is a significant concern because, in
the world of the Internet, it is always a challenge that people
understand who they are dealing with. So, I did want to bring
that to your attention.
The other thing about this, about your website, and I will
be glad to let you respond to the first thing as well, but let
me go ahead and get this second point in. I noticed on here
that you talk about, and I am seeing, one, two, three, four,
just in the first two pages of the website, four references to
reviews that you can get on here and read the reviews from
others.
I am guessing that you do not put the negative reviews on
your website. I did not see any. And, to me, that is misleading
if you are only telling part of the story, but you are not
telling the rest of the story. And, I think your customers have
a right to know if there have been a lot of complaints.
So, I would like for you to respond to both of those.
Mr. Romrell. Thank you, Senator. The explanation on the
website, if you have not seen it yet, I would urge you to click
on the video that is on the homepage. It is very prominently
displayed at the very top.
Senator Pryor. Yes, it is right there, a little video clip.
Mr. Romrell. Yes, and also I think the image has a link to
the video. The video explains our business model as a broker.
It lays it out in a graphic audio visual way, very clearly.
There is nothing misleading, if you watch that video, about our
role as a broker. We follow the regs, and list our status as a
broker, our MC and DOT numbers, and those give consumers
options to say, ``Can I go to the FMCSA and look at your
reviews?''
There are a lot of other rating agencies industry-wide, and
consumer rating in general, that have reviews for us. So, it is
an interesting idea to post the good and the bad. We have not
done a great job collecting a lot of positive reviews. It is
something we are doing more of now, actually surveying our
customers after the move, and we are getting a good response
rate and some very positive feedback.
But, the last step in the process before we do business,
before we have a business relationship with a consumer, is to
send them our binding estimate, and our binding estimate is not
an obligation for them, it is not a payment document. It is
their chance to say, ``What are you telling me you are going to
do?''
And I have written this in a way, revised the estimate we
used to use in a way that it is not full of legalese, and there
is no fine print. And, the very first paragraph where it says
``General Information,'' the very first line there says, ``As a
moving broker licensed with the FMCSA, an agency with the DOT,
Budget Van Lines matches your moving needs with a carrier that
is insured and licensed by the DOT,'' and we reference our role
as a broker ten times in our written estimate, clearly
displaying our role as a broker on the top, and throughout.
So, this is the consumer's chance, if they read it, which
is a challenge that is a challenge in any industry, if they
read it, there is no question before they decide to do business
with us that we are a broker and we are only an intermediary.
Senator Pryor. I will look at the video, but one point, and
I will even look at your form if you want me to, but one more
point on that is that, I think one thing that causes
confusion--my guess would be, one thing that causes confusion
in the consumer's mind, is on your website, at least on two, or
three, or four occasions, in big, nice, bold letters you talk
about full-service moves.
And, I think when people say on I'm on Budget Van Lines
full-service moves, even though you have said broker at
different places, they are thinking that you guys do the move.
Now, you all may not have intended that, but I do think that
would be confusing to consumers.
Mr. Romrell. Can I respond to that?
Senator Pryor. Sure.
Mr. Romrell. Senator, I think there are two issues
actually. The full-service move is an industry term that means
something to people in the industry. Consumers may not
understand that. I can concede that point. The other issue, and
I was just talking to Mr. Barry about this earlier this morning
is, I do not think consumers realize that there is a broker
industry within the moving industry itself. So, even if they
see broker, it may not register, and that is an opportunity for
the industry itself, and for us to educate consumers better.
Senator Pryor. Right. From my stand point, the fact that
there is a broker, just by virtually being a broker is not a
deal killer, it is not a bad thing necessarily. But, what I
would hope is my broker would be out there picking reputable
companies for me to deal with, and I think that is part of this
consumer-broker relationship that you need to safeguard and
work on. So, that would be my concern.
Mr. Chairman, thank you.
The Chairman. Thank you, Senator Pryor. I am somewhat
amazed that we are spending so much time on Mr. Romrell. I do
not know what the heck you are in business for, and I want to
go to Ms. Darr. You booted him out. You terminated him. You
terminated him. Why did you terminate him?
Ms. Darr. We terminated Budget Van Lines because of their
history with the Better Business Bureau and unsatisfactory
ratings.
The Chairman. How many people do you terminate?
Ms. Darr. Well, I mentioned in my testimony the first time
that we did our review of all of our movers, the several
thousand movers, we terminated 200 movers in the first year. It
is pretty significant. But, as time goes on, our movers have
kind of stepped up to the plate, and they are used to the
screening and the standards that we apply. We feel like the
boats have risen, and those that have not, we found maybe 20 to
25 a year that we have to get rid of during the course of the
year.
The Chairman. Maybe somebody, the four of you, can help me
understand why brokers have to exist at all? I mean, in other
words, do you not have all of these moving vans? Can people
call you and get advice? Do you offer advice? Do you have to
rely on him?
I mean, do you understand that many of the people who have
relied on him, when they got in trouble, received absolutely no
assistance whatsoever? They just walked away from them. I see
him as nothing but trouble, and I am really trying to figure
out in my own mind, good grief, what Ms. Kovalcik must be
thinking.
I do not know why he is in business. I do not know how he
makes his money. What does he make it off of? What service does
he render? He spends 2 hours, he said, I doubt that happens
very often, you know, scanning a living room which he never
gets into, to offer a price, and then he produces, or does not
produce, I do not know if he does produce or does not produce.
He takes a name, which implies that he is a moving company,
just like Senator Pryor said. I would believe, based upon what
Senator Pryor said in that paper, what I had seen before, that
he is a mover. What is he doing in business? Why is he in
business? Please answer me. You were not happy when he was
talking. I was watching your body language.
Ms. Darr. Thank you, Mr. Chairman. I guess you were
noticing my body language on a couple occasions. We are
concerned about consumers hiring brokers rather than going
directly to the mover. We are concerned about consumers having
estimates provided over the phone, rather than the mover coming
into the house and providing a written in-home estimate, which
we believe is their practice.
The Chairman. If Ms. Kovalcik wanted to find a mover, how
would she have done it? Not using him.
Ms. Darr. She would--I would have recommended her to come
to the American Moving and Storage Association for us to
recommend a mover.
The Chairman. That sounds like a great idea.
Ms. Darr. We provide recommendations.
The Chairman. Do you put yourself forward? Does she have
reason to know about you?
Ms. Darr. It is very--we do try to put ourselves forward.
The ProMover Program is what we are trying to make the brand of
the industry, and we are trying to create a standard high
enough that movers are gravitating toward it, they know that it
is necessary to be a part of the ProMover Program in order to
be successful in this industry, but it is difficult, because as
you noted earlier, Mr. Chairman, people move very rarely. It is
not like what kind of cereal you eat every day.
So, it is hard to get the penetration, the brand
penetration, that we need for a program like this, but we have
made a lot of good progress. It has been five and a half years,
and we are getting a lot of good press. The Federal Motor
Carrier Safety Administration has been helpful coming out with
press releases and talking about the importance of the program.
We work very closely with the Better Business Bureau.
All of those steps are leading people to come to the
American Moving and Storage Association to look for a
recommendation and to hire a legitimate mover. There are
limitations, and I have to say I think that there is more that
we could do with the Federal Motor Carrier Safety
Administration to promote the ProMover Program. I think that
there is also more that we could do with FMCSA to promote the
MoveRescue program that we talked about. And finally, I think
we should take the MoveRescue program to a higher level, and I
think Senator DeMint had a really interesting concept. You
know, put on the back of a truck, you know, how is your move? I
mean, why cannot there be a 1-800 number for people that are
having problems with their move, and if there were, that number
could come into a call center, for a program like MoveRescue.
The problem right now is that MoveRescue is run by a
private entity. There is not a partnership, a formal
partnership, with the Federal Motor Carrier Safety
Administration in place, and we think that is absolutely
critical. It was proposed in the bill, it did not make it
through, but the administrator talks about force multipliers.
The industry is there, to be a force multiplier, it is in
our own best interest that we get rid of the rogues, and
honestly, to some extent, a lot of our movers would like to
eliminate the amount of business that brokers have in the
industry, because in some cases that is money taken out of
their pocket. But, we can only do that if we are given the
opportunity through programs like MoveRescue and working with
FMCSA to let people know about the concerns, give them a simple
course of action to address these issues, and then once they
make that call, there have enforcement people on the ground to
deal with these issues, and with ten full-time inspectors for
our entire industry, it seems a little crazy to me. I have to
be honest. I believe it was 170 under the ICC, but we need to
check those numbers.
The Chairman. Yes, welcome to Federal budgeting.
Ms. Darr. Yes.
The Chairman. I mean this, it is a horrible thing.
Ms. Darr. It is a horrible thing.
The Chairman. I am humiliated and embarrassed that that is
the case. Then it could get worse. Maybe the economy will come
back and it will get much better.
Ms. Darr. Sir, I would add----
Mr. Chairman. You terminated him.
Ms. Darr. I did.
The Chairman. So why are we sitting here discussing him as
a useful component in this decision process that Ms. Kovalcik
went through? Why is it necessary that he be involved, or his
people be involved? I think he false advertises, he gives the
impression he is a moving company, and he is not full-service,
and he is not--he does not show up at the house. You know, to
me it is one-sided, and maybe I am wrong, so I am going to turn
to Ms. Ferro and Mr. Barry, and you can give me a scolding if
you want too, but I do not think you will.
Ms. Ferro. Mr. Chairman, the question of why are brokers in
business in the household goods moving industry is a tough one
to answer, because that is a longstanding practice. It is sort
of a because they can.
The law, the Federal law, overseeing the movement of
freight, allows for a broker industry in all aspects, whether
it is a household goods mover or a standard freight mover. As I
mentioned, we have 21,000 brokers in our oversight structure
that have authority through the Federal Administration, FMCSA,
to operate, and about four or five hundred of those are
household goods brokers, specifically.
We are absolutely committed to pursuing the provisions of
the broker rule that we put in place last year, to ensure that,
since brokers operate, that they are required to demonstrate
full disclosure, that we hold them to that, and that we
continue to identify as we have, and are doing right now as we
can carry out two pretty significant investigations, the data
points that are indicators of patterns of potential violations
so we can prevent the kind of fraud that you have heard about
today, and that I know you have heard from constituents on, so
that we can continue to pursue that.
The Chairman. Now Ms. Darr can terminate him, figuratively
speaking. You can, too.
Ms. Darr. We can now. Yes, we will take----
The Chairman. Because of the new authority?
Ms. Darr. With the authority we have, and we have issued
much clearer enforcement policies where we identify evidence of
hostage loads. Now, this is where it is a little tougher to
link to a broker, because again the broker does not have the
assets. But, where we can create those links and pursue other
areas of violation, we can suspend and revoke a broker's
membership.
The Chairman. Now, remember that the person who is the
center of all of this is Ms. Kovalcik. And, I do not know this,
but I am going to guess, Mr. Romrell, that you have changed
your website, since we started investigating, and you knew that
we were.
Mr. Romrell. Mr. Chairman, I am not----
The Chairman. Can you just say yes or no?
Mr. Romrell. I am not aware of any changes since the
investigation started, any substantive change.
The Chairman. I am not aware. All right. Could you follow
that up? We will follow that up.
Mr. Romrell. Absolutely, yes.
The Chairman. OK. It is just crazy. It is just crazy. She
is the person who is going to pay, Ms. Kovalcik, some money to
be able to do something which happens in America and frequently
to individual families, but in an aggregate manner happens a
lot. And, you say the rules and regulations allow them to
exist, and then I look at them and I look at Ms. Darr, and she
has terminated him, she does not want anything to do with him.
No affect on him, no affect on him at all. Goes right ahead and
does his business. Terminated by Ms. Darr, well that is too
bad, but I will go ahead and keep on with what I am doing,
which is making a misery of Ms. Kovalcik's experience.
Now, I have to leave in about 5 minutes, but I am really
stunned by all of this. You know, at this point it is just like
what happened on Wall Street, you know, Too Big To Fail, and
then that wonderful question that Hank Paulson asks at the end
of the movie when they have got what $125 billion or $700
billion they have given to the big banks, and then somebody
says, ``Now, they are going to use that for housing aren't
they?'' And, Mr. Paulson is not sure, and the movie ends while
he is saying, looking out a blank window, with a blank stare,
and a sad face, ``I hope they do.'' And they didn't. They spent
it all on rewarding themselves on salaries.
And, it just absolutely defies my imagination that some of
those people have not gone to jail. I think going to jail is a
big deal. Certainly is for the person who does go to jail. I
think it is a big deal for all of those who are contemplating
doing business on an important sector and important people,
like Ms. Kovalcik who has not had much of a chance to talk
here, and she cannot defend herself against his company.
He false advertises what he is doing, then he says it is
fully explained, but if the word full-service is in there what
in the heavens name do you expect Ms. Kovalcik to think he is?
That he is a moving company. That is what he is, but of course
he is not, and has never been in her place, has no idea,
although he spends 2 hours on the phone. What he does for those
2 hours on the phone I have absolutely no idea. How big is the
chandelier? How big is your living room table? I mean all that
kind of thing, I have no idea.
But, it just does not hold water to me, and it strikes me
as it may be legal, and if it is legal under your definitions,
and rules, and regulations, and yours, Mr. Barry, then there is
not a whole lot I can say, except complain mightily, and try
and get your budgets in place so that you can--and of course,
the public never understands that, you know, that you do not
have enough people. They just say, ``Well, I have got a
problem, and nobody is helping me,'' and you want to and you
cannot because you do not have enough people. So, that is part
of our responsibility.
But, I do not understand why he is business, because he
misled a lot of people, abandoned a lot of people, they have
told us, because we have been working on this for many, many
months, and it is just wrong.
Ms. Kovalcik, you are going to end this hearing with
whatever is in your heart.
Ms. Kovalcik. You know, I was also really attracted to
Ranking Member DeMint's comment about having a hotline. When
this happened to us, I knew the police were not the right
people to call, but they were the most immediate, and I
recognized that budgets are tight and you cannot have--you
know, you cannot call someone and have the moving police come
to your door 10 seconds later. I understand that.
But, I do consider myself to be a savvy consumer, and I did
do my homework, and if there had been a number to call, I would
have called it. Instead, I had to think, OK, interstate
transit, who is going to regulate that? OK, shipping, who is
going to regulate that? And find these things throw my own
knowledge base.
I would love it if there was a number, even if the truck
was not reputable and they did not have the number listed, but
I could search and find the number, and then there be some
relationship with local law enforcement where they at least
they could detain the truck, and then, you know, whoever needs
to sort it out, can sort it out.
But, the police told me, you know, this is a contract
dispute, it is not our problem. So, there was no immediate
solution, and then the truck is gone, and then that is too
late. And, when we searched for moving companies, I had never
heard of Ms. Darr's organization. So, when a consumer is
searching that does not come up for them.
So, I would love the idea of a hotline, and maybe some way
at the very least whoever is the local law enforcement could
stop what is happening, and then the agency that really needs
to handle it, could come and intervene.
The Chairman. Yes, because they had a bill of lading, and
that was very compelling to you. Bill of lading is a bill of
lading. Something sort of final, and professional, and legal
about that, except it just does not mean anything, when the
mover comes in and has a different one, and asks you to sign up
at a much higher price, and says if you do not do it he is
going to hold you hostage.
This Committee's work is to make sure that people like you,
Ms. Kovalcik, do not get held hostage. You happened to be very
smart, and you did a whole lot more, you know, sort of smart,
investigatory work then would be the case for most families.
So, in fact, you are, untypical, unlikely to have this happen
too, but it did happen to you, because there is a limit to what
you can do, and I feel incredibly, badly about that.
So, I am going to adjourn this hearing, and I am a very
unhappy Chairman, and when I took over as Chairman I formed an
investigative committee. I took that idea from Henry Waxman,
and I have sitting behind me, some highly trained lawyers, who
look for malevolence wherever they can find it. They do not
look at airline schedules, or slots at Washington Reagan
National Airport, whatever. They just look for consumers
getting the bad end of the deal, and I think that is an
honorable and sacred work, and so do you, and so do you, and it
is what you do.
So, let us just agree that we have to pursue this, let us
understand that Mr. Romrell has been terminated, kicked out, by
the trade association, and that Ms. Kovalcik has had a horrible
experience and came all the way down here to tell us about it,
which is very brave. Although you are not shy, you did
extremely well. So, having said all of that, we have work to
do, do we not?
This hearing is adjourned.
[Whereupon, at 11:52 a.m., the hearing was adjourned.]
A P P E N D I X
Budget Van Lines Response to September 12, 2012 Committee Staff Report
Budget Van Lines
Los Angeles, CA, October 26, 2012
Hon. John D. Rockefeller IV,
United States Senate,
Chairman,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
Dear Chairman Rockefeller:
On behalf of Budget Van Lines, Inc., we offer this response to the
September 19, 2012 Committee Staff Report ``Internet Moving Brokers--A
New Consumer Protection Problem In The Household Goods Moving
Industry''. We respectfully request that our comments be made part of
the official hearing record for the hearing held on this subject on
September 20, 2012.
We appreciate the work of the Committee to investigate issues in
the household goods industry. Budget Van Lines has been cooperative
throughout the Committee's investigation by providing over 500,000
pages of documents to assist its investigation and was the only
corporate entity investigated that agreed to testify at the September
20th hearing. We agree that the household goods brokers and carriers
and the enforcement community can do a better job to ensure consumers
have good moving experiences. Budget Van Lines has been working hard
over the last several years to continually enhance its policies and
procedures with this goal in mind. We acknowledge that there are still
areas of improvement within our company where we can further reduce the
complications consumers sometimes face with a household goods move. In
addition, we will continue to work with the Committee, industry leaders
and the Federal Motor Carrier Safety Administration to identify and
implement industry-wide solutions. We support strong enforcement of
existing Federal regulations, enhancements included in the recently
passed MAP-21 legislation, and future legislative and regulatory
changes that will ensure the industry operates optimally.
Budget Van Lines agrees with the report's concerns with unethical
and unscrupulous brokers and carriers that do not comply with
regulations and create difficult situations for consumers. Budget Van
Lines agrees with the report's concern with brokers and carriers that
do not follow regulations and supports the strongest levels of
enforcement to get these entities out of the business. The entire
household goods industry suffers from the actions of a few bad actors.
Household goods brokers that misrepresent themselves to consumers,
evade regulations or operate under multiple names are problematic and
should not be permitted to operate. Rogue carriers and unethical
brokers should be investigated and put out of business.
However, household goods brokering by ethical brokers is a
legitimate business with many benefits for consumers and carriers.
Brokering is a common business model in many industries helping
consumers save time and money. In the household goods industry, brokers
help customers by providing easy access to more transportation options,
lower costs and time savings. We help carriers, many of them small
businesses, operate more efficiently by helping them connect with
customers and giving them a way to fill return trips and partial loads.
Honest and ethical brokers ensure consumers have access to reasonably
priced moves and ensure that independent carriers will continue to
survive and thrive. Without brokers, moving costs for all consumers
would be much more expensive and harder to obtain and many smaller
carriers would not be in business.
Budget Van Lines agrees with the report that brokers that engage in
the practice of intentional low-balling of estimates to get business
mislead and confuse consumers. If brokers are engaging in this
practice, they should be investigated and put out of business. Budget
Van Lines does NOT engage in this practice. Our sales representatives
are trained to complete as thorough an inventory as possible and to
prepare estimates that are complete and fair. We do not earn and our
sales personnel to not receive a commission on additional or adjusted
charge assessed by the motor carrier at pickup or delivery, even when
the carrier and the customer agree to a revised estimate. Therefore,
there is no incentive whatsoever to underestimate the cost of a
particular job. In addition, Budget Van Lines closing rate on estimates
is between 3 percent and 6 percent. What this means is that of the
estimates we provide, only a small portion of them actually turn into
moving jobs. If we were intentionally low-balling estimates, our
closing rate would be much higher.
Budget Van Lines agrees with the report's concerns about
unscrupulous brokers that collect booking fees and deposits and do not
perform legitimate services or credit them to carriers. Budget Van
Lines collects a booking fee and a deposit for its services at the time
the move is booked. Budget Van Lines credits the deposit to the
customer against the total cost of the move and reflects the motor
carrier's fee for the services Budget Van Lines provides. Motor
carriers who work with Budget Van Lines do not have to incur the same
expenses for marketing to prospective customers, taking routine calls
with questions about the moving process, creating inventories,
preparing estimates or addressing customer service concerns before
goods are shipped. The provision of these services by Budget Van Lines
offers considerable savings in overhead for the motor carriers. The
booking fee and deposits are separately itemized on the estimate. In
addition, the booking fee and deposit ensures the customer that Budget
Van Lines will provide as accurate an estimate as possible, arrange the
move with a reputable and licensed carrier, and be available to help
resolve disputes or issues should they arise. If unscrupulous brokers
are collecting fees and deposits and not performing legitimate
services, they should be investigated and put out of business.
Budget Van Lines agrees with the report's concern that many
consumers do not understand what a household goods broker does, leading
to confusion for consumers and that some unscrupulous brokers are
intentionally misleading consumers. Budget Van Lines has operated as a
federally-licensed household goods broker since 2005, operating
continuously under the same name. We have always intentionally
represented ourselves as a broker and not a carrier. We do this in
prominent ways on our website, documents and estimates and through our
sales personnel. Sales representatives are trained diligently to
disclose our role as a broker and are terminated if they would attempt
by action or omission to mislead a potential customer into thinking
otherwise. This is a zero tolerance policy for our company. In
addition, these disclosures and policies were all in place before the
Committee's investigation began. That being said, we acknowledge that
many consumers may not understand what a broker is and this can lead to
confusion. Budget Van Lines believes more can be done to further
improve our corporate communications regarding explanations of the role
of a household goods broker, how we interact with qualified carriers,
the broker's role in the moving process and procedures to follow for
when a problem arises during a move.
Budget Van Lines believes the report's analyses based on volume of
complaints against our company based solely on raw numbers could be
improved by evaluating a company's complaint ratio instead. The
complaint ratio is the relationship between the numbers of complaints
to the numbers of jobs handled. We believe this is the only meaningful
and relevant data point. Without using the complaint ratio as a
measuring stick, it is impossible to assess whether the number of
complaints is high or low or whether they are increasing or decreasing
over time as a percentage of jobs performed. The use of raw volume data
alone is misleading and does not aid in identifying problems, bad
actors or overall industry trends. The staff report shows that over a
five year period, Budget Van Lines had 200 total complaints. However,
over that period, Budget arranged over 30,000 moves, resulting in a
relatively low complaint ratio of .006, which is not reflected in the
report. Budget is one of the Nation's largest household goods brokers
and has grown significantly each year over that time period, which we
attribute to operating our company with a high level of integrity,
referrals from past customers and our ability to provide consumers with
quality and cost-effective moves. While we strive for a positive moving
experience for every customer, occasionally problems do occur and we
endeavor to intervene and resolve them on behalf of our customers when
they do.
Budget Van Lines agrees with the report's concern with unexpected
price increases from original estimates to price of actual moves. Motor
carriers are not required by Federal regulations to, and as a matter of
practice do not provide us information on price increase from original
estimates. However, in an analysis of customer complaints on file,
Budget Van Lines estimates that approximately 15-25 percent of our
nonbinding estimates result in a price increase to the customer beyond
the 110 percent rule. While no estimate will ever be perfectly accurate
due to the need to weigh the shipment at actual loading, Budget Van
Lines agrees that more can be done to reduce the number of jobs
resulting in price increases. Budget Van Lines agrees that unexpected
price increases in the industry can sometimes create situations where
consumers are treated unfairly. There are many reasons for price
increases. Inventories are not accurate, estimates are not understood,
customers have high demand for written estimates or carriers are
unscrupulous. Budget Van Lines has spent considerable time and effort
improving our internal processes, and we still can and continually
strive to do better. We routinely evaluate and reevaluate every aspect
of our operations and continue to make refinements. Just over the last
two years, we have revised and improved our estimates for more clarity
and eliminated legalese and fine print. We have implemented better and
more consistent training of our sales and customer service teams. We
have a quality assurance department that screens every estimate for
obvious errors and omissions and continually evaluates performance of
our sales representatives. We have a robust carrier screening process
that goes above and beyond what is required by law. We are developing a
smart phone application that will help us provide a visual tool to aid
in producing more accurate estimates. Budget Van Lines is at the
forefront of the industry in trying to improve the customer experience.
Changes to the regulatory scheme should be considered if such changes
could reduce the frequency of customer complaints where the price of a
move based on a nonbinding estimate increases above 110 percent. In our
testimony of September 20th, we included 17 individual proposals
recommendations for brokers, carriers and the FMCSA to improve the
process and commend them to the Committee's consideration.
Budget Van Lines believes the comprehensive fact situations
surrounding each of the specific case examples involving Budget Van
Lines are not fully acknowledged in the report. There are specific
circumstances surrounding each of the cases analyzed in the report
which were not sought out by the Committee nor included in the report.
In each situation cited, Budget Van Lines attempted to resolve the
conflict at issue. From our perspective, these cases are not indicative
of systemic problems with the company's processes. We would welcome the
opportunity to walk through the fact situations surrounding these
examples for the benefit of the Committee.
In conclusion, we appreciate the work of the Committee and the
opportunity to respond to the staff report. We look forward to working
with the Committee going forward to address the concerns that have been
raised.
Sincerely yours,
Jason Romrell,
President and CLO,
Budget Van Lines Inc.
cc: Ranking Member, Senator Jim DeMint
______
Statement of the UniGroup, Inc. Move Rescue Program
The Move Rescue program was launched by UniGroup, Inc. in 2003 as a
resource for consumers who fall victim to criminals when moving across
state lines. Just four years later, our program was the only consumer
advocacy group recognized by the U.S. Government Accountability Office
in its report to Congress on the household goods moving industry.\1\
---------------------------------------------------------------------------
\1\ GAO, Consumer Protection: Some Improvement in Federal Oversight
of Household Goods Moving Industry Since 2001, But More Action Needed
to Better Protect Individual Consumers, GAO-07-586 (Washington, D.C.,
May 16, 2007).
---------------------------------------------------------------------------
UniGroup is the parent corporation of two of the Nation's largest
household goods movers, United Van Lines, LLC and Mayflower Transit,
LLC. The Move Rescue program leverages the UniGroup-owned van lines'
combined decades of quality industry service to aide all consumers
regardless of which mover they chose. The moving public can access Move
Rescue services by going online at www.MoveRescue.com, or by calling
the toll-free Move Rescue Help Line [telephone number removed]. Using
Move Rescue, consumers will find a large breadth of educational
resources--including what to look for when moving and how to avoid
falling victim--and their options if they believe they have already
been scammed.
In addition to real-time consumer advocacy, Move Rescue also
provides consumers with access to a nationwide network of
transportation attorneys who make pro bono commitments to our program.
Moreover, in extreme cases of hostage goods or abandonment UniGroup's
two licensed moving companies can be counted on to provide emergency
transportation services known as ``Shipment Rescues'' at no cost to
consumers.
Over the last nine years, Move Rescue's toll-free Help Line has
received around 2,500 calls from moving consumers in need of our free
assistance and education services. Move Rescue strives to develop
collaborative relationships with state and Federal regulatory agencies
and law enforcement officials to in order to effectively combat the
criminals who prey on moving consumers, including through the
coordinated location and recovery of consumers' property. All Move
Rescue callers are asked to also file their complaints with the FMCSA
complaint database, and we refer the most egregious matters directly to
FMCSA personnel.
______
Statement for Record
On behalf of UniGroup's Move Rescue program, we appreciate this
opportunity to provide the Committee with a statement for its hearing
entitled ``Taking Consumers for a Ride: Business Practices in the
Household Goods Moving Industry.''
For nearly a decade, the Move Rescue program has committed industry
expertise and assets toward educating consumers and finding innovative
ways to protect them from the actions of criminals posing as movers.
While the frequency of actual crimes committed against moving consumers
is relatively low, various government reports \2\ suggest that on
average less than one-half of 1 percent of the approximate 1.3 to 1.5
million moving consumers annually report actual crimes, we nonetheless
recognize that such crimes are financially and emotionally devastating
to the consumers involved.
---------------------------------------------------------------------------
\2\ See, GAO, Consumer Protection: Some Improvement in Federal
Oversight of Household Goods Moving Industry Since 2001, But More
Action Needed to Better Protect Individual Consumers, GAO-07-586
(Washington, D.C., May 16, 2007); GAO Consumer Protection: 'Household
Goods Moving Industry: Progress Has Been Made in Enforcement, but
Increased Focus on Consumer Protection Is Needed, GAO-10-38
(Washington, D.C., November 30, 2009) and U.S. Senate Committee on
Commerce, Science and Transportation Staff Report: Internet Brokers: A
New Consumer Protection Problem in the Household Goods Moving Industry,
September 19, 2012.
---------------------------------------------------------------------------
This Committee's interest in Internet brokers is appropriate. In
fact, the two Internet brokers identified in the Committee's early
investigation and hearing are, in terms of total complaints received by
Move Rescue in its history, the most serious of the offenders
investigated by the Committee.
Move Rescue receives on average 300 consumer calls per year, and
has responded to around 2,500 consumer complaints in its nine-year
history. Based on our observations, the thousands of legitimate, hard-
working, licensed household goods movers are not committing the
egregious crimes against moving consumers. Instead, we believe that it
is usually online brokers and other fly-by-night individuals who pose
as legitimate, licensed household goods carriers in order to perpetrate
such frauds on moving consumers.
Today it is just too easy for criminals to prey upon the moving
public via the Internet. Indeed, we believe that this problem exists
because the creation of attractive-to-consumer websites is the only
practical barrier to market entry for illegal online brokers, who often
ignore Federal licensing requirements. During the course of assisting
moving consumers, Move Rescue has found many Internet-based brokers who
operate from apartment homes, while their websites suggests that they
are instead sophisticated nationwide van lines.
Move Rescue is concerned that moving consumers can be easily
mislead by flashy Internet marketing tactics and unrealistically low
moving quotes, and are subsequently victimized through such Internet
brokers' outright deception. We have observed from assisting our
callers that Internet-based brokers do not perform visual surveys of
the property to be moved and provide low-ball moving estimates. These
consumers are asked to pay significant amounts of money in disguised
broker fees, and ultimately end up handing their worldly possessions
over to undisclosed third-parties that they never heard of before the
trucks show up in their driveways. In the most egregious cases, the
Internet brokers then seemingly disappear, and the so-called movers
hold the consumers' property hostage until they pay significantly more
money than quoted by the brokers.We concur with the Committee, without
reservation, that there is no place for such deceptive Internet brokers
in the interstate household goods moving industry, whose customers have
been given special protections by the Federal Government. The industry
is in a unique position with relation to its consumers, as its service
providers are in a position to enter into its customers' private homes;
to personally interact with their consumers' family members; and to
take possession of all the consumers' personal property.
Move Rescue urges Congress to provide Federal enforcement officials
with the resources that they require to fully enforce existing Federal
laws and regulations. Based on our industry knowledge and years of
experience in helping victims of fraud, Move Rescue is confident that
enforcement of existing regulatory requirements is the solution to this
problem, and more resources are needed.
According to one government report, in 2009 the FMCSA had assigned
14 of its roughly 1,100 staff to oversee the interstate household goods
moving industry--5 staff at its headquarters and 9 staff in field
offices. Among the 9 field staff, 8 were our household goods
specialists.\3\ Only 1 of the 8 was dedicated 100 percent of his time
to household goods enforcement, while the others were also responsible
for enforcing safety regulations.\4\ A little less than half of the 255
safety investigators in FMCSA's field offices had taken household goods
training and could assist in enforcement,\5\ though they also had other
duties.
---------------------------------------------------------------------------
\3\ GAO-10-38.
\4\ Id.
\5\ Id.
---------------------------------------------------------------------------
Move Rescue believes that increased funding for the FMCSA's
household goods enforcement efforts could permit the agency to devote
significantly more staff exclusively to combating illegitimate Internet
brokers and protecting the moving public. We believe that funding
enforcement and consumer education efforts will permanently rid the
industry of criminals and help all of the million or more consumers who
move annually to avoid illegitimate Internet brokers.
New laws, regulation or programs are neither necessary nor helpful
for combating the bad Internet brokers. In fact, any additional rules
or penalties are unlikely to influence the behavior of criminals as
long as the current enforcement levels are maintained. Rather,
additional regulations stand to harm both legitimate, hard-working,
licensed movers and the consumers they serve, who will pay higher costs
for lawful services or may be even more tempted to unwittingly select a
seemingly low-cost criminal online.
We believe that existing Federal laws and regulations already
successfully target and prohibit the improper practices of Internet
brokers. Through SAFETEA-LU and MAP-21, Congress provided the FMCSA
with powerful enforcement resources to ensure regulatory compliance and
impose fines and penalties. With adequate funding, the FMCSA could
provide protection to consumers without detrimentally affecting
legitimate, hard-working, licensed moving companies.
Finally, Move Rescue considers increased education as part of an
overall approach that, along with increased enforcement, will help
guard consumers against the acts of unscrupulous Internet brokers. We
support the efforts of the FMCSA in proactively educating moving
consumers about their rights through their ``Protect Your Move''
Website and consumer pamphlets, ``Your Rights and Responsibilities When
You Move'' and ``Ready to Move.'' Consumers must be well-informed when
deciding upon a mover--just as they would for any other major consumer
purchase. Move Rescue believes that working together, the agency,
industry, and the American Moving and Storage Association and its
ProMover program are collectively taking positive steps to increase the
effectiveness of consumer education.
Move Rescue thanks the Committee for allowing us to provide our
perspective.
______
Prepared Statement of Aldo DiSorbo
Mr. Chairman, I commend you for initiating this hearing into the
unfair practices that can occur within the moving industry. I am sorry
that I could not be here today. Please accept this written testimony in
my place, and I look forward to working with your staff to help the
Committee prepare its report.
As a long-time veteran of the moving industry--and an owner of nine
carrier and broker companies--I strongly believe the Federal government
must do more to protect consumers from the dishonest practices some
moving and broker companies may engage in. I have advocated for
stronger consumer protection laws in the past and I was pleased that,
as part of the 2012 Federal surface transportation bill, Congress
recently enacted some of the stricter regulatory standards I have been
publicly advocating for since 2007, such as requiring carriers to pass
a proficiency exam before becoming licensed.
Mr. Chairman, the moving industry has unfortunately become home to
too many unscrupulous and dishonest scam artists that create the
hostage situations you read about today. This is due to several
reasons.
First, consumers in the market for moving services are particularly
vulnerable to scam artists because consumers have little leverage or
recourse when a carrier or broker company takes advantage of them.
Consumers often need to move by a certain date and often must have
their household goods delivered by a certain date. Accordingly,
consumers can be put in a difficult situation if a carrier wrongly
changes the price at the last minute. The consumer can object, but the
carrier sometimes either refuses to conduct the move or deliver their
goods. Alternatively, the consumer can pay the increased price and
later challenge the company. But bad actor companies often make it very
difficult for a consumer to recover the overpayment. Many times,
consumers turn to my companies for assistance in these situations.
Second, in recent years, there has been a large increase in
bargain-seeking consumers and bargain carrier and broker companies;
many of whom have no experience in moving but who offer great deals and
then later raise their prices. The increase in bargain-seeking
consumers may be attributed to these difficult economic times. And the
increase in bargain companies stems from the Internet, which has made
it easy for anyone to start one of these companies.
In short, your Committee's investigation is badly needed. My
employees and I support your efforts and have worked with your staff
over the last nine months to assist your Committee with this
investigation. We have produced over 12,000 pages of documents and have
responded to dozens of staff inquiries about my business.
The Committee also asked me to produce consumer complaints I have
received. I have produced 180 complaints from 2011. I have given you
full complaint files, some of which contain comments from unhappy
consumers. In reviewing these complaints, I have three important points
I would like to the Committee to acknowledge:
1. Not all the complaints I produced were against my company; the
documents include complaints against independent carriers that
consumers asked my companies to help with.
2. I produced complete files, several of which described difficult
consumer experiences. In consideration for producing the files,
I would like to explain the rest of the story, and how things
were resolved.
3. Further, the complaints documented in these records represent
just a small fraction of the moves my companies arranged or
conducted. Specifically, my companies arranged or conducted
14,507 moves in 2011. Of those 14,507 moves, roughly 180
prompted complaints to the Better Business Bureau, state
attorney generals, or the Department of Transportation on the
subjects that the Committee is interested in (price changes,
late deliveries, and goods being held in custody). That is
about one percent of the moves my companies arranged or
conducted. In other words, the vast majority of customers who
book moves through my companies--about 99 percent of them--do
not experience these issues.
I have voluntarily cooperated with the Committee's requests because
I share your concerns about protecting consumers and am optimistic this
Committee can help solve the serious problems in the moving industry.
In fact, I have several legislative and regulatory recommendations that
I have included at the end of my testimony to improve the broker
industry.
Mr. Chairman, solutions are needed for two reasons: to protect
consumers who are taken advantage of by bad actors and to protect the
honest businessmen's reputation in the moving industry from scam
artists that openly flout the law. But Mr. Chairman, the only way to
truly address the problems in the moving industry is through an honest,
balanced, and fair discussion. Here is probably the most important
thing I can say today: Not every price increase is the result of an
unfair business practice. As my testimony will show, moving prices
quite frequently vary from the initial estimate to the final delivery
price for a variety of legitimate reasons: consumers making additions
to the list of goods to be shipped, changes in packing and moving
instructions, and changes in delivery times and dates. I believe I can
help the Committee sort out the legitimate from the illegitimate
reasons--the good from bad and the honest from dishonest--to find
solutions to address what can cause hostage situations.
In this statement, I will touch on the following topics that I hope
are helpful to your work:
A. What are interstate broker companies and how do they operate?
B. Why do prices sometimes increase when a consumer books a move
through a broker company? How do my companies address these
issues?
C. How can the broker industry be improved to protect consumers from
unfair price increases and other related practices?
A. Background on Interstate Broker Companies
The moving industry in the United States is a diverse and
competitive industry. Consumers have a wide range of choices for types
of moving services--from companies that do everything for the consumer
to companies that just drop off a pod so the consumer can do-it-
themselves.
Generally speaking, full-service, all-inclusive major van lines
offer the most comprehensive service. These traditional van lines
usually take care of everything for a consumer, including providing an
in-home estimate and packing a consumer's household goods. The major
van lines are large, sophisticated companies with thousands of
employees nationwide. But these companies' services are very expensive;
indeed, they are often too expensive for lower or middle-class
families.
Consumers who do not need, or cannot afford, major van lines'
services often turn to regional independent carriers. These carriers
are often the proverbial ``two guys and a truck.'' They are simple
operations that do not have dedicated customer service personnel and
cannot send employees to a consumer's home to provide an in-home,
visual estimate. And the only way these carriers can profitably perform
long-distance, inter-state moves is by moving several consumers in one
trip. For example, a regional independent carrier may pick up a
consumer's goods in Boston, a second consumer's goods in Washington,
D.C., a third consumer's goods in Richmond, Virginia, and then drop off
each consumer's goods at various locations along the East Coast. While
regional independent carriers generally do not provide the same level
of comprehensive service as the major van lines, they fill an important
need in the industry by offering affordable services.
Broker companies perform the sales and marketing function for
regional independent moving companies. Generally speaking, a broker
markets moving services through the Internet, is contacted by a
consumer, takes an inventory of the consumer's property over the
telephone, identifies the origin and destination addresses, provides an
estimate of the costs of services, accepts a booking deposit from the
consumer, and then refers the booked job to an independent carrier
within its network to conduct the move. A good broker helps guide a
consumer through the stress and complex logistics of a long-distance
move, something regional independent carriers often do not have the
resources or expertise to handle. This often saves the consumer time,
headaches, and money.
Many regional independent interstate moving companies could not
exist--and their more affordable moving services could not exist--
without broker company services. Some benefits of using a good broker
company include:
Reputable broker companies have a large network of regional
independent carriers. This often allows a broker company to
generate more competitive options and prices for a consumer
than a consumer can negotiate with just one carrier on their
own.
Good broker companies work with consumers to generate a
reliable estimate for their move. Rather than conducting an in-
home review, the Broker makes an estimate based on an interview
with the consumer about what they plan to move and whether
there are any unique aspects to their manifest or the origin or
destination locations, such as multiple flights of stairs or
narrow streets that require shuttle services. If a consumer
wants to use an independent carrier then, broker companies play
a valuable role by using their software, expertise, and
consumer service training to provide a consumer with an
estimate of how much their move should cost. Thus, a good
broker company can help a consumer in two important ways: (1)
it can save consumers money by performing a phone estimate
rather than an in-home estimate; and (2) if the consumer
completely describes their move, it can provide an estimate
that is just as accurate as an estimate generated by a more
expensive company that would conduct an in-home estimate.
Many independent carriers generally do not have their own
dedicated customer service personnel. This means that when a
consumer encounters a problem with their move, their
independent carrier is not able to (and sometimes is not
willing to) adequately assist them. Good broker companies have
trained customer service personnel who mediate disputes between
consumers and independent carriers. My broker companies help
consumers throughout the duration of the move, advocate for the
consumer when problems arise with the independent carrier, and
take punitive action against bad actor companies in my broker
companies' network. We even pay for part of a consumer's move
if an irreconcilable dispute occurs.
In sum, broker companies are a critical component of the modern
moving industry. Without brokers, consumers would be left with the
options of full-service national van lines--an option that is
financially out-of-reach for many Americans--or trying to find an
independent carrier that may have the resources or capabilities to
provide the level of customer service most Americans expect. The
problem is: how do we separate the good brokers from the bad.
B. Price Fluctuations Often Occur Because the Circumstances of the Move
Change, Not From Unfair Business Practices
Mr. Chairman, your staff has advised me this investigation has
primarily focused on one issue: Why can prices fluctuate from the time
a consumer receives an initial estimate to the time a carrier charges
them for the actual move? The Committee is absolutely correct to focus
on this issue because many problems in the moving industry can be
traced back to price variations between consumers' initial estimates
and final prices. To address this problem, it is necessary to
understand why final prices sometimes vary from initial estimates. It
is my hope that I can help the Committee identify the root causes of
this problem and, in turn, identify solutions that address these
causes.
To identify why final prices sometimes vary from initial estimates,
it is useful to break the consumer-broker-carrier interaction into its
most basic form using a simple example like the following:
Let's say a consumer needs to move a six-foot couch from his
Washington, D.C. apartment to an apartment in Chicago, Illinois. The
consumer sees an advertisement on the Internet for a broker company.
The consumer calls the broker company to ask for an estimate and speaks
with the broker company's salesperson. That salesperson generates an
estimate for moving a six-foot couch from Washington, D.C. to Chicago,
Illinois. The broker company then finds a carrier within its network to
conduct the move. But: let's say the carrier arrives at the consumer's
apartment, and it turns out the consumer decides to move a coffee table
in addition to the couch. The carrier must give the consumer the option
to approve a new estimate on the spot before moving the couch and the
additional coffee table. Next, the carrier takes the couch and the
coffee table and begins the move. Before delivering the furniture, the
carrier provides the consumer with a price which is based on the actual
weight of the property. The carrier determines the actual weight of the
property by weighing it on a certified scale (as we all know: some
couches and coffee tables weigh more than others). Lastly, the carrier
delivers the property once consumer pays the final price.
While a typical move will of course involve more goods than just a
couch and a coffee table, that basic sequence will remain the same. In
a perfect world, the initial estimate and Carrier's final price should
not vary significantly. But as the Committee knows, significant
variations between a consumer's move list, the broker company's
estimate, and the carrier's final price do occur. Here are several
causes:
1. Cause # 1: Communications Breakdowns Between Consumer and Estimator
and Last-Minute Changes to Consumer's Moving Plan
In the above example, the carrier's final price will be higher than
the initial estimate because the initial estimate was based on moving
just a couch while the consumer actually needed to move a couch and a
coffee table. In addition, if the consumer orders last minute packing
services--for example, disassembly and reassembly of the coffee table--
the carrier's final price will be higher than the estimate. The same
will be true if the estimate fails to account for unique factors
related to the delivery destination that will require additional
services, such as a narrow street at the delivery destination that will
require the carrier to rent a smaller truck to complete the move. In
some cases, these discrepancies between the information upon which the
estimate is based and the consumer's final moving plan are due to
communication breakdowns between the consumer and the estimator. In
other cases, these discrepancies are simply due to the fact that
unexpected problems sometimes arise during a move.
How the law addresses this issue:
There are no specific laws or regulations that help prevent
communications breakdowns between consumers and estimators.
The DiSorbo Broker Company's Safeguards to Address this Issue:
To generate an accurate estimate, it is critical that an estimator
obtain as much information as possible from a consumer. If there are
communication breakdowns, this will likely lead to an inaccurate
estimate. The DiSorbo Broker Companies have the following procedures in
place to minimize the likelihood of communication breakdowns between a
consumer and a DiSorbo Broker Company estimator.
Intensive Employee Training: The DiSorbo Broker Companies
have an intensive two-week training session for new
salespeople. During this training, my salespeople are trained
how to solicit all relevant information from consumers. I have
provided the Committee with my training materials, which I
believe are the best in the industry.
Require Consumer Review of Estimate and Packing List: After
my salespeople develop an estimate and packing list based on
the consumer's description of their goods and services
requested, my salespeople generate a draft list for consumers
to review. This list must be approved by the consumer. And the
consumer must expressly confirm that they have reviewed, and
agree with, the packing list when they sign the estimate.
Again: my companies' price estimates are based on the
consumer's description of the property they are moving.
Quality Assurance Department: My companies have a Quality
Assurance Department that follows up with the consumer several
days before their move to inquire whether their packing list
has changed or if they need additional services. This is
important because a consumer's packing list often changes
between the time they first call a broker company several
weeks, or even months, before the move and when they are closer
to the move.
2. Cause #2: The Estimator Fails to Generate an Accurate Estimate
An estimate and a final price will vary if the estimator fails to
generate an accurate estimate. There are two main reasons why an
estimator may fail to generate an accurate estimate. First, an
estimator could unintentionally fail to solicit all items on a
consumer's packing list. Second, an estimator could intentionally
provide a consumer with a lower estimate. This is a classic example of
a bait-and-switch scam--the salesperson intentionally baits the
consumer with a low estimate knowing full well that the actual price
will be much higher.
How the law addresses this:
There are no specific Federal laws or regulations that address this
issue, except that, under FMCSA regulations, a consumer must be
provided with a ``reasonably accurate estimate.'' General consumer
protection laws and criminal fraud, extortion, and related laws can
apply when an estimator intentionally provides a lower estimate as part
of a bait-and-switch scam.
The DiSorbo Broker Companies' Safeguards Create Accurate Estimates:
The DiSorbo Broker Companies have implemented the following
procedures and safeguards to prevent inaccurate estimates:
Intensive Employee Training: As described above, the DiSorbo
Broker Companies require all new employees to undergo an
intensive two-week training program where they are trained on
how to accurately solicit all relevant information from
consumers about their move.
Automated Estimate Process that Minimizes Possibility of
Human Error: The DiSorbo Broker Companies use a proprietary
software program that generates accurate, complete, and
detailed estimates for our customers. This software calculates
the weight of each item on a consumer's packing list using the
industry standard American Moving and Storage Association
(AMSA) 400N weight tables. For example, if a salesperson inputs
a six-foot couch into this software program, the program will
generate an estimated weight for a typical six-foot couch.
Based on the consumer's origin and destination, this software
program also calculates the total number of miles to be
travelled. The software program uses Google Maps for this
function. Once the software program has generated weight and
distance calculations, it automatically generates an estimate
based off those figures (and the cost of any special services
needed such as packing). This portion of the estimate is based
on fixed numbers derived from the tariff of the independent
moving company that will actually conduct the move (or whose
agent will conduct the move).
This automation means that, with few exceptions, the DiSorbo Broker
Company estimators receive automated weight formulations of a
customer's property. The only variable is that estimators must gather
all relevant information from the consumer and correctly input this
information into the software program.
Compliance with 49 C.F.R Sec. 371.113(b): On January 28,
2011, an important new Federal Motor Carrier Safety
Administration (FMCSA) regulation went into effect. This
regulation requires broker companies to base their estimates
``upon the published tariffs of the authorized motor carrier
who will transport the shipper's household goods.'' Before this
law, it was perfectly legal for a broker company to base an
estimate on an arbitrary tariff and then try to find a carrier
that would conduct the move at that arbitrary tariff rate. If
the broker company failed to find a carrier to conduct the move
at the arbitrary rate, the consumer either had to pay a higher
price or cancel the move. As you can imagine, this system was
ripe for abuse and made it incredibly difficult for a consumer
to rely on a broker company's estimate. This practice is now
specifically prohibited by the regulation that went into effect
on January 28, 2011.
To comply with the January 28, 2011 regulation, the DiSorbo Broker
Companies have entered into arrangements with several carriers who act
as ``primary carriers'' for the DiSorbo Broker Companies. When my
software program generates an estimate, this estimate is based on the
primary carrier's published tariff. Accordingly, the estimate is based
on a tariff that will not change. Unfortunately, it is my understanding
that the DiSorbo Broker Companies are the only companies in the
industry that comply with this regulation. And it is also my
understanding that the FMCSA has never pursued an enforcement action
for a broker company's violation of this regulation.
This regulation is not easy to follow and it is a substantial
burden on my business. Indeed, the burden of complying with this
regulation has contributed to a significant decline in my business in
recent years (approximately 30 percent decline from 2009 to end of
2011). Despite the negative impact on my business, I have followed the
law and I am proud of my companies' work to come into compliance with
this important regulation. In fact, on the day the new laws went into
effect, I invited the FMCSA into my office to see the changes we
undertook. In addition, last year, my attorney Michael Garcia wrote to
Secretary LaHood asking that FMCSA begin enforcing this regulation (I
have attached Mr. Garcia's letter as Exhibit A). I am so confident in
my software and personnel that I would invite the Committee to come to
my office and watch actual moves being originated, priced, and booked.
We could even engage in hypothetical moves your staff may create.
It is my hope other companies will follow my lead in complying with
this important consumer protection law. It is also my hope that the
FMCSA will begin to take action against companies that fail to comply.
Fee Structure that Disincentivizes Up-charging: Some broker
companies structure their fee as a percentage, or commission,
not on the initial estimate of the move, but on the final cost
of the move. This may sound like a minor difference, but it is
very important. A final-cost fee structure gives the broker an
incentive to give a low estimate at the beginning and then reap
the benefits when the carrier raises the price on the consumer
at the end. The DiSorbo Broker Companies do the opposite--we
take a commission only on the initial estimate. In other words,
the DiSorbo Broker Companies derive no benefit if a carrier
increases fees on customers after the move. This practice
creates an incentive for my Salespeople to provide higher, and
more accurate, estimates.
Periodic Reviews of Salespeople's Estimates: As a result of
this Committee's investigation, I have decided to institute
additional new safeguards to monitor my sales personnel's
estimates. The procedure will work as follows: On a regular
basis, I or another member of my management team will review
each sales person's performance to determine whether they are
generating accurate estimates. I will do this by comparing the
final price to the estimate each salesperson generates for
their customers. If the average fluctuation between the
estimate and the final price continually exceeds ten percent,
my management team will undertake a review of that
salesperson's performance. If the review demonstrates the
employee is failing to provide adequate estimates, I will
require the employee to be retrained. If the employee does not
improve, he will be subject to progressive discipline, which
will include probation, suspension, and termination.
I am also putting an additional procedure in place to more closely
monitor significant price fluctuations so that they will automatically
come to my attention. My companies' current practice is for management
to review all consumer complaints involving significant variations
between initial estimates and final prices. If we determine the
variation was our company's fault, we take corrective action including
compensating the customer for the error.
I am now in the process of putting in place an additional system to
pro-actively monitor price fluctuations. Under this procedure, if there
is a variation of twenty percent between a customer's final price and
their estimate, I or another member of my management team will conduct
an immediate review. If we determine that the salesperson caused the
variation by failing to provide an accurate estimate, my company will
take automatic corrective action. This may include compensating the
customer the difference between the final price and the estimate. These
procedures go well beyond what is required by law and I am confident no
other company in the business has put in place stronger safeguards to
prevent variations between the broker estimate and the final move
price. If the Committee would like, I can report back in a year on how
these changes have made a difference.
3. Cause #3: Carrier Manipulates the Final Weight of Consumers'
Property
A third reason why initial estimates and final prices vary is that
carriers sometimes fail to general accurate final weights for
consumers' goods. In the typical moving sequence, a carrier will
generate a final weight by first weighing their empty truck on a
certified scale without a consumer's property, then weighing the truck
with the property, and then calculating the difference. Unfortunately
there are a variety of ways for unscrupulous carriers to manipulate
this weight.
For example, I know of carriers that weigh their empty truck with
little gasoline in the tank. The carrier will then fill the gas tank
before weighing their truck with the consumer's goods. This added
gasoline can increase the second weight by hundreds of pounds, which
will increase the consumer's final price. Similarly, I have heard of
carriers that manipulate the initial weight of the empty truck by
positioning the tires of the truck in such a way that the scale does
not capture the full weight of the truck. This will lead to a lower
initial weight, which will increase the difference between the full
truck and the empty truck and, in turn, increase the price.
What the law requires:
FMCSA regulations provide that carriers may base their final price
on the actual weight of a consumer's goods or on the cubic feet of the
consumer's goods. If the price is based on weight, carriers must advise
consumers that they are entitled to observe the weighing of their
goods. FMCSA regulations also require carriers to provide consumers
with the location and time of the weighing and a reasonable opportunity
for them to be present. If a consumer disputes the weight of the
shipment, they have the right to a re-weighing of the property at no
charge. The carrier must provide the consumer with a copy of the weight
certificate.
The DiSorbo Broker Company Safeguards:
The DiSorbo Broker Companies have implemented the following
procedures and safeguards that go beyond what is legally required to
prevent unfair final prices:
Standard Operating Procedures: All carriers in the DiSorbo
Broker Companies' network must comply with the terms of my
standard operating procedures. These procedures expressly
incorporate the FMCSA re-weighing regulations described above.
A carrier's failure to comply with my network's standard
operating procedures will lead to that company's termination
from the network.
Review of weight tickets: All carriers in the DiSorbo Broker
Companies network are required to submit certified weight
tickets for approval and inspection. Although not required by
law, my broker companies act on behalf of the consumer by
double checking each weight ticket for compliance with the
governing regulations and accuracy. We do not allow a carrier
to charge a consumer without proper certified weight tickets.
If there is any doubt as to the accuracy of the weight we
instruct the carrier to re-weigh the property.
Prohibition of cubic foot charging: Current law allows a
carrier to charge a consumer based on either the weight of the
consumer's goods or the cubic feet of their goods. While a
price based on weight can be easily verified by reviewing the
weight tickets, there is no way to easily verify a carrier's
cubic foot measurement. Not surprisingly, bad actor companies
prefer the cubic foot method over the weight method because it
is easier to overcharge a consumer using this method. To
prevent this practice, I prohibit carriers in my broker
companies' network from using the cubic foot method.
Accountability for Bad Actor Moving Companies: The DiSorbo
Broker Companies do everything in their power to prevent
problems that arise from bad actor carriers in its network,
help consumers through problems when they arise, and hold
carriers accountable. For example, I periodically hold
mandatory training meetings for carriers in my network. These
meetings have included training session and speeches by FMCSA
special agents.
In addition, over the last few years, my broker companies have
terminated relationships with approximately 100 carriers that
have demonstrated patterns of regulatory non-compliance or
generated too many consumer complaints. For example, on
November 11, 2010, I terminated Able Moving, Inc., a Chicago
based carrier, from the DiSorbo Broker Companies' network after
a routine quality assurance review determined they had forged a
consumer's signature and flagrantly violated important consumer
protection laws (a copy of Able Moving, Inc.'s termination
letter is attached to this testimony as Exhibit B). In fact, I
have provided the Committee with a list of all carriers I have
terminated from my network. I encourage the Committee or FMCSA
to investigate these carriers.
Customer Service: Broker companies have no legal obligation
to assist customers who experience issues with carriers during
a move the broker company arranged. Because there is no legal
obligation, most brokers refuse to help consumers who
experience problems with the carrier that conducted the move.
The DiSorbo Broker Companies, on the other hand, do not wash
their hands after they book a move. My companies stay involved
with consumers from the beginning to the end of the move. My
companies accept customer complaints and work with the carrier
to ensure consumer complaints are adequately addressed. Indeed,
I often help pay for a customer's move even when the customer's
issues entirely unrelated to my broker company's conduct to
ensure customer satisfaction.
C. Solutions For Price Increase Problems in Moving Industry
In July 2012, Congress passed, and President Obama signed into law,
a surface transportation reauthorization bill (MAP-21). This law
contains a number of important new consumer protection provisions
related to the moving industry, including imposing stricter
registration requirements for brokers and directing the Secretary of
Transportation to establish minimum solvency and bonding requirements
for brokers. While these changes are encouraging, they are not enough.
There are a number of additional straightforward, common sense actions
the Federal government can take to better protect consumers from unfair
price increases and hostage situations that could occur during a move.
I outline below a number of my recommendations.
1. More FMCSA Enforcement
The first and easiest solution to addressing the problem of price
increases in the moving industry is for FMCSA to enforce the
regulations that are currently on the books. As detailed in this
testimony, the FMCSA has not aggressively enforced some of its most
important consumer protection regulations. For instance, as described
above, the FMCSA does not appear to aggressively enforce 49 CFR
Sec. 371.113(b), the regulatory requirement that brokers base their
estimates on carriers' tariffs. A second important regulation FMCSA
does not appear to enforce is 49 CFR Sec. 371.107, which requires
brokers to prominently disclose to consumers that they are not
carriers. One frequent complaint about brokers is that consumers
sometimes book broker services without fully understanding that brokers
do not actually conduct moves. 49 CFR Sec. 371.107 is designed to
prevent this type of consumer confusion. While my broker companies
strictly comply with this regulation, it is my understanding that many
in the industry do not and the FMCSA has not aggressively enforced it.
I urge this Committee to work with the FMCSA and to ensure the agency
has the resources and authority it needs to aggressively enforce its
mandate.
2. Require Broker Companies to Provide Consumers with the Opportunity
to Review a Written Itemization of their Packing List
One of the most important consumer protection practices that my
broker companies have implemented is to always provide consumers with
an itemized list of the packing list that my estimators use when they
generate an estimate. A customer must confirm in writing that they have
reviewed and agree with this list. This practice helps ensure that the
customer's packing list is accurate and helps generate more accurate
estimates.
My companies provide this list even though there is no legal
requirement for a broker company to provide a customer with a written
packing list as part of the estimate process. I strongly urge Congress
or the FMCSA to make this a legal requirement. This simple and common-
sense proposal would help ensure that consumers are provided with
reliable estimates.
3. Require Broker Companies to Proactively Follow up with Consumers
within One Week of Move
One reason the final price sometimes fluctuates from a broker
company's estimate is that consumers often book moves with a broker
months in advance of their move date. Between that booking date and the
moving date, the consumer's packing list could change considerably.
Indeed, it is highly likely that the consumer did not have a full
understanding of all they had to move at the time they booked the move.
My companies' Quality Assurance Department follows up with all
customers within one week of the move to go over their packing list.
This follow-up ensures my customers have a more accurate idea of what
their move will cost before the carrier shows up on the day of the
move. I urge Congress or FMCSA to require all broker companies to
contact customers within one week of the move date to confirm the
customer's packing list.
4. Prohibit Broker Companies From Tying Commissions to Final Move Price
One of the biggest problems in the industry is that some broker
companies link their commission to the final price charged by carriers.
Naturally, this gives those broker companies an incentive to give
consumers an initial low estimate to get their business in the door and
then reap the benefits when the carrier charges them a significantly
higher price. As described above, the DiSorbo Broker Companies do the
opposite--the DiSorbo Broker Companies' fee is linked to the initial
estimate. Accordingly, the final price has no bearing on my companies'
fee and there is no incentive for my companies to pull the bait-and-
switch scams that too often occur in the moving industry. I urge
Congress or the FMCSA to expressly prohibit broker companies from
linking their fees to the final cost of the move.
5. Stricter Registration Requirements for Brokers
The July 2012 surface transportation reauthorization bill included
a provision requiring carriers to complete a proficiency examination to
demonstrate that they know how to, and intend to, comply with law
related to consumer protection, estimating, and liability limitations.
But the law did not include a similar requirement for broker companies.
There is no reason that brokers are not subjected to the same
requirements and I strongly urge Congress or the FMCSA to implement
proficiency requirements for broker companies.
6. Provide Broker Companies with More Information About Carriers
One obstacle for broker companies that want to hold bad actor
carriers within their networks accountable is that broker companies
have access to only a small amount of information about those carriers.
For instance, it may be the case that a broker company never learns
about an issue that occurred between a customer and a carrier during a
move booked by the broker because the customer never reports the issues
to the broker company. If a carrier in my network harms one of my
customers, I want to know so that I can help the customer and take
action against the carrier.
The FMCSA could provide broker companies with this information by
taking the simple step of advising broker companies about all
complaints it receives about moving companies in the broker's network.
I wrote to the FMCSA in 2007 asking the agency to implement this
change. The FMCSA has not yet acted on my recommendation.
7. Prohibit the Use of Cubic Foot Calculations to Determine Consumer
Charges
As described above, it is easy for a carrier to overcharge a
consumer by basing the price of the move on a cubic foot measurement
rather than the weight of the property because it is very difficult for
a consumer to verify the accuracy of the carrier's cubic foot
measurement. I urge Congress or the FMCSA to prohibit carriers from
basing final prices on cubic foot measurements.
8. Require Advance Disclosure of A Menu of All Services and Prices to
Consumers
A common problem that arises during a move is that consumers are
surprised when a carrier charges them more to complete the move because
the carrier encounters an unexpected variable. For example, if the
consumer's new home is on a very narrow street, the carrier may have to
pay to shuttle the consumer's goods from their truck to the consumer's
home by renting a smaller truck that can fit down the street. Or it may
sometimes be the case that a consumer requires packing help that the
consumer did not expect when he booked the move. While it is a good
business practice to clearly disclose to consumers that extra services,
such as shuttle and packing services, are not included in their
estimate, no disclosure laws mandate this practice. I urge Congress or
FMCSA to implement strict disclosure requirements so that consumers
know exactly what they are paying for.
D. Conclusion
Mr. Chairman, when time allows, I would like to extend my testimony
to further discuss ``hostage'' situations and why (or how) there has
been an increase in the numbers of unregistered brokers and unlicensed
carriers, many of whom cause the problems you are investigating today.
There are serious problems in the moving industry and I again commend
the Committee for holding this hearing to get to the bottom of those
issues. But identifying problems is just a start; Congress and the
FMCSA must find solutions to better protect consumers and the honest
broker companies that cannot compete with the rogue companies that
flout the law.
I have voluntarily cooperated with this Committee's investigation
because I am hopeful that this hearing and this investigation will lead
to solutions. In particular, I have provided the Committee with
complete copies of consumer files and consumer complaints sent to my
companies. I have willingly provided these documents because I believed
they would aid the Committee's investigation. All I ask in return is
that I have the opportunity to tell the story from my perspective.
Moving is a difficult business and coordinating a move is a
difficult task. There are a variety of complex logistical variables
that go into a move, including the availability of moving company
trucks and personnel, ensuring that drivers do not exceed the maximum
number of hours they are legally allowed to drive in a day, weather
issues that may cause travel delays, and the inherent difficulty of
predicting the weight of a consumer's goods (and, in turn, the price of
the move). It is unfortunately the case that things occasionally go
wrong and a consumer has a bad moving experience.
And there is no doubt that some of the documents I produced
illustrate bad moves. I acknowledge that, at times, my customer's
expectations, and my expectations, were not satisfied and I acknowledge
that some of these files document these shortcomings. I wish I could
personally broker and conduct every move. But, of course, I cannot; I
must rely on others to broker and conduct moves for my companies.
If the Committee deems my specific business practices important to
its investigation, I urge the Committee to avoid just focusing on a few
of the complaints in my production. My commitment to providing
customers with reliable moving services cannot be assessed based on a
review of a small percentage of the customer's story about the move.
Like any business, there are instances where my employees do not follow
their training and do not comply with the company's rules. Instead of
focusing on these isolated incidents, I encourage the Committee to
focus on the practices I have put in place. As detailed in this
statement, these practices go above-and-beyond what the law requires
and what is standard in the industry.
Finally, many of the complaints do not relate to my companies'
performance. Instead, most of the consumers' complaints in those files
relate to the carriers' failures. As you can see by reviewing those
documents, consumers often call broker companies to complain about
carriers because the broker company has served as the consumer's point-
of-contact. While most broker companies refuse to help consumers at
that point since there is no legal obligation to do so, my companies
mediate disputes between consumers and carriers and often serve as a
consumer's advocate with the carrier. Indeed, as the documents I
produced illustrate, I often wind up compensating consumer's for their
issues with carriers even though I have no legal or business obligation
to do so.
Mr. Chairman, it is time for this Committee and this Congress to
take action to clean up the moving industry. I believe this Committee
can best help in this effort by focusing its time and resources on the
questions of why bad moves occur and what are the solutions to address
these causes. Please know that you and your Committee have my continued
support as you continue your important work on this issue. Thank you
for the time and attention to my ideas and recommendations.
Exhibit A
Exhibit B
______
Response to Written Questions Submitted by Hon. Jim DeMint to
Hon. Anne S. Ferro
Question 1. Please explain the consumer outreach and public
awareness initiatives undertaken by the FMCSA regarding the household
goods moving industry, including the ``Protect Your Move'' website.
Answer. FMCSA continues to maintain wide scale outreach and
education awareness for consumers. The outreach and education includes
communications with household goods industry associations and State and
Federal agencies. The four main initiatives that are used by FMCSA are:
1. Protect Your Move website: www.protectyourmove.gov
2. Household Goods Working Group
3. Moving Fraud Working Group
4. National Consumer Complaint Database (NCCDB)
In December 2004, FMCSA developed a Household Goods (HHG) Consumer
Information Program Plan outlining its enforcement and outreach
strategies, which included market research, a new website, outreach and
education materials, and links to State and industry Websites.
In February 2005, FMCSA established a HHG partnership with other
Federal agencies, State law enforcement agencies, consumer protection
groups, and several moving industry associations to provide consumers
information to protect themselves against dishonest and rogue movers.
In June 2005, FMCSA launched its Protect Your Move website
(www.protect
yourmove.gov). The website provides information for consumers to plan a
successful HHG move and to avoid becoming victims of moving fraud.
There have been more than 15 million hits on the website since its
launch. The average daily hit rate is 11,600, with the average visit
lasting 12 minutes.
In December 2009, FMCSA established a HHG Working Group with other
Federal agencies, State law enforcement agencies, consumer protection
groups, and several moving industry associations to develop ways to
effectively communicate and share information to aid in law enforcement
efforts.
In May 2012, FMCSA overhauled its Protect Your Move website. The
website is an interactive tool/resource for consumers who are seeking
to move their HHGs. Additionally, FMCSA has partnered with State
counterparts to allow States access to specific tools within the new
website to assist in HHG investigations. The website includes Consumer
Protection Advisories and information to help protect consumers from
fraud, Public Service Announcements, and links for consumers to do
research and file complaints. The website also features a Moving Fraud
Prevention Checklist. This document provides a list of steps the
consumer should take to avoid being a victim of moving fraud, and is
translated into 9 languages. Another new feature of the website is the
FMCSA Spotlight. This section provides targeted information for
consumers and updates that consumers can use to assist them in planning
for a move. Last, the website has a section of important resources
where: (1) the consumer may check the registration status and complaint
history of a carrier in advance of his/her relocation; and (2) obtain
information about State resources pertaining to HHG moves.
The FMCSA continues to feature its Protect Your Move website in the
``mover's disclaimer box'' in the ``Movers'' section of the Yellow Book
USA directory. There are over 975 Yellow Book directories printed each
year with an annual distribution of nearly 123 million copies.
Question 2. Do household goods moving brokers provide a service
that consumers can realize value from using?
Answer. Legitimate brokers can be of benefit to consumers if the
brokers have a large client base and volume of business that allows
individual customers to benefit from competitive pricing. In addition,
good brokers research, pre-qualify, and recommend moving companies that
are properly licensed and insured. Brokers can arrange and recommend
specialty packing service providers and assist customers in filing
valuation and/or insurance claims with the moving company after the
move. However, most HHG brokers conclude their transaction with the
consumer after securing payment and linking the consumer with a motor
carrier.
Question 3. Do household goods moving brokers provide a service
that household goods carriers can realize value from using?
Answer. A broker works to determine the needs of the shipper, and
connects the shipper with a carrier willing to transport the items at
an acceptable price. If performed in accordance with the regulations,
broker services can be valuable, especially to small household goods
companies which have more of a challenge finding loads during non-peak
moving season. Many small operations do not have the resources to
solicit business, so this market arrangement is beneficial. By using a
broker, the carrier can fill his/her truck with products going on the
same route, allowing them to earn more money. Brokers can be used to
coordinate and schedule the loads and interact with the shipper.
Question 4. Are household goods carriers and brokers required to
place FMCSA contact information on their websites? If not, does the
FMCSA have authority to require such action?
Answer. FMCSA does not currently require HHG carriers and brokers
to provide FMCSA contact information on their websites. Pursuant to its
statutory authority to regulate HHG carriers and brokers at 49 U.S.C.
Subtitle IV Part B, FMCSA believes that it has the authority to require
carriers and brokers to provide such FMCSA contact information. Such a
requirement would need to be adopted pursuant to notice and comment
rulemaking.
Question 5. What changes could FMCSA make to improve the household
goods moving experience for consumers?
Answer. The new surface transportation reauthorization law, Moving
Ahead for Progress in the 21st Century (MAP-21), sets forth
requirements pertaining to the standard for entry into the interstate
HHG industry. MAP-21 directs the Secretary of Transportation to issue
distinctive registration numbers to a person for each authority they
request to provide transportation or services such as brokering or
freight forwarding. MAP-21 increases the level of financial
responsibility necessary to be registered as a HHG broker, from $25,000
in surety bonds or trust funds, to $75,000, in order to help address
claims from failure to pay freight charges under a contract or
agreement. HHG motor carriers also will be required to pass an
examination to demonstrate knowledge of safety and consumer protection
regulations before entering the industry. These changes will improve
the HHG moving experience for consumers.
In addition, FMCSA will continue its multi-layered approach to
ensuring consumers are protected against moving fraud and abuses. The
main components of FMCSA's efforts to maintain high standards in the
HHG industry are the National Consumer Complaint Database (NCCDB), the
Top 100 Household Goods Prioritization list, and the hostage goods
resolution program.
The Agency also is considering other outreach methods including the
development of a smart phone application that would allow shippers to
check FMCSA's data before hiring a moving company or broker.
______
Response to Written Questions Submitted by Hon. Jim DeMint to
Timothy M. Barry
Question 1. Please explain the impetus for ``Operation Boxed Up.''
Answer. We recognized the significant, negative impact that rogue
HHG motor carriers and brokers can have on our Nation's consumers and
workforce, and developed a risk-based strategy to direct investigative
resources in this area of fraud. In March 2011, we launched ``Operation
Boxed Up,'' a proactive, cooperative initiative aimed at removing
unscrupulous HHG movers before they further victimize American
consumers. Operation Boxed Up involved the analysis of databases from
FMCSA's HHG regulatory program and then identifying the most egregious
hostage load complaints consumers filed against HHG carriers and
brokers. We focused, in particular, on groups of interrelated carriers
and brokers engaged in hostage fraud schemes. Currently we have 14 open
investigations involving companies operating under 108 different names
with over 3,800 potential victims.
Question 2. Are brokers and carriers involved in DOT IG
investigations generally registered with FMCSA?
Answer. Of the approximately 108 names being used by companies that
are associated with our investigations, approximately 58 percent have
either a DOT and/or MC number from the FMCSA.
Question 3. Do household goods moving brokers provide a service
that consumers can realize value from using?
Answer. We would agree with Ms. Bauer Darr's testimony \1\, wherein
she indicated that legitimate brokers can perform an important function
as intermediaries between consumers and reputable movers, if consumers
are adequately educated about brokers' role in the moving process.
However, due to the nature of our work we are exposed to only the
negative interactions between consumers and brokers, a relationship
that appears to us to be valuable only to the broker.
---------------------------------------------------------------------------
\1\ http://www.promover.org/content.asp?contentid=254&sl=3&pl=19.
Question 4. Do household goods moving brokers provide a service
that household goods carriers can realize value from using?
Answer. A broker links household goods carriers with consumers, who
might not otherwise find each other. Again, as Ms. Bauer Darr indicated
in her testimony, legitimate brokers can perform an important function
as intermediaries between consumers and reputable movers.
As to the value of the relationship between HHG brokers and HHG
carriers, based on our investigative work, we are not able to make any
observations about that relationship.
Question 5. What changes could FMCSA make to improve the household
goods moving experience for consumers?
Answer. We have not assessed the effectiveness of FMCSA's HHG
program. However, the GAO has conducted three audits of FMCSA's HHG
program over the past eleven years, the last of which was conducted in
2009 and concluded that Increased Focus on Consumer Protection Is
Needed.
In July 2012, Congress and the President gave FMCSA additional
authorities to directly assist the HHG consumer. Under the MAP-21 \2\
legislation FMCSA may now award an aggrieved consumer all or a portion
of a civil penalty imposed against an unscrupulous household goods
mover. Further, FMCSA may now act on behalf of the victim in these
types of frauds by ordering, after notice and opportunity for
proceeding, that a carrier holding a customer's HHG hostage return the
goods.
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\2\ U.S. Public Law 112-141.
---------------------------------------------------------------------------
______
Response to Written Questions Submitted by Hon. Jim DeMint to
Linda Bauer Darr
Question 1. What does AMSA require of brokers and carriers to
attain and maintain a membership?
Answer. AMSA requires motor carrier and broker applicants for AMSA
membership to agree in writing to abide by the AMSA Code of Ethics;
compliance with Federal and state licensing and registration
requirements; no use/display of AMSA or ProMover names and logos before
authorization to do so; compliance with relevant FMCSA household goods
broker, carrier and consumer protection regulations; no indication of a
pattern or excessive number of consumer complaints; have a BBB rating
of ``C'' or higher; and no evidence of holding goods hostage. Only AMSA
interstate mover members are authorized to participate in the ProMover
program. ProMover is AMSA's primary means of providing consumers with a
guide to movers who will provide services in an ethical manner in
compliance with all Federal consumer regulations. AMSA carefully
monitors and annually reviews certified ProMovers to ensure compliance
with the ProMover standards and Federal consumer rules and removes
carriers that do not comply. In the first year of the ProMover program,
AMSA terminated the membership of 200 carriers for failure to meet
standards.
Question 2. What benefits are offered to consumers when they use
the services of a household goods broker?
Answer. Brokers can act as a marketing bridge between consumers and
household goods motor carriers. An ethical, experienced broker will
have developed relationships with a number of responsible, competent
household goods carriers and can provide an array of reasonably priced
choices and options to the consumer.
Question 3. How does a motor carrier benefit from the use of a
household goods broker?
Answer. The primary benefit of brokers to motor carriers is that
they offer expanded marketing and consumer outreach capability, greater
than what most motor carriers could afford on their own. This is
particularly true for small household goods carriers.
Question 4. What changes could FMCSA make to improve the household
goods moving experience for consumers?
Answer. On October 18, 2012, FMCSA published a Notice in the
Federal Register announcing a new program to clamp down on motor
carriers who wrongfully withhold household goods shipments by
suspending carriers' authority to operate in interstate commerce from
12 to 36 months. This is a promising development, but the program can
be effective only if FMCSA has the resources to enforce it.
FMCSA could improve consumers' household goods moving experience by
establishing a joint cooperative program with the household goods
moving industry to provide real-time consumer assistance and advice.
This joint assistance program could be patterned after MoveRescue, an
existing industry program to provide immediate advice and assistance to
consumers with household goods moving problems, particularly in hostage
shipment situations.
FMCSA could also enhance the household goods moving experience and
help safeguard consumers by modernizing the educational information
that consumers receive from household goods carriers and brokers. FMCSA
today requires the distribution of an information package, Your Rights
and Responsibilities, that resembles 60 pages of the Federal Register.
It is difficult to comprehend and often ignored by consumers. FMCSA
could convene a group of education, consumer, and industry experts to
refine that document and other educational materials into a more user
friendly format that would be truly useful to consumers.
Question 5. Please provide the Committee any proposals you may have
to improve the regulatory structure provided for the household goods
industry.
Answer. AMSA has provided legislative proposals to the Commerce
Committee, which would implement most of the suggestions regarding
establishing a new joint industry/government consumer assistance
program and ways to improve consumer education. However, a critical
shortcoming is that FMCSA needs additional resources to carry out a
program of effective consumer protection and enforcement. The
protection of interstate household goods shippers is an appropriate and
important current Federal government function, but it must be improved.
There are approximately 7,000 companies at 13,900 locations executing
between 800,000 and 1.2 million interstate household goods moves
annually, yet there are only 5-10 FMCSA employees trying to protect
household goods consumers and catch rogues. AMSA has called for $3
million annually to hire additional FMCSA household goods inspectors.
We continue to believe that this is needed, at a minimum. When
household goods regulatory responsibility rested with the Interstate
Commerce Commission before its termination in the mid-1990s, ICC had a
household goods staff of approximately 70-100.
______
Response to Written Questions Submitted by Hon. Jim DeMint to
Jason M. Romrell
Question 1. What is your company's process for selecting carriers?
Answer. Budget Van Lines has a robust carrier selection process
that goes above and beyond what is required by law. We have contractual
relationships with federally licensed and insured household goods motor
carriers to whom we broker jobs. We only use motor carriers that are
licensed by the Federal Motor Carrier Safety Administration and that
are adequately insured. We created our own custom-built software system
that checks the Federal licensing status of every motor carrier in our
network each day to ensure they have not been placed out of service by
FMCSA. This ensures that we do not book moving jobs with carriers who
have unacceptable safety ratings or who have been suspended or revoked
by the FMCSA. We are not aware of any other broker in the industry that
has developed any type of similar software. If we find a carrier has
been placed out of service, we suspend all jobs to that carrier
immediately and will not book jobs for that carrier until they are back
in good standing with FMCSA. Since 2005, we have terminated
relationships with over 580 motor carriers for various reasons,
including a lack of quality customer service and regulatory
noncompliance.
Before signing a carrier to our network, we consider the history of
prior ownership, prior affiliations with other companies, service
history, credit history, complaint history, claims-resolution processes
and other important business information and practices to the extent
such information is available to us. Because safety is also important
to us, we also check the carrier's FMCSA Compliance, Safety and
Accountability (CSA) score and will refuse or subsequently drop a motor
carrier if the carrier's CSA score suggests serious ongoing concerns.
In fact, the same software program we designed to check every carrier's
licensing status on a daily basis also checks every carrier's safety
ratings so carriers who are deemed `unsatisfactory'' by the FMCSA are
flagged for immediate review and disqualification in our system.
If we discover a motor carrier that exhibits an ongoing pattern of
unprofessional performance or that fails to comply with Federal
regulations, we will suspend or terminate that carrier from our
network. We also provide motor carriers with our own Quality Control
Guidelines, a checklist of issues to help them conduct business in
compliance with the Federal regulations, and to help them avoid or
reduce customer complaints. As evidenced here, we go well beyond our
legal requirements. The only thing the law requires we do is to check
that a carrier is licensed and insured.
Question 2. What benefits are offered to consumers when they use
the services of a household goods broker?
Answer. Brokering is a common business model in many industries,
from travel to insurance sales to the groceries on the supermarket
shelves. Brokering is an effective and common business model because it
increases options and saves businesses and consumers time and money. In
the interstate moving industry, brokers like us arrange transportation
services between customers and qualified household goods motor
carriers. We help customers in a variety of ways, by providing easy
access to more transportation options, lower costs and time savings. We
help customers navigate a host of complicated and often unfamiliar
decisions that must be made when arranging an interstate move. Many
customers with smaller moves and smaller budgets, and those outside
major urban areas, would not have access to an affordable household
goods mover without the services of a broker.
Question 3. How does a motor carrier benefit from the use of a
household goods broker?
Answer. Household goods brokers help federally licensed household
goods motor carriers operate more efficiently by reducing their
marketing costs and helping them connect with customers. We save motor
carriers money and time by taking inventories and working with
customers through the initial sales cycle. We also help motor carriers
operate in a difficult economy by giving them a way to fill empty space
on return trips and to fill partial loads. The majority of the motor
carriers in our network are small businesses that would not survive or
thrive without the services of qualified brokers such as Budget Van
Lines. The services we provide create a win-win situation for both
consumers and household goods motor carriers.
Question 4. What changes could FMCSA make to improve the household
goods moving experience for consumers?
Answer. Budget Van Lines makes the following recommendations for
FMCSA to improve the household goods moving experience for consumers:
Require FMCSA to focus more attention on the enforcement of
household goods brokers and carriers.
Require the FMCSA to create a short, easily readable, summary
consumer education document with key information necessary for
consumers to make informed decisions when considering
interstate moves.
Require FMCSA to create a more accessible, user-friendly online
resource where shippers can evaluate brokers' and carriers'
performance and job histories, including the previous
suggestion that brokers and carriers report total jobs booked/
carried so complaint ratios can be provided to consumers with
accuracy and reliability.
Encourage or require more expeditious, responsive, and
aggressive license revocation processes for brokers and
carriers who are in violation of Federal regulations, thereby
protecting consumers from rogue movers and automatically
preventing brokers from using rogue movers.
Encourage the FMCSA to create standard volume measurements for
common household items, thereby bringing some uniformity to the
inventory process.
Require the FMCSA to deny licensing to individuals or
businesses who have been implicated in regulatory violations
previously, including the transfer or sale of existing
businesses already licensed, if the new owners have an adverse
or negative history in the moving industry.
Because we believe that many rogue movers giving the moving
industry a bad name are run by individuals who pay others to take
record-ownership of the company to circumvent close FMCSA scrutiny and
to obtain or retain carrier authority (straw-men strategies), require
the FMCSA to conduct interview of new applicants or restrict the free
transfer of motor carrier authority already assigned to an existing
company, thereby reducing or eliminating straw-man strategies.
If the FMCSA cannot or will not engage in faster or more aggressive
license revocations, require the FMCSA to share with brokers its data
on motor carriers so brokers can ensure they are not working with known
problem carriers.
Question 5. Please provide the Committee any proposals you may have
to improve the regulatory structure provided for the household goods
industry.
In addition to the actions recommended for FMCSA in the previous
question, Budget Van Lines has several recommendations for requirements
on brokers and carriers to further improve the regulatory structure for
the household goods industry and to improve the moving experience for
consumers:
Consider whether to require brokers and carriers to provide
estimates based only on weight, since shipments moved pursuant
to volume-based estimates can be easily manipulated upward by
carriers in the packing and loading process. NOTE: Budget Van
Lines requires our estimates to be done by weight, even though
Federal law currently permits either weight or volume.
Require brokers and carriers to send the shipper's survey-based
inventory to customers separate from all other paperwork, along
with a simple explanation that the inventory is the basis for
the estimate and any changes to the inventory may results in a
revised estimate and additional fees on the day of the move.
Require motor carriers to price overages based on the price-
per-pound quoted in the estimate instead of allowing the motor
carrier to use a higher price-per-pound, even if that higher
rate is allowed under the motor carrier's tariff.
Require brokers and carriers to notify customers that they may
review and revise their estimate's inventory of items up to 48
hours before the scheduled pick-up time, giving customers time
to see how such changes will affect the estimated cost.
Prohibit brokers, motor carriers and their employees from
profiting from price adjustments, before, during or after a
move that do not meet regulatory requirements (in such cases,
the FMCSA could ``claw-back'' those profits and return them to
the consumer, along with other appropriate penalties assessed
against the offending entity.
Require brokers and carriers to publish on their websites,
visible to consumers, the percentage of their loads booked
during a specified period that resulted in a known price
increase, the range of those increases, and average or median
increases (similar to airlines reporting their percentage of
on-time departures).
Require motor carriers using a broker for booking jobs to
promptly provide the broker with data regarding price
increases.
Mandate the inclusion of a prominent warning on the Bill of
Lading and on any revised written estimate above the shipper's
signature lines warning shippers not to sign documents with any
blanks (except those blanks that are necessary to be blank and
are authorized by Federal regulations).
Require brokers and carriers to report to the FMCSA and display
on their websites the number of household goods shipments they
booked/carried each month, so consumers are able to evaluate
complaint ratios versus gross complaint numbers posted by the
FMCSA (a broker or carrier with 10,000 jobs and 200 complaints
may be providing far better service than a broker or carrier
with 1,000 jobs and 40 complaints.)