[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
    FRAUD ON THE ELDERLY: A GROWING CONCERN FOR A GROWING POPULATION
=======================================================================



                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 16, 2013

                               __________

                           Serial No. 113-41


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania             GENE GREEN, Texas
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
  Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana                  Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
CORY GARDNER, Colorado               BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas                  PETER WELCH, Vermont
ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
           Subcommittee on Commerce, Manufacturing, and Trade

                          LEE TERRY, Nebraska
                                 Chairman
                                     JANICE D. SCHAKOWSKY, Illinois
LEONARD LANCE, New Jersey              Ranking Member
  Vice Chairman                      G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee          JOHN P. SARBANES, Maryland
GREGG HARPER, Mississippi            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    JOHN D. DINGELL, Michigan
DAVE B. McKINLEY, West Virginia      BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas                  JIM MATHESON, Utah
ADAM KINZINGER, Illinois             JOHN BARROW, Georgia
GUS M. BILIRAKIS, Florida            DONNA M. CHRISTENSEN, Virgin 
BILL JOHNSON, Missouri                   Islands
BILLY LONG, Missouri                 HENRY A. WAXMAN, California, ex 
JOE BARTON, Texas                        officio
FRED UPTON, Michigan, ex officio


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Lee Terry, a Representative in Congress from the State of 
  Nebraska, opening statement....................................     1
    Prepared statement...........................................     2
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................     3
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     5
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     6
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................    87

                               Witnesses

Kay Brown, Director, Education, Workforce, and Income Security, 
  U.S. Government Accountability Office..........................     8
    Prepared statement...........................................    11
    Answers to submitted questions...............................    92
Joseph S. Campbell, Deputy Assistant Director, Criminal 
  Investigation Division, Federal Bureau of Investigation........    28
    Prepared statement...........................................    30
Charles Harwood, Acting Director, Bureau of Consumer Protection, 
  Federal Trade Commission.......................................    37
    Prepared statement...........................................    39
    Answers to submitted questions...............................    97
Gail Hillebrand, Associate Director, Consumer Education and 
  Engagement, Consumer Financial Protection Bureau...............    52
    Prepared statement...........................................    54
    Answers to submitted questions...............................   108
William H. Sorrell, Attorney General, State of Vermont...........    58
    Prepared statement...........................................    60

                           Submitted Material

Letter of May 16, 2013, from the National Consumers League to the 
  subcommittee, submitted by Mr. Terry...........................    89


    FRAUD ON THE ELDERLY: A GROWING CONCERN FOR A GROWING POPULATION

                              ----------                              


                         THURSDAY, MAY 16, 2013

                  House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:47 a.m., in 
room 2322, Rayburn House Office Building, Hon. Lee Terry 
(chairman of the subcommittee) presiding.
    Present: Representatives Terry, Lance, Blackburn, Harper, 
Guthrie, Olson, McKinley, Bilirakis, Johnson, Long, Schakowsky, 
Butterfield, Sarbanes, Welch, Barrow, Christensen, and Waxman 
(ex officio).
    Staff Present: Kirby Howard, Legislative Clerk; Nick 
Magallanes, Policy Coordinator, Commerce, Manufacturing and 
Trade; Brian McCullough, Senior Professional Staff Member, 
Commerce, Manufacturing and Trade; Gib Mullan, Chief Counsel, 
Commerce, Manufacturing and Trade; Shannon Weinberg Taylor, 
Counsel, Commerce, Manufacturing and Trade; Michelle Ash, 
Minority Chief Counsel, Commerce, Manufacturing and Trade; and 
Will Wallace, Minority Professional Staff Member.

   OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEBRASKA

    Mr. Terry. So good morning. Welcome to the Commerce, 
Manufacturing, and Trade Subcommittee on elderly fraud. I am 
pleased to have a distinguished panel of witnesses before us 
today, including representatives of four separate Federal 
entities, and a State attorney general. By the way, nice 
timing.
    The hearing title today goes a long way to explaining why 
we are here. It is absolutely a growing concern for an 
expanding population. The fact is America's population is 
growing older. According to the Census Bureau, from 2000 to 
2010, the percentage of Nebraskans over age 65 rose 6.2 percent 
and the percentage of those over the age 85 jumped by 15.8 
percent.
    The trend is set to continue and accelerate. By 2050, the 
number of Americans over age 65 is expected to double. Thanks 
to medical innovation and better standards of living, folks are 
living longer. And this population tends to be a little 
wealthier and have better credit than the average American. 
According to the 2010 Census data, the median net worth of 
households of those 65 years or older was 4.9 times that of 
households age 35 to 44, and 25.5 times the net of those under 
age 35.
    This fact is not lost on many of the people in this room 
here today. Unfortunately, neither is it lost on those seeking 
to take advantage of our seniors, who tend to be more 
vulnerable and susceptible to some of the many different types 
of frauds that are being perpetrated.
    The testimony submitted for today's hearing only scratch 
the surface in describing the multitude of fraud schemes out 
there. The threat is very real and does not appear to be just 
small-time crooks. Everything from home equity theft, letter 
fraud originating in foreign countries seems to be occurring. 
Clearly there is no shortage of individuals or perhaps 
organized crime groups working to trick, abuse and steal from 
our American senior citizens.
    One of the reasons we are here today, besides to shed light 
on this awful trend, is to conduct oversight on the agencies 
sitting before us and make sure they are doing their best to 
protect seniors as effectively and efficiently as possible. 
When reviewing the testimonies, I counted at least five 
separate task forces spread out amongst DOJ, FTC, CFPB alone, 
some agencies specific and other intra agency. My concern is 
whether or not we are using our resources as effectively as 
possible, and not duplicating them when several agencies have 
separate working groups set up that may duplicate the work 
being done at another agency.
    Additionally, there--are all the agencies communicating 
with each other? For example, what happens when a phone company 
sends over a list of numbers that have been connected to 
fraudulent phone calls like in the widely reported 876 Jamaica 
phone scam? Does the FBI share this list with the FTC? Does FTC 
share this with private companies within its jurisdiction?
    Stealing from individuals who have worked and saved their 
entire lives so that they may live in dignity during their 
golden years is nothing less than appalling, and we need to 
make sure government is doing everything it can as efficiently 
as possible to protect the most vulnerable adults.
    [The prepared statement of Mr. Terry follows:]

                  Prepared statement of Hon. Lee Terry

    Welcome to the Commerce, Manufacturing, and Trade 
Subcommittee's hearing on elderly fraud. I am pleased to have a 
distinguished panel of witnesses before us today, including 
representatives of four separate federal entities and a state 
attorney general.
    The hearing title today goes a long way to explaining why 
we here. This is absolutely a growing concern for a growing 
population. The fact is, America's population is growing older. 
According to the Census Bureau, from 2000 to 2010 the 
percentage of Nebraskans over age 65 rose 6.2% and the 
percentage of those over age 85 jumped by 15.8 percent. This 
trend is set to continue and accelerate. By 2050, the number of 
Americans over age 65 is expected to double. Thanks to medical 
innovation and better standards of living, folks are living 
longer.
    And this population tends to be wealthier and have better 
credit than the average American. According to the 2010 census 
data, the median net worth of households of those 65 years and 
older was 4.9 times that of households aged 35-44 and 25.5 
times than that of those under age 35. This fact is not lost on 
many of the people in this room today.
    Unfortunately, neither is it lost on those seeking to take 
advantage of our seniors who tend to be more vulnerable and 
susceptible to some of the many different types of frauds that 
are being perpetrated.
    The testimonies submitted for today's hearing only scratch 
the surface in describing the multitude of fraud schemes out 
there. The threat is very real and does not appear to be just 
small-time crooks. Everything from home equity theft, to letter 
fraud originating in Nigeria seems to be occurring--clearly, 
there is no shortage of individuals or perhaps organized crime 
groups working to trick, abuse, and steal from American senior 
citizens.
    One of the reasons we are here today, besides to shed light 
on this awful trend, is to conduct oversight on the agencies 
sitting before us, and to make sure they are doing their job to 
protect seniors as effectively and efficiently as possible.
    When reviewing the testimonies, I counted at least five 
separate tasks forces spread out amongst DOJ, FTC, and CFPB 
alone--some agency specific and others intra-agency. My concern 
here is whether or not we are using are resources as 
effectively as possible and not duplicating them, when several 
agencies have separate working groups set up that may duplicate 
the work being done at another agency.
    Additionally, are all the agencies communicating with each 
other? For example, what happens when a phone company sends 
over a list of numbers that have been connected to fraudulent 
phone calls--like in the widely reported ``876 Jamaica phone 
scam?'' Does FBI share this list with FTC? Does FTC share this 
with private companies within its jurisdiction? Stealing from 
individuals who have worked and saved their entire lives so 
that they may live in dignity during their golden years is 
nothing less than appalling and we need to make sure government 
is doing everything it can as efficiently as possible to 
protect these vulnerable individuals.

                                #  #  #

    Mr. Terry. I look forward to today's hearing, today's 
testimonies, and thank everyone for being part of this hearing. 
And I now yield to the ranking member of the subcommittee, the 
gentlelady from Illinois, Ms. Schakowsky.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. I really thank the chairman so much for 
having this hearing. Much of my adult life has been as an 
advocate for seniors. For 5 years, I was director of the 
Illinois State Council of Senior Citizens. The issues of fraud 
are very important to our older population, in particular for 
many of the reasons that my chairman mentioned.
    Seniors represent the fastest growing segment of our 
population. Every day 10,000 Americans turn 65. Happy birthday 
to 10,000 people. Many seniors have certain characteristics 
that make them an attractive target for criminal behavior. 
According to The Scam Foundation, more than one in four seniors 
who live alone have difficulty with activities of daily living 
or some cognitive impairment. According to the FBI, seniors 
generally have higher net worth, the tendency to be trusting, 
and are less likely to report fraud.
    I do want to say that although I agree that the net worth 
of seniors is higher, the median income of people over 65 is 
$22,000 a year, so many tend to be cash poor, but perhaps house 
rich, which again makes them vulnerable.
    We have seen an uptick in the numbers of products and 
services that are targeted toward the elderly: anti-aging 
products, I am well aware, health-related products, prize 
promotions and reverse mortgages. I am incredibly concerned 
about the negative consequences associated with some of those 
products and services.
    Reverse mortgages allow homeowners over the age of 62 to 
borrow against their homes to receive either a cash payment or 
a line of credit. And while reverse mortgages, if they are 
structured fairly, can offer financial security to seniors, 
they can also lead to unforeseen foreclosures and financial 
hardship. Many former subprime lenders have entered the reverse 
mortgage market, and the results have been devastating for 
seniors. According to The New York Times, the rate of default 
on reverse mortgages reached a record high of 9.4 percent last 
year.
    I offered an amendment, which is adopted to the Dodd-Frank 
Wall Street Reform Consumer Protection Act that allows the 
Consumer Financial Protection Bureau to better regulate reverse 
mortgages. I look forward to hearing from Associate Director 
Hillebrand about the status of that rule making.
    This subcommittee must ensure that our Federal agencies 
have the capacity to root out fraud where the problems are so 
clear and the solutions are within reach. We should especially 
do so for our senior citizens who have done so much for our 
country.
    Again, I thank the witnesses for appearing today. I look 
forward to working collaboratively with Chairman Terry, as we 
have, I don't know about uniquely in this Congress, but 
certainly on this committee, and members of the subcommittee to 
address the issue of senior fraud. And I yield now to Mr. 
Welch.
    Mr. Welch. I thank Mr. Terry, Ms. Schakowsky. They have 
been leaders on senior fraud issues and protecting seniors in 
general. I really appreciate the bipartisan approach.
    We have today my friend, Bill Sorrell, who is the attorney 
general of the State of Vermont. He has been attorney general 
since 1997. Before that, he was secretary of administration in 
the administration of Governor Howard Dean. Before that, he was 
the State's attorney in our largest county, Chittenden County. 
And he has done an extraordinary job of putting the focus on 
protecting consumers, with a particular focus on seniors.
    And you may remember, Mr. Chairman, we had Mike Smith, who 
is the executive from Fair Point Communications, and actually 
his successor as secretary of administration in Vermont to a 
Republican governor, Jim Douglas, who had a real concern about 
fraud, and he testified about the Jamaican scams, telephone 
scams that are really ripping off seniors in Vermont, and Mr. 
Sorrell has been very active and aggressive on this.
    And what we need to provide at our level, as both of you so 
well know, are the tools that our attorney generals and our 
local prosecutors need back home. So this has got to be a 
partnership, the policy has to allow you to do your job, but 
the hard work actually is right at where you all are doing it. 
So, Mr. Sorrell, I really appreciate it.
    Also, my first job in politics, his mom was on the Senate 
Government Operations Committee, and was the godmother of all 
politicians Democratic in Vermont. Now, you may not like that, 
but we all have very fond memories of----
    Mr. Terry. Is there another type of politician in Vermont?
    Mr. Welch. We are trying to--we are trying to keep it 
clean, you know what I mean? But his mom was a big--was a 
mentor of Howard Dean and many of us, and we really just admire 
the Sorrell family going back generations in Vermont. So thanks 
for letting him be here.
    Mr. Terry. Thank you. And now I yield 2 minutes to the 
gentlelady from Tennessee, the vice chairman of the full 
committee, Ms. Blackburn.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman. And thank you for 
what I think is a really important hearing. As we look at the 
issue of fraud and the elderly fraud abuse, it is a very 
complex problem, and the more I have delved into it, the more 
complex it seems to become. Of course, I appreciate the fact 
that much of this I am learning firsthand, as I have a mom, who 
is in her late 80s, and just lost my dad, who was in his late 
80s. So we are going through this and living it every single 
day, and I appreciate the good work that you all are doing to 
help us get to the bottom of it.
    As we were preparing for this hearing today, I looked at a 
TBI, Tennessee Bureau of Investigation report that actually 
pulled together the numbers of what had occurred from 2009 to 
2011 in the elderly fraud offenses, and there were over 6,200, 
nearly 6,300 that were reported, and it accounted for nearly a 
third of all the fraud victims. The most frequently reported 
offense was the credit card ATM fraud. And I know you are 
dealing with that.
    The majority of the elderly individuals that reported these 
crimes were related to or acquainted with their offender. And, 
sadly, the number of reported fraud cases we have on hand might 
only be the tip of the iceberg, because one of the things that 
I have learned is that many of the elderly are embarrassed to 
report that this has happened to them, or they are not sure how 
to report it or how it happened. So there are a lot of factors 
that come into play in this.
    And I think there is one other thing that contributes to 
this, and it is the rogue Web sites. These rogue Web sites with 
rogue financial networks that continue to target our seniors 
with free goodies and with pirated content and it is so 
inexpensive, so affordable. We all know the come-ons that they 
put out there. Cracking down on those pirated Web sites is 
going to be essential to protecting our seniors and allowing 
them to protect what I term the virtual you, their virtual 
presence online.
    And I am hoping that our hearing today will help clarify 
the roles that each agency has in preventing elderly fraud and 
possibly identifying areas of duplicative efforts so that we 
can more effectively target the problems. I yield back.
    Mr. Terry. Thank you. Mr. Lance, the vice chairman of the 
committee, subcommittee, you are recognized for the remainder 
of the time.
    Mr. Lance. Thank you, Mr. Chairman. Fraud perpetrated on 
the elderly is often a terrible crime of opportunity. With 
America's baby boomers beginning to enter retirement age, I am 
happy that Chairman Terry and this subcommittee are examining 
the Federal role in anticipating and preventing this trend.
    My office receives requests to assist in combating fraud on 
a weekly basis. With technological advancements, the criminal 
element becomes more sophisticated and more difficult to 
combat. Many scammers prey on American senior citizens, many of 
whom must navigate a complicated bureaucracy on their own, 
perhaps as new users of computers or the Internet.
    It is my hope that Congress, and in particular this 
subcommittee, can provide the needed tools and resources to 
prevent current and future fraud threats.
    Fraud against senior citizens has risen consistently in New 
Jersey. Nearly 6,400 cases of elder abuse were reported 
throughout the State in 2010, up from the 2 previous years. 
About one in five cases of fraud in New Jersey involves 
financial exploitation. This is intolerable.
    I commend groups such as AARP and the law enforcement 
community for their aggressive defense on behalf of senior 
citizens. I also commend the New Jersey Division of Aging and 
Community Services for its work as well.
    It is my hope that these partners and our witnesses here 
today will educate the public on the trends and threats 
regarding this issue. I look forward to hearing your testimony 
this morning. Thank you, Mr. Chairman.
    Mr. Terry. Thank you, Mr. Vice Chairman. We will yield back 
our time and would like to recognize the full committee, I 
almost said----
    Mr. Waxman. She has already gone?
    Mr. Terry. Yes. So Mr. Waxman, you have the 5 minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you very much, Mr. Chairman. I want to 
thank you for holding this hearing on fraud affecting older 
Americans.
    Imagine getting an email from a dear friend that she had 
gotten mugged while on vacation, that her cash and credit cards 
were taken at gunpoint, and she needs you to wire money so that 
she can pay her hotel bill. After you wire the money, you find 
out that the mugging never occurred. Unfortunately, this 
emergency scam happened to a senior in my district, and many 
other similar frauds are committed each day around the country.
    One may think that fraud is easy to spot, but in the case I 
just mentioned, the email was sent from the friend's actual 
email account, now hacked, and included her actual address and 
phone number. And with the prevalence of social media sites, 
one can easily imagine a fraudster knowing that a victim's or 
grandchild or friend is on vacation.
    Last month the Federal Trade Commission released the 
results of its most recent survey on fraud, reflecting data 
from 2011. This report estimated that over 25 million Americans 
were victims of surveyed frauds, including those that preyed on 
consumers' desire to improve their health, find a job or save 
money on everyday needs.
    According to the FBI, older Americans possess certain 
characteristics that make them attractive targets for 
fraudulent activity. Many seniors have accumulated retirement 
savings, tend to be polite and trusting, and are unable or 
reluctant to report fraud or serve as criminal witnesses. They 
are also targeted disproportionately for certain scams like 
those involving prize promotions, health-related products and 
services, and reverse mortgages.
    And appallingly, older Americans are also exploited 
financially by those close to them, including by trusted people 
like family members, friends, attorneys or financial advisors.
    Fraud against the elderly is a very serious crime with the 
potential for severe harm, including lost retirement funds, 
ruined credit, and an emotional toll on victims and their 
families that is not easy to overcome.
    I commend President Obama for recognizing this through his 
administration's significant efforts to educate consumers about 
fraud and through his establishment of the financial fraud 
enforcement task force.
    Federal, State, and local authorities must remain vigilant 
in the fight against fraud occurring on consumers of any age, 
and Congress must ensure that law enforcement has the tools it 
needs to win that fight. This hearing on fraudulent activities 
is a good start. Thank you, Mr. Chairman.
    I thank the witnesses for being here. I do want to 
apologize in advance, because I will be required to be at 
another subcommittee at the same time, and while cloning is a 
possibility, it still hasn't, God forbid, come to the level of 
making another me.
    And I have some time left. Anybody on our side or either 
side want the time?
    Mrs. Blackburn. If the gentleman would yield for just----
    Mr. Waxman. The gentlelady from the Virgin Islands. I yield 
to her.
    Mrs. Christensen. I wanted to just say for my part that 
fraud committed against the elderly--and I thank you for 
yielding--against our seniors is an egregious crime, and so I 
want to thank the chairman and ranking member for holding this 
hearing.
    In my district, people over 60 are a sizeable population 
and we have a fair number of people in their 90s, and so in a 
place where services are not readily available, they are 
particularly vulnerable to insurance and other financial crimes 
even, easy repairs on homes and any number of fraudulent offers 
that seem attractive, and so they take advantage of them and 
find themselves in difficulty, so I am glad we are having this 
hearing. And thank you to the witnesses for being here. I yield 
back.
    Mr. Waxman. I have a few minutes left. I want to yield to 
the gentlelady from Tennessee.
    Mrs. Blackburn. I thank the gentleman from California. I 
was just going to encourage you to send your avatar to the 
other hearing and then you can stay with us. You know, I 
thought that----
    Mr. Waxman. A good idea.
    Mrs. Blackburn. Yes.
    Mr. Waxman. Another good idea.
    Mrs. Blackburn. Absolutely. Yield back.
    Mr. Waxman. Thank you.
    Mr. Terry. Thank you. All right. We do not need avatar 
testimony.
    We appreciate all of you here. I am going to introduce the 
entire panel, and appreciate all of you being here, and we will 
go right to left. When you start, Ms. Brown. You are the 
director of Education, Workforce and Income Security with GAO. 
Appreciate you being here.
    Joseph Campbell, criminal investigation division of the 
Federal Bureau of Investigation. And I had mentioned to him 
earlier that it is always nice that we invite you in instead of 
you just showing up. That has a little bit different 
connotation.
    Gail Hillebrand, associate director----
    Oh. Charles Harwood. We are going to let you testify as 
well. Acting director, Bureau of Consumer Protection, Federal 
Trade Commission.
    And Gail Hillebrand, associate director, Consumer Education 
and Engagement, the Consumer Financial Protection Bureau.
    And last, and already introduced by our good friend from 
Vermont, we have the AG of Vermont, Mr. Bill Sorrell.
    So appreciate all of you here. And we will go from my left 
to right. So Ms. Brown, you get to start. You are now 
recognized for 5 minutes.

 STATEMENTS OF KAY BROWN, DIRECTOR, EDUCATION, WORKFORCE, AND 
INCOME SECURITY, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; JOSEPH 
S. CAMPBELL, DEPUTY ASSISTANT DIRECTOR, CRIMINAL INVESTIGATION 
  DIVISION, FEDERAL BUREAU OF INVESTIGATION; CHARLES HARWOOD, 
 ACTING DIRECTOR, BUREAU OF CONSUMER PROTECTION, FEDERAL TRADE 
   COMMISSION; GAIL HILLEBRAND, ASSOCIATE DIRECTOR, CONSUMER 
EDUCATION AND ENGAGEMENT, CONSUMER FINANCIAL PROTECTION BUREAU; 
AND HON. WILLIAM H. SORRELL, ATTORNEY GENERAL, STATE OF VERMONT

                     STATEMENT OF KAY BROWN

    Ms. Brown. Thank you. Chairman Terry, Ranking Member 
Schakowsky, and members of the subcommittee, thank you for this 
opportunity to discuss our work on elder financial 
exploitation. My remarks today are based on a year-long GAO 
study completed last November.
    Financial exploitation can result from foreign lottery 
scams, unscrupulous financial advisors, betrayal by trusted in-
home caregivers, or multiple other causes. This exploitation 
can undermine the health, dignity and independence of older 
adults, leading to far-reaching effects for the victims in 
particular, but for society in general. Victims who lose their 
ability to support themselves can put additional pressure on 
scarce health care and social service resources.
    Much of the responsibility for combating elder financial 
exploitation falls on State and local social service, criminal 
justice and consumer protection agencies. And the problem is 
large and likely growing.
    The Federal Government has an important role to play, and 
today I will mention four key areas that can benefit from 
Federal attention.
    First, officials at all levels of government need to better 
understand the nature and extent of the problem. Data from 
FTC's Consumer Sentinel Network, FBI's Internet Crime Complaint 
Center, and FinCEN's suspicious activity reports can be 
analyzed to shed light on current trends and schemes to help 
agencies better determine how to best direct Federal resources. 
In our report, we made recommendations to FTC that we believe 
would improve the usefulness of the consumer sentinel data for 
these purposes.
    Second, identifying and preventing financial exploitation 
that is before victims have lost their entire life savings 
requires marshalling the efforts of those who interact with 
older adults regularly in the community, such as bank tellers 
and medical professionals. In our field work, we were told that 
bank staff in particular may be reluctant to report their 
suspicions of exploitation for fear of violating important 
privacy rules. We recommended that CFPB takes steps to help 
employees of financial institutions recognize signs of 
exploitation and understand their reporting options.
    Third, regarding investigating and prosecuting financial 
exploitation, State and local criminal justice officials told 
us they could benefit from additional training and support from 
the Federal agencies that have specialized expertise. This is 
especially true for interstate and international mass marketing 
scams. We have recommended that Justice launch its planned Web 
site that would make resources, such as training and primary 
litigation materials, available to State and local officials, 
and also that Justice conduct outreach to clarify the process 
for requesting assistance or referring cases to the Federal 
level.
    And fourth, possibly the best way to fight this problem is 
through education. Older adults, family members and the public 
in general need more information about what constitutes 
financial exploitation and how to avoid it. This information 
could range from tips on avoiding scams, to shedding light on 
the many designations used by financial service professionals.
    Each of the seven Federal agencies we reviewed 
independently produces educational materials, but we believe 
these efforts would be more effective if they were part of a 
broader, more coordinated national public awareness campaign.
    As you will hear from others today, multiple Federal 
agencies are working to address financial exploitation in ways 
that are consistent with each of their individual missions. 
Also, agency representatives have participated in various 
working groups and collaborated through task forces over time; 
however, we believe a more cohesive and deliberately planned 
national strategy is needed to increase the likelihood of 
success and to optimize the use of scarce Federal resources.
    The recently formed Elder Justice Coordinating Council, 
charged by law with setting priorities and coordinating Federal 
elder justice efforts, can be an appropriate vehicle for this. 
We recommended that the council develop this national strategy 
along with a clear set of goals and assignments for completing 
these goals. The council met this week for the second time and 
received a set of recommendations from its working group that, 
if approved and implemented, would begin to address many of the 
issues I have raised today.
    This concludes my prepared statement. I am happy to answer 
any questions.
    Mr. Terry. Well timed. Much appreciated.
    [The prepared statement of Ms. Brown follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Terry. Mr. Campbell, you are now recognized for your 5 
minutes.


                STATEMENT OF JOSEPH S. CAMPBELL

    Mr. Campbell. Thank you. Chairman Terry, Ranking Member 
Schakowsky----
    Mr. Terry. Is your microphone on?
    Mr. Campbell. Chairman Terry, Ranking Member Schakowsky and 
members of the subcommittee, I am pleased to appear before you 
today to discuss the FBI's efforts to combat fraud against our 
Nation's seniors.
    At the beginning of 2011, the first of our Nation's baby 
boomers reached the age of 65. Since then, thousands a day also 
reach that milestone. They have many reasons to celebrate. 
Senior citizens are most likely to have a nest egg, to own 
their home, and to have excellent credit. Unfortunately, these 
are also many of the same qualities which make them so 
attractive to con artists.
    Unscrupulous loan officers, investors, appraisers, 
developers and others are exploiting home equity conversion 
mortgages, HECMs, also known as reverse mortgages, to defraud 
senior citizens. HECM-related fraud is occurring in every 
region of the United States and reverse mortgage schemes have 
the potential to increase substantially as demand for these 
products rises in demographically dense senior citizen 
jurisdictions.
    For its part, the FBI continues to develop new ways to both 
detect and combat these fraudsters. We are working with our 
partners at all levels of law enforcement and within regulatory 
agencies and using the full array of investigative techniques 
to find and stop criminals before the fact rather than after 
the damage has been done.
    Most recently, Nigerian letter frauds combined the threat 
of impersonation fraud with a variation of an advanced fee 
scheme in which correspondence from Nigeria offers the 
recipient the opportunity to share in a percentage of millions 
of dollars that the author, a self-proclaimed government 
official, is trying to transfer illegally out of Nigeria. The 
scheme relies on convincing a willing victim to send money to 
the author of the letter in Nigeria in several installments of 
increasing amounts for a variety of reasons.
    To combat the numerous fraudsters who would do our citizens 
harm, the Federal Bureau of Investigation and the National 
White Collar Crime Center established the Internet Crime 
Complaint Center, IC-3. The IC-3 serves as a vehicle to 
receive, develop and refer criminal complaints regarding the 
rapidly expanding arena of Internet fraud. It gives the victims 
of Internet fraud a convenient and easy-to-use reporting 
mechanism that alerts authorities of suspected criminal or 
civil violations.
    Through the IC-3, we are also establishing effective 
alliances with industry, allowing us to leverage both 
intelligence and subject matter expert resources. In 2012, IC-3 
received complaints from more than 42,000 victims over the age 
of 60 with total reported losses of more than $115 million.
    The more prevalent scams reported to IC-3 which target the 
elderly are romance scams, lottery scams, 419-type letters, 
also referred to as Nigerian scams, and the grandparent scam. 
The grandparent scam is a telephone scam targeting grandparents 
and involved fraudsters calling elderly individuals claiming to 
be a grandson, granddaughter or other young relative in a legal 
or financial crisis. The crisis generally involves a claim of 
being arrested or in a car accident in another country. The 
callers create a sense of urgency and make a desperate plea for 
money, begging the grandparents not to tell the parents, while 
often crying on the phone to help prevent the potential victims 
from discovering the scam.
    With jurisdiction over both Federal and private insurance 
programs, the FBI is also actively involved in the health care 
fraud prevention partnership and the cabinet level health care 
fraud prevention and enforcement team. Since the inception of 
the Medicare fraud strike force, prosecutors filed more than 
700 cases, charging more than 1,400 defendants, who 
collectively billed the Medicare program more than $4 billion. 
Over 900 defendants pleaded guilty and over 100 others were 
convicted in jury trials, and more than 700 defendants were 
sentenced to imprisonment for an average term of more than 45 
months.
    By working together to stop fraud, we can ensure America's 
hard earned dollars are used to care for the sick and we can 
keep our Nation's health care system strong for those who need 
it both now in and in the future.
    Chairman Terry, Ranking Member Schakowsky, I would like to 
thank you again for this opportunity to discuss the FBI's 
efforts to combat fraud against our nation's senior citizens. I 
am now happy to answer any questions that you may have.
    Mr. Terry. Thank you very much.
    [The prepared statement of Mr. Campbell follows:]

    [GRAPHIC] [TIFF OMITTED]  

    Mr. Terry. Now, Mr. Harwood, you are recognized for 5 
minutes.


                  STATEMENT OF CHARLES HARWOOD

    Mr. Harwood. Thank you, Chairman Terry, Ranking Member 
Schakowsky and members of the subcommittee. I am Charles 
Harwood, acting director of the Bureau of Consumer Protection 
at the Federal Trade Commission. The FTC has submitted an 
official statement for the record. My remarks and responses to 
questions are based on that statement, but they are my views.
    Seniors are among the many victims of the consumer fraud 
schemes targeted by the FTC. Three Commission efforts, one 
concerning work-at-home scams, one concerning prize or lottery 
fraud, and one concerning identity theft illustrate our law 
enforcement and education efforts on behalf of senior 
consumers.
    Many Americans, including seniors, living on fixed income 
or with limited ability to work outside the house look for ways 
to supplement their incomes by working from home. Opportunistic 
scam artists take advantage of this market by selling bogus 
work-at-home programs that in reality, just deplete the 
consumer's resources even further.
    This past February, the Commission sent out redress checks 
to more than 50,000 consumers as a result of our successful law 
enforcement action against the deceptively named Real Wealth 
Program, a work-at-home scheme that targeted seniors. In its 
mailings to consumers, Real Wealth claimed ``All I do is mail 
30 postcards every day and I make an extra $350 a week,'' and, 
``collect up to $9,250 with my simple 3-minute form. In fact, 
consumers who responded received nothing, or at most, they 
received a booklet on how to pitch the very same scam to other 
consumers.
    The case highlights our work with partners. First, it was 
referred to us by AARP legal counsel for the elderly, a local 
legal services provider here in D.C. And second, we partnered 
with the AARP Fraud Fighter Call Center to offer interested 
consumers one-on-one counseling about the fraud.
    Prize and lottery fraud is also on the Commission's radar 
scream. Consumers between 65 and 74 years of age are more 
likely to be victims of such scams, according to the 
Commission's recent fraud report, which has already been 
referred to, and which was a survey of common consumer fraud 
schemes.
    On the enforcement side, the Commission has not only gone 
after the perpetrators of such lottery frauds, but it has also 
pursued a money transfer company, Money Gram, that allegedly 
allowed its system to be used by telemarketers pitching prize 
and lottery fraud.
    Complementing our law enforcement efforts, an innovative 
partnership with the AARP foundation enables the Commission to 
refer individuals for peer counseling who are over the age of 
60, and who have called the FTC complaining they have been the 
victim of certain frauds, including prize and lottery frauds.
    The Commission is the Federal clearinghouse for consumer 
identity theft complaints, which we share with other Federal, 
State and local criminal prosecutors, and we have been the 
leaders in identify theft education for both business and 
consumers. Just last week, the Commission held a workshop to 
collect information about the extent to which seniors are 
vulnerable to identify theft. In particular, the Commission is 
concerned about tax, Medicare and nursing-home related identity 
theft. The Commission has invited public comment on the issues 
discussed at the workshop, and as we learn more, we will share 
our findings with our civil and criminal law enforcement 
partners and use the information to advance our education and 
outreach efforts.
    As a part of our consumer protection mission, the 
Commission tries to anticipate how fraud schemes may evolve and 
we watch for emerging threats. We are watching closely two 
developments that may give rise to frauds directed towards 
seniors in the coming years.
    One development relates to health care coverage. We know 
from experience that changes in government programs create 
fertile conditions for fraud schemes. Scams involving 
questionable national medical discount plans have been around 
for a while now and have been the target of a number of FTC and 
State law enforcement actions.
    As the Affordable Care Act is implemented, the discount 
plan scam could easily evolve into an ACA-related scam sewing 
confusion and tricking consumers, including seniors, into 
paying for worthless products or divulging financial account 
information.
    The second development concerns the Internet. A recent Pew 
study shows that the number of adults over 65 who use the 
Internet is increasing rapidly. As more seniors use the 
Internet, more will be exposed to fraudulent online offers. We 
see more Internet fraud affecting--we will see more Internet 
frauds in the future affecting seniors, we think. Indeed it is 
conceivable that the Internet scammers will actually target the 
online seniors as their numbers increase.
    Finally, education is an essential part of our consumer 
protection and fraud prevention work. The Commission is widely 
known for its plain language information on dozens of issues, 
including family emergencies, which Mr. Campbell talked about, 
also known as the grandparent scam and which at least one 
member talked about, fraudulent prize offers, and government 
imposter scams.
    We have partnered with other government agencies, State and 
local law enforcement agencies and community resources to 
disseminate the information.
    In addition to our broad-based outreach efforts, in a new 
initiative, the Commission is turning to activities directors 
and other professionals in facilities where boomers and seniors 
live and visit for guidance on the kinds of information that 
people will find useful, the messengers they trust, and the 
delivery mechanisms they are likely to pay attention to. 
Ultimately we expect to provide these professionals with fraud 
awareness materials and activities that they can tailor to and 
share with their particular communities.
    Thank you for the opportunity to describe the Commission's 
consumer protection work on behalf of older Americans.
    Mr. Terry. Thank you.
    [The prepared statement of Mr. Harwood follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Terry. Ms. Hillebrand, you are recognized for your 5 
minutes.


                  STATEMENT OF GAIL HILLEBRAND

    Ms. Hillebrand. Thank you, Chairman Terry, Ranking Member 
Schakowsky and distinguished members for the opportunity to 
speak with you today about the Consumer Financial Protections 
Bureau's work to address the devastating problem of elder 
financial exploitation.
    The CPB's division of consumer education and engagement 
includes our office for the financial protection for older 
Americans. This office for older Americans is specifically 
dedicated to the financial health of Americans aged 62 and 
older.
    Older Americans have assets that make them attractive 
targets for fraudsters. The net worth of U.S. households aged 
65 and older was approximately $18 trillion in 2009. And these 
individuals and families may be victimized by a broad range of 
perpetrators, including scam artists, family members, 
caregivers, financial advisors, home repair contractors, and 
even fiduciaries.
    One national prevalence study found that an estimated 5.2 
percent of Americans, 60 and over experienced financial 
mistreatment by a family member, and other studies indicate 
that most incidents of elder financial abuse are never reported 
to authorities, but remain under the radar. After a fraud, 
older Americans have very little time and few opportunities to 
recoup those lost savings.
    So to address elder financial exploitation, we recognize 
that collaboration across and among levels of government is 
critical. We participate in the congressionally mandated Elder 
Justice Coordinating Council as a venue for that collaboration.
    I would like to discuss a few of the current initiatives at 
the CFPB to address financial issues and problems faced by 
older Americans. First, older Americans can lose money because 
they trust the wrong person to give them financial advice. 
There are a bewildering array of titles for persons claiming 
special expertise in providing financial advice to seniors, and 
it can be very hard to distinguish those persons holding an 
easy-to-obtain credential from a fully-trained professional.
    To begin to address this challenge, we studied the variety 
of so-called senior designations and issued a report discussing 
the risks for older consumers who may rely on these 
designations. That report is entitled Senior Designations for 
Financial Advisors: Reducing Consumer Confusion and Risks.
    Second, we are helping seniors, caregivers and others in 
the community avoid fraud and scams. We have partnered with the 
FDIC to build a new module for the FDIC's Money Smart Program, 
called Money Smart for Older Adults. The new material 
identifies common financial issues that face seniors, including 
how to spot scams and frauds, and we will we jointly issuing 
that material for use across the Nation this summer.
    Third, older Americans who experience declining mental 
capacity and capacity to handle their finances face special 
challenges. Even mild cognitive impairment can disastrously 
reduce an older adult's ability to detect a fraud or scam. 22 
percent of Americans over 70 experience mild cognitive 
impairment, and experts say that the ability to handle finances 
is one of the very first life skills to go, often well before 
family members observe the more visible signs of diminished 
capacity. This means some seniors need a family member or other 
person to handle their money, and those legally authorized 
fiduciaries are a critical source of support, but they often 
have no training in how to handle someone else's money. Some 
may fall victim to fraud or even engage in it.
    So for the untrained person, often a family member who is 
asked to step in and handle someone else's money, the CFPB is 
developing a set of guides for lay fiduciaries. These guides 
will explain what a fiduciary does, how to properly segregate 
and account for funds, and how to protect the assets of seniors 
from frauds by others.
    Fourth, there is a role for financial institutions and for 
those who regulate them. Bank tellers may be among the first 
persons to observe signs that an older adult may be the victim 
of financial abuse, but the bank may be unsure whether Federal 
privacy laws permit them to report their suspicion to social 
service or law enforcement agencies. So the CFPB is developing 
strategies for clearly communicating with financial 
institutions that the Gramm-Leach-Bliley Act does not prohibit 
them from sharing these suspicions with law enforcement and 
adult protective services.
    Finally, I would like to mention two resources that CFPB 
offers to all consumers that are of use to older Americans. At 
our Web site, consumerfinance.gov, we offer Ask CFPB. Ask CFPB 
is an interactive online tool. It provides consumers with 
short, unbiased answers to their financial questions and 
includes a special tag for issues that may be of particular 
interest to seniors.
    We also accept consumer complaints through our Consumer 
Response program. And Consumer Response is handling complaints 
on a wide variety of financial products, including things like 
credit cards, mortgages and credit reports.
    Elder financial exploitation is a serious problem for our 
country. I commend you, Chairman Terry, Ranking member 
Schakowsky, and all of the members of the subcommittee for 
holding this hearing to put this issue in the spotlight. Thank 
you.
    [The prepared statement of Ms. Hillebrand follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Terry. Mr. Attorney General, appreciate your efforts to 
get here, and you are now recognized for 5 minutes.


              STATEMENT OF HON. WILLIAM H. SORRELL

    Mr. Sorrell. Thank you very much, Mr. Chairman. My thanks 
to the subcommittee, and particularly to Congressman Welch for 
the invitation to be here and speak to these issues today. I am 
not here speaking on behalf of the National Association of AG's 
nor individual attorneys general, but I would be very surprised 
if General Madigan or General Bruning, General Cooper, General 
Koster, would disagree with what I have to say as to what we 
are seeing in Vermont, or disagree with the requests I make for 
Federal assistance.
    We have a very real problem in the State of Vermont right 
now with scams preying on seniors, and as has been discussed 
with the aging demographic in this country, it is just going to 
get worse.
    Just some of the reasons why seniors are particularly 
preyed upon by certain scam artists, we have talked about the 
fact that they tend to have more resources or assets than 
others, but seniors tend to be more trusting than others. They 
want to believe that you have their best intentions at heart. 
They are more polite. They don't as readily hang up or close 
the door. And not just in rural Vermont. Seniors frequently 
tend to find themselves socially isolated, and a lot of seniors 
report that they appreciate the call from Jamaica or whatever 
to interact and talk about religion or the family or whatever.
    And then, of course, we have to take into account that 
seniors, some seniors suffer from dementia or related diseases, 
but otherwise, normal aging processes can have an impact on 
seniors in terms of making reasoned decisions about their 
financial affairs.
    My remarks go not to home repair fraud or caregivers or 
family members who perpetrate frauds. We see that. I want to 
focus a little bit on the stranger frauds, particularly those 
that come in from outside the country. We have talked about 
Jamaica a little bit, but we see a lot of the so-called 
grandparents scams, the grandson or granddaughter who has 
supposedly been in an auto accident or has been arrested. They 
will say, I have a cold. That is why I don't sound like--or I 
got punched in the mouth or I hit the steering wheel in the 
auto accident, so I don't sound like myself.
    We had the lottery and sweepstakes cases. We had a 
Vermonter who took out a home equity loan on her house to send 
the port fees or taxes off to Australia or Canada to get the 
lottery winnings.
    We see the romance or relationship scams coming in from out 
of the country, pen pals that leads to more. And just to bring 
it more immediately, just in the last 10 days to our consumer 
assistance program, we had an 83-year-old man suffering from 
dementia who lost $8,000 in an investment scam and a 79-year 
old woman who wired $29,000 to her dear friend in Ghana. All 
scams.
    Truth is, States are struggling, we need Federal help. The 
Vermont State Police, let alone the Burlington Police 
Department or the Montpelier Police Department are not in the 
position to identify the scam artists from out of the country. 
We don't have the jurisdiction to arrest them or prosecute 
them. And the likelihood that we will get the Vermont 
consumer's money back is virtually nil. We really need Federal 
help on that. So there are three main issues I would like to 
very quickly mention.
    We need Federal assistance to support research and 
development of evidence-based programs that go beyond simple 
consumer education, the fliers, the posters in banks and 
whatever, of what will work on a sustainable way to help 
seniors avoid being scammed, put together training materials, 
send to the States where at the ground level we can use those. 
So we are looking for effective and sustaining programs, 
research-based, to change consumer behavior.
    Second of all, and related to the first, is once we have 
those training materials and that research, we are looking for 
the support of State or local networks of individuals who work 
in senior meal sites, Social Security offices, banks, senior 
housing sites, to help prevent through interactions with 
seniors scams, identify it when they see it is happening, and 
then be able to effectively intervene to avoid further harm.
    And third and finally, we ask the Congress and look forward 
to working with our Federal partners to take a look at those 
players in the marketplace that in their legal carrying out of 
their business unknowingly, or at least facilitate the 
perpetration of the frauds. And particularly we would look to 
those wire service industries. And just in 2002, the States had 
a survey where 58 percent of the money wired to Canada over the 
period of the survey was fraudulent. I believe the FTC had a 
2007 report where of wire transfers of over $1,000 into Canada 
during the survey period, 79 percent were fraudulent.
    So we would ask the Congress to look at some things at this 
industry and others and give protection from antitrust 
restrictions on wire companies sharing information about 
vulnerable consumers; maybe some extra hoops for wires of a 
certain amount to certain countries.
    Thank you very much for the opportunity, and I look forward 
to answering questions.
    [The prepared statement of Mr. Sorrell follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Terry. Thank you very much. Very informative from all 
of you.
    My first comment/slash question, Ms. Brown and Ms. 
Hillebrand, my wife is a bank teller part-time. Kids are 
getting older, wanted something to do. And about 2 months ago, 
and this is kind of an impetus for this hearing today, older 
gentleman, mid 80s, walks into the bank, he is a customer 
there, or has his accounts there, says, I need a money order 
check for X thousands of dollars.
    And my wife, thinking, well, this is odd that he is asking 
for this, and prompts a couple of questions. Oh, you know, what 
is this for? And he says, well, I am going to get this money. 
If I give this X amount of money, $5,000 or whatever it was, I 
am going to get all of this money.
    And, of course, she knew instantly he was being scammed and 
told him, you are being scammed. This isn't real. You are not 
going to get this money. I feel very uncomfortable letting you 
go through with this transaction.
    No. And he was very, very demanding, called the boss over, 
supervisor.
    Supervisor instantly recognized it. Refused to give him the 
check that he was asking for. And they didn't know, as Ms. 
Hillebrand, you pointed out, what their rights were. They just 
know they were being a good--wanted to protect this guy from 
the mistake he was about to make.
    So they asked, is there somebody in your family that helps 
you with your money? And they concluded the conversation, well, 
bring her in and we will work with the both of you on this 
check. And, of course, he didn't show back up. But those are 
very real out there.
    And so that is just a real life story that occurred. And so 
when you mention, Ms. Hillebrand, about bank tellers needing to 
know what their rights are, most of the time, bank tellers have 
a lot of things they have to know about banking law, but how to 
work with somebody at the counter is probably not one of the 
things they are really taught. So you pointed that out in both 
your statements.
    Now, I am going to focus my questions a little bit--Mr. 
Campbell, Mr. Harwood, first question is regarding collection 
of the data. You mentioned, Mr. Campbell, your IC-3, 42,000 
registered complaints within that database. Mr. Harwood, I 
don't know how many you all receive at the FTC in a year span.
    Do you guys work together? Do you share the data and 
coordinate your efforts, Mr. Campbell, Mr. Harwood? Mr. 
Campbell first.
    Mr. Campbell. That is right. We do share that information, 
and we feed much of it into the Consumer Sentinel Network as 
well, where it can be shared even additionally from there. And 
I believe Mr. Harwood can comment on that as well.
    Mr. Harwood. Yes. In fact, Mr. Campbell's correct. IC-3 
does feed almost all of its complaints, all of its complaints 
except for the murder and fraud-type things, I think, to--
murder and those kinds of things, to the FTC, and then they are 
incorporated into our Consumer Sentinel System.
    Last year we received about 2 million complaints from 
consumers around the country. And our total database is over--I 
am going to say it is over 8 million complaints that we make 
available to law enforcement agencies throughout the United 
States, Federal, State and local to use in developing cases.
    Mr. Terry. All right. Now, Mr. Campbell, on the law 
enforcement side, and Mr. Sorrell brought this up to some 
extent, and you are dealing with international. How does local 
law enforcement, how are they able to work with State and 
Federal agencies when they have a person that has been scammed, 
when there is an actual victim?
    Mr. Campbell. Well, certainly with the international 
aspect, as you can imagine, there are difficulties there in 
pursuing that, but we do receive information from all kinds of 
sources, including local law enforcement, in regard to scams 
similar to the one that you posited. And what we do then is run 
checks on all of that information, determine if there have been 
others elsewhere, if it is a pattern, if it is tied to any 
particular criminal organizations, tied to any particular 
subjects that we are already focusing on, and determine if in 
that sense there is a pattern involved that would initiate our 
involvement.
    The onesies, twosies, there are so many of them, it is 
difficult for us obviously with resources, but the good thing 
about the IC-3, though, is that they can compile that 
information, store it, continue to run analysis. And it may 
come up later that, based on information we get, it is tied to 
something else that is substantial enough that we would be able 
to engage, but we also do share that information with others 
who might be able to take action.
    Mr. Terry. Very good. General Sorrell brought up a really 
good point, and that is there are money entities that are 
enabling the fraud. Money Gram. General Sorrell mentioned that 
58 percent of the checks going to Canada through this wire 
service is fraudulent, and even higher when the amounts get 
higher.
    How can the FBI work to shut those down? Is there something 
that Congress needs to do to disable those that are enabling 
this type of fraud?
    Mr. Campbell. Well, I don't have specific information as to 
what we are doing with Money Gram and so forth, and I can maybe 
get back to you on something like that----
    Mr. Terry. All right.
    Mr. Campbell [continuing]. but in regard to Congress, 
certainly if there is legislation that could be contemplated, 
we would be interested in working through the Department of 
Justice to consider legislation that might be effective, 
especially in those cross-border issues, which----
    Mr. Terry. Yes.
    Mr. Campbell [continuing]. do create a lot of threat 
problems for the elderly.
    Mr. Terry. Mr. Harwood?
    Mr. Harwood. Sure. Thank you. So with regard to Money Gram 
in particular, the FTC filed a law enforcement action against 
Money Gram precisely for facilitating lottery and prize 
promotion scams that involved Canadian operations. That was 
filed a couple of years ago. We obtained a substantial order 
against Money Gram, including injunctive relief and restitution 
for consumers.
    Since then, we have instituted a regular conference in 
Chicago that involves Money Gram, Western Union and GreenDot, a 
newer entry into the wire transfer, money transfer industry, 
and we meet regularly to talk with them about the kinds of 
complaints that we are seeing and the kinds of things they are 
doing to try to deal with the problem. That conference includes 
representatives from other Federal, State and local law 
enforcement agencies.
    Third, we have been working with all three of those 
entities to develop consumer education initiatives so they can 
actually stop or warn consumers before they wire money offshore 
and try to discourage them.
    And then finally, all the complaints that we get from 
Western Union, Money Gram and Green Dot, and we get many, many 
complaints from them, go into the consumer sentinel system and 
we make those complaints available to Federal, State and local 
law enforcement agencies.
    Mr. Terry. Fantastic. My time has expired, and Ms. 
Schakowsky, you are now recognized.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    In a June 2012 report to Congress, the Consumer Financial 
Protection Bureau noted that consumers are getting reverse 
mortgages at younger ages, and that 70 percent of the borrowers 
are opting for lump sum payments rather than an income stream 
or line of credit. Unsuspecting seniors who select the lump sum 
option are particularly vulnerable to fraud, given the appeal 
of quick money.
    The CFPB has identified property flipping, inflated 
appraisals, cash-out theft, power of attorney and third-party 
imposters as some of the top risks to reverse mortgage 
borrowers.
    As I mentioned in my opening statement, Ms. Hillebrand, I 
offered an amendment that provides the director of the CFPB 
with authority to issue regulations for reverse mortgage 
transactions, and I was wondering what the status of the rule-
making process, recognizing that there are some funding issues 
and the delayed appointment of Mr. Cordray, but how are we 
doing?
    Ms. Hillebrand. Thank you, Congresswoman Schakowsky, for 
that question and for your longstanding interest in protecting 
consumers as they consider whether or not to take reverse 
mortgages.
    We started with a study, which I believe was mandated by 
Dodd-Frank, I think that was part of your amendment to DFA, 
quite a comprehensive study. We found that even after housing 
counseling, some of the basic characteristics of these loans 
were not well understood. Housing counselors told us that 
people didn't quite understand that it is a loan and, that you 
are essentially borrowing and using up your home equity as you 
go. And that was a difficult concept for people who actually 
were considering taking these loans.
    We did say in that study, or identified some of the 
potential future activities. One is regulation. And we said 
that we expect to undertake a project to improve and integrate 
the Truth in Lending Act and the Real Estate Settlement 
Practice Act disclosures for reverse mortgages, because it is a 
very different kind of product than a forward mortgage, so they 
would work better, and that as part of that project, we would 
consider----
    Ms. Schakowsky. Let me just say----
    Ms. Hillebrand. Yes.
    Ms. Schakowsky [continuing]. as someone who has been 
refinancing, some of that paperwork, I think, is virtually 
useless, I just want you to know. I mean, you get this huge 
pile, you have got, like, an hour for the closing, and it is 
flipping through. And, you know, just a point there.
    Ms. Hillebrand. I appreciate that.
    Ms. Schakowsky. We don't all often feel better because a 
piece of paper has been added to the stack.
    Ms. Hillebrand. Well, no. We want to actually make the 
disclosure work for consumers, and that is a major undertaking 
and something that we intend to do as--in the meantime, we do 
have some good consumer education material focusing on the key 
insight from the study, it is a loan, and then focusing on four 
key questions people should ask themselves.
    And for all of your constituents, if they are considering a 
reverse mortgage, make certain that both spouses are on the 
loan. If they are not, you can have a situation where the widow 
or widower has to either cough up the full amount of the loan 
proceeds or move out of the family home. So that is number one: 
put all the borrowers on the house. And then there are some 
difficult questions about what your expected life--how long you 
think you will live, whether it is worth it. And if you are too 
young, it also can be quite dangerous to take the reverse 
mortgage, because you have a risk of outliving your money.
    Ms. Schakowsky. The thing that is hard about a bunch of 
these different scams is that often there is a legitimate 
offering. A work-at-home program, I suppose, could be 
legitimate.
    So what are the kinds of things that we can do to really 
help people distinguish? I mean, I think that is kind of what 
you are saying, Ms. Hillebrand, but are there other examples, 
or Mr. Sorrell, I mean, the kinds of things that help people 
sort through an offer, some of the key things they should be 
listening for that would alert them. I am just wondering if 
anybody wants to add to that?
    Mr. Sorrell. Well, I would go back to my suggestion that 
where the Federal Government could be really helpful is with 
some research-based analysis of what can work, because our view 
is just straight consumer education, the fliers, the mailers, 
even the peer counseling, the posters at banks near the teller 
as to whether this check is actually going to be there, the 
funds are going to be there 2 weeks from now when it has 
finally gotten back to the sending bank, that that is not 
adequate. And I think AARP would suggest that just a few weeks 
after peer-to-peer counseling, the beneficial impact is 
reduced.
    So we really want to see the National Institute of Mental 
Health and academia take a look at this to tell us at the State 
level what can be effective for sustainable protection going 
forward.
    Ms. Schakowsky. I have got a couple of seconds. Mr. 
Harwood, it looked like you want to----
    Mr. Harwood. Sure. I would agree with everything that 
General Sorrell said. That is part of the reason that we have 
been working with this new consumer education effort to try to 
talk with professionals and activities directors and others who 
are at facilities that are frequented by boomers and seniors to 
try to get a better sense of what kinds of messengers they will 
trust, what kinds of messages will be meaningful to them, and 
hopefully in that way help them better educate consumers in a 
way that is going to be best received by those consumers 
receiving the messages.
    Ms. Schakowsky. Let me just say because it is interesting 
that the gentleman who was actually protected at the bank went 
away mad. You know? Anyway, thank you.
    Mr. Terry. It is interesting. At this time the gentlelady 
from Tennessee is recognized for your 5 minutes.
    Mrs. Blackburn. I thank the chairman, I want to go to Mr. 
Harwood and General Sorrell, and let's talk about some 
specifics. So let me use this Jamaican lottery scheme as an 
example. And I know New England has been hit particularly hard 
by that.
    And as these events happen, whether it is that lottery 
scheme which is telephone driven----
    Mr. Sorrell. Yes.
    Mrs. Blackburn [continuing]. Or whether it is some of the 
rogue Web sites, what I want to know from you is what you are 
learning on the ground that you could transfer that information 
to Mr. Harwood? And then Mr. Harwood, what could you give us as 
action items where you could block some of these phone calls, 
block these Web sites, block the financial networks that are 
allowing some of the transactions? You always don't have a bank 
teller who is going to say, you know, I think this is a scam. 
Let me get some help over here.
    And so let's use that as a specific and talk about the 
lessons learned and then the action item that transfer that 
information and the action item and we have got 3 minutes and 
47 seconds to do that.
    Mr. Sorrell. In 30 seconds I will say we don't have the 
answers. We are trying peer-to-peer counseling. We go to AARP 
functions. We go on talk shows. We continue to say if it sounds 
too good to be true, it probably is. But what we have found 
thus far is that even one-to-one contact, that after a matter 
of weeks, the protective impact of that gets dissipated.
    Mrs. Blackburn. OK, let me say then when you find the 
action, what you are doing with that data and that information? 
Are you putting it in the Consumer's Sentinel Network or how 
you are working with Mr. Harwood? Where do you transfer your 
lesson learned? How you are handling that?
    Mr. Sorrell. We communicate the information that we have to 
the Federal authorities.
    Mrs. Blackburn. OK. Then, Mr. Harwood, what then what do 
you do with that and what can you advise us would be helpful to 
do?
    Mr. Harwood. Thank you, Representative. There are a couple 
of challenges. First of all, we get information that oftentimes 
doesn't tell a complete picture. Lots of times what happens in 
these scams the consumer knows something about what happened 
and they know they lost some money, but they oftentimes don't 
know where they sent it. Sometimes it goes to multiple places. 
Sometimes it is wired to one country but picked up in another 
country. Sometimes there is an intermediary. I know that 
General Sorrell has seen all of these stories come up as well.
    So the first things, oftentimes, is to try to take those 
pieces of information that we receive from attorneys general 
and others and try to turn them into a meaningful picture, and 
that is where the Consumer Sentinel system comes in and other 
analysts come it. You are trying to create a where is this 
money being wired from, where is it being picked up at? And it 
is oftentimes a challenge, frankly, because these scammers 
don't want to be found. They are trying to hide behind 
international borders and behind multiple steps in the process.
    Nevertheless, we have had some success in that regard. In 
fact, some companies have stopped agreeing to wire or process 
money that goes to Jamaica. I think GreenDot, which is one of 
the wire transfer companies, actually stopped allowing people 
to remove money in Jamaica because of the number of scams that 
are coming there. That, in part, is because of ongoing dialogue 
with GreenDot about the number of scams.
    Mrs. Blackburn. What about the credit card processors? And 
PayPal, and some of those?
    Mr. Harwood. I don't think they have taken the same sort of 
action in that regard, but I would have to confirm that before 
I could say for sure.
    Mrs. Blackburn. OK.
    Mr. Harwood. The next step is there is actually a Federal 
law enforcement effort that is actually located in Jamaica 
called Project JOLT that is a joint effort by criminal law 
enforcers, and I think it is the Postal Inspection Service that 
is leading that effort at that point, but it includes other 
Federal criminal agencies. They are working with local 
prosecutors in Jamaica to try to shut down some of the scammers 
in those countries. They use information such as the 
information from the Sentinel system to help them target the 
entities they are going after.
    Of course, the challenge is even if you find them you have 
to know how to prosecute them and get them extradited to the 
United States. That is a very expensive process and can 
oftentimes be a challenge for criminal law enforcers, but that, 
nevertheless, is what they try to do. So the information we 
obtain is used also by Project JOLT to develop their efforts 
and go forward.
    Mrs. Blackburn. What about the communication companies? 
What kind of information do you have to give them and programs 
like FairPoint?
    Mr. Harwood. So this would be, for example, we are talking 
about telephone companies, mobile carriers, Internet?
    Mrs. Blackburn. Yes.
    Mr. Harwood. So there are a couple of different things we 
have done with them. Obviously, they are aware of the problem 
we are seeing here. The challenge has been a lot of these 
operations now use VoIP services, so they actually disguise 
where they are located. VoIP is an automatic system. It is very 
hard to track them down. So as much as the phone companies like 
to tackle the problem, oftentimes they can't really see where 
the calls are coming from. Which, again, means they can be only 
of limited service to us. But to the extent they know what is 
going on they do try to work with us.
    Mrs. Blackburn. Thank you. Yield back.
    Mr. Terry. At this point, we recognize the son of the 
Godmother of Vermont politics, Mr. Welch.
    Mr. Welch. Thank you very much, Mr. Chairman.
    I want to follow up on Mrs. Blackburn's questions, Mr. 
Attorney General. Thanks so much for being here. The real 
question here is at the point where the scam is initiated, or 
at the point where the victim is coming into the bank, it is at 
the moment before that actual transfer of cash, that appears to 
be from everyone's testimony the very critical moment.
    And there are some challenges here. For instance, Mr. 
Terry's wife, what is she to do when the depositor comes in, 
has a right to access the money, but she really does know that 
this is going to vanish? Are there some things that we can do 
to provide encouragement and protection to a person like his 
wife who is going to do what we all think is the right thing?
    Mr. Sorrell. Well, we had an example up at the Price 
Chopper in St. Johnsbury where a woman was in trying to wire 
money, a grandparents scam, and the clerk said, Mrs. Stowe, I 
think this is a scam. I don't want to do this. And she said it 
might well be a scam, I love my granddaughter, she needs help, 
send the money. But Price Chopper didn't send it and within a 
matter of hours, learned that it was a scam. So that was a 
intervention. Good for Price Chopper.
    I don't know what legally could be done, unless you are 
looking at some restrictions of some extra hoops that a wire 
transfer company would need to go through for transfers above a 
certain amount to certain countries or would-be recipient 
locations.
    Mr. Welch. Mr. Harwood, what about that? Because again, as 
a practical matter, what the Attorney General told us is 
something we all knew. Once the money is out the door, it is 
gone. And that victim is not going to get it back. And then you 
also mentioned that a lot of victims are so embarrassed that 
they got taken that they won't even report. Are there things 
that we can do that would help the wire transfer company? That 
would help the banks? That would help the Price Choppers? So 
that when they made a very reasonable judgement that look, this 
is a scam, they could take appropriate action to stop it before 
it ended?
    Mr. Harwood. That is a great question. There are a couple 
of things. First of all, obviously we have been trying to 
encourage the wire transfer companies to implement better 
procedures that would make it possible to more easily track 
where the money is being picked up, who is picking it up, that 
sort of thing. Their current procedures--let me say their 
historic procedures have been rather loose in terms of tracking 
where the money is going.
    Mr. Welch. So let's talk about that a little bit, because 
they obviously make money each time they make a transfer. So 
the victim's loss is the wire company's gain. And it shouldn't 
be any motive here but, there is not a strong incentive for 
them to make that extra step. What would be some of the 
practical steps they could take, and that we could practically 
and reasonably require them to take, to provide for the 
protection of the person transferring that money?
    Mr. Harwood. Well, I think there are a couple of things. 
First of all--and some of them have already done this--
implement a call-back program where they are being asked to 
wire a certain amount of money, before they actually make that 
wire, call back the consumer.
    Mr. Welch. That is it sort of what Mrs. Terry did.
    Mr. Harwood. And some of them are already doing that. It 
would be great to see that happening with all the companies. 
Secondly more intervention by the actual tellers than we are 
seeing now. In some cases they have got signs up, not all of 
them have signs or warnings up, or provide the training. That 
would be wonderful to see. Third, it would be good if we could 
make sure that when they wire a particular country or 
particular location, the more precise we can get information on 
where that money is being wired, the more likely it is going to 
be for us to actually target the scam there.
    Lots of times right now you can wire to one place, but it 
can actually be picked up somewhere else. For example, if you 
wire it to Vancouver, British Columbia, your money might even 
be picked up in Montreal, for example, which makes it different 
to deal with that issue.
    And then finally, through our ongoing sort of dialogue with 
all the wire transfer companies, we have been pointing out to 
them which ones seem to have the worst problems. Somebody 
commented on the fact there are antitrust issues with sharing 
information. We are trying to bridge that by working with them 
and saying, you seem to have bigger problems with this country, 
seem to have a bigger problem with this country. And we do that 
by looking at the data we are getting on all of them through 
our consumer----
    Mr. Welch. So you from the FTC would be OK with the 
allowing of sharing of information when the goal of that 
sharing was to protect against victimization?
    Mr. Harwood. Well, I am not an antitrust attorney, but I 
would certainly think that because I think there would be 
significant consumer benefits in that regard.
    Mr. Welch. So you wouldn't object to us doing the right 
thing here?
    Mr. Harwood. No, even for competition purposes, yes.
    Mr. Terry. He might not be able to speak for the Justice 
Department though.
    Mr. Welch. Do I still have some time?
    Mr. Terry. Yes.
    Mr. Welch. Well, I just want to ask the FBI, you know, Mr. 
Sorrell, the Attorney General, is saying that the Montpelier 
Police Department, Burlington Police Department, they don't 
have all the resources. But I have noted you guys are kind of 
busy yourselves with a few things going on, and wire transfers 
are probably not things that you have a lot of agents to chase 
down one after another. What I think might be helpful, Mr. 
Chairman, is that we ask the FBI, the FTC, and maybe the 
National Association of Attorneys General to give us some 
concrete A, B, C what we can do that would help at that point 
of transfer so that we are stopping the transfer before it is 
impossible to catch up. Would that be something----
    Mr. Sorrell. We would welcome that.
    Mr. Harwood. We as well.
    Mr. Welch. Thank you. I yield back.
    Mr. Terry. Thank you, Peter. And at this point I now 
recognize Mr. Lance, the vice chairman of this subcommittee.
    Mr. Lance. Thank you, Mr. Chairman. To Ms. Hillebrand, you 
discussed the fact that financial advisors, sometimes the 
elderly, trust the wrong advisor. Could you explain briefly how 
your authority differs from that of the FTC?
    Ms. Hillebrand. Thank you. Let me start by describing a 
little more detail our study, which is a congressionally-
mandated study on senior designations. We found a wide variety 
of these designations. Some you can--there is one you can get 
by taking a 100-question multiple choice test with no 
education, all the way to ones that require graduate level 
education and substantial professional credentials.
    But the initials are quite similar and it is very hard to 
tell one from the other. So we issued the report with the 
analysis looking at things like what is the educational 
requirement to get the designation? Is there any ongoing 
checkup to see if you are still qualified by the entity that 
gives the designation? Is there any oversight? A CPA license 
can be taken away by the State Board of Accountants; can a 
designation be taken away by the conferring agency? We found a 
very wide variety and have recommended that the agencies that 
do licensing think about adding a feature to their license 
check sites that say we can check on this too. You asked a 
slightly different question and I will try to answer it.
    Mr. Lance. Are most of these designations determined by 
State entities?
    Ms. Hillebrand. The designations are conferred by private 
entities, private bodies that give the designations. But most 
of these folks also have a license of some kind and many of 
them hold a State license.
    Mr. Lance. And the State license would be CPA----
    Ms. Hillebrand. Could be a CPA license, could be a 
financial planning licenses in States that license those, it 
could be an insurance agency license.
    Mr. Lance. Is there a broad array across the Nation as to 
these designations and whether or not they are overseen by 
State capitals?
    Ms. Hillebrand. Yes, the licenses are overseen by the State 
licensing body, but generally, there is nobody overseeing the 
designations and that is why we raised this issue to bring it 
partly to the attention of those who license the individuals 
who have a license to look at what they are doing with the 
designation as well.
    Mr. Lance. Thank you. It seems to me that scam artists are 
brazenly open about their business and I am not sure that 
current penalties deter them. To the FBI, do you believe that 
we need more severe penalties to deter scams and fraud?
    Mr. Campbell. Again, we would certainly be interested in 
working through the Department with regard to studying 
potential legislation that might----
    Mr. Lance. The Department of Justice?
    Mr. Campbell. The Department of Justice, that is right, in 
regard to maybe considering stiffening those penalties. That is 
correct.
    Mr. Lance. And from your perspective, what is the most 
egregious situation where you think penalties might--stronger 
penalties might be appropriate?
    Mr. Campbell. Well, that is--that is difficult to say, 
because with each of these scams, they impact various victims 
in different ways regarding their life savings, personal 
issues, that type of thing. So I think more research would 
probably have to be done in order to sort of categorize maybe 
what is more egregious or has specific factors related to it 
that might mean that there are aggravating factors, that type 
of thing.
    Mr. Lance. Thank you. To whoever on the panel is expert on 
this area, I am not as familiar with reverse mortgages as I 
should be. Are there several national reverse mortgage 
companies? Or is this widely dispersed across the Nation? 
Perhaps, Ms. Hillebrand?
    Ms. Hillebrand. Yes, thank you. There is a program 
federally insured and providers generally will provide the so-
called HECM mortgage. That is the more common one. Consumers do 
have a choice to take it all out in a lump sum or take monthly 
payments. If you take it all out in a lump sum, you are at risk 
of somebody stealing it from you after you have it in your 
pocket. That is it a danger that is very hard to understand 
when somebody says to you would you like this dollar amount or 
so much per month?
    Mr. Lance. Are reverse mortgages regulated at the State 
level or are they regulated here?
    Ms. Hillebrand. At the Federal level.
    Mr. Lance. At the Federal level. And which agency does the 
regulation?
    Ms. Hillebrand. There are requirements under the Truth in 
Lending Act, and we have the regulatory responsibility at the 
CFPB. As you know, under Dodd-Frank, there are multiple 
entities that can enforce the Truth in Lending Act and we are 
among those entities.
    Mr. Lance. Thank you very much, and I yield back the 15 
seconds I have left.
    Mr. Terry. Very well. Thank you. Now we recognize the 
gentleman from Missouri, Mr. Long.
    Mr. Long. Thank you. And thank you all for being here 
today. General, let me ask you, on my notes here from your 
testimony, earlier you said that the Federal Government could 
be of benefit to you by research and development, training 
materials, change consumer behavior. And then you said 
something about protection from, was it antitrust, or did I 
write that down wrong?
    Mr. Sorrell. Yes, that was the issue Congressman Welch 
raised, and there are concerns that there might be some 
antitrust restrictions on companies that wire funds sharing 
information with each other about their customers who are 
vulnerable to being scammed. And also possibly the sharing of 
information as to locations to which money is being wired that 
there have been complaints or reports of high percentages of--
--
    Mr. Long. So that is something we could help you with on a 
Federal level?
    Mr. Sorrell. Very much. Yes.
    Mr. Long. OK. I would like to get something in writing from 
you later. In answering the question, to you, General, you 
mentioned AARP could be of benefit to us or to you or 
something. Could you explain that or how that would work?
    Mr. Sorrell. AARP is very concerned about seniors generally 
and being scammed. And there was a wonderful meeting--very 
beneficial meeting at Stanford a couple of years ago that AARP 
was behind trying to bring academia and enforcers together to 
deal with issues about how to better protect seniors from being 
scammed.
    Mr. Long. Do you know what they define as a senior? How old 
do you have to be to join AARP or----
    Mr. Sorrell. I think it is 50.
    Ms. Hillebrand. Fifty-five, I think.
    Mr. Sorrell. I have been a member for so long I have 
forgotten when I became eligible.
    Mr. Long. Well, you might be interested to know that some 
of your money is being spent to send out literature such as 
this from the AARP. And it says: According to our records show 
that you haven't registered for the valuable benefits of AARP 
membership, even though are you are fully eligible. Please 
return the above form with your payment to receive your 
membership kit and new card for you and a household member. 
Their membership is included at no additional charge.
    It is pretty tempting. You are going to get a free 
insulated travel bag if you send this in with the appropriate 
dollar amount, and they even have a card in there for my 
daughter because the letter is addressed to her and she is 24 
years old.
    Mr. Terry. I think they have lowered the age.
    Mr. Long. It says on here that you have to be 50. Is this 
normal? Why would they send something to a 24-year-old kid?
    Mr. Sorrell. I assume that was some mistake, but I can't 
speak for AARP on that
    Mr. Long. I tried to contact them--my staff tried to 
contact them and they said that they will call me personally on 
the matter. I don't know why they can't share information with 
my staff. Anyway, I qualify, but my 24-year old daughter 
doesn't.
    Let's see, Ms. Hillebrand, you are talking about SEC and 
bad advice--not the SEC, but you are talking about bad advice 
with financial brokers. Is that what you were--financial 
advisors?
    Ms. Hillebrand. Financial advisors, yes.
    Mr. Long. How do you ascertain--there is good financial 
advisors out there, there are financial advisors that have a 
good reputation, and then there are some other financial 
advisors out there. So how do you ascertain whether you are 
getting fraudulent advice or someone is scamming or maybe they 
have a really, really good reputation, but they are putting you 
in mutual funds that they get a big payoff on every time they 
sell you one, and they churn your account and they decide to 
put you in another one?
    So how do you decide if someone is getting bad financial 
advice or someone is being scammed?
    Ms. Hillebrand. So you raise a difficult question for 
individual seniors who are investing their life savings and 
need to make good choices for themselves. It is a complicated 
market. There are a lot of licenses. There are a lot of these 
people who have the word ``senior'' in their title, and that is 
what we focused our report on, people who claim to have 
specialize expertise for seniors.
    Of course, individuals need to get references. They need to 
ask. We know do there are some dangers signs. Any advisor or 
salesperson who tells you the door is closing, act now, that 
could be a moment to stop and say I want to think about this 
more carefully.
    We have seen some difficulties associated with the so-
called free lunch programs where people will assert that they 
are senior specialists, give you a free lunch, and it is 
actually a sales activity but it may be pushed as an 
educational activity. That is a danger sign.
    But it is a complicated and difficult choice for people.
    Mr. Long. I would think it would be, because there are a 
lot of financial advisors who operate businesses in different 
ways, and may have had a client for years and years and years, 
and I don't know where you draw the line between poor financial 
advice and fraudulent financial advice, I would guess.
    And real quick for Mr. Campbell, on mortgage scams, we had 
a tremendous run on real estate scams. I was a real estate 
broker for 30 years before I came into Congress, and our 
particular area, southwest Missouri, Springfield in particular, 
we had a lot of fraudulent real estate companies there that 
some people have gone to prison, others may. But as far as a 
mortgage scam, how does that work exactly?
    Mr. Campbell. Well, it is the same type of thing where we 
will receive information either through contacts we have made 
within that industry or from victims themselves. And then we 
look into those issues and if it turns out that there is a 
pattern there, again, if there is some kind of criminal 
organization behind it, a dollar loss of significant amounts, 
that type of thing, that is going to trigger then potentially 
our----
    Mr. Long. What is a mortgage scam? Is it the mortgage 
broker collecting--not the real estate broker, but the mortgage 
broker collecting too much commission? I know how the real 
estate scams work, because we had that prevalent in our 
community, and they would run ads on the radio and signs 
everywhere where you would get in for nothing and then you buy 
this house and they finance it, and then they would talk you 
into buying another house and another house at a bigger value 
and they would give you the profit off of that one. And pretty 
soon everything collapsed.
    But a mortgage scam--I am past my time. Real briefly, can 
you just give me one example of how one would work a mortgage 
scam?
    Mr. Campbell. That is all generally the same. Those are 
mortgage scams. The same with the reverse mortgage scams. That 
type of thing. Straw buyers, and then----
    Mr. Long. But I am assuming there are legitimate reverse 
mortgage companies out there; correct? Good resource mortgage 
companies?
    Mr. Campbell. There are, yes, that is correct.
    Mr. Long. I don't know much about their business, but it 
seems they have taken a pretty good hit and today and I have 
not heard anyone say there are some good ones out there. 
Anyway, thank you for being here.
    Mr. Terry. The gentleman's time has expired. The chair 
recognized the gentleman from Maryland.
    Mr. Sarbanes. Thank you, Mr. Chairman. This is a really, 
really important hearing, given the demographic wave that is 
coming at us and how many seniors potentially are going to be 
exposed to these scams. And Ms. Hillebrand in, particular, I am 
gratified to hear the efforts that the new Bureau is 
undertaking in this area. In that sense, the Bureau arrives 
just in time given what is coming.
    I have been intrigued by General Sorrell's observations 
about how things that we might believe would help our seniors 
in terms of education efforts, posters, even peer counseling 
and so forth, really, in some instances, aren't that effective 
right out of the gate or lose their effectiveness over time. It 
seems to me that is a huge challenge in this and I wondered if 
you could speak--and any others on the panel who would like 
to--just about kind of the difference between passive outreach, 
if you will, and education, versus ongoing active outreach, and 
how you enlist third parties in that, how you enlist those who 
have the occasion to interact with seniors on a more regular 
basis to be kind of part of a comprehensive network of 
resources that are helping those seniors be much more vigilant? 
How potentially you enlist families to be on the alert that 
their parents or their grandparents may be at risk for these 
kinds of scams? Because we can delude ourselves into thinking 
that we are doing enough, and in fact, that may not be 
happening. So I will just throw that to you.
    Ms. Hillebrand. Thank you for that important question about 
how we can all be more effective in helping seniors and those 
who work with them to protect themselves. We agree. It is not 
``here is a brochure and good luck with that.'' We need to 
actually get in at the moment when people are thinking about 
these financial issues, being approached by a scammer, and that 
is very hard to do. But there are some points of light.
    With the Money Smart for Older Adults program, that is 
designed to be given in person at senior centers and community 
centers by lay volunteer or a community trainer, because as 
General Sorrell pointed out, people want to be together and 
talk about issues. The Financial Services Roundtable has done 
some training for banks to give to their own tellers to 
identify those risk spots.
    And we have a project now, we are looking not only at 
educating seniors, but we need to educate the caregiver 
generation. We need to educate those folks who seniors may be 
turning to in their communities and also in their families. And 
there is one other form of person in between the senior and the 
scam, and that is folks who provide convalescent care settings. 
So senior housing, assisted living, nursing home staff. And we 
are putting out a guide later this summer for the professionals 
who work in those places to spot the first signs of elder 
financial abuse. So if may be that it is a senior who has 
trouble making a homeowner's payment to the homeowners 
association. That may be an indication that someone is actually 
tapping them for money and draining their account. We are 
trying to build that layer in with people who are reaching 
seniors in other ways to be aware of and to spot and to start 
to cut this off before the money is lost.
    Mr. Sarbanes. General, does your office have, like, an 
information hotline or like something--or do those sorts of 
things exist where you put out if you for getting a call, if 
you are curious, or if you are worrying about a scam, you can 
call this number?
    Mr. Sorrell. Yes, we, in a population of about 630,000, we 
have a consumer assistance program. Toll free number. We get 
between 5- and 8,000 calls a year. Questions complaints and 
such. We do a lot of Web-based consumer advice. We invite 
seniors to sign up for consumer alerts. We go around to senior 
centers and make these kinds of presentations. But it feels to 
us that despite all of those efforts, as I mentioned earlier, 
just in the last 10 days, we are seeing seniors in Vermont lose 
thousands of dollars despite our best efforts.
    Mr. Sarbanes. I am about to run out of time, but do you 
think there can be more opportunities for public service 
announcements on television and other places that sort of offer 
seniors an opportunity to call into a hotline and so forth?
    Mr. Sorrell. Well one of my suggestions for Federal 
assistance is funding for more academic study as to what will 
be effective. And what we have been trying is only moderately 
successful.
    Mr. Sarbanes. OK. Thank you.
    Mr. Terry. Thank you, Mr. Sarbanes. At this time the 
gentleman, Mr. Johnson, is recognized.
    Mr. Johnson. Thank you, Mr. Chairman. I want to thank the 
panel for being here today also. I represent the Appalachian 
Ohio district which runs all along the Ohio River. We have a 
very large senior population. And so the testimony and the 
evidence garnered from this hearing is very important to the 
people that I represent.
    Ms. Brown, starting with you first, your testimony contains 
a frightening statement that the financial fraud perpetrated 
against elders is reaching epidemic proportions. Is this 
because of a growing senior population, because of the reach of 
the Internet, or something else?
    Ms. Brown. I think it is a combination. The first and most 
important factor is the significant growth in the senior 
population and in proportion of our population that are 
seniors. And when you combine that with the many different new 
opportunities with different things, like the Internet and ways 
to reach seniors. I think that the third factor that we have 
heard about today is that there are new sets of caregivers that 
may not be aware that their parents or those that they are 
caring for are becoming vulnerable and are in vulnerable 
positions yet.
    Mr. Johnson. I have an 80-year-old mother, and I can tell 
you it is a full-time job for me and my siblings to keep her 
out of trouble. About every week she has got another good deal 
that someone has laid out for her. Mr. Harwood, you testified 
that you try to anticipate future areas of concern. How do you 
read the tea leaves, and what data do you use to identify 
emerging threats?
    Mr. Harwood. Thank you. And that anticipation is 
challenging. As I indicated though, we based on past 
experience, we know some area where scams tend to evolve. For 
example, where there are new programs or new initiatives, 
Federal Government initiatives, scammers are opportunistic. 
They see confusion that surrounds those new programs and new 
initiatives and it is an opportunity for them to create 
confusion and defraud consumers and seniors. So we watch for 
those kinds of things emerging.
    Secondly, we look at things like surveys showing the 
tremendous growth among seniors with regard to Internet usage. 
And we have been seeing a lot of that in the last years. That 
reflects at this point younger seniors who moving on line, but 
obviously there is a much greater usage of the Internet by 
seniors which leads us to suspect that we will see more fraud 
on the Internet that are targeted to seniors or at least 
attractive to seniors.
    Mr. Johnson. Sure. You know, you bring up a good point. You 
testified that a Pew study shows that seniors over 65 are 
rapidly going on line. More of them are. My 80-year-old mother 
is one of them. I spend more time doing remote diagnostics than 
I do anything else. And I am an IT professional having spent 30 
years in the industry.
    Are there special scams that they should be aware of or 
take precautions to prevent? And before you answer that, you 
know, we have talked here in the House about cybersecurity. 
Given the magnitude of the threat that you folks are laying 
out, do we need a more proactive, almost like identifying 
hackers and intruders into our networks? Do we need some kind 
of offensive operation to identify these scams so that we can 
put the word out to seniors and let them know about it?
    Mr. Harwood. Well, first of all, I am not a cybersecurity 
expert, so I can't tell you--I don't know whether----
    Mr. Johnson. The answer to the second one. So that is good.
    Mr. Harwood. Fine. Good. As to the scams, yes, I think that 
there are scams that are particularly likely to be attractive 
to seniors. We see more and more scams that involve age-related 
maladies, health issues, things like that, that are occurring 
on the Internet. Arthritis-related, diabetes-related products 
being marketed on the Internet and elsewhere. Some of those are 
particularly conditions that are more prevalent among seniors.
    I think probably some of the investment scams, things like 
that may be attractive to seniors as well. The extent those 
migrate to the Internet, we may see some of those as well. The 
point is that various scams that used to be targeted to seniors 
and more marketed to them through mail or through telephone, as 
more seniors get on the Internet, you are going to see those 
scams migrate to the Internet as well.
    Mr. Johnson. Quickly, to what extent are any of these scams 
originating outside of the United States? Do we have any cases 
of cross-border issues?
    Mr. Harwood. Many of them, I am sure. Particularly on the 
Internet, it is easy to market across international borders and 
we see a lot of scams that have significant international 
connections. The FTC has filed a number of cases over the 
years. But of course, the international borders can be a 
challenge for law enforcement.
    Mr. Johnson. I have a lot more questions and no more time, 
Mr. Chairman. I yield back.
    Mr. Terry. Such is life. Jan and I have one question that 
we are going to ask you before we gavel this hearing and that 
is, each one of you--Ms. Brown, we will start with you--30 
seconds, minute, give us the one thing you want to leave us 
with. The message to us. What can we do?
    Ms. Brown. What you have heard today is a lot of wonderful 
ideas and a lot of good positive actions with good intentions. 
And what concerns us is that there seem to be scattering in so 
many different directions. Each agency has its own know 
responsibility and they are fulfilling it. That is why we 
believe that there really needs to be a comprehensive plan 
looking across the board at how we can marshal those resources 
in the best possible way.
    Mr. Terry. Mr. Campbell?
    Mr. Campbell. Yes, sir. I think increasing the partnerships 
as we discussed here today is going to be important, and 
sharing information. I also want encourage the public to visit 
the IC3.gov Web site to obtain information about all the scams 
we are talking about today. And there is another Web site they 
produce called lookstoogoodtobetrue.com, and it explains in 
very plain language all of the definitions of the scams that we 
have spoken about here today and information that if you 
suspect you are being scammed, or someone you know, there is 
good information there and please call the FBI or your local 
law enforcement as well if you believe that there is a scam 
occurring.
    Mr. Terry. Good counsel. Mr. Harwood?
    Mr. Harwood. Thank you, I am actually going to steal an 
area that I suspect General Sorrell is going to make as well, 
which is more research. I actually participated in the Stanford 
event that he talked about, and it is clear that we can are 
deficient with regard to research that would help us understand 
why seniors are being defrauded or how they are being 
defrauded, what kinds of messages are working with them, what 
kinds of experience they have. That research would also help us 
better target our consumer education efforts, and in fact, also 
would probably help us target better our law enforcement 
efforts to have a better sense much of what works for those 
efforts.
    I would strongly urge more research, more study. Both by 
academics and applied research looking at what messages work 
for seniors.
    Mr. Terry. Thank you. Ms. Hillebrand?
    Ms. Hillebrand. Thank you, Chairman Terry, and I commend 
your wife on her care.
    Mr. Terry. I will pass that on.
    Ms. Hillebrand. Please join the CFPB in encouraging the 
older Americans who you serve to speak up and speak out about 
elder fraud and elder financial abuse. The more people stand up 
and say this nearly happened to me and here is how is how I 
spotted it, and the more they say it did happen to me, and I am 
telling you so that it won't happen to you, the more we are 
going to be able to spread this word. Thank you.
    Mr. Terry. Good point. Thank you. General Sorrell?
    Mr. Sorrell. Again my thanks for the opportunity to be 
here. I just want to repeat the States need help. There is a 
real Federal lull here with financial support and resources. I 
look forward to working with the Congress and Federal partners 
to do a better job to protect seniors in this country.
    Mr. Terry. Well, I want to thank all of you for your 
efforts here, your information, your testimony. It is going to 
be helpful for us deciding how to best help our senior 
constituents.
    I do want to add that probably the main driving impetus was 
not only my wife's experience at the bank, but Jan's passion on 
this issue. So she has a long history of working that area and 
her election to Congress just transferred where her voice is 
heard.
    So with that, I ask unanimous consent to have a letter from 
the National Consumers League included in the record. And it 
has been shared with the minority.
    Ms. Schakowsky. Without objection.
    Mr. Terry. Without objection, so ordered then.
    [The information appears at the conclusion of the hearing.]
    Mr. Terry. And again, thank you to our panel. I want to 
remind the members that they have 10 days to submit additional 
questions for the record, and then if there are any questions 
submitted by the members, they will be sent to you, and we 
respectfully request timely responses and multi-month is not 
considered upon timely by most of us.
    So with that note, we are now adjourned.
    [Whereupon, at 11:29 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Fred Upton

    Defrauding anyone of their hard earned savings is 
despicable. While the Federal Trade Commission indicates the 
overall rate of fraud against our senior population is no more 
prevalent than fraud against the rest of the population, there 
are reasons to be concerned about this group in particular.
    Demographics are changing in this country, and quickly. The 
baby boom generation is just beginning to retire and will 
increasingly swell the proportion of our population enjoying 
their golden years. In Michigan, out of a population of just 
under 10 million people, we have 1.3 million citizens over the 
age of 65, and another two million between the age of 50 and 
64. This developing increase means that the number of fraud 
cases against the elderly will rise for many years to come, 
even without any change in the overall historical rate of 
fraud.
    Adding to this dynamic is the financial reward to criminals 
of targeting the elderly. Most workers nearing retirement 
aspire to begin those years with a nest egg that will last them 
two or more decades. To do so they have accumulated far more 
assets and benefits over their working career than the younger 
people who are still working. And statistics indicate the 
wealth gap between today's retirees and their younger 
counterparts has widened over the past few decades. These facts 
would suggest that the elderly will increasingly be targeted by 
criminals. Just as the infamous Willie Sutton targeted banks 
for his robberies, more retirees with more wealth are an 
attractive group to criminals because ``that's where the money 
is.''
    There are additional reasons to be concerned for the 
elderly. We are living much longer, healthier lives than ever 
before. But the longer we live, the greater the odds of 
diminishing mental acuity that can affect our decision making 
and make us more susceptible to scams. And as Internet 
broadband adoption expands, we are also seeing a growing 
proportion of elderly going online and opening up a potential 
new avenue for scam artists to target them. Though it may pose 
new challenges, the good news is the Internet can also be a 
great research tool for seniors to help prevent fraud.
    It is our duty to make sure government resources are 
allocated accordingly to help our citizens prevent these 
crimes. As the saying goes, an ounce of prevention is worth a 
pound of cure. So education can and should be the first line of 
defense. From the federal government down to media to community 
organizations, there are plenty of resources available for 
consumers to stay informed about scams and learn how to protect 
themselves or their loved ones. The hurdle seems to be getting 
the message to everyone and alerting them to the dangers that 
exist--whether it's online or over the phone.
    I am pleased to see the issue is clearly in the focus of 
our relevant state and federal agencies and you share our goal 
to prevent this from becoming a bigger problem than it is 
today. I look forward to learning more about the efforts to 
prevent these crimes and hear any recommendation we should 
consider further.

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