[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]



 
 SAFEGUARDING AMERICAN CONSUMERS: FIGHTING FRAUD AND SCAMS DURING THE 
                                PANDEMIC

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

                            VIRTUAL HEARING

                               BEFORE THE

            SUBCOMMITTEE ON CONSUMER PROTECTION AND COMMERCE

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 4, 2021

                               __________

                            Serial No. 117-3
                            
                            
                            
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                            
                            


     Published for the use of the Committee on Energy and Commerce

                   govinfo.gov/committee/house-energy
                        energycommerce.house.gov
                        
                        
                           ______                       


              U.S. GOVERNMENT PUBLISHING OFFICE 
 45-229 PDF            WASHINGTON : 2021 
                        
                        
                        
                        
                    COMMITTEE ON ENERGY AND COMMERCE

                     FRANK PALLONE, Jr., New Jersey
                                 Chairman
BOBBY L. RUSH, Illinois              CATHY McMORRIS RODGERS, Washington
ANNA G. ESHOO, California              Ranking Member
DIANA DeGETTE, Colorado              FRED UPTON, Michigan
MIKE DOYLE, Pennsylvania             MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois             STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina    ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California          BRETT GUTHRIE, Kentucky
KATHY CASTOR, Florida                DAVID B. McKINLEY, West Virginia
JOHN P. SARBANES, Maryland           ADAM KINZINGER, Illinois
JERRY McNERNEY, California           H. MORGAN GRIFFITH, Virginia
PETER WELCH, Vermont                 GUS M. BILIRAKIS, Florida
PAUL TONKO, New York                 BILL JOHNSON, Ohio
YVETTE D. CLARKE, New York           BILLY LONG, Missouri
KURT SCHRADER, Oregon                LARRY BUCSHON, Indiana
TONY CARDENAS, California            MARKWAYNE MULLIN, Oklahoma
RAUL RUIZ, California                RICHARD HUDSON, North Carolina
SCOTT H. PETERS, California          TIM WALBERG, Michigan
DEBBIE DINGELL, Michigan             EARL L. ``BUDDY'' CARTER, Georgia
MARC A. VEASEY, Texas                JEFF DUNCAN, South Carolina
ANN M. KUSTER, New Hampshire         GARY J. PALMER, Alabama
ROBIN L. KELLY, Illinois, Vice       NEAL P. DUNN, Florida
    Chair                            JOHN R. CURTIS, Utah
NANETTE DIAZ BARRAGAN, California    DEBBBIE LESKO, Arizona
A. DONALD McEACHIN, Virginia         GREG PENCE, Indiana
LISA BLUNT ROCHESTER, Delaware       DAN CRENSHAW, Texas
DARREN SOTO, Florida                 JOHN JOYCE, Pennsylvania
TOM O'HALLERAN, Arizona              KELLY ARMSTRONG, North Dakota
KATHLEEN M. RICE, New York
ANGIE CRAIG, Minnesota
KIM SCHRIER, Washington
LORI TRAHAN, Massachusetts
LIZZIE FLETCHER, Texas
                                 ------                                

                           Professional Staff

                   JEFFREY C. CARROLL, Staff Director
                TIFFANY GUARASCIO, Deputy Staff Director
                  NATE HODSON, Minority Staff Director
            Subcommittee on Consumer Protection and Commerce

                        JAN SCHAKOWSKY, Illinois
                                  Chair
BOBBY L. RUSH, Illinois              GUS M. BILIRAKIS, Florida
KATHY CASTOR, Florida                  Ranking Member
LORI TRAHAN, Massachusetts           FRED UPTON, Michigan
JERRY McNERNEY, California           ROBERT E. LATTA, Ohio
YVETTE D. CLARKE, New York           BRETT GUTHRIE, Kentucky
TONY CARDENAS, California            LARRY BUCSHON, Indiana
DEBBIE DINGELL, Michigan             NEAL P. DUNN, Florida
ROBIN L. KELLY, Illinois             GREG PENCE, Indiana
DARREN SOTO, Florida                 DEBBIE LESKO, Arizona
KATHLEEN M. RICE, New York           KELLY ARMSTRONG, North Dakota
ANGIE CRAIG, Minnesota               CATHY McMORRIS RODGERS, Washington 
LIZZIE FLETCHER, Texas                   (ex officio)
FRANK PALLONE, Jr., New Jersey (ex 
    officio)
    
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Jan Schakowsky, a Representative in Congress from the State 
  of Illinois, opening statement.................................     3
    Prepared statement...........................................     4
Hon. Gus Bilirakis, a Representative in Congress from the State 
  of Florida, opening statement..................................     5
    Prepared statement...........................................     6
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     8
    Prepared statement...........................................     9
Hon. Cathy McMorris Rodgers, a Representative in Congress from 
  the State of Washington, opening statement.....................    10
    Prepared statement...........................................    12

                               Witnesses

Bonnie L. Patten, Executive Director and Cofounder, Truth in 
  Advertising....................................................    14
    Prepared statement...........................................    16
    Answers to submitted questions...............................   144
Traci Ponto, Crime Victim Advocate, Spokane Community Oriented 
  Policing Service...............................................    38
    Prepared statement...........................................    40
    Additional material submitted for the record.................    42
William E. Kovacic, Professor, George Washington University 
  School of Law..................................................    65
    Prepared statement...........................................    67
    Submitted questions \1\......................................   147
Jessica Rich, Distinguished Fellow, Institute of Technology Law 
  and Policy, Georgetown University Law Center...................    78
    Prepared statement...........................................    80
    Answers to submitted questions...............................   150

                           Submitted Material

Letter of February 4, 2021, from Jonathan Spalter, President and 
  Chief Executive Officer, USTelecom-The Broadband Association, 
  to Ms. Schakowsky and Mr. Bilirakis, submitted by Ms. 
  Schakowsky.....................................................   129
Letter of October 22, 2020, from Joseph J. Simons, Chairman, 
  Federal Trade Commission, et al., to Mr. Pallone, et al., 
  submitted by Mr. Cardenas......................................   131
Letter of February 4, 2021, from Dean S. Marks, Executive 
  Director and Legal Counsel, Coalition for Online 
  Accountability, to Ms. Shakowsky and Mr. Bilirakis, submitted 
  by Ms. Schakowsky..............................................   136
Letter of July 30, 2020, from Joseph J. Simons, Chairman, Federal 
  Trade Commission, et al., to Mr. Latta, submitted by Mr. Latta.   142

----------

\1\ Mr. Kovacic did not answer submitted questions for the record by 
the time of publication.


 SAFEGUARDING AMERICAN CONSUMERS: FIGHTING FRAUD AND SCAMS DURING THE 
                                PANDEMIC

                              ----------                              


                       THURSDAY, FEBRUARY 4, 2021

                  House of Representatives,
  Subcommittee on Consumer Protection and Commerce,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 12:00 p.m., via 
Cisco Webex online video conferencing, Hon. Jan Schakowsky 
(chair of the subcommittee) presiding.
    Members present: Representatives Schakowsky, Rush, Castor, 
Trahan, McNerney, Clarke, Cardenas, Dingell, Kelly, Soto, Rice, 
Craig, Fletcher, Pallone (ex officio), Bilirakis (subcommittee 
ranking member), Upton, Latta, Guthrie, Bucshon, Dunn, Pence, 
Lesko, Armstrong, and Rodgers (ex officio).
    Also present: Representatives Blunt Rochester and Carter.
    Staff present: Jeffrey C. Carroll, Staff Director; Lisa 
Goldman, Senior Counsel; Waverly Gordon, General Counsel; 
Tiffany Guarascio, Deputy Staff Director; Perry Hamilton, 
Deputy Chief Clerk; Alex Hoehn-Saric, Chief Counsel, 
Communications and Consumer Protection; Ed Kaczmarski, Policy 
Analyst; Zach Kahan, Deputy Director, Outreach and Member 
Service; Mackenzie Kuhl, Press Assistant; Kaitlyn Peel, Digital 
Director; Tim Robinson, Chief Counsel; Chloe Rodriguez, Deputy 
Chief Clerk; Sydney Terry, Policy Coordinator; Anna Yu, 
Professional Staff Member; Sarah Burke, Minority Deputy Staff 
Director; William Clutterbuck, Minority Staff Assistant; 
Theresa Gambo, Minority Financial and Office Administrator; 
Nate Hodson, Minority Staff Director; Peter Kielty, Minority 
General Counsel; Emily King, Minority Member Services Director; 
Bijan Koohmaraie, Minority Chief Counsel; Tim Kurth, Minority 
Chief Counsel, Consumer Protection and Commerce; Brannon Rains, 
Minority Policy Analyst, Consumer Protection and Commerce, 
Energy, Environment; Michael Taggart, Minority Policy Director; 
and Everett Winnick, Minority Director of Information 
Technology.
    Ms. Schakowsky. Good afternoon, everyone. Welcome to the 
Subcommittee on Consumer Protection and Commerce, and it will 
now come to order.
    Today I will be holding a hearing entitled ``Safeguarding 
American Consumers: Fighting Scams and Fraud During the 
Pandemic.'' And due to COVID-19 public health emergency, 
today's hearing will be conducted entirely remotely. All 
Members and witnesses will be participating via video 
conference.
    As part of our hearing, microphones will be set on mute for 
the purpose of eliminating inadvertent background noise. 
Members and witnesses will need to unmute your microphones each 
time that you wish to speak. I will try and remind you.
    Additionally, Members will need to be visible on screen in 
order to be recognized.
    Documents for the record can be sent to Ed Kaczmarski and--
at the email address that we have provided to staff. All 
documents will be entered into the record at the conclusion of 
the hearing.
    Before I recognize myself for an opening statement, I want 
to take a point of personal privilege, and recognize some of 
the--all of the new Members to our subcommittee. And I--first 
let me just recognize the Democrats.
    We have Kathleen Rice from New York, Angie Craig from 
Minnesota, Lizzie Fletcher from Texas, and Lori Trahan from 
Massachusetts. So welcome to the Democratic new Members.
    I will mention the new Members also on the Republican side, 
and afterwards I am going to welcome the new ranking member, 
Gus Bilirakis from Florida, who has been on this committee but 
not on the subcommittee before. And I am so happy to have him. 
But let me just mention the GOP Members.
    We have Neal Dunn from Florida, Debbie Lesko from Arizona, 
Greg Pence from Indiana, and Kelly Armstrong from North Dakota.
    Welcome all. We are so--I am so happy. I hope you are now, 
to be on this important subcommittee.
    So I am going to see if Congressman Bilirakis, our ranking 
member, has some words to say. Let me turn it over to you.
    Oh, let me first just say we do have new staff--I really 
messed up his name once--Ed Kaczmarski.
    And I also just wanted to mention that we have a new Acting 
Chair of the Federal Trade Commission. She has been on the 
Commission before, but--Rebecca Kelly Slaughter.
    So, Gus, Representative and Ranking Member Bilirakis?
    Mr. Bilirakis. Yes, Chair.
    Ms. Schakowsky. Go ahead.
    Mr. Bilirakis. Yes, thank you very much. I appreciate it. 
And I look forward to working with you for our constituents 
and, well, the whole country. And this is a wonderful, 
wonderful committee, the best committee in Congress. And I am 
really looking forward to it.
    I do have a prepared statement, but I am really looking 
forward to working also with the Republican leader, Cathy 
McMorris Rodgers, my great friend.
    So, again, you recognized the new Members. I think we have 
an all-star team here. These new--Dr. Dunn from Florida and, of 
course, Mr. Pence, who we just spoke with, has some great ideas 
from Indiana. And then Ms. Lesko, I admire her so much, she 
does a great job for the team, and for her district as well, 
from Arizona. And then Mr. Armstrong from North Dakota. So--and 
again, all the Democratic--the new Members on the Democratic 
side, as well. We are going to work and get things done for the 
American people.
    So with that, I will yield back, Madam Chair.
    Ms. Schakowsky. Thank you. I just wanted to say I am 
excited about Representative Bilirakis. He was voted in Florida 
the most effective Member of Congress because of all the bills 
that he actually got passed into law. So I am looking forward 
to seeing that kind of performance in a bipartisan way here, 
also, in the committee.
    So at this point I will recognize myself for an opening 
statement of 5 minutes.

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

    So, again, good morning and welcome to our hearing on the 
Federal Trade Commission and its response to COVID-19.
    The Federal Trade Commission was established in 1914, 
through an Act of Congress, and is inextricably linked to our 
committee, and particularly to the work of our subcommittee.
    And of course, you know that the Energy and Commerce 
Committee is the oldest standing committee in Congress, 
originally stood up to regulate interstate and international 
commerce. And, like this committee, the Federal Trade 
Commission was tasked with regulating interstate commerce. It 
is the only agency with jurisdiction over both consumer 
protection and competition issues.
    Many critics, myself included, frankly, would argue that 
the Federal Trade Commission has not lived up to its potential 
over the last, well, 40 years. But yesterday the FTC announced 
a remarkable settlement with Amazon over its systemic stealing 
of delivery drivers' tips. Imagine.
    This is an example of the sort of announcement I had hoped 
that the new Acting Chairwoman would make, a sign that the 
Federal Trade Commission would be taking on big cases that 
serve as a true deterrent to illegal conduct by those who might 
prey on American consumers.
    But we must recognize that this settlement would not have 
been possible without the threat of the Federal Trade 
Commission using its section 13(b) authority. I will explain.
    Under 13(b), the Federal Trade Commission can require 
defrauders to provide restitution, money, to individuals who 
have been defrauded. Unfortunately, this authority is under 
assault right now at the Supreme Court, and the FTC may find 
itself deprived of a critical tool.
    Additionally, companies that defraud consumers make it hard 
on honest businesses to be able to conduct their business and 
to gain the trust of consumers. So I would hope that 
organizations like the Chamber of Commerce would recognize that 
rooting out bad actors and returning stolen funds to consumers 
is important for them and for everyone.
    Luckily, the Federal Trade Commission, in a bipartisan way, 
has reaffirmed the authority of section 13(b). So all the 
Commissioners are on board, but it should be--we should all be 
on board.
    Specifically, the COVID--specific to COVID-19, the Federal 
Trade Commission has been very aggressive in investigating 
fraud that originates online. The agency has sent hundreds of 
takedown letters, but has not really gone after the major cause 
of the problem, which is negligence by platforms.
    These platforms are not unwitting co-conspirators, but 
rather partners in profit. Platforms must demonstrate real 
efforts toward keeping scammers off their sites, especially 
now, of course, with consumers relying more on the Internet for 
their shopping.
    I would like to see the subcommittee pass what we--what I 
have called the Informed Consumer Act, which would require 
online platforms to verify the identity of their third-party 
sellers. This would go a long way toward protecting Americans. 
And I hope that this Congress--this subcommittee can pursue a 
21st century consumer rights agenda, in a bipartisan way, and 
make sure that consumer rights that exist in the physical world 
also extend to the online world.
    I am looking forward to the direction that the FTC Acting 
Chair will take in protecting consumers and using all the 
tools, including the franchise rule, the funeral home rule, and 
pursue more when it comes to unfair practices, unfair cases.
    [The prepared statement of Ms. Schakowsky follows:]

               Prepared Statement of Hon. Jan Schakowsky

    Good afternoon, and welcome to our hearing on the Federal 
Trade Commission and its response to COVID-19. The Federal 
Trade Commission was established in 1914, through an act of 
Congress, and is inextricably linked with this committee, in 
particular this subcommittee. The Energy and Commerce Committee 
is the oldest standing committee in Congress, originally stood 
up to regulate interstate and international commerce. Like this 
committee, the Federal Trade Commission was tasked with 
regulating interstate commerce. It is the only agency with 
jurisdiction over both consumer protection and competition 
issues.
    Many critics, myself included, would argue that the Federal 
Trade Commission has not lived up to its potential over the 
last 40 years. But, yesterday, the FTC announced a remarkable 
settlement with Amazon over its systematic stealing of its 
delivery drivers' tips. This is exactly the sort of 
announcement I had hoped the new Acting Chairwoman would make, 
a signal that the FTC would be taking on big cases that serve 
as a true deterrent for illegal conduct by those who might prey 
on Americans. But we must recognize that this settlement would 
not have been possible without the threat of the FTC using its 
section 13B authority. I'll explain.
    Under 13(b), the FTC can require defrauders to provide 
restitution (money) to individuals who have been defrauded. 
Unfortunately, this authority is under assault at the Supreme 
Court, and the FTC may find itself deprived of a critical tool. 
Additionally, companies that defraud consumers make it hard for 
honest businesses to compete and gain the trust of consumers. I 
would hope that organizations like the Chamber of Commerce 
would recognize that rooting out bad actors and returning 
stolen funds to consumers is important to everyone. Luckily, 
reaffirming the FTC 13(b) authority is a bipartisan issue at 
the Commission as it should be everywhere.
    Specific to COVID-19, the FTC has been very aggressive in 
investigating fraud that originates online. The agency has sent 
hundreds of takedown letters but has not gone after a major 
cause of the problem--negligence by platforms. These platforms 
are not unwitting conspirators, but rather partners-in-profit. 
Platforms must demonstrate real efforts towards keeping 
scammers off the sites. Especially now when Americans are more 
reliant than ever on e-commerce.
    I would like to see our subcommittee pass the INFORM 
Consumer Act, which would require online platforms to verify 
the identity of third-party sellers. This would go a long way 
toward protecting Americans. I hope this Congress, this 
subcommittee can pursue a 21st Century Consumer Rights agenda, 
in a bipartisan way, and make sure consumer rights that exist 
in the physical world extend to the online world. And I am 
looking forward to the direction the FTC Acting Chair will take 
the Commission--using all the tools--including the franchise 
rule, the funeral home rule, and pursuing more unfairness 
cases.
    Thank you to witnesses for joining us today. I now 
recognize Mr. Bilirakis for 5 minutes.

    Ms. Schakowsky. So I want to thank the witnesses who are 
here for joining us today. I now will recognize Mr. Bilirakis 
for 5 minutes.

 OPENING STATEMENT OF HON. GUS BILIRAKIS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Bilirakis. Thank you, Madam Chair. And again, I want to 
thank all the members of the committee. Welcome to the Consumer 
Protection and Commerce Subcommittee hearing of the 117th 
Congress.
    I would like to congratulate again you, Madam Chair, for 
another term leading this great subcommittee, where we promise 
innovation, champion emerging technologies, and protecting 
consumers. And I am greatly looking forward to working with 
you.
    And I want to thank also the Republican leader for giving 
me--the E&C leader, for giving me the opportunity to serve on 
the committee. I appreciate it so much. And to chair--I mean, 
excuse me, to be the ranking member, or the lead Republican on 
the CPC. So I--again, I want to thank Ms. Rodgers for giving me 
the opportunity to lead as a Republican and congratulate her on 
leading the committee on the Republican side, and I also look 
forward to working with the full committee chair, who is a good 
friend of mine, as well, Mr. Pallone.
    I know Cathy is going to do a great job as our leader to 
help the American people, as well.
    Today we will explore steps we can take to advance our 
fight against fraud and scams, which is so important to--again, 
especially during this pandemic. Millions are forced to isolate 
or remain in their homes, and bad actors continue to exploit 
consumers' fears, their fear and confusion, some promising fake 
reservations for the coronavirus vaccines--again, fake is the 
word that I want to use--stimulus checks, fake loans for small 
businesses struggling to stay afloat, and, of course, we want 
to discuss the Super Bowl tickets. And we are hoping--I am 
hoping that my Tampa Bay Buccaneers will prevail on Sunday.
    Just earlier this year, in my district in Pasco County --I 
represent Pasco, which is the Tampa Bay area, as well as 
Pinellas and Hillsborough Counties--the health departments 
discovered use of a fake Eventbrite website being used to 
charge money for registrations for the COVID vaccine. 
Inexcusable. This fake website was a complete scam, where, as 
we know, vaccine registration is completely free.
    We must continue to protect consumers from falling victim 
to scams. And it is not only--it not only cripples individuals 
financially, but can also cause serious mental health issues 
and lead to suicide, again, particularly during this pandemic.
    We made great progress on this subcommittee last year. We 
enacted H.R. 6435, the Combating Pandemic Scams Act, led by 
Representative Carter, along with Representatives Hudson, 
Kuster, and Blunt Rochester. With the efforts of our friends at 
the FTC, this law will focus the tools, give us the tools and 
resources on vulnerable communities to better educate and 
protect them from scams.
    Unfortunately, scammers are continuing to find new ways to 
exploit vulnerable Americans during COVID-19. With people 
remaining locked in their homes, many head online for social 
interaction, particularly our seniors. The bad guys know this 
and take advantage of it. And the FTC has already found that 
people are increasingly falling victim, unfortunately, to scams 
through social media platforms. This must stop.
    In just the first 6 months of 2020, scams originating from 
social media tripled, resulting in 117 million in losses. With 
more consumers tuning in to these platforms, scammers create 
fake profiles offering connection, friendship, or economic 
relief, only to steal information and hard-earned dollars. 
These scams will often come by way of a friend, a friend 
request, and direct messages or advertisements.
    As the FTC continues to publish helpful information on best 
practices, I urge big tech platforms--I urge them to--that they 
should help your users remain vigilant against scams and fraud.
    Bad actors will resort to any means to steal money and 
information. We know that. They will create fake profiles, 
calls from new phone numbers, and even try to mask their 
identity as a friend or family member.
    The best preventative measure is education, as you all 
know, and entities across the country working in unison to 
share educational materials. And we must have a duty to share 
these materials with our constituents. If consumers know what 
to look for, they will be better equipped to avoid these scams.
    I commend the FTC for their tireless work fighting on 
behalf of consumers. However, they cannot do it alone. There 
must be greater collaboration--I am over my time, Madam Chair. 
I am just--can I ask for another 20 seconds?
    [No response.]
    Mr. Bilirakis. If not, that is OK. We will discuss these 
issues during the meeting, and I apologize for going over my 
time.
    And I will yield back----
    Ms. Schakowsky. No, go ahead, go ahead, finish.
    Mr. Bilirakis. Is that OK? All right, I am very--I will be 
finished.
    There must be greater collaboration and cooperation with 
State and local law enforcement, as you know, collaboration and 
cooperation for merchants, and platforms, and communities to 
better educate consumers on best practices to avoid falling for 
scams, and to increase efforts to hold bad actors accountable.
    I want to thank all of our witnesses for being here today, 
and I look forward to learning how to better strengthen 
protections for Americans from scams and frauds. And this is a 
great way to lead, Madam Chair. Thanks for having the agenda 
and this particular meeting. It is so important. Thank you.
    [The prepared statement of Mr. Bilirakis follows:]

                Prepared Statement of Hon. Gus Bilirakis

    Thank you Madame Chair. Good morning and welcome to our 
first Consumer Protection and Commerce Subcommittee hearing of 
the 117th Congress.
    I would like to congratulate Chair Schakowsky for another 
term leading this great subcommittee where we promote 
innovation, champion emerging technologies, and protect 
consumers, and I am greatly looking forward to working with 
you.
    I would also like to recognize the newest Republican 
members of the subcommittee, Dr. Dunn from Florida, Mr. Pence 
from Indiana, Ms. Lesko from Arizona, and Mr. Armstrong from 
North Dakota.
    You all bring unique and invaluable expertise and I am 
eager to see the great work you all will accomplish.
    Lastly, I would like to thank my friend, E&C Republican 
Leader Rodgers, for giving me the opportunity to lead 
Republicans on this subcommittee and congratulate her on 
leading this great committee for our side of the aisle.
    I know she is going to do great things as our leader to 
help the American people.
    Today we will explore steps we can take to advance our 
fight against fraud and scams--which is so important during 
this pandemic. Millions are forced to isolate and remain in 
their homes and bad actors continue to exploit consumers' fear 
and confusion--some promising fake reservations for coronavirus 
vaccines, stimulus checks, loans for small businesses 
struggling to stay afloat, and even Super Bowl tickets.
    Just earlier this year in my district in Pasco and Pinellas 
Counties in Florida, the health departments discovered use of a 
fake Eventbrite website being used to charge money for 
registrations for the COVID vaccine.
    This fake website was a complete scam, for as we know 
vaccine registration is completely free.
    We must continue to protect consumers from falling victim 
to scams, as it not only cripples individuals financially but 
can also cause serious mental health issues and lead to 
suicide.
    We made great progress on this subcommittee last year.
    We enacted H.R. 6435, the Combating Pandemic Scams Act, led 
by Rep. Carter, along with Reps. Hudson, Kuster, and Blunt 
Rochester.
    With the efforts of our friends at the Federal Trade 
Commission, this law will focus tools and resources on 
vulnerable communities to better educate and protect them from 
scams.
    Unfortunately, scammers are continuing to find new ways to 
exploit vulnerable Americans during COVID-19.
    With people remaining locked in their homes, many head 
online for social interaction.
    The bad guys know this, and the FTC has already found that 
people are increasingly falling victim to scams through social 
media platforms.
    In just the first 6 months of 2020, scams originating from 
social media tripled, resulting in $117 million in losses.
    With more consumers tuning in to these platforms, scammers 
create fake profiles offering connection, friendship, or 
economic relief only to steal information and hard-earned 
dollars. These scams will often come by way of friend requests 
and direct messages or advertisements.
    As the FTC continues to publish helpful information on best 
practices, I urge Big Tech platforms to do better--you should 
help your users remain vigilant against scams and fraud.
    Bad actors will resort to any means to steal money and 
information--they will create fake profiles, calls from new 
phone numbers, and even try to mask their identity as a friend 
or family member.
    The best preventative measure is education, and entities 
across the country working in unison to share educational 
materials. If consumers know what to look for, they will be 
better equipped to avoid scams.
    I commend the FTC for their tireless work fighting on 
behalf of consumers.
    However, they cannot do it alone.
    There must be greater collaboration and cooperation with 
State and local law enforcement, merchants and platforms, and 
communities to better educate consumers on best practices to 
avoid falling for scams and to increase efforts to hold bad 
actors accountable.
    I want to thank all of our witnesses for being here today 
and I look forward to learning how to better strengthen 
protections for Americans from scams and frauds.
    I yield back.

    Mr. Bilirakis. And again, I will yield back.
    Ms. Schakowsky. When I listen to you, I can see that we are 
really on the same page on so many things.
    And now--the gentleman yielded back, and I now recognize 
the chairman of the full committee, Mr. Pallone, for 5 minutes.

OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Chairwoman Schakowsky. And it is 
good to see our new ranking member, Gus Bilirakis, as well. 
Good to see you both.
    I wanted to--let me just say my concern, of course, we have 
a situation now where we have safe and effective vaccines, and 
we are trying to push them out. But, while these vaccines 
provide real hope, there are new variants of the coronavirus, 
you know, that are now spreading, that are highly 
transmissible. And for consumers, these new strains are causing 
a renewed panic--I am sure you are hearing about this from your 
constituents--and another scramble for personal protective 
equipment, intense demand for vaccine appointments.
    But for scammers and fraudsters, this is exactly the kind 
of fear and desperation that they seize and thrive on. So that 
is why I think that this hearing is so important, not only to 
deal with the scams and frauds that we have seen in the last 10 
months but now, you know, even more opportunity for scams and 
frauds because of the fear that a lot of people have with these 
new variants.
    And overall, the pandemic has just upended American life, 
pushing so many aspects of consumer laws to the online realm. 
And you get all these fly-by-night businesses that are just a 
click away, and fraudsters that can assume different 
identities. And there are con artists that really pose threats 
to consumers' health, safety, and financial well-being.
    And these sellers, these unscrupulous sellers on the 
Internet, are sophisticated. They flood fees to drive traffic 
to their suspect goods. They include counterfeit and 
substandard personal protective equipment, sham testing kits, 
bogus cures. But the products they are selling can endanger the 
health, and their online stores may just be a front to scam 
consumers. And the number of reports about scams originating on 
social media has more than tripled in the past year.
    And these scams, Madam Chair, have been particularly 
harmful to older Americans and senior citizens. I know you have 
been involved with the Senior Task Force for so many years, 
Jan.
    And this isolation--you know, a lot of these people are 
isolated now, these seniors, and that has left them 
particularly vulnerable to fraudsters. For example, online 
puppy scams and romance scams have risen precipitously during 
the pandemic.
    And some of the worst fraudsters are the identity thieves 
stealing stimulus checks and unemployment benefits from those 
already struggling to pay their bills. To make matters worse, 
these people are often targeted for fake employment scams, 
deceptive income schemes, and unwise investment solicitations.
    So I wanted to applaud both the chairwoman and Congressman 
Bucshon for their bipartisan work in giving the Federal Trade 
Commission new authority to seek civil penalties for COVID-19 
scams. That was in the 2021 omnibus end-of-the-year package. 
And that provision empowers the FTC to dole out real 
consequences to bad actors. They reported losing more than 300 
million--you know, consumers have lost more than 300 million in 
just pandemic-related fraud.
    Now, one of the concerns that I have, though, is that the 
FTC's ability to make victims whole is under threat in the 
Supreme Court. And it is--that is why it is critical that the 
FTC step up its efforts to protect consumers. I know that Tony 
Cardenas has a bill to deal with this power of restitution that 
we feel is under threat, and he is going to talk about that.
    But the former FTC chairman, Joseph Simons, I think, 
insulated some of the worst that came out, some of these scams, 
because of--and was very critical sometimes of the Trump 
administration. But the agency really needs to show its teeth 
now. And because--since the beginning of the pandemic the FTC 
has issued numerous warning letters, but warning letters are 
nothing, they are really just a slap on the wrist.
    [The prepared statement of Mr. Pallone follows:]

             Prepared Statement of Hon. Frank Pallone, Jr.

    As our Nation continues to confront the unprecedented 
public health and economic crisis resulting from the COVID-19 
pandemic, we are now seeing the rollout of powerful tools to 
help us contain the virus--safe and effective vaccines. While 
these vaccines provide real hope, new variants of the 
coronavirus are now spreading that are highly transmissible. 
For consumers, these new strains are causing renewed panic, a 
fresh scramble for personal protective equipment, and intense 
demand for vaccine appointments. For scammers and fraudsters, 
this is exactly the kind of fear and desperation they seize and 
thrive on.
    The COVID-19 pandemic has completely upended American life, 
pushing so many aspects of consumers' lives to the online 
realm, where fly-by-night businesses are just a click away and 
fraudsters can easily assume different identities. These con 
artists pose real threats to consumers' health, safety, and 
financial well-being, to say nothing of the emotional trauma 
and embarrassment.
    Unscrupulous sellers are sophisticated on social media, 
flooding feeds to drive traffic to their suspect goods, 
including counterfeit and substandard personal protective 
equipment, sham testing kits, and bogus cures. But the products 
they are selling can endanger one's health and their online 
stores may just be a front to scam consumers. The number of 
reports about scams originating on social media has more than 
tripled in the past year.
    These scams have been particularly harmful to older 
Americans and senior citizens, who have gone months with little 
interpersonal contact and support. This isolation has left them 
particularly vulnerable to fraudsters. For example, online 
puppy scams and romance scams have risen precipitously during 
the pandemic.
    Some of the worst fraudsters are the identity thieves 
stealing stimulus checks and unemployment benefits from those 
already struggling to pay their bills and feed their family. To 
make matters worse, these people are often also targeted for 
fake employment scams, deceptive income schemes, and unwise 
investment solicitations.
    I want to applaud Chairwoman Schakowsky and Congressman 
Bucshon for their bipartisan work in giving the Federal Trade 
Commission (FTC) new authority to seek civil penalties for 
COVID-19 scams and deceptive practices in the 2021 omnibus. 
This provision will empower the FTC to dole out real 
consequences to bad actors that prey on consumers during these 
especially challenging times.
    Since the beginning of the pandemic, consumers have 
reported losing more than $300 million in just pandemic-related 
fraud.
    A core part of the FTC's consumer protection mission is 
returning money to consumers that was unlawfully taken from 
them. Last year, the FTC successfully returned more than $400 
million back to consumers that had been lost to fraud.
    But the FTC's ability to make victims whole is under threat 
in the Supreme Court. With this looming threat, it is critical 
that the FTC step up its efforts to protect consumers. Former 
FTC Chairman Joseph Simons may have helped insulate the agency 
from some of the worst that came out of the Trump 
administration, but to effectively combat scammers, the agency 
needs to show its teeth.
    Since the beginning of the pandemic, the FTC has issued 
numerous warning letters to companies allegedly selling 
unapproved products that claim to treat or cure COVID-19. But 
warning letters are nothing more than a slap on the wrist and 
do nothing to help consumers who may have already been harmed. 
Over the objections of Democratic Commissioners, the FTC also 
settled case after case, failing to hold individual executives 
accountable or seek sufficient monetary penalty. And the FTC 
failed to initiate rulemakings that could help the Commission 
efficiently pursue civil penalties.
    I look forward to hearing from our expert witness panel on 
what must be done to meaningfully combat scammers and protect 
consumers.
    Thank you, and I'd like to yield my remaining time to 
Congressman Cardenas.

    Mr. Pallone. So I want to hear from the panel. But before 
that, I would like to yield the time remaining to Tony 
Cardenas, who--I know he has some important legislation that I 
mentioned.
    Mr. Cardenas. Thank you, Mr. Chairman. The Federal Trade 
Commission is the country's premier consumer protection agency, 
and respected internationally, and is the leader in consumer 
protection. For example, just in the last 5 years alone, they 
returned $11 billion in refunds to victimized consumers.
    Again, as the chairman mentioned, this authority to secure 
monetary relief for consumer victims under section 13(b) of the 
FTC Act currently hangs in the balance in the United States 
Supreme Court. Should the court rule against the FTC, American 
consumers will pay the price. As warned in a remarkable 
bipartisan letter from all five FTC Commissioners to the 
committee last October, and I quote, it says, ``It is 
imperative that the Congress act quickly, so that the FTC can 
continue to effectively protect American consumers.''
    I would like to submit that letter for the record, Madam 
Chair, and I plan to introduce legislation in response to the 
bipartisan call to ensure the FTC's continued ability to return 
consumers and victims their resources.
    I welcome working with my Republican colleagues on this 
issue. I note that Senator Wicker introduced legislation last 
Congress to address 13(b), and I hope we can continue to work 
in a bipartisan way on this.
    Mr. Thank you very much. I yield back my time.
    Mr. Pallone. And I yield back as well, Madam Chair.
    Ms. Schakowsky. There we go. That will be submitted in the 
record at the end of the hearing today.
    Ms. Schakowsky. And let me now both congratulate and 
recognize Congresswoman McMorris Rodgers, and--for now being 
the ranking member on the full committee, and for her 5 minutes 
on this subcommittee.
    You are recognized.

      OPENING STATEMENT OF HON. CATHY McMORRIS RODGERS, A 
    REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON

    Mrs. Rodgers. Thank you very much, Madam Chair. A big 
welcome to everyone to the first Consumer Protection and 
Commerce Subcommittee of the 117th Congress.
    Last Congress I had the pleasure of working very closely 
with the chair, Chair Jan Schakowsky, as I was the subcommittee 
Republican leader. And I am very proud that we were able to 
accomplish some significant bipartisan priorities. We 
reauthorized the U.S. Safe Web Act to ensure international 
cooperation against scams and frauds, which has never been more 
important.
    We also got the American COMPETE Act signed into law. And I 
really appreciate the help in getting this included in the end-
of-the-year package. This bill will play an important role in 
widely deploying emerging technologies, many of which are also 
being used right now to respond to the pandemic.
    We also made great bipartisan strides on privacy 
protections, and I hope that we can build on the bipartisan, 
bicameral achievements from the end of last year and get a 
Federal privacy law signed this year, as soon as possible.
    I also want to congratulate my friend from Florida, Gus 
Bilirakis, for taking on the leadership of this subcommittee 
for the Republicans. I have every confidence he is going to do 
a great job. He is someone that digs in and really does the 
hard work of legislating to get results. And I am excited about 
what we will be able to accomplish for the American people, and 
how we will be able to help win the future.
    These have been some difficult times, unprecedented times. 
Millions of citizens remain trapped inside their homes with 
little social interaction. In addition to worsening our 
country's mental health and substance abuse crisis, this 
isolation has created opportunities for bad actors to exploit 
Americans' pain.
    Last Congress this subcommittee helped combat these bad 
actors and empower vulnerable communities to not become 
victims. Buddy Carter's Combating Pandemic Scams Act was signed 
into law at the end of last year, and I am glad that we are 
continuing the good work of this subcommittee at the beginning 
of this year.
    As Mr. Bilirakis discussed, there are several scams to be 
on the lookout for, and lies about COVID vaccines and attempts 
to steal stimulus checks, as well as the good old gift card 
scams that are on the rise.
    I want to thank and welcome Traci Ponto. She is from 
Spokane, Washington. She is with Spokane COPS., Community 
Oriented Policing Services. And she is one of our witnesses 
today. She is going to be sharing some of her insight on a 
range of scams that she sees and her work to protect and serve 
eastern Washington.
    Education is the best prevention. And I know your 
dedication to that, and your cooperation with law enforcement 
is getting results for victims.
    I also want to thank our allies at the Federal Trade 
Commission. They are on the front lines, educating our 
communities about the risks of COVID scams and holding bad 
actors accountable. And, just as I said during our work on 
privacy protections, we need a strong national standard and a 
regulator who is empowered to enforce that standard.
    The FTC has long relied on section 13(b) of the FTC Act to 
obtain and enforce a range of remedies against certain illegal 
conduct. But I understand that that authority is currently 
being challenged in the courts. Specifically, the Third and 
Seventh Circuits have ruled recently that the FTC cannot obtain 
monetary relief under section 13(b). And the Third Circuit 
decided that the FTC misused section 13(b) to address past 
illegal conduct. While we await the Supreme Court's decision, 
Congress has been asked by the FTC to amend the Act to clarify 
this authority.
    There is certainly a need to get financial restitution to 
victims. However, I am concerned about the potential for the 
FTC to abuse that authority and use it primarily to leverage 
defendants into settlements. If the argument in favor of 
increased FTC authority is that defendants are defending 
themselves too often without it, it is simply not persuasive.
    I want to be clear. I understand the importance of section 
13(b) and the role that it can play in an agency's consumer 
protection mission, especially in the bigger cases. But I also 
understand the reality that the Democrats are in the control of 
both chambers and may want to move before the Supreme Court 
rules. If that is the case, we must use this time as an 
opportunity to address other reforms to the Commission.
    Again, I want to thank the witnesses for being here today. 
This is a timely and important discussion, and I look forward 
to hearing from all of you. Thank you.
    [The prepared statement of Mrs. Rodgers follows:]

           Prepared Statement of Hon. Cathy McMorris Rodgers

    Good morning and welcome to the first Consumer Protection 
and Commerce Subcommittee hearing of the 117th Congress.
    Last Congress, I had the pleasure of working closely with 
you, Chair Schakowsky, as this subcommittee's Republican 
leader. We were able to achieve significant bipartisan 
priorities.
    For instance:
     We reauthorized the U.S. SAFE WEB Act to ensure 
international cooperation against scams and frauds, which has 
never been more important.
     We also got the American COMPETE Act signed into 
law. I appreciated your help and Chairman Pallone's help in 
getting it included in the year end package.
    This bill will play an important role in widely deploying 
emerging technologies, many of which are already being used to 
respond to the pandemic.
    We also made great bipartisan strides on privacy 
protections. I hope we can build on the bipartisan, bicameral 
achievements from the end of last year and get a Federal 
privacy standard signed into law this Congress.
    I want to congratulate my good friend from Florida, Gus 
Bilirakis, for taking on the leadership of this subcommittee 
for Republicans.
    I am excited to see what you will accomplish for the 
American people and how you will help us win the future.
COVID SCAMS
    These are unprecedented times.
    Millions of our citizens remain trapped inside their homes 
with little social interaction.
    In addition to worsening our country's mental health and 
substance abuse crisis, this isolation has created 
opportunities for bad actors to exploit American's pain.
    Last Congress this subcommittee helped combat these bad 
actors and empowered vulnerable communities to not become 
victims.
    Buddy Carter's Combating Pandemic Scams Act was signed into 
law at the end of last year, and I am glad we are continuing 
this good work through this hearing.
    As Mr. Bilirakis discussed, there are several scams to be 
on the lookout for from lies about COVID vaccines to attempts 
to steal stimulus checks, as well as ``old-school''n gift cards 
scams that are on the rise.
    I want to thank you, Traci Ponto of Spokane COPS (Community 
Oriented Policing Services), for sharing your insights on the 
range of scams you are encountering, and for your work to 
protect and serve Eastern Washingtonians.
    Education is the best prevention, and I know your 
dedication to that and your cooperation with law enforcement 
gets results for victims.
FTC 13(b) AUTHORITY
    I also want to thank our allies at the Federal Trade 
Commission.
    They are on the frontlines educating our communities about 
the risks of COVID scams and holding bad actors accountable. 
And just as I have said during our work on privacy protections, 
we need a strong national standard and a regulator who is 
empowered to enforce that standard.
    The FTC has long relied on Section 13(b) of the FTC Act to 
obtain and enforce a range of remedies against certain illegal 
conduct, but I understand that authority is currently being 
challenged in the courts.
    Specifically, the Third and Seventh Circuits have recently 
ruled that the FTC cannot obtain monetary relief under Section 
13(b), and the Third Circuit decided the FTC misused Section 
13(b) to address past illegal conduct.
    While we await the Supreme Court's decision, Congress has 
been asked by the FTC to amend the act to clarify this 
authority.
    There is certainly a clear need to get financial 
restitution to victims however, I am concerned about the 
potential for the FTC to abuse that authority and use it 
primarily to leverage defendants into settlements.
    If the argument in favor of increased FTC authority is that 
defendants are defending themselves too often without it, that 
simply is not persuasive with me.
    I want to be clear: I understand the importance of Section 
13(b) and the role it can play in the agency's consumer 
protection mission, especially its bigger cases.
    I also understand the reality that Democrats are in control 
of both chambers and may want to move before the Supreme Court 
rules.
    If that is the case, we must use this time as an 
opportunity to address other reforms to the Commission.
    Due process is a foundational principle for the protection 
of Americans' legal rights, and it must be central to any 
changes to existing law.
    If we are to tackle 13(b) authorities, we should also take 
a holistic look at the FTC's authorities and consider other 
amendments.
    We considered FTC process and transparency reforms in the 
114th Congress, and that must be part of this legislative 
effort.
CONCLUSION
    I want to thank our witnesses again for being here today 
for this timely and important discussion. I look forward to 
hearing from you all.
    Thank you. I yield back.

    Ms. Schakowsky. I would like to introduce our witnesses for 
today's hearing.
    There is Bonnie Patten, the executive director of 
TruthinAdvertising.org; the Honorable William E.--let me say it 
right--Kovacic, who is global--let me get this right, OK--
global competition professor of law and policy, professor of 
law and director of Competition Law Center at Georgetown 
University Law School. We have Traci Ponto, spokesman--no. 
Traci Ponto from Spokane COPS, crime victims advocate. You 
heard our ranking member of our full committee talk about her, 
from Spokane Community Oriented Policing Services. And Jessica 
Rich, director--no, I am sorry, distinguished fellow at the--I 
think maybe I could use my glasses here, let's see. No, not as 
good. Jessica Rich--am I past her? No, Jessica--distinguished 
fellow at the Institute of Technology Law and Policy at 
Georgetown Law.
    Those are our witnesses, and we want to thank our witnesses 
for joining us today. We look forward to your testimony. And so 
let's begin with Ms. Patten.
    You are recognized now for 5 minutes.

    STATEMENTS OF BONNIE L. PATTEN, EXECUTIVE DIRECTOR AND 
  COFOUNDER, TRUTH IN ADVERTISING; TRACI PONTO, CRIME VICTIM 
ADVOCATE, SPOKANE COMMUNITY ORIENTED POLICING SERVICE; WILLIAM 
 E. KOVACIC, PROFESSOR, GEORGE WASHINGTON UNIVERSITY SCHOOL OF 
   LAW; AND JESSICA RICH, DISTINGUISHED FELLOW, INSTITUTE OF 
  TECHNOLOGY LAW AND POLICY, GEORGETOWN UNIVERSITY LAW CENTER

                 STATEMENT OF BONNIE L. PATTEN

    Ms. Patten. Thank you, Chairman Schakowsky, Ranking Member 
Bilirakis, and members of the subcommittee. On behalf of Truth 
in Advertising, TINA.org, I am pleased to appear before you to 
highlight fraudulent and deceptive marketing schemes that have 
arisen during this unprecedented crisis, and to sound the alarm 
that the worst may be yet to come if the FTC cannot claw back 
ill-gotten gains from wrongdoers under section 13(b) of the FTC 
Act.
    My organization, TINA.org, is a nonpartisan, nonprofit 
consumer advocacy organization whose mission is to combat 
deceptive advertising and consumer fraud. We work with 
businesses and government agencies on behalf of consumers to 
effectively prevent and stop deception in our economy. There 
can be no doubt that the ongoing pandemic has exacerbated the 
ever-present dangers of deceptive and unfair acts and practices 
in the marketplace.
    TINA.org has heard from countless consumers, senior 
citizens, military veterans, and struggling parents whose 
experiences illustrate the fact that deceptive marketing is 
putting the health, financial well-being, and safety of our 
most susceptible populations at risk.
    The list of deceptively marketed products and services 
exploiting this pandemic is extensive: CBD products marketed to 
military veterans as a coronavirus treatment; bleach, 
advertised as a liquid cure-all; wellness centers targeting 
first responders with IV vitamin drips to protect against 
COVID-19; Amazon and eBay sellers falsely claiming that their 
PPE is FDA approved; hand sanitizer marketed as protecting for 
24 hours against COVID-19; alleged immunity-boosting 
supplements targeting children; colloidal silver solutions 
advertised as having the ability to kill the virus from within; 
toothpaste and teeth-whitening products claiming to prevent 
COVID-19; and sham wellness kits targeting seniors.
    Unfortunately, the deception does not stop with outrageous 
health claims; many are exploiting the economic desperation 
wrought by this pandemic: multilevel marketing companies 
claiming people can earn full-time pay working part time; 
lending companies deceptively using the CARES Act to exploit 
college students; investment scams claiming to have patented 
COVID cures; and financial entities pretending to be SBA-
authorized lenders to lure in small businesses struggling to 
keep their workers employed.
    And to make matters worse, the agency primarily charged 
with policing these deceptive acts, the FTC, is now at risk of 
losing a mainstay of its enforcement authority: the ability to 
make victims whole under section 13(b).
    Because 13(b) does not specifically say anything about 
equitable relief when a permanent injunction is issued, the 
Supreme Court is now deciding the remedial scope, if any, of 
13(b) in the case AMG v. FTC. AMG was a payday lending scheme 
that extracted money from people in desperate circumstances. In 
its appeal, the company does not dispute that it violated the 
law. Instead, it argues that the $1.3 billion it stole should 
be its to keep.
    AMG asserts that it was never Congress's intention for the 
FTC to return money to victims of fraud under 13(b). Quite to 
the contrary, AMG argues that this legislative body fully 
endorsed the notion that wrongdoers should pocket the money 
they have illegally taken when it drafted 13(b). If the Supreme 
Court rules in AMG's favor and this Congress does not act to 
empower the FTC to seek restitution under 13(b), then the 
deceptive practices I have enumerated will only multiply.
    Allowing wrongdoers an absolute right to retain funds under 
13(b) will make consumers and our economy more vulnerable to 
harm, especially during these unprecedented times.
    Thank you, and I look forward to answering your questions.
    [The prepared statement of Ms. Patten follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
                   
    Ms. Schakowsky. Thank you. Thank you for your testimony. 
And next we will hear--and thank you so very much for that 
really compelling, compelling testimony. And now let me call on 
Ms. Ponto.
    You are recognized now for 5 minutes.

                    STATEMENT OF TRACI PONTO

    Ms. Ponto. Thank you. Good afternoon, Members of Congress. 
Thank you for inviting me here today to talk to you about our 
organization and what is happening in the world of scams and 
frauds over this past 2020 season.
    First, let me introduce myself. My name is Traci Ponto. I 
am a retired Spokane police officer, after serving 25 years. I 
now work full-time as a crime victim advocate for Spokane 
Community Oriented Policing Services.
    Spokane COPS is the nonprofit organization for the Spokane 
Police Department. We have 5 staff members, 400 volunteers, and 
9 COPS shops throughout our city. Our COPS shops serve as a 
liaison between the police department and our communities and 
provide a location for neighbors to come in and seek assistance 
with their concerns. Our COPS shops provide programs such as 
block watch, identity theft and fraud victim callbacks, 
neighborhood observation patrols, and other programs that work 
on getting neighbors engaged in their community, working 
alongside law enforcement, and taking ownership and keeping 
their communities safe.
    Our organization focuses on crime prevention and working 
with neighbors to help resolve quality-of-life issues. In a 
time where our Nation is asking questions on how to get our law 
enforcement and community working together, our focus is to 
help educate the community and provide crime prevention tips to 
help solve many of their concerns.
    My current position as a crime victim advocate is to help 
any and all victims of crime. Law enforcement is able to go 
after the criminals, but who takes care of those that are 
victimized? Many people feel unsafe after being victimized. 
And, as an advocate, we are able to help restore some of that 
sense of safety by providing a crime prevention through 
environmental design survey, amongst other services.
    When you are a victim of identity theft and fraud, you are 
incredibly vulnerable to losing your money, which is what 
supports your daily life. Our advocates' primary goals are to 
respond to the emotional, psychological, and physical needs of 
crime victims. We assist victims in stabilizing their lives 
after victimization and help them understand and participate in 
the criminal justice system. Our goal is to restore a measure 
of security and safety for them.
    In 2020 many victims found themselves losing their 
employment or working from home. With quarantine and social 
distancing, victims found themselves doing more of their 
shopping online. Victim advocates saw an increase in identity 
theft, fraud, and scams with this vulnerable population. 
Phishing scams targeted victims by claiming they were trying to 
process Amazon returns and needed more personal information. 
Microsoft scams targeted victims using threats of subscriptions 
expiring, which would disrupt people trying to work online from 
home. Unemployment fraud, where databases were hacked, personal 
information stolen, and fraudulent unemployment claims 
surfaced. This alone affected thousands of people dependent on 
supplementing their lost wages. This also created concern from 
victims that were still employed, yet had claims open under 
their names.
    Now, as we prepare for tax season, we have seen an increase 
from victims who are receiving paperwork showing unemployment 
income they were not aware of. With the pandemic, victims that 
are already feeling isolated and lonely are more vulnerable to 
phone calls and social media messages that lead to scams.
    Victims that have been targeted by scammers and have lost 
money are often too ashamed to tell family members, and now 
have an increased anxiety and fall into despair. Victims do not 
know where to turn, and the magnitude of these crimes are 
overwhelming and creating more mental-health-related issues.
    COVID set a perfect storm by creating isolation and 
depression that put people at a higher risk for scams and 
allowed scammers many different opportunities to prey on this 
vulnerable audience. As a crime victim advocate, our goal is to 
provide assistance to our clients and walk them through a step-
by-step process of reporting the fraud, gathering evidence to 
provide their financial institutions, and protect them from 
further identity theft and fraud-type crimes.
    Thank you for your time today.
    [The prepared statement of Ms. Ponto follows:]
    
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
        
    Ms. Schakowsky. And thank you.
    Professor Kovacic, it is yours for 5 minutes. You are 
recognized.

                STATEMENT OF WILLIAM E. KOVACIC

    Mr. Kovacic. Thank you, Madam Chair. Thank you, Ranking 
Member and members of the committee. I am very grateful for 
having the opportunity to participate in these proceedings.
    I am going to suggest a series of steps that you and your 
colleagues can take to put the FTC in a better position to 
address the formidable challenges that you have mentioned.
    I acknowledge the wonderful work that I think the FTC has 
done in a terrible time in which the challenges have 
intensified, and they have had to move out of their building 
and do everything remotely.
    I speak from my experience at the FTC and my current work 
as a non-executive director on the board of the United 
Kingdom's Competition and Markets Authority. I don't speak on 
behalf of the agency, but I speak with an awareness of what the 
CMA, the FTC, and others have done in an extraordinary 
circumstance when they have had the hardest challenges, and 
have had to work in a remarkably difficult setting. I think 
they performed admirably. I have some thoughts about what you 
and your colleagues can do to put them in a position to do 
still better.
    Let me start by offering three suggestions that involve new 
legislation and then to come up with three that involve your 
role as an oversight body and as a forum for holding policy 
discussions about what the FTC and others should do.
    First, on the legislative side, I simply echo the priority 
that all of you have given, that Bonnie Patten has just given, 
as well, to repairing what is likely to be a hole in 13(b) 
authority. My own view of the AMG case which Bonnie just 
discussed is that the FTC will lose that case. The oral 
argument was not favorable, from a wide variety of perspectives 
within the Supreme Court.
    I think priority number one is to be prepared as soon as 
possible to repair the damage that an adverse decision would 
do. If the Commission does not have the ability to disgorge 
ill-gotten gains from misconduct, the deterrent effect of its 
enforcement power is considerably weakened. That is priority 
number one. You are aware of that.
    Second, I would make major new investments in the 
capability of the Federal Trade Commission. Let's remind 
ourselves of what Congress has asked it to do. It is not only 
the principal consumer protection agency in the country, it is 
a major antitrust agency, and it is the principal U.S. data 
protection agency. But we pay peanuts to carry out those 
functions. We pay low salaries compared with even what other 
Federal officials get. And we provide a very modest budget, not 
even quite $350 million a year.
    My suggestion: Raise the compensation of FTC employees, at 
least to the level of the Consumer Financial Protection Bureau. 
That salary scale is fully 20 percent higher. Why and in what 
respect is financial services consumer protection more 
important than the concerns we mentioned?
    Second, and more dramatically, I would give the FTC a 
billion dollars a year to do its job. I would monitor the 
performance with that money, but my view is that we are 
demanding Mercedes-like performance, but we want to pay for a 
Chevy instead. And that doesn't happen in real life. I see a 
real measure of the sincerity of the Nation and its elected 
officials to deliver on this promise its willingness to fund 
these activities appropriately. Otherwise, we are just kidding 
ourselves about what we want to be done.
    Related to that, major investments in upgrading the FTC 
system built over a period of 20, 25 years to improve its 
capacity to collect data on misconduct, and to apply it--a 
major upgrade of the Sentinel System--and to mimic the 
experience of the Competition and Markets Authority to build up 
a data team. The Competition and Markets Authority has a team 
of 40 technologists that now work on these issues.
    A third legislative proposal is to eliminate gaps in the 
FTC's jurisdiction by eliminating the exceptions for common 
carriers, banking and financial services, and not-for-profit 
organizations.
    Finally, three thoughts about the use of oversight 
authority.
    One, as the ranking member mentioned, boost cooperation. I 
suggest to you that taking money away with civil remedies is 
not going to keep serious bad guys from doing what they do. The 
only solution there is cooperation with criminal enforcement 
authorities to take away their freedom. If we are not going to 
do that, again, I think we are not really digging in to the 
seriousness of the problem and addressing it.
    Second, invite the FTC and its partners at the State and 
local level to sit down with you and talk about what they 
learned by way of doing innovative things to address the COVID 
crisis and what gaps have to be filled. That should be an 
ongoing collaboration between the committee and the public 
enforcement agencies.
    And last, to confront the future design of the FTC. Should 
you adopt new privacy legislation, what do we want the FTC to 
do in the future?
    My thanks to the committee for the chance to be here.
    [The prepared statement of Mr. Kovacic follows:]
    
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    Ms. Schakowsky. Thank you so much for your testimony.
    And last, but not least, Ms. Rich, you are recognized for 5 
minutes for your testimony.

                   STATEMENT OF JESSICA RICH

    Ms. Rich. Thank you, Chair Schakowsky, Ranking Member 
Bilirakis, and members of this subcommittee. I am really 
pleased to be here to discuss the challenges of fighting fraud 
during the pandemic.
    I am no longer at the FTC, but I spent most of my career 
there, actually, 26 years, the last 4 of those years as its 
Director of Consumer Protection. I care deeply about ensuring a 
safe and fair marketplace for the American public.
    One of the biggest challenges in consumer protection, as we 
have all been talking about here today, is fighting fraud, a 
pernicious problem that steals from consumers, often those 
least able to afford it, undermines their trust, and distorts 
the functioning of the marketplace.
    In times of crisis, fraud can be especially relentless. Con 
artists prey on distressed consumers, offering bogus health 
cures, nonexistent financial aid, and many other scams, often 
posing as a government agency or official. This happened with 
Hurricane Katrina and the Great Recession, and it is happening 
now.
    Over the past year the FTC has received many consumer 
complaints related to COVID-19 and has responded with consumer 
alerts, warning letters to scammers, and law enforcement. As of 
December, thanks to the leadership of this committee, the FTC 
can now impose fines on the scams' perpetrators. However, the 
FTC is facing serious challenges in its broader fight against 
fraud, which is the focus of my testimony today.
    In my written testimony I flagged four issues.
    First is the FTC's authority to obtain restitution under 
13(b) of the FTC Act. As everybody has discussed extensively 
today, it is under risk. For over 40 years, the FTC has used 
section 13(b) to return many billions of dollars to consumers 
and small businesses victimized by fraud and deception. Until 
recently, every circuit court to consider the issue held that 
the FTC could do so.
    Notably, 13(b) is the only provision in the law that has 
enabled the FTC to seek in the same action both an injunction 
against FTC Act violations and restitution for consumers. The 
adverse rulings in the circuit courts have already undermined 
the FTC's ability to obtain restitution in those circuits. An 
adverse ruling in the Supreme Court would be devastating.
    Section 13(b) is simply the most efficient and effective 
tool that the FTC has to stop illegal conduct, prevent 
defendants from profiting from it, and return money to 
consumers. Without it, the FTC has to engage in either a 
cumbersome two-step process with two separate back-to-back 
lawsuits, or limit restitution to those situations where it is 
enforcing a rule which is a subset of cases. These options will 
severely hinder the FTC's ability to get money back to 
consumers, and I hope that Congress will restore the authority 
to do that, that the FTC has been using for over 40 years.
    The second issue I flagged is the ability of the FTC and 
others to hold accountable the entities that enable frauds to 
thrive, including the platforms through which scammers 
disseminate fraudulent information. At the FTC and elsewhere, 
defendants of all types argue they are immune from liability 
under section 230, often forcing protracted litigation to 
resolve the issue. Although 230 reform is complex and beyond 
the scope of this hearing, there may be other measures, like 
last year's Inform Consumers Act, that could create much-needed 
accountability short of wholesale 230 reform.
    Third, fraud can have a disproportionate impact on certain 
communities such as seniors, veterans, African Americans, and 
Latinos. During my tenure at the FTC we created an ambitious 
outreach and research initiative called Every Community, the 
goal of which was to ensure that the FTC was reaching and 
protecting the diverse communities victimized by fraud. The FTC 
should scale up this program again now, including by collecting 
more data with appropriate safeguards to enable a broader 
examination of whether the FTC is reaching different 
communities. Also, it should consider hiring experts on racial 
equity and representation to assist with this effort.
    Finally, the FTC needs stronger authority to protect 
consumers' privacy, including the ability to seek penalties for 
first-time violations. One lesson of the pandemic was that 
Americans refused to use contact tracing apps, which could have 
been helpful to track the disease, largely due to concerns that 
the data wouldn't be protected from misuse. This subcommittee 
has shown very strong support for privacy legislation in the 
past, and I hope that will continue.
    Thank you again for allowing me to be here today.
    [The prepared statement of Ms. Rich follows:]
    
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    Ms. Schakowsky. Well, thank you so much. The gentlewoman 
yields back, and let me now--we have concluded the witnesses' 
opening statements.
    At this time we will move to Member questions. Each Member 
will have 5 minutes to ask a question and get an answer of our 
witnesses. And I will start by recognizing myself for 5 
minutes.
    So we certainly have talked a lot about 13(b) and the 
importance of that. I want to thank Representative Cardenas for 
your leadership on this, on addressing this issue. And I want 
to say that I hope that every single member of this 
subcommittee can agree that scammers should not get to keep the 
money that they stole from consumers, which is essentially what 
would happen if we were to get rid of 13(b).
    So, Ms. Patten, I noticed that you filed an amicus brief 
urging the Supreme Court to uphold the FTC's ability to seek 
restitution. And as you may know, the attorney general from the 
State of Illinois, Attorney General Kwame Raoul, has a 
bipartisan coalition now of 30 State attorneys general who are 
also filing an amicus brief in support. I wondered if there is 
anything--I know you spoke about it, but if there is anything 
else that you want to say that we should know and care about 
when it comes to protecting this very important tool.
    Ms. Patten. Yes, thank you, Chair. The amici brief from the 
States and the District of Columbia made clear that States 
absolutely need the FTC to have 13(b) authority. States do not 
have nationwide jurisdiction over these scams. They can't go 
into foreign countries easily. So if the FTC cannot claw back 
ill-gotten gains through 13(b), then the States will be 
required to shift resources over to trying to make victims 
whole.
    One of the things that I thought was so telling in the 
amici brief was that they said between 2016 and 2019, the FTC 
returned more than $10 billion to 9 million consumers in all 50 
states, the District of Columbia, and Puerto Rico. And then, if 
the FTC loses 13(b), you can be guaranteed that consumers in 
every single State will be faced with more deceptive acts and 
practices.
    Ms. Schakowsky. Thank you. I wanted to ask Ms. Rich--I am 
sorry--Mr. Kovacic. Here is a really important question: Is 
there any point in waiting to see how the Supreme Court rules 
on the question of 13(b), or should the authority under that--
should we deal with it before the Supreme Court?
    Mr. Kovacic. My own intuition would be to wait until the 
decision comes up. There is the possibility--comes out. There 
is the possibility that the Court will say, contrary to my 
prediction, the FTC is doing a great job, that is just what 
Congress wanted, full speed ahead.
    I would be faintly concerned that, if there were a measure 
introduced and adopted before that, the argument could be made, 
or the impression given that, oh, my God, Congress didn't think 
that it had--that the Commission has the authority. So it has 
got to put in a supporting mechanism right now.
    I guess my inclination would be--but you are--you 
understand the legislative process better than I do, how long 
it takes and how it goes. My inclination would be to drop that 
bill as fast as possible, or even now to be ready if there is 
an adverse decision. But I hope I am wrong. Maybe the Supreme 
Court says, ``God bless the FTC, full speed ahead.''
    Ms. Schakowsky. So let me ask Ms. Rich or anyone else who 
wants to weigh in on this. Go ahead.
    Ms. Rich. I would love to just state a contrary view, which 
is that I understand that the FTC already cannot pursue 
restitution under 13(b) in two circuits. And in other circuits 
now defendants are saying, ``Oh''--dragging their feet, 
delaying, saying, ``You don't have the authority.'' And these 
are defendants that have wrongly taken money from consumers.
    And so the FTC is limited now, and I would encourage 
Congress to take action now, because it is already a problem. 
And I, too, have been following the arguments in the Supreme 
Court, and I am not optimistic. But regardless, it is already a 
problem.
    Ms. Schakowsky. So, although I am out of time, I am just 
going to ask Ms. Patten what--yes or no, should we move now, or 
wait for the Supreme Court?
    Ms. Patten. I think you should absolutely move now to 
protect 320 U.S. consumers and honest and fair businesses. They 
deserve that protection now.
    Ms. Schakowsky. Thank you. Well, this is a very important 
decision for us to consider as a subcommittee and as a full 
committee. So we will get to it.
    And now I will recognize the ranking member of the 
committee, Mr. Bilirakis, for 5 minutes----
    Mr. Bilirakis. Thank you, Chair----
    Ms. Schakowsky [continuing]. For questions.
    Mr. Bilirakis. Thank you very much, Chair. I appreciate it. 
I thank the panel for their testimony today, very informative.
    Recently, constituents in my district have been targeted by 
scammers promising COVID-19 vaccinations. I mentioned that in 
my opening comment. Fake Eventbrite websites masking themselves 
as health departments, requiring residents to pay fees for 
appointments to receive the vaccination. This was reported in 
my local paper, the Tampa Bay Times, recently.
    I am glad to hear steps have been taken to remedy this 
particular situation, but more needs to be done to protect the 
vulnerable individuals trying to receive the vaccinations. I 
think most people would agree with that.
    Ms. Ponto, how can we better educate individuals on 
vaccination scams?
    And then, should local health departments around the 
country work with community organizers and law enforcement 
agencies?
    If yes, what should they collaborate on?
    I know you mentioned this. I believe you mentioned--you 
touched on this. Can you elaborate a little more?
    Ms. Ponto. Thank you. We have not actually seen a lot of 
scams in regards to vaccinations and PPEs and other things in 
our community. Because we are so well based and have our shops, 
we actually filter a lot of what is happening out there into 
our shops, and thus into our COPS program.
    We do have a health district that is down around our police 
station, and they are pretty good at educating folks about what 
is going on and staying up on that population. What I am 
concerned about is definitely our elderly, who are sitting at 
home and isolated and scared and might be more susceptible to 
that social media or those phone calls and fall prey to this.
    Education, again, is the way to go. And for us, it is 
getting it out there, making our phone calls to our community 
members. Our neighborhood councils are also very successful at 
getting out the information, and then getting our city council 
involved, as well, to get it out. And that is on our level--
citywide. Thank you.
    Mr. Bilirakis. Working with law enforcement, do you 
recommend that, as well?
    Ms. Ponto. I always recommend working with law enforcement, 
and law enforcement is my background, so I--any way that we can 
pull them in and work with them and not have them do our work 
for us is a win-win in my books.
    So what does that look like? Not exactly sure, but we are 
community-oriented policing, and so we kind of are setting in 
the Nation--we have other cities that come to see our programs, 
and why it works so well for our city. Volunteers in the 
community is where it is at, and we get to work alongside with 
our law enforcement.
    Mr. Bilirakis. Very good. Thank you.
    Ms. Ponto. Thank you.
    Mr. Bilirakis. Ms. Rich, in your testimony you mentioned 
the findings of Every Community, an FTC program you worked on, 
which highlighted that the underserved communities impacted by 
scams are not reporting them as often as they should. Can you 
explain why it is important that every scam should be reported?
    And then I have a question for Ms. Ponto.
    Why should every scam be reported?
    Ms. Rich. The FTC really does rely on--it relies on many 
sources for targeting its law enforcement, but one of the 
sources is consumer complaints that it receives, and also 
information it receives from its partner about the complaints 
they are seeing on the ground.
    So if the inputs for--if the agency isn't getting 
information about the scams that are really hurting consumers, 
it can't target its enforcement well. And if certain 
communities aren't comfortable reporting to the FTC or don't 
know to report to the FTC, the FTC may not be protecting those 
communities. And research that we did when I was still at the 
FTC suggests that was the case in some instances.
    And so it is very, very important that the FTC do more work 
to ensure that it is reaching every community that needs its 
protection, whether through--by itself or through trusted 
partners, so that it can target its protection efforts 
effectively.
    Mr. Bilirakis. I would thank you, Madam Chair. I am going 
to go ahead and yield back, because my time has expired. But I 
will submit questions for the record. Thank you.
    Ms. Schakowsky. I now recognize the chair of the full 
committee, Mr. Pallone, for 5 minutes.
    Mr. Pallone. Thank you, Chairwoman Schakowsky. I wanted to 
ask some questions.
    I wanted to use New Jersey, if I could, as an example, 
because we have had a very aggressive State attorney general 
who has been trying to go against consumer protection 
violations. But even so, since the beginning of the pandemic, 
we--New Jersey has lost nearly $9 million in--individuals--in 
fraud, despite this aggressive enforcement by the attorney 
general. And that includes--he sent out, like, 1,800 cease-and-
desist letters, and at least a dozen enforcement actions.
    And, of course, I am proud of the fact that we did a 
bipartisan initiative at--in the end-of-the-year package to 
include, you know, this provision that gives the FTC new 
authority to seek civil penalties for scams and deceptive 
practices related to COVID. That, I believe, was Jan and Dr. 
Bucshon's initiative. And the FTC has issued more than 500 
warning letters to sellers of unapproved or misbranded products 
related to COVID.
    So let me just ask quickly, because there is not a lot of 
time, obviously. Ms. Patten, are warning letters enough to 
protect consumers from fraud and scams?
    Ms. Patten. Unfortunately not. I think the one common theme 
with every scam we are going to talk about today is that they 
are perpetrated for financial gain. And unless the money is 
taken out of the pockets of wrongdoers, it will always be in 
their interest to continue. So a warning letter, regardless of 
where it comes from, is just not going to deter criminals.
    Mr. Pallone. Well, thank you. So let me ask Ms. Rich, how 
could the FTC use the new authority from the COVID-19 Consumer 
Protection Act to fight fraud and scams more effectively?
    If you could, quickly. And I hate to say, ``quickly,'' 
but----
    Ms. Rich. The new law covers a huge amount of scams. It is 
very broad as to COVID scams. So, if a company engages in any 
of that activity, it can--the FTC can pursue civil penalties. 
So, just as Ms. Patten just said, it is very important for 
deterrence to make it painful for fraudsters to rip off 
consumers. And so the civil penalty authority----
    Mr. Pallone. All right. Well, let me ask this. You know, I 
mentioned today about the Supreme Court and the threat to the 
FTC's 13(b) authority, you know, restitution. And Tony has a 
bill to deal with that.
    But now that the FTC has this authority to fine companies 
that have committed fraud and scams related to the pandemic 
under this new law, why is it still important to ensure that 
the FTC's 13(b) authority is preserved? Why is that still 
important, Ms. Rich?
    Ms. Rich. The COVID scams are terrible, but they are one of 
many frauds that the FTC has to fight all year long, in and out 
of a pandemic. So, in many of those cases, the FTC doesn't have 
civil penalty authority, and its redress authority is under 
threat. So it is a much broader problem that goes beyond the 
COVID scams that are occurring here. And so it still needs to 
be fixed.
    Mr. Pallone. All right. And then, just quickly, on social 
media for Ms. Patten or Ms. Rich. We know that, you know, the 
scams on social media have tripled this year, mostly with 
online shopping. And earlier this week, Jan, myself, Anna 
Eshoo, Mike Doyle sent a letter to Facebook, Twitter, and 
Google regarding their handling of COVID vaccine 
misinformation, and how it has escalated on their platforms. 
And obviously, I am concerned about that.
    So, Ms. Patten, can you talk more about why it is so easy 
for consumers to be duped by the ads they see on social media?
    And then I could ask both of you what are some things that 
FTC could be doing to help prevent those types of social media 
scams in the time left.
    I will start with Ms. Patten.
    Ms. Patten. Thank you. Social media is incredibly effective 
at persuading consumers to believe what they are seeing, 
because they are following people they believe in or they want 
to emulate. So it is one of the most effective tools scammers 
have to be able to get to consumers, because there is honest 
and trustworthy belief by consumers.
    Mr. Pallone. So what do you suggest, between you and Ms. 
Rich, about the things the FTC could do to help prevent these 
scams on social media? Just briefly, if you could.
    Ms. Patten. I will defer to Ms. Rich.
    Ms. Rich. Well, obviously, the FTC should keep doing 
warning letters and take action wherever possible using its new 
authority.
    But there is a huge role for education here and for the FTC 
working with the groups that consumers trust to get the word 
out. People trust information that comes from their community 
groups, their church, et cetera, their local groups. So the FTC 
really has to be aggressive about education. I don't know 
whether the FTC is amplifying its own messages on social media. 
If not, it should be doing that. And, of course, the FTC should 
be pressing the platform strongly to take their own action.
    But as you know, 230 is a problem in terms of the FTC 
actually taking action against the platforms.
    Mr. Pallone. Thank you. Thank you, Jan.
    Ms. Schakowsky. Thank you. Now I recognize the ranking 
member of the full committee, Mrs. Rodgers, for 5 minutes.
    Mrs. Rodgers. Thank you, Madam Chair. And before I move to 
questioning, I just want to emphasize the importance of section 
13(b) and the role that it plays and has played and will 
continue to play in the FTC's consumer protection mission, and 
especially with the bigger cases.
    I think we also need to recognize, as these cases are 
moving up to the Supreme Court and we are anticipating a 
decision, as we move forward, due process is a fundamental 
principle for the protection of Americans' legal rights, and it 
must be central to any changes to existing law.
    If we are to tackle 13(b) authorities, we should also take 
a holistic view, I believe, of FTC's authorities, and consider 
other amendments.
    We considered FTC process and transparency reforms in the 
114th Congress. And I would just recommend them to you, Madam 
Chair and the other members of this committee, that as we are 
moving forward looking at FTC roles and responsibilities, that 
what was put together then be a part of this legislative 
effort.
    With that I would like to start with Ms. Ponto from 
Spokane, Washington, and just thank you for your excellent 
testimony today. I thought it was really helpful to be able to 
hear from somebody who is on the front lines really trying to 
help so many in our community that are being impacted by 
various scams.
    You know, we are talking a lot about the FTC and its 
statute and authorities, but I also think it is also important 
just for us to better understand, you know, why people are 
falling for these scams and why they are vulnerable now and how 
we can improve education to prevent scams and facilitate 
cooperation among the Federal, State, and local agencies.
    So, in that vein, Ms. Ponto, I just wanted you to speak to 
the type of scams that you are seeing for the most part, 
whether they are directly tied to COVID, or if other things are 
also on your radar screen, perhaps a cure scam or a treatment 
scam. Or are consumers just more vulnerable in general because 
they are shut in, and are more likely to be tricked by scammers 
calling their home phone during COVID?
    Ms. Ponto. Thank you. Absolutely. With the isolation, and 
people being locked up in quarantine, that is the number-one 
complaint that I am seeing coming through our office, is that 
they are lonely. And these scammers are targeting folks.
    I had an elderly lady who bought an iPad, and somehow she 
got a scammer telling her that he sees 29 hacks on her iPad, 
and, you know, she is in her 70s and she is thinking, OK, this 
gentleman is nice, sounds nice, he is going to help me fix 
this. Broken English accent, you know, but she didn't see those 
flags.
    And basically, long story short, he had her in the car, 
tripping around to Fred Myers and Target, pulling gift cards, 
putting 500 to $1,000 on gift cards, walking her through the 
process of going through different checks stands, giving him 
cash. The store manager came up, recognized that she may have 
been a victim of fraud. She lied to him. She goes, ``Crazy, I 
knew that he was telling me--and I still lied to him.''
    The scammer stayed on the phone with her while she did all 
of this, while she drove to the stores, picked up the gift 
cards, went through the different check stands, went back out 
to her car, scratched off the numbers, and read the numbers to 
him. He called her 12 times a day when she wouldn't pick up the 
phone. He claimed that he got control of her Nest camera, and 
was able to look into the house because he was concerned for 
her.
    And so, when you are talking about these kinds of things, 
whether some of this happened or not, it absolutely is scary. 
The way that it came about was that her daughter was flying up 
here for the holidays, and the credit card was declined. And as 
soon as she saw--and Mom didn't tell her daughter, because she 
was embarrassed. These are stories that we are seeing over and 
over and over again.
    The newest thing now with Washington State auditors, with 
this big, massive breach that is just coming about, worries me 
that I am going to have tons of victims in my office that were 
victims with the Employment Security Department breach we saw 
this spring.
    So we need help. I have got detectives who are having 
difficult times pulling information for victims, even though 
the FTC says that, you know, these businesses shall provide 
this information. It is taking months to get it. And so we need 
better, thorough, more timely help from the Federal Trade 
Commission in these areas. Thank you.
    Mrs. Rodgers. Thank you. Thanks for what you are doing on 
the front lines, and joining us today. I yield back.
    Ms. Schakowsky. Those are amazing, amazing stories. Now I 
am happy to call on my dear friend and fellow Illinoisan and 
longtime member of this committee, Congressman Bobby Rush.
    [Pause.]
    Ms. Schakowsky. Bob, can you unmute?
    [Pause.]
    Ms. Schakowsky. Bobby Rush, unmute.
    Mr. Rush. Thank you, Madam Chair. And I am your friend, and 
we have been friends for decades now. And I certainly enjoy 
your friendship.
    Ms. Rich, the COVID-19 pandemic has exposed the healthcare 
disparities in our Nation. And parallel to these, to this 
pandemic, is what I call a consumer protection pandemic that is 
more longstanding, and that has existed for many multiple 
decades in our Nation.
    In your testimony you mention that the rulings on 13(b) by 
the Third and Seventh Circuits--and I quote--``have already 
undermined the FTC's ability to obtain restitution for 
consumers.'' My district is in the heart of the Seventh 
Circuit.
    And I would ask you if you would please drill down for us 
and to describe how these rulings have undermined the FTC's 
ability to obtain restitution and how has this impacted 
communities, consumers?
    Ms. Rich. Well, I am not at the FTC now, so I don't have 
the details of the cases and--that have been stopped or changed 
because of the rulings.
    But when the circuit court says that you can't get 
restitution through 13(b), until that is reversed, whether by a 
miracle at the Supreme Court or by Congress acting, the FTC 
cannot bring a 13(b) action and in one action both get 
injunctive relief against law violations--often fraud--and 
restitution at the same time.
    Instead, it has to bring--get--instead it would have to sue 
that company. And if it wants to get restitution in an 
administrative action, that takes years at the Commission. And 
then, when that is done and there is an order, go to court in 
the Seventh Circuit in your district and seek redress then. In 
cases where the FTC has used this tool, it is taking years and 
years. And the money--there is no guarantee the money will be 
there at the end of it, allowing defendants to keep the money.
    The other alternative is that if, there is a rule on the 
books that the FTC can enforce, then you can go to the Seventh 
Circuit and seek restitution in the same action where it is 
stopping the conduct. But many cases the FTC brings don't 
involve rule violations. And so that is a problem, as well.
    And so you are putting your finger on the very heart of the 
problem.
    Mr. Rush. Thank you.
    Ms. Patten, can you please discuss what reforms you think 
are needed to section 230?
    And specifically, why should the Congress exclude 
commercial speech from the protections section 230 currently 
affords?
    Ms. Patten. Thank you. I don't think that deceptive and 
false speech that is commercial in nature--and I want to stress 
commercial speech--should be protected. That is the kind of 
speech that is being used to take advantage of susceptible and 
vulnerable populations, especially during this pandemic, to 
steal money from them, steal their identities.
    And it does more than just economically impact these 
people. It really goes to, as we have talked about, people's 
mental health care and the like. And so I just don't think that 
there should be a law protecting that kind of illegal speech.
    Mr. Rush. Thank you.
    Madam Chair, I yield back.
    Ms. Schakowsky. And now--thank you for your questions and 
answers--and let me now call on everybody's friend and a one-
time chairman of this committee, Congressman Upton, for 5 
minutes.
    Mr. Upton. Well, thank you, Madam Chair. And it is a very 
important hearing, and I really appreciate the listening in and 
participating with all of my colleagues. This is so important, 
because so often this really does prey on the most vulnerable, 
those that are our least prepared to deal with something like 
this.
    And, you know, we have seen it on other issues. You know, 
traditionally the, you know, ``I have been kidnapped, please 
send money to pay my hotel bill'' and, you know, it goes to 
Nigeria and it disappears. But this is even worse, because all 
of us know about COVID and all of us want a resolve to this 
issue so that we can get our life back to normal again. And 
these folks who are preying--with an e-y versus a-y--are so 
dangerous to our society.
    Let me just say a couple of things from Michigan's 
perspective. We know that there have been already contacting 
our offices, our State offices, more than--almost 4,600 cases 
of fraud have already been identified; another almost 2,600 
scams; identity theft, almost 1,300; do not call, 331; 5--
almost $6 million total, with an average of $250 per 
individual. And the percentage of reports indicating the loss, 
44 percent. So a real issue.
    I guess my first question is to Mr. Kovacic.
    What is your understanding as it relates to section 13(b) 
and section 19? Are they mutually exclusive? What are your 
thoughts on that issue?
    Mr. Kovacic. There are complementary mechanisms, but 
Jessica has underscored the superior quality of section 13(b). 
It provides, by far, a more effective way of getting the kind 
of immediate relief, getting a temporary restraining order 
right away. Freezing assets, making it possible to preserve the 
possibility for recovery.
    The Commission does have other tools. But, in the context 
we are describing, especially with the urgency that you have 
just set out, 13(b) is the best mechanism the Commission has to 
get immediate, effective relief.
    But part of what I find disheartening about our 
conversation is notice how often we have heard the word 
``crime'' and ``criminals'' mentioned here. My concern is that, 
if there is not an effective collaborative mechanism between 
the civil enforcement side and criminal enforcement officials, 
if that is not a priority, what we have really said is that the 
worst that will happen to you is you will have to give the 
money back. And I think the only way to have the real deterrent 
message here is to take away the freedom of the criminals we 
have been talking about.
    But 13(b), for getting the civil recovery in place, by far 
superior to the other tools the FTC has.
    Mr. Upton. Well, thank you.
    Ms. Ponto, you know, in your previous service in law 
enforcement before joining the Spokane COPS, how can law 
enforcement be better equipped to go after scammers?
    I know social media is used. I look at my relationship with 
my law enforcement folks, and they are often the ones that are 
going knocking on the doors, trying to help individuals who 
might have been victims of scams. But how did you work and 
enlist social media to try and bring about the knowledge and 
education to folks as relates to potential scams in your 
previous role?
    Ms. Ponto. Thank you. Backing up just a little bit, with 
our department I think it is important to know that, you know, 
fraud is not necessarily a glamorous crime. Most of our crimes 
that we investigated that took higher priority are the crimes 
against persons. And, you know, identity theft and fraud is a 
property crime.
    It also has multiple layers to it. And I know, as a patrol 
officer, you know, we would hand off to go to domestic 
violences and big assaults, and you had somebody that was at a 
Safeway with identity theft. You know, it was like, oh, my God, 
I am not even sure if I know how to do this. There are so many 
layers to identity theft and fraud that, when we would take the 
report, then we would pass it off to the detectives to do the 
investigations.
    Well, about 10 years ago our fraud unit was dissolved. We 
needed more detectives in different areas of Spokane. And so 
they kind of farmed out the fraud cases to those detectives 
that were already carrying a large caseload. And so I think 
that is detrimental in itself, because we don't have folks that 
are doing that specifically.
    And I see my time is just about up, so--thank you.
    Mr. Upton. Well, thank you.
    Ms. Schakowsky. Thank you, and now I recognize Mr. Cardenas 
for 5 minutes of questions.
    [No response.]
    Ms. Schakowsky. Did I skip someone? Oh, you know what? 
Sorry, I am so sorry. Yes, it was a couple of people. Wow. OK, 
Mr.--oh, no.
    Ms. Castor, you are next. Sorry.
    Ms. Castor. Great. Thanks, Chairwoman Schakowsky. This is a 
very important hearing.
    And let me start by congratulating my good friend and 
neighbor, Gus Bilirakis. ``Ranking Member Bilirakis'' has a 
great ring to it. And I know Representative Soto would agree 
that, when the Tampa Bay Buccaneers win the Super Bowl this 
Sunday, it will not be a scam. It may be hard to believe. It 
may be a miracle. But no scam at issue here.
    But this is a really good place for the subcommittee to 
start, because we are talking about the fundamental authorities 
of the Federal Trade Commission and whether or not the FTC is 
really working at its full capacity for our neighbors. And 
unfortunately, in many cases it is not. And it couldn't be more 
obvious than during this pandemic, when folks are desperate and 
they don't know who to trust from day to day.
    And, as our witnesses have pointed out, it is just these--
the scams are widespread. Unfortunately, the scam artists are 
all too creative these days. And back home in Tampa I have 
heard from my neighbors about fake COVID cures, and phony 
clinical studies, and even the puppy and romance scams. And 
unfortunately, the FTC has been ineffective because they are 
required to send these toothless warning letters to lawbreaking 
companies. And that is just not going to cut it anymore, in my 
opinion.
    So, Ms. Rich, you have been at this for many years. In your 
testimony you point out that the FTC lacks the authority to 
impose that first-offense civil penalty. Explain to us how this 
is harmful to the FTC efforts to go after deceptive companies.
    And do you think now it is emboldening companies to proceed 
with these deceptive practices?
    Ms. Rich. Some of my copanelists and many of the 
Representatives have--the Members have said it is very 
important to have appropriate remedies to deter wrongdoing and 
also to, where possible, return money to consumers.
    The FTC's first choice of remedy is always to return money 
to consumers, not penalties. But you can't always return money 
to consumers. And, as we have been discussing, that authority 
is under threat. And one of the reasons you can't always return 
money to consumers is you can't find the consumers, there is 
not enough to implement a meaningful redress program, et 
cetera.
    So, in some instances, civil penalty authority is better 
than redress authority and--for example, in many of these types 
of scams where it is against a small, fly-by-night company. So 
the FTC needs all of these monetary remedies in order to 
provide meaningful deterrents. And it lacks them in, you know, 
across a lot of its programs.
    Ms. Castor. And, Ms. Patten, do you agree?
    Ms. Patten. Absolutely. I think we can look at the Amazon 
case that we have mentioned earlier. To think that this giant 
company that makes billions of dollars every year had to steal 
$60 million of tips from its drivers, and all the FTC could do 
in that case was get the money back, they couldn't penalize 
Amazon. And I just think that is crazy, it is outrageous. And I 
think that Amazon absolutely deserves a penalty.
    Ms. Castor. Well, I think it is clear that, especially with 
the evolution of the online platforms, these scam artists are 
just--the scams have accelerated, the online platforms have 
facilitated it, and I think this committee will have an 
obligation to modernize the FTC and address the first-offense 
civil penalties and the ability to use and reinforce section 
13(b) going forward. So I will look forward to working with all 
of my colleagues here to do just that.
    And thanks, and I yield back.
    Ms. Schakowsky. Thank you. And now I recognize Mr. Latta 
for 5 minutes of questions.
    Mr. Latta. Well, I thank the chair, and also for our 
witnesses today who are appearing for us virtually.
    Before I begin with my questions, I would like to briefly 
touch on how important access to the WHOIS information is to 
this discussion. In short, WHOIS information is like the public 
lands records for the Internet. It tells us who is responsible 
for doing a domain name or an IP address. This data can be 
incredibly helpful for Federal agencies and law enforcement 
when investigating crimes, and even consumer scams.
    Unfortunately, due to an overly broad interpretation of the 
European Union's General Data Protection Regulation, the GDPR, 
WHOIS information is no longer made widely available for public 
access.
    Last year I sent a letter to the Federal Trade Commission 
asking how they use WHOIS to stop consumer fraud related to 
COVID-19. The FTC made it clear in their response that, since 
the implementation of GDPR, they can no longer quickly and 
easily obtain the information they need to combat fraud. This 
has been particularly harmful during the COVID-19 pandemic as 
the FTC works to monitor the marketplace for unsubstantiated 
health claims, robocall scams, and other deceptive practices.
    To effectively combat consumer scams, we need to develop a 
solution that allows our Federal agencies to access WHOIS. I 
appreciate that the Internet Corporation for Assignment of 
Names and Numbers, ICANN, recognizes the importance of WHOIS 
and is working to find a pathway that provides this data for 
legitimate, lawful needs. But it is taking far too long to make 
this information accessible.
    As we discuss COVID-19 scams today, I ask my colleagues on 
this committee to consider how helpful WHOIS information would 
be to stop criminal schemes and to work with me to fix this 
issue.
    I ask the chair unanimous consent to enter into the record 
the written response I received from the FTC on July the 30th 
of 2020.
    [No response.]
    Mr. Latta. Getting to the questions, through the course of 
the pandemic scammers have preyed upon Americans' concerns 
about the COVID-19 virus. We have seen this through phone 
calls, social media posts, phishing schemes, and counterfeit 
products. Senior citizens, especially those in Ohio, were hit 
hard by these scams. And in just a short period of time, 578 
scams targeted individuals 60 and older.
    Most recently in my district, county health departments 
have been warning citizens of scammers pretending to be health 
department officials. These bad actors are telling residents 
about coronavirus test results, contact tracing, and vaccine 
scheduling and asking for personal information such as credit 
card numbers and Social Security numbers.
    So, Ms. Ponto, if I could start my first question with you, 
again, while we know that the FTC is taking action against many 
scammers who are using the pandemic to defraud consumers, how 
are law enforcement agencies taking action at the local level?
    And how can we better--again, I know you brought it up a 
couple of times, but how can we better educate our consumers, 
especially our seniors, to identify these potential scams?
    Ms. Ponto. Thank you. Before COVID we were able to do a lot 
of our tablings. We had town hall meetings. Now we do 
everything by Zoom, much like what we are doing here today. We 
are still getting that information out in those forums. We 
divvy that information out to our neighborhood council, to our 
city councils who have their own social media platforms.
    Our COPS program is very good. Again, we are all situated 
in the different neighborhoods. And a lot of that comes 
filtered through our COPS shops. We have pamphlets, we do the 
brochures. And we are able to talk to people on the phone. We 
have all kinds of elderly folks who give us a call to confirm 
that the, you know, ``The police organization is giving us a 
call, and they want money for their emergency fund. Is this a 
scam, or do I give them money?'' You know, and we are able to 
talk them through these things.
    We will continue to educate in these different platforms 
the best that we can. But really, the COPS shop is a great 
alternative for being right there in the neighborhood and 
serving that liaison between the police department and the 
community.
    Mr. Latta. Also your testimony, you talk about the 
unemployment scams and that a lot of people don't realize their 
information is being used for fraudulent unemployment claims 
until much later. Are there systems in place to help these 
individuals to sort of protect their information and recover 
from this theft?
    Ms. Ponto. At this time I do not believe so, but I am not 
confident on that.
    Mr. Latta. OK. Well, thank you very much.
    And Madam Chair, my time is expired, and I yield back.
    Ms. Schakowsky. I thank the gentleman. And next we have 
Congressman McNerney for 5 minutes of questions.
    Mr. McNerney. Well, I thank the chair for holding this 
hearing, and the ranking member. Good luck with the Buccaneers 
this Sunday, Gus, but I don't think you are going to win it.
    Say, I want to thank the witnesses. Your testimony has been 
very stark and effective, and it will motivate us, I think, 
into action. So it is a very good hearing in that regard.
    As already noted here, we have seen a sharp increase during 
the pandemic in scammers targeting unemployment benefits. And 
in recent years we have also seen numerous data breaches where 
consumers' personal information was stolen.
    Ms. Rich, how do you--how do these pervasive data breaches 
increase the risks that consumers' information can be used to 
target the consumers later on, like going out to their 
unemployment benefits?
    Ms. Rich. The data breaches are very harmful. The whole 
purpose of a data breach, it is usually to steal consumers' 
information so it can be used to rip them off at later times. 
If they don't get financial information enough to directly 
defraud consumers, they can use the information they obtain for 
phishing. You know, they know something about the consumer, so 
they can then send them emails that look authentic, come from 
some place the consumer is expecting to get an email, and then 
get more information from them. So data breaches are very 
harmful, and that is an area where I am hopeful Congress will 
act to give the FTC more authority to take action.
    Mr. McNerney. Good, that is a great segue to my next 
question to you, Ms. Rich. What additional tools and resources 
does the Federal Trade Commission need to help stop these 
breaches from happening in the first place?
    Ms. Rich. A special law authorizing the FTC, in particular, 
not just to address breaches but to address the underlying core 
security that causes these breaches. And it would be very 
important to give the FTC first civil penalties for first 
violations as part of this law, which has been discussed it 
lacks. And as Professor Kovacic discussed, to fill in some of 
the gaps in jurisdiction that the FTC has--for example, common 
carriers, telecom companies, and nonprofits. So that is an area 
that Congress can really make a difference.
    Mr. McNerney. Well, thank you. I am also concerned that, 
once consumers fall victim to identity theft, they aren't 
getting the help they need to clean up their data and prevent 
the same thing from happening repeatedly to them. Ms. Rich, do 
you think more cooperation is needed from all stakeholders 
involved in helping consumers in such cases, including consumer 
reporting agencies?
    Ms. Rich. Yes, it is a real problem, as Ms. Ponto 
discussed. I think she talked about local police not 
necessarily taking the action they need to on--to follow up on 
identity theft schemes. So it involves the credit reporting 
agencies, it involves the FTC referring complaints, and it 
involves local law enforcement. And they all really need to 
step up.
    Mr. McNerney. Thank you. Well, my district includes the 
city of Stockton, California. It is perhaps the most racially 
and ethnically diverse city in the country. So it also has a 
large low-income population. Many folks are just struggling to 
put food on the table and pay their bills.
    Ms. Rich, do you think more outreach needs to be done to 
help consumers who fall victim to identity theft in communities 
like Stockton?
    And what could the FTC be doing to help, to be more 
helpful?
    Ms. Rich. The FTC's strategy has been to try to partner 
with trusted sources of information in various--but I don't 
know how successful it has been in your community. I don't know 
whether FTC has been able to invest the resources it needs to 
really reach out and partner with those communities. But that 
is the strategy I know it has tried to use, and it even 
encourages local enforcement to rebrand FTC materials so that 
they can be trusted materials. So that is a very important 
thing the FTC needs to continue to do.
    Mr. McNerney. Well, my last comment is about price gouging. 
Many of my constituents have raised concerns about price 
gouging during the pandemic. I am sure everyone on the dais has 
had the same issue. I think it is important that we pass strong 
Federal legislation like H.R. 675 to protect consumers against 
these practices.
    Thank you, and I yield back.
    Ms. Schakowsky. The gentleman yields back, and now I call 
on Mr. Guthrie.
    Mr. Guthrie. Thank you. Thank you, Madam Chair, I really 
appreciate you and Republican Leader Bilirakis for holding this 
hearing, and thank all the witnesses for their testimony.
    Since the COVID-19 pandemic began nearly a year ago, 
deceptive marketing, counterfeit products, and scammers 
targeting America's most vulnerable have been on the rise.
    In order to help protect Americans and stop this trend, I 
introduced my bill, the Safeguarding Therapeutics Act, working 
with our former colleague, Eliot Engel. I hope he is doing 
well. It was signed into law last month. This legislation gives 
the FDA the authority to seize and destroy counterfeit medical 
devices and products such as counterfeit vaccines and other 
combination devices that could harm patients. So proud that 
that was work signed before--last session.
    So my question, starting with Ms. Patten, in your testimony 
you mentioned multiple misleading health products, such as 
unapproved treatments and cures for the coronavirus that are 
continually advertised to susceptible populations around--
across the country. So my question is, how is that 
truthinadvertising.org--how does it successfully work with 
businesses and government agencies to combat fraudulent 
marketing schemes, to protect these consumers from these 
harmful products, and what resources are available to help 
consumers identify these products?
    Ms. Patten. Thank you. So one of our goals is to always get 
information to consumers as quickly as possible. So we 
immediately put things on our website, TINA.org, and on social 
media platforms to try and educate consumers about 
inappropriate health products.
    Moreover, when we do find a company that is violating the 
law, FTC law, we will immediately contact the company and ask 
them to stop it. Sometimes we find that we are educating the 
uneducated and that they just don't know better. And, in other 
instances, where we are either ignored or we feel that they 
have not done a good job, we will not hesitate to go to State 
and Federal agencies to try and stop the inappropriate health 
claims from being marketed.
    Mr. Guthrie. OK, thanks. And does TINA have--TINA.org have 
the resources to help these consumers?
    Ms. Patten. We try and do as much as we can. We are a small 
organization. But we have thousands of posts on our website, a 
lot of them dealing with the wellness industry and 
inappropriate health claims. And we try and guide consumers to 
where they can get help at the local, State, and Federal level 
when appropriate.
    Mr. Guthrie. OK, thank you very much. And now I will switch 
to Ms. Ponto.
    Can you explain how your organization assists victims of 
scams?
    And do you direct victims to file complaints with the FTC 
or any law enforcement agencies?
    And if so, can you walk us through the process once a 
report is filed?
    Ms. Ponto. Yes, absolutely. Thank you. So we end up 
getting--well, we have been in a proactive, active manner. We 
have this vehicle, prowling victim callbacks, where we get 
these daily reports from the police department that talk about 
victims who have been prowled, maybe their purse was stolen, 
maybe credit cards were stolen. Our COPS shops do these 
callbacks, and so we are very proactive.
    We reach out to the folks and find out, ``Do you have any 
personal identification in there at all that would lead to 
identity theft?'' If they do, we have been following this 
recovery plan very well. This is a wonderful source of 
information for us.
    One thing that I did notice, though, is some of these 
larger banks and corporations, when they are talking to--the 
victims usually go to their bank first to say, ``Hey, I am a 
victim of fraud'' to see what they need to do next--the banks 
have been pretty good about starting that fraud alert. And that 
is what we would say, is let's go and get a fraud alert started 
for you.
    The larger banks are not--I am not hearing anyone that says 
from the larger banks are telling them to go to the FTC and 
file a report. And that is really odd to me. We do. I ask 
them--you know, this might be a new phone number that they 
don't have, or at least update the phone number that is most 
currently used. But we got to get it in there, because, just 
like report writing, if it is not down in a report, it didn't 
happen.
    And so we need all of these to go through the FTC, just so 
that you have that information, and that you can get it out 
there to other----
    Mr. Guthrie. Great. Thank you to both of you. My time is 
about----
    Ms. Ponto [continuing]. Social Security numbers, we point 
them in that direction there, and start really following this 
bible right here, as far as helping our victims.
    So thank you for this, this is a beautiful piece of work. I 
have it framed in my office.
    Mr. Guthrie. Well, thank you. My time is expired. I 
appreciate your answers, and I yield back.
    Ms. Schakowsky. I thank the gentleman, and now I recognize 
Mr. Cardenas for his 5 minutes.
    Mr. Cardenas. Thank you very much, and thank you, Traci, 
for expressing how you put your heart and soul into your work 
and for framing that document.
    It is very concerning to me that we hear these stories over 
and over, and during the worst pandemic we have seen in over 
100 years. It appears that over hundreds of millions of dollars 
have been stolen from Americans, and it is very important for 
us to understand that this is not a nebulous thing. This is 
going on every day and affecting the most vulnerable people in 
our community.
    For example, grandparents being told that their Social 
Security payments will be withheld if they don't make an urgent 
payment. They are your neighbor who is struggling to get 
consistent work because of the pandemic, and they have lost 
their job, and they fall into this fraudulent investment 
coaching scam.
    For years, the FTC has sent a strong message to people who 
would prey on consumers to make money off of people illegally. 
And the message is simply this: You will face consequences, and 
you will be held accountable, and you will pay. Now, more than 
ever, it is critical that we ensure that the FTC has the tools 
it needs to continue doing its job and protecting American 
consumers.
    Jessica--I am sorry, Ms. Rich, during the past year 
consumers reported losing more than $300 million to fraudulent 
activities related to the pandemic. In general, how often is 
the FTC able to recover money lost to fraud and scams?
    Ms. Rich. I don't know that I could put a particular number 
on it, but whenever the FTC takes actions its goal is to get 
money back for consumers. That is the top priority, which is 
why this, the 13(b) threat, is so urgent and why I am sure 
everybody at the FTC watching this hearing right now is very 
thankful to you for taking the leadership to try to solve that 
issue.
    But that is the top goal. Frequently the money is gone, and 
that will be more and more the case if this authority goes 
away.
    Mr. Cardenas. Thank you. Yes, 13(b) is critical, and I hope 
that we can legislatively put that right once and for all.
    Is it fair to say that bad actors who are taking advantage 
of people with these schemes related to the pandemic would be 
emboldened should the FTC lose its power to return the money 
back to the American people when they have been scammed?
    Ms. Rich. They already are. And, as I mentioned, the FTC 
can't pursue this relief in two circuits already, and others 
are watching that and saying, ``Oh, look, the Supreme Court may 
take this authority away, let's delay'' or ``Let's not pay.''
    And, as we also discussed, the FTC lacks civil penalty 
authority in many cases. And so, between the two of those, it 
is going to embolden fraudsters a lot.
    Mr. Cardenas. Thank you.
    Bill, Mr. Kovacic, as a former small business owner myself, 
I know that it is even--it is hard to run a business, even in 
the best of times. The overwhelming majority of small business 
owners are honest Americans who want to do things the right 
way. How are small businesses who are playing by the rules 
harmed when they have to compete in a marketplace with actors 
who break the rules and who are not brought to justice?
    Why is section 13(b) so important to the FTC's work to make 
sure that we have a fair playing field out there?
    Mr. Kovacic. I think, as we are all painfully aware, the 
businesses you are talking about already are suffering a 
horrible period of distress, and there is a good question about 
how many of them will survive this process.
    In your own district, how many small businesses that were 
fully operational 12 months ago will be operational 12 months 
hence? And my guess is the denominator is a lot bigger than the 
numerator there.
    You add to that the additional concern that, you know, I 
play by the rules, I pay my employees fairly, I give my 
customers a fair deal. I think one of the most damaging things 
is that, when you have the bad guys--and again, these are 
cynical, bad guys--it gives the sense that the whole 
neighborhood of commerce is corrupt. It creates a sense of 
doubt about the legitimacy of other transactions. That is, if I 
am the hardworking small businessman that you describe, how do 
I persuade people that I am clean?
    So one taint of this process is that it raises questions 
about the legitimacy of the entire market system. But the other 
is that it--again, it damages the individuals in the short term 
in that it diverts trade away from people who are playing by 
the rules. So it is--in addition to this horrible scourge that 
small businesses face, now you see a diversion of trade away, 
you see a loss of confidence, and you see the possibility that 
people just don't trust the market.
    Mr. Cardenas. Thank you, Mr. Kovacic. My time has expired.
    And we are a country of laws. And the FTC needs to be able 
to do its part. And hopefully we, as Congress, will restore 
that, clearly.
    Thank you so much, I yield back the balance of my time. 
Thank you, Madam Chair.
    Ms. Schakowsky. Thank you. Thank you. And now I want to 
welcome Mr. Bucshon for his time and just say we were able to 
pass at least a first step, the COVID-19 Consumer Protection 
Act. But, obviously, we have learned today we have to do much 
more. So, Mr. Bucshon, it is yours.
    Mr. Bucshon. Thank you, Chair Schakowsky, for holding this 
very important hearing. And it is--I think sometimes you have 
hearings in Congress that don't get a lot of media attention. I 
hope this one does, because the level of scams that are out 
there has probably grown exponentially during COVID-19, 
shamefully, unfortunately. So this is an important hearing.
    I was proud to work alongside you, Chair Schakowsky, to 
help introduce and include the COVID-19 Consumer Protection Act 
in the end-of-the-year funding bill to put real teeth behind 
the FTC's enforcement efforts in combating COVID-19 scams by 
allowing them to seek civil penalties for first-time offenders 
throughout the duration of the pandemic. But as you mentioned, 
this is the tip of the iceberg of the work that we need to do.
    But I also believe that promoting education and awareness 
of these scams is critical in reducing harm to Americans. A lot 
of people, particularly seniors, just aren't well aware of 
these scams. My mother is 80, and I can tell you that she calls 
me all the time and says, ``Hey, I got this call'' or ``I got 
this email.''
    And I am like, ``Mother, that is a scam.'' So this is real, 
and it hits home for everyone.
    I also know, as a surgeon, that using appropriate and 
approved medical equipment is critical in achieving positive 
outcomes during the pandemic for both patients and healthcare 
providers. So I am going to focus a little bit on that.
    Ms. Ponto, have warnings of fraudulent personal protective 
equipment obtained in scams been part of the Spokane COPS 
community outreach when promoting the proper usage of various 
personal protective equipment?
    Ms. Ponto. Thank you. To be honest with you, we are not 
seeing a large number of fraudulent vaccinations, or remedies, 
or personal protective devices. We are not seeing that really 
in the Spokane area too much.
    Mr. Bucshon. Well, that is good to hear, because across the 
country, you know, this has been a pretty substantial problem, 
where products that are supposed to be protective are not. Or, 
as you mentioned, now we are seeing fraudulent vaccines and 
other things as it relates to COVID-19.
    As you mentioned earlier in this hearing, falling victim to 
a scam also causes serious mental health concerns, and victims 
may be too embarrassed to admit they were scammed. And I know 
that is true. They won't even admit it to family members. As I 
mentioned, my mother, she was a victim of a scam. And 
fortunately, it wasn't that significant. But she--I didn't know 
about it until I went to her house, and I am like--and I won't 
get in detail, but I am like, ``Well, how did--where did you 
get this thing?''
    ``Well, somebody called me.'' So I know that. And, you 
know, she was embarrassed, and also it causes mental health 
concerns.
    Can you speak to some of the issues you have seen and how 
we can best address providing support in this area for victims?
    Ms. Ponto. You know, we really need to be stepping up as 
communities and taking care of our elderly population. You 
know, a lot of the folks, you know, especially in their 70s, 
80s, they don't have WiFi, they don't have laptops, they don't 
have smartphones. And so they really are feeling the isolation. 
They might get something in the mail. And, you know, these 
folks have good hearts, they want to send money to these 
different agencies to help, you know, support whatever mission 
they are on. And so it is more difficult.
    And I almost think that it falls heavily on family members 
being educated and having those hard conversations with their 
mothers and their fathers. We don't want to disrespect our 
mothers and fathers, you know. We want to have them keep their 
independence. We do not want them to feel foolish and those 
things. So it really is important that our adult children 
really do that follow-up and get that information to their 
mothers and fathers.
    Churches--churches is another great forum because a lot of 
this population do go to their local churches, town halls, 
senior community centers, places like that, places that they go 
and frequent, assisted living centers. So those are areas that 
would benefit from brochures and education.
    Mr. Bucshon. Ms. Patten, do you have any comments on that, 
or anyone else on the panel want to comment on this--the PPE 
situation, where the fraudulent--stuff related specifically to 
COVID, and what you are seeing and what we can do.
    Ms. Patten. Yes, TINA.org has received numerous complaints 
from consumers that have ordered PPE on the Internet and failed 
to get it.
    We have also seen many advertisers putting the FDA logo or 
saying that they are FDA approved, when obviously that is not 
the case, on Amazon and eBay. So it has been a huge issue.
    Mr. Bucshon. OK, well, I am out of time, so I will yield 
back. Thank you, Chair Schakowsky.
    Ms. Schakowsky. Thank you. I think Congresswoman Dingell is 
not back yet. I am going to move on, then, to my Illinois 
sister, Congresswoman Robin Kelly, for 5 minutes.
    Ms. Kelly. Thank you so much, Madam Chair, and welcome to 
the ranking member. As much as I love Kathy Castor, I say ABB, 
Anybody But Brady, on Sunday. But anyway, thank you to the 
witnesses.
    The coronavirus pandemic has been ripe territory for 
scammers, as we all know. Criminals have taken advantage and 
have profited from confusion and hardship. Seniors, in 
particular, have been targeted during this pandemic.
    Ms. Patten, many seniors struggle with technology and lack 
of digital literacy skills. Due to the coronavirus pandemic, 
many are now having to rely on the Internet more than ever, 
including for booking COVID-19 vaccine appointments. In some 
States vaccine appointments need to be booked online, leaving 
those who can't navigate the Internet at risk of falling prey 
to fake vaccine appointment websites.
    Have you seen seniors targeted during the pandemic?
    And what did they keep in mind to guard against falling 
victim to a scam?
    Ms. Patten. Absolutely. I mean, I don't think it is a 
coincidence that one of the largest scams that seniors fall 
victim to is tech support scams, right, on the computer, 
because they do struggle. So it has been a huge issue. And, you 
know, it is hard to stop.
    I think that seniors also are primarily scammed using the 
telephone. And while there is an ability for local, State, and 
Federal agencies to find scams on the Internet or in print, it 
is much harder when the scam is perpetrated over the telephone. 
So it is a huge issue, and I know one that is being examined by 
agencies at every governmental level.
    Ms. Kelly. Thank you. Ms. Rich. When you were the bureau 
director, you created the Every Community program to ensure the 
FTC was reaching a diverse set of communities. What were the 
major--and what were the obstacles you ran----
    [Audio malfunction.]
    Ms. Rich. Well, it was an incredibly important program, and 
we had ambitious plans for it. It was not only outreach to 
different communities, but research to see how successful we 
were doing in reaching out to different communities, and 
enforcement to make sure that--enforcement in the areas where 
we saw problems.
    And one of the challenges we have--in the data that we did 
collect at the time, it turned out that certain populations, 
specifically African-American and Latino populations, were 
disproportionately targeted by fraud but were underreporting 
fraud, that weren't reporting fraud in as great numbers to the 
FTC, showing that the FTC was not capturing the complaints it 
needed, and had a lot more work to do.
    I am--I don't know exactly what the agency has been doing 
since I left. I know in their outreach that they do a lot to 
reach out to different communities. But I think this program 
really needs to be scaled up now with additional research, with 
more resources devoted to this, to making sure that all these 
communities are represented and with everybody at the agency 
working on this goal.
    Ms. Kelly. And how do you think the FTC should prioritize 
its resources toward combating scams?
    I mean, you know, there are so many different ones targeted 
toward consumers.
    Ms. Rich. I would say, based on past experience--I don't 
have access to the details now--that the fraud program is at 
least 50 percent of what the FTC does, between its headquarters 
and regional offices. And, given the pervasiveness of scams, I 
think that is appropriate that it be such a large program. And 
it should continue to invest those kind of resources.
    Ms. Kelly. Thank you so much.
    I want to let my colleagues know that I have reintroduced 
the bipartisan Protecting Seniors from Emergency Scams Act, and 
I hope my colleagues will join me as cosponsoring this very 
important legislation to protect seniors.
    So thank you so much, and I yield back, Madam Chair.
    Ms. Schakowsky. Is Mr. Dunn here?
    [No response.]
    Ms. Schakowsky. No? Give me a signal if you are. Otherwise, 
I am going to move on to Representative Lesko for 5 minutes.
    [No response.]
    Ms. Schakowsky. Representative Lesko, are you here?
    Dunn, are you here?
    OK, you are recognized. You are recognized for 5 minutes.
    [No response.]
    Ms. Schakowsky. Unmute, unmute.
    [No response.]
    Mr. Dunn. Is that to me, or to Representative Lesko?
    Ms. Schakowsky. No, it is--no, if you are there, Mr. Dunn, 
and that is you----
    Mr. Dunn. Oh, OK, I am sorry. I thought you----
    Ms. Schakowsky. You got recognized. OK.
    Mr. Dunn. I apologize. Thank you, Madam Chair. I am 
grateful that we are here today discussing this important topic 
of fighting back against the scams and frauds during the COVID-
19.
    What is new is the fraud now carries a new risk, not just a 
financial toll but an increased potential for damage to their 
health and well-being, as well. For that reason, this is more 
important than ever.
    I am particularly concerned with scams targeted towards 
veterans, seniors, and those living in rural communities like 
the ones I represent in Florida's 2nd congressional district. 
To date we have seen a commendable effort by our local 
partners, who are raising awareness and preventing these scams.
    Ms. Patten, during the COVID-19 pandemic we have seen a lot 
of groups impacted. Specifically, though, I am concerned right 
in this question about our military veterans. And can you speak 
toward the work that TINA.org is doing with groups to represent 
those communities?
    Ms. Patten. Right. Well, TINA.org provides a platform for 
consumers to come to complain to us about issues. And we have 
received multiple complaints from military veterans that have 
been finding products, especially wellness products, 
supplements that are claiming to either prevent, cure, or 
mitigate the symptoms of COVID-19.
    And I should note that one of the issues we are finding is 
that the supplements and the products, they are not new. What 
is new is the marketing. There is--they pivoted. So before, 
they were targeting military veterans with these same products, 
saying they could cure, prevent, or treat PTSD. And now they 
are COVID cures and----
    Mr. Dunn. What remedies do the military--are you directing 
our veterans, the military, towards particular remedies?
    Ms. Patten. Right. So on TINA.org we have listed State, 
Federal, and local agencies that they can complain to and share 
their issues with.
    Mr. Dunn. Thanks so very much.
    Ms. Ponto, our local law enforcement has been a very 
valuable resource in terms of education on scams, especially 
for frauds that originate outside our region. What helpful 
tools can Congress provide--you or whoever--in order to help 
local law enforcement on scams that originate remotely?
    Ms. Ponto. You know, one of the things, when I was talking 
to a detective about fraud investigations, is that she is 
having a difficult time getting this information for 
investigations. And it would be helpful if, when the time 
comes, Federal Trade Commission could step up or step in and 
help get that information to our law enforcement so they can 
look at getting convictions, and maybe, you know, put somebody 
in jail over this.
    They are very good, too, about getting the education out 
there. Most of the education for identity theft and fraud 
really does come from our COPS shops. We get a lot of 
referrals, and we are able to walk them through this process of 
reporting plus provide them with brochures and just firsthand 
knowledge. I think they like talking to a live person, versus 
having something in their hand at times and reading something 
online. So we provide that.
    Mr. Dunn. So I thank you, I thank you specifically for 
bringing in the role of the shops, who have been very helpful, 
honestly, in our community on that, as well.
    Ms. Patten, once again, the pandemic certainly has created 
isolation for so many people that used to get their advice and 
kind of guidance from their friends and their workplaces, 
community events, churches, et cetera. Could you walk us 
through some of the details of how your organization reaches 
the people in more rural communities in our current situation 
of isolation?
    Ms. Patten. Right. So I think it is important that you have 
to reach consumers where they are, and where they are now is 
social media. So TINA.org is very active on Facebook. We 
actually take out ads to warn consumers about scams and schemes 
that are on Facebook or on the Internet. And we also are very 
active on Twitter to try and educate consumers, and get the 
word out as much as possible.
    Mr. Dunn. Thank you for that comment. I see my time has 
expired.
    I too see a face of the social media out there in the rural 
communities.
    Thank you, Madam Chair. I yield back.
    Ms. Schakowsky. Thank you. I am--you may have noticed, the 
witnesses, that we are in and out. That is because votes are 
happening.
    Is Mr. Pallone here to--I am--OK, Frank, I am going to 
announce the next person. I think Debbie Dingell is not back.
    So, Congressman Soto, you are next.
    And Frank, I am going to go vote.
    Mr. Pallone. OK.
    Ms. Schakowsky. Thank you.
    Mr. Soto. Thank you, Madam Chair. We all understand that 
American families are in crisis. They are losing loved ones, 
losing their jobs and small businesses, facing home insecurity 
and food insecurity. So it is understandable that they are 
desperate for solutions to these problems that they face, which 
makes them more vulnerable to scams. COVID-19 scams kick people 
while they are down. And we must put an end to this scamster 
carnival barkery that runs rampant throughout the United 
States.
    According to the Florida attorney general office, we have 
seen several rampant themes of scams. Common COVID scams in 
Florida include unsubstantiated disinfectant claims; treatment, 
vaccine, and cure false claims; sham at-home testing kits; 
Federal stimulus scams; fraudulent products; charity scams; 
unsolicited calls, texts, and emails; and phone solicitations. 
The latest scams in Florida, as of this January, are 
vaccination scams, suspicious texts or emails claiming to have 
info about the vaccine in exchange for personal information. 
This is disgraceful.
    So the question becomes, how can we protect consumers 
without penalties, without restitution for victims? This would 
render the FTC a toothless tiger feared by no one, and leaving 
scammed consumers defenseless. It is clear we have to act on 
13(b) to ensure that the FTC can continue to obtain restitution 
for victims.
    Ms. Patten, we recently passed in December the COVID-19 
Consumer Protection Act. My question to you is, is this being 
sufficiently used already by the FTC?
    Do you anticipate gaps in this law, realizing it just was 
passed?
    Ms. Patten. To my knowledge, the FTC has not yet used that 
act, but that is the only information I know, that there is no 
public--on their website.
    It does have gaps. It does--you cannot target work-from-
home scams using this, because it is really focused primarily 
on government benefit scams and healthcare scams.
    But what I would say is that, while it is absolutely 
critical to have an act like this at this time during the 
pandemic, I would warn you that it doesn't provide for coverage 
for the next disaster, for the next earthquake, for the next 
fire, what have you. There aren't--unfortunately, will always 
be a segment of our population that is in a devastating event. 
And so I think that legislation is necessary that covers all 
such events, and not just focused on the pandemic.
    Mr. Soto. Thank you, Ms. Patten. And I hope the FTC is on 
notice we want them to start utilizing this act, and we are 
certainly paying attention, and thank you for your comments on 
additional ways we could fill these gaps.
    Mr. Kovacic, you have called upon, in your initial 
statement, a billion dollars for the FTC budget. If we were 
able to secure these funds, what important items do you think 
the funding should be used for to protect consumers?
    Mr. Kovacic. I think we can go through the list of items 
that have been mentioned.
    One is a major expansion of law enforcement. That is, bring 
more cases, bring more visible cases.
    Second, much deeper collaboration, as I have mentioned 
before, with criminal enforcement authorities to build the 
criminal cases. I think we would have a much greater raising of 
public awareness, certainly among wrongdoers, who are 
geographically mobile, they are technologically proficient, 
they understand gaps in the law, and they have been building 
experience, going from one scam to another. So bring visible 
criminal prosecutions, and spend money on that.
    I would spend money on the outreach effort that we have 
been referring to, to build better networks with a collection 
of government and nongovernment institutions to develop the 
capacity to analyze complaints in real time, and target 
attention on vulnerable communities.
    I would spend the money to learn more about how commerce 
and fraud take place in historically disadvantaged communities.
    I would spend the money on doing the better public 
education that we have been speaking with (sic).
    I would spend the money on building better networks with 
public and nongovernment organizations, civic organizations.
    I would spend the money on the capital investment to build 
up the technological capacity to analyze and build databases 
and use them effectively.
    That would be my short list of what to do. And I would 
think ahead about the moment when we are going to have new 
privacy legislation. The FTC is being asked to bring big cases 
against big tech companies across the board. None of this is 
cheap to do. This is how I would use my billion dollars.
    And, of course, were I in your position, I would say, ``I 
am going to come back regularly to see what the return is to 
this kind of effort.'' But notice how many times you have been 
saying in the past 2 hours plus: ``We are going to do more. 
More outreach, more education, more cases, more, more, more.'' 
It costs.
    Mr. Soto. Thank you, Mr. Kovacic. My time has expired.
    Mr. Pallone [presiding]. OK, I thank you, Mr. Soto. We now 
go to the gentleman from Indiana, Mr. Pence, recognized for 5 
minutes.
    [No response.]
    Mr. Pallone. Greg, you have got to unmute, I think.
    [No response.]
    Mr. Pallone. Mr. Pence?
    Mr. Pence. All right, I apologize. I always----
    Mr. Pallone. Oh, that is all right.
    Mr. Pence [continuing]. Everybody when they do that.
    Mr. Pallone. Start the clock.
    Mr. Pence. Sorry about that.
    Chair Schakowsky and Ranking Member Bilirakis, thanks for 
calling this meeting today. Thank you to the witnesses. It has 
been very interesting listening to you today. Thanks for coming 
here to engage on the topic of COVID frauds and scams, which we 
have heard a lot about and we have all experienced a lot about.
    From fake stimulus checks to phony pet adoption sites, 
scammers are seizing the opportunities during the pandemic to 
prey on vulnerable Americans. Like Congressman Bucshon, my 
mother and stepfather have had the same problems. Thank God 
they call us and ask us first. Not everybody has that 
opportunity or that luxury.
    Unfortunately, many Hoosiers are not immune from these 
scams. Over the past year alone, Indiana has reported almost 
4,400 scams to the FTC, accounting for an estimated loss of 
$1.9 million.
    Many of the fraud schemes have shadowed the evolution of 
the COVID-19 response. In April, hospitals in my district 
raised the issue many times of nontraditional medical suppliers 
engaging in deceptive price gouging of scarce PPEs, as much as 
$50 sometimes for some of that equipment.
    Then, with the passage of the CARES Act, scammers took 
advantage of critical relief intended for individuals and 
families. Now we are seeing fraudulent claims around vaccine 
distribution all over the country. But recently, the Indiana 
Governor highlighted how pandemic unemployment relief programs 
in the State have become a target of fraudsters and scammers.
    Similar to the situation you highlighted in your testimony, 
Ms. Ponto, criminals are gathering personal information from 
websites and social media to apply for benefits in their 
victims' names. I think we talked about the IRS dollars showing 
up on some people's returns. The State uncovered a fake website 
scam that closely mimicked the Indiana Department of Workforce 
Development webpage to trick individuals into giving up their 
information for unemployment. Not only does this result in a 
loss of resources for the State, it is creating significant 
delays in the ongoing verification process for Hoosiers out of 
work and seeking that assistance as quickly as they can get it.
    Ms. Ponto, have you seen this type of scam increase?
    And how would you recommend we stay ahead of the curve to 
prepare for these schemes so that Hoosier relief programs are 
not obstructed or delayed?
    Ms. Ponto. Thank you. I did. This spring, when it first 
came about, I got hit hard with companies--I mean universities 
and companies, not individuals--that got hacked over this 
unemployment security department scam. And I don't know what 
the question is. That should have been very secure, in my 
opinion. The Department of Corrections was struck. That is a 
huge entity.
    So I am not sure what the answer is. I just know that we 
all have a role to play, and we have got to all work together 
to figure that out.
    One of the things I did find interesting was one of the 
detectives I talked to said that she has a daughter who is a 
minor that has Social Security disability. And within a week, 
the detective herself actually started receiving AARP paperwork 
applications, because they thought that the Social Security 
disability was from her, not this minor. So somewhere along the 
lines we have got this sale of personal information that is 
going back and forth. And that probably needs to stop too 
because of what all is in that information that is going 
elsewhere and out there.
    So I don't know what the answer is, as far as the 
unemployment benefits. I fear with this newest hack that is 
just coming about with the auditor's office, that this is just 
the tip of the iceberg. They are getting so smart, and they 
work all day on doing this. So I don't know what the answer is.
    Mr. Pence. Thank you for what you do, Ms. Ponto.
    I yield back.
    Mr. Pallone. I thank the gentleman. Next--Mrs. Dingell is 
not here, so we will go to the gentlewoman from New York, Ms. 
Rice.
    Kathleen?
    Ms. Rice. Thank you, Mr. Chairman. At the epicenter of the 
initial coronavirus outbreak in the U.S., State and local 
officials in my State of New York and in my district on Long 
Island were also the first to deal with the issue of price 
gouging.
    So at the start of the pandemic, a pharmacy in my district, 
for instance, was selling N95 masks for $5 each from open boxes 
of 20. And then, in another part of town, we had hand sanitizer 
going for all different amounts for tiny sizes, ounce sizes 
of--you know, up to $10 for a 4-ounce bottle at--and this was 
all within, you know, three different locations within a 10-
minute drive apart from each other.
    Nassau County, which my district sits in, made a little bit 
of history when Federal prosecutors brought the first case in 
the Nation under the Defense Protection Act against the owner 
of a warehouse store who was hoarding more than 4 tons of 
personal protective equipment and marking up items by as much 
as 1,328 percent.
    So Ms. Rich, if I could start with you, in my district we 
were able to overcome these challenges because we had strong 
local leadership, and we mobilized our Department of Consumer 
Affairs. Can you just talk a little bit about how the FTC has 
or hasn't responded to price gouging complaints during the 
pandemic?
    Ms. Rich. Yes. So I am not an expert on price gouging, 
because it is typically handled on the competition side of 
things, rather than consumer protection. But I understand that, 
when the FTC looks at this issue, it looks at it through its 
unfairness authority, which requires a detailed cost benefit 
analysis of price changes, of the reasons behind it, of the 
effect on consumers and competition.
    Its unfairness authority is not a nimble way to respond to 
a fast-moving problem. A better way, which would be more 
similar to what happens with the States, would be for Congress 
to decide to set forth legislation establishing standards for 
price gouging but similar to what happens in the States, where 
they define it either by a percentage or fluctuations that 
happen within a certain period of time compared to the prices, 
you know, 5 days ago or whatever.
    Clearer standards would allow for much more nimble 
enforcement than unfairness. And then the FTC could enforce 
those standards in the way that you want.
    Ms. Rice. So do you think it is one of the--that is one of 
those issues that should be handled at the local level?
    Ms. Rich. Thirty-four States have legislation. You were 
just talking about how effectively it was done at the local 
level. But there may be companies that operate nationwide, 
which would make it appropriate for the FTC to handle something 
like that.
    Ms. Rice. Well, certainly, you know, with the increase in 
various e-commerce platforms, it has made it harder for local 
officials to go after price gougers who are on the other side 
of the country or on the other side of the planet. So I guess 
that is a specific role for the FTC to play.
    You know, so I think it is really important, you know, if 
you talk about section 13(b), and what I am hearing from every 
single witness here today is that Congress needs to act 
forthwith. So I just want to maybe have, you know, Ms. Rich or 
Mr. Kovacic, anyone who has an opinion about this--so it is one 
thing in terms of what the Supreme Court is going to rule on, 
in terms of recouping stolen money. But maybe talk a little bit 
more about what additional penalties--I think it was Mr. 
Kovacic who was talking about the lack of--I mean, if you look 
at what happened with the, you know, stealing the tips from 
taxi--or delivery drivers, I mean, that is just absurd that, 
you know, you call--we call it a victory, just because we got 
the money back and we are going to distribute it to the 
victims.
    But--so maybe just talk a little bit more about what 
Congress should look at, in terms of additional penalties, 
other than just recouping--allowing the FTC fraud jurisdiction 
to recoup lost money.
    Ms. Rich. Yes, the penalties are a very important area too. 
And certain--you know, most--many agencies, like the CFPB and 
many State AGs offices, have the capacity to impose penalties 
in a way the FTC doesn't, even though the FTC has this enormous 
jurisdiction and mission to deter this behavior. So the--I 
think Congress should consider giving FTC penalties across the 
board, but at the very least in certain key areas like privacy.
    Like, you know, the gig economy was another--was an area 
that we just talked about with what just happened with Amazon. 
And that was something that the acting chair is supporting in 
certain areas of fraud where they can't get penalties at this 
point. That would be very important, as well.
    Mr. Pallone. Thank you.
    Ms. Rice. Thank you, Mr. Chairman. I yield back.
    Mr. Pallone. Next we go to--I thought I saw Mr. Armstrong. 
Is he there? Oh, yes. The gentleman from North Dakota, Mr. 
Armstrong, recognized for 5 minutes.
    Mr. Armstrong. Thank you. Mr. Cardenas referenced a 13(b) 
proposal by Senator Wicker. I believe that that was part of the 
Senator's privacy proposal, so I think we would all be pleased 
to see it move as part of a broader effort.
    Given that, I would just like to ask our two FTC veterans 
on the panel this: If we are going to address 13(b) and 
consider first-offense penalties for privacy violations and 
rulemaking authority, does it--it doesn't make sense for 
individual States to add conflicting rules and allow private 
rights of action, correct?
    [No response.]
    Mr. Armstrong. It is easier in person, you can just do it, 
but--yes, please.
    Ms. Rich. Preemption and private right of action are some 
of the key issues that are subject to the debate. If State 
laws--if there is any discussion of preempting State laws, at 
the very least the States should be able to enforce the law, 
any law that gets passed at the Federal level.
    Mr. Kovacic. First, I applaud the sense of urgency with 
which you and your colleagues, Congressman, are approaching the 
development of a comprehensive, nationwide privacy policy. At 
the moment, our national privacy policy is being set in 
California and Brussels, and we don't have one at the national 
level. So I think it certainly deserves your attention.
    My intuition on private rights is that I would perhaps 
begin by creating the robust public enforcement framework, 
which is the collaboration between the Federal and State 
authorities. I would see how that works for a while, and I 
would take stock of that in 5 years, and decide what kind of 
private enforcement I want to develop. Maybe you develop 
private enforcement that is a follow-on to the State and 
Federal enforcement. But I think you have a great deal of room 
to maneuver and to shape the program in a way that reflects the 
competing interests that have been brought to bear in the 
fruitful debate you are having about private rights.
    On the preemption, I would like to preserve, in general, a 
framework that promotes coherence at the national level. 
Because the States, in a number of instances, have had very 
useful additions to the framework, by way of experimentation I 
would like to preserve some capacity on their part to perhaps 
go beyond provisions of the national coverage and to experiment 
with new techniques that could be adopted and brought into the 
Federal scheme.
    I confess I don't have an excellent administrative 
mechanism to do that, and I hesitate a bit because I see the 
benefits of the broad coherence. But I also see benefits that 
States have brought to the process by being able to do things 
that the Federal system has not done at the moment. So I would 
like a mechanism that incorporates both of those elements and 
policymaking.
    Mr. Armstrong. Well, I appreciate that. As a former chair 
of a State senate judiciary committee, I can tell you two 
things: we like to have State authority, and I don't--with all 
due respect to my good friend, Congresswoman Castor, North 
Dakota politics and California politics are pretty 
significantly just distinct and different. But we sure seem to 
get a lot of uniform laws that are based out of California.
    So just as we go through this, I want to just point out a 
couple of things, and one, I am excited to be on this 
committee. No offense to all of my colleagues on Judiciary and 
Oversight, but we have made it well into 2 hours and nobody is 
yelling at each other yet. So that is--it is very different.
    And two, I just--just so--as we are doing in the actual 
COVID thing, according to the FTC, North Dakota has had over 
270 COVID-related scams. And we are actually really lucky. We 
have a great attorney general who has been on top of these 
things, and also--and has started warning our consumers about 
it as early as last April.
    But I just want to be clear real quick that product 
liability is actually almost always primarily a State law 
function, and it is a principle that manufacturers, sellers--
strict liability and defective consumer products. I do think we 
have to have a broader--I am glad people were asking questions 
about section 230 and how it applies as people--as online 
retailers become part of the entire distribution chain, and the 
distinction between an online retailer and that.
    And then I would also just say we have to be careful in 
anything we do that doesn't further entrench the big guys and 
decrease competition.
    And with that, I will yield back.
    Mr. Pallone. I thank the gentleman. And now we are going to 
move to the gentlewoman from Minnesota, Ms. Craig.
    You are recognized for 5 minutes.
    Ms. Craig. Thank you so much, Chairman. Thanks for 
yielding, and thanks for having me on this committee and on 
this subcommittee. I am super excited to be here.
    I want to expand on the conversation in my question to you 
and highlight the work on COVID-19 that I began in the last 
Congress on scams related to COVID-19 with my fellow Minnesota 
Congressman, Pete Stauber. Together we introduced a bill called 
the Stop Coronavirus Scams Act of 2020, which would double the 
applicable forfeiture penalty, criminal fine, and term of 
imprisonment for anyone who provides misleading or inaccurate 
caller information in an attempt to defraud, cause harm, or 
wrongfully obtain anything of value by using false information 
related to COVID-19.
    While this bill primarily deals with the FCC's existing 
authorities under the Communications Act, I wanted to bring it 
up in the context of the comment you made about fraud not 
occurring in a bubble and how it relates to other entities, 
individuals, and systems to function, including the platforms 
and conduits through which scam artists disseminate fraudulent 
information.
    You note in your testimony that among the warning letters 
that the FTC sent regarding COVID-19 scams were letters to 
Voice Over Internet Protocol providers and other companies, 
warning them that routing and transmitting illegal robocalls 
related to COVID-19 is against the law. In one of those joint 
letters sent by the FTC and FCC, the agencies noted that these 
unwanted robocalls included messages alleging that recipients 
have been charged almost $400 for tech support services but may 
receive a refund by responding to the robocall. They also 
included robocalls falsely claiming to come from the United 
States Social Security Administration threatening cutoff of SSA 
benefits.
    Clearly, these activities have the potential to inflict 
harm on consumers. Given the severity of the ongoing crisis, do 
you feel these bad actors would be less willing to engage in 
fraudulent activities if the fines and penalties were increased 
for covered communications related to COVID-19?
    And are there any other actions, including legislative fix 
to 13(b), that Congress should be contemplating in this area?
    Ms. Rich. I think that strong fines and penalties--I 
haven't reviewed your act, but it sounds like there are 
criminal penalties. It would be very important to deter these, 
you know, terrible acts.
    But I also think the responsibility of platforms is very, 
very important. And 230, of course, is a very complex 
undertaking and beyond the--230 reform--and beyond the subject 
matter of this hearing.
    But I do think that this subcommittee could be thinking of 
other responsibilities to impose on these platforms and large 
hosts of other content, short of 230 reform, along the lines of 
the Informed Consumers Act that would actually spell out 
duties, as opposed to imposing--just imposing strict liability 
and have everybody wonder what it is they are supposed to do. 
It would impose specific duties on the platforms to screen out 
some of this content.
    Ms. Craig. Ms. Rich, I really appreciate you and all of the 
panelists being here today.
    And Mr. Chairman, with that, I yield back.
    Mr. Pallone. Thank you. So now we go to the gentlewoman 
from Arizona, Mrs. Lesko, for 5 minutes.
    Mrs. Lesko. Thank you very much, Mr. Chairman. It is an 
honor to be a new member of this committee. And I thank all of 
the witnesses for their testimony.
    Earlier on in the testimony, Ms. Ponto, you had said you 
need--you would suggest we need more help from the FTC. And so 
can you give examples of where you needed help from the FTC and 
it was possibly a little bit lacking?
    Like, could you give us concrete examples of how you could 
get more help from the FTC? What specifically?
    Ms. Ponto. Thank you. So I reached out to detectives at the 
Spokane Police Department, just to find out more about the 
fraud that they were seeing, because they are the ones who are 
going to put the bad guys in jail. And my opinion, that is what 
we need to be doing.
    What she gave me, an example, was--is that there was a 
particular case where we had an elderly victim, and she lived 
in an assisted living center. Her adult son was her power of 
attorney, and he was in charge of all of her finances. One of 
the caregivers at the assisted living center started stealing 
credit cards from multiple residents.
    And so, in an effort for the adult son, the power of 
attorney, to go and get the evidence from his elderly mom's 
accounts, he had all of his documentation, he had his 
paperwork, and he went to the first credit card company. They 
declined to help him or give him the information he needed. So 
then he went to the bank, and they helped him get information 
on her accounts. But if his name was not on a credit card, then 
he did not get that information.
    He then went to the detective and signed all the paperwork, 
all the authorization forms, showed the power of attorney. She 
ended up having to write three different search warrants, 
because she kept coming up with roadblocks. At the first 
business they claimed that they had contracted out to someone 
else, so really you need to do a search warrant at the second 
place. So she goes to the second place. They played a game of, 
well, you know what? This is not really our business address, 
this one is. So she ended up writing three warrants by the time 
it was said and done.
    Two months it took for her to get the account information. 
Two months. And in that time that she got that paperwork--she 
only got a third of it, she didn't even get everything that she 
needed to possibly bring charges against this caregiver.
    What--she wanted to specifically address that, under the 
Fair Credit Reporting Act, businesses are required to provide 
this information. And the FTC wants to hear if we are not 
getting that kind of cooperation. But the problem is that she 
did not feel like there was any teeth from the FTC, that maybe 
it was a, you know, a threat, or ``get it done,'' but there was 
nothing that caused them to make sure that she got all the 
information that she needed. And so it really would have been 
quite helpful if they would have stepped in at that stage and 
be able to help get our detectives the information they need 
from these different financial institutions or credit card 
places, so they can bring charges to these folks, put them in 
jail.
    Mrs. Lesko. Well, thank you very much, Ms. Ponto.
    And maybe that--maybe I will go to Ms. Rich next, then, 
since you used to work at the FTC, and see if you have any 
comments about what Ms. Ponto said.
    I mean, one of the other witnesses said the pay is lower at 
the FTC and found that as a problem. Do you need more staff 
there?
    Why are these things falling through the cracks, in your 
opinion?
    Ms. Rich. I don't know why that, you know, particular issue 
fell through the cracks.
    I also don't--to be honest, I don't recall whether this 
particular provision of the FCRA is enforceable and has teeth. 
I can assure you that the FTC is watching this hearing today 
and is taking this very seriously, what Ms. Ponto was talking 
about, because working with partners on identity theft is 
hugely important.
    The FTC desperately does need more resources. They are paid 
less than other agencies, but I don't think that stops the 
commitment to work diligently to help consumers. So many people 
there are already working for much less than they would in 
other places they could be working. But the number of staff--I 
mean, sure, give them what they deserve to be paid, but the 
issue is more the strain on the number of staff.
    You think about--you on this subcommittee know more than 
anyone the broad mission of the agency and what it is tasked to 
do and how it is very small compared to other agencies, but its 
mission is huge.
    Mrs. Lesko. Thank you, Madam Chairman, and I yield back.
    Ms. Schakowsky [presiding]. Great, and I am back. And so 
let me catch up. Has Congresswoman Trahan--have you asked your 
questions yet, or is it your turn?
    Ms. Trahan. I think it is my turn. Thank you.
    Ms. Schakowsky. OK, you have 5 minutes.
    Ms. Trahan. Thank you, Chairwoman Schakowsky and Ranking 
Member Bilirakis.
    And for the record, as New England sits on the sidelines 
watching the Super Bowl this year, I for one will happily take 
the GOAT back. So, go Bucs.
    Hey, so first, thanks to all the witnesses for testifying 
today on behalf of the many victims of fraud who have been 
cheated with phony letters about COVID treatments and cures. I 
really appreciate you hanging for the duration.
    Ms. Rich, I want to focus my question on what more the FTC 
can be doing to protect consumers and deter bad behavior by 
fraudsters. And, like my colleague from Minnesota, I was 
compelled by your observation that ``fraud does not happen in a 
bubble, it relies on other systems to function.''
    And this very point was raised by Consumer Reports with the 
FTC last summer in comments about the need for clearer guidance 
on online reviews and endorsements. And they wrote, ``Social 
media sorting algorithms tend to prioritize posts that receive 
more engagement from users with higher followers, providing 
further incentives for marketers to use deceptive tactics to 
augment those numbers.'' I am convinced that they have put 
their finger on the heart of this issue and the broader 
challenge of social media misinformation and disinformation, 
the faulty incentive structures involved in these algorithms.
    Now, recognizing that you are no longer with Consumer 
Reports, I would like to ask your thoughts on how we can better 
rein in these practices used by scammers to make products look 
more popular than they are. How else can the FTC update the 
endorsement guides to keep pace with these manipulation 
strategies in the online marketplace and social media?
    Ms. Rich. Well, I am no longer with the FTC or with 
Consumer Reports. But I was in both places, so I am very 
sympathetic to everything that you are talking about.
    Deceptive endorsements are a horrible problem. The FTC has 
comprehensive guides, and it--for a lot of enforcement, 
actually. But this is pervasive, and the enforcement hasn't 
been able to make at all a dent in this problem. And, of 
course, because of the rapid development on social media, it 
just--it changes its format all the time. And while the 
deceptive--the endorsement guides have specific examples, when 
the FTC only updates its rules and guides, like, every 10 
years, it is just not enough to keep pace. So I am very 
sympathetic to all those points that have been made by Consumer 
Reports and you.
    This may be an area where more teeth are needed because of 
the pervasiveness of this problem. Maybe a rulemaking. And I 
think this is something that Commissioner Chopra raised when 
the comments went out, that--and I know Consumer Reports also 
mentioned maybe there need to be more bright lines here. And if 
there was a rule enacted, then there could be civil penalties 
for it.
    So, of course, the best way to get this done would be for 
Congress to authorize rulemaking, and the Commission to pass a 
rule, because otherwise it is going to use its cumbersome 
Magnuson Moss procedures. But I really do think there needs to 
be more--more teeth in what the FTC can do in this area because 
it can't make a dent.
    Ms. Trahan. Great. That is super helpful.
    Ms. Patten, following up with Ms. Rich's comments, I would 
love to hear your thoughts as well. I mean, you went straight 
after section 230 in your testimony, but you also noted that 
narrower approaches are on the table, like Senator Baldwin's 
COOL Online Act. With respect to the specific issue of 
endorsement guides, do you see room for improvement at the FTC 
as well?
    Ms. Patten. Absolutely. I mean, I think, you know, we can't 
ask the FTC to do more, unless they have more resources 
available to them. And, of course, you know, we have seen a 
change in, you know, endorsements from influencers. It started 
out with clothing and private jets, but now, you know, we are 
getting into serious issues when it comes to treatments and 
preventions for COVID.
    So, obviously, that is an area where the FTC is incredibly 
concerned, but they don't have the resources. I mean, if you 
look at Instagram alone and you search the hashtag COVID-19, 
you are going to come up with more than 20 million hits. No 
human can go through that. So they need the technology and 
resources to really address this issue.
    And I absolutely agree that updated endorsement guides are 
needed, and that penalty authority for first-time offenders on 
social media influencers would be incredibly helpful.
    Ms. Trahan. Thank you. I will try to squeeze in my last 
one, but if I get cut off, that is fine.
    You know, Mr. Kovacic, I was intrigued by your 
recommendation that the FTC borrow some of the lessons from 
UK's Competition and Markets Authority, particularly its 
establishment of a data unit. As one of our panel's insider 
experts on the FTC, can you expand upon your reasoning that the 
FTC should adopt something similar?
    And if I have out of--if I am out of time, I am happy to 
submit that question for the record.
    Mr. Kovacic. Notice that just a moment ago, Congresswoman, 
you were referring to algorithms and the ability to understand 
what goes on inside these systems.
    Part of the rationale for the UK development of a data 
unit--which has 40 people, mostly technologists, not lawyers 
and economists, but real technologists--is, one, to understand 
what is going on inside those processes; two, to do searches, 
intelligence searches that allow you to figure out what is in 
that mass of 20 million hits, what is going on there; and to 
distill some lessons about what is taking place in the 
marketplace.
    During COVID this group was doing almost real-time 
assessments with respect to complaints, patterns in complaints, 
identifying within a couple of days where the hotspots were 
with wrongdoers, repeated indications you could focus 
attention. And now they have a major program that they have 
just launched to use their new study in algorithms on both the 
competition and consumer side to get a better idea of how firms 
use algorithms to target individual vulnerable consumers and to 
prey upon them. And----
    Ms. Schakowsky. OK, I am going to have to--we are over a 
minute over, and I am going to have to cut you----
    Ms. Trahan. My first subcommittee meeting, and I went over. 
I apologize. Thank you so much to the witnesses.
    Ms. Schakowsky. And, you know, you can put something in 
writing or reach out to him personally. And I understand that 
Debbie Dingell is there.
    Congresswoman Dingell, are you there?
    Mrs. Dingell. I am, thank you.
    Ms. Schakowsky. OK, it is your turn for 5 minutes.
    Mrs. Dingell. Thank you. Sorry, I was over voting. And 
thank you for holding this hearing today. It is a very 
important one, and we have learned a lot, listening to every--
all of the questions on both sides of the aisle.
    You know, this pandemic has made us more isolated than 
ever, which leaves people, as we have all been talking about, 
turning to the internet, social media, and other resources in 
search of community. They just want to talk to somebody, help 
and comfort.
    And many of the scams that my colleagues have been talking 
about today, and the witnesses highlighted, prey on people's 
loneliness and fear during this unprecedented time and can 
originate and do originate and proliferate on these platforms. 
Scams have affected--we have heard the stories from some of 
you--struggling families, people then embarrassed to tell 
somebody something happened, individuals seeking employment 
during the crisis, and seniors who are just plain scared and 
desperate, trying to protect themselves and those around them 
from the virus.
    It is unconscionable that, during this unprecedented time, 
individuals and families cannot be certain of what is real and 
what is not real of the products and services that--the victims 
of these scams cannot receive the compensation they deserve.
    And just for the record, I have started--I have got a file 
that thick of ones that I have gotten. In some days I don't 
even know. You know, I will get a ``Hey, your Yahoo! Mail is 
about to be cut off. Give us this to''--or the Amazon, it is--
and I have hearings like this, and you teach me, and it is 
pretty scary.
    So FTC guidelines and authorities need to meet the demands 
of evolving technology and tactics and reflect our continuing 
priority of protecting consumers. So that is what we have been 
talking about.
    So let's start by discussing social media consumption 
habits and its impact on consumers' vulnerability to frauds and 
scams. Last August there was a new report that discriminatory 
ads are still appearing on Facebook, even after the landmark 
settlement in 2019 that Facebook violated Federal 
antidiscrimination laws. It appears that advertisers are able 
to use Facebook's platform to microtarget populations based on 
their identities of age and race.
    Ms. Rich and/or Ms. Patten, could tools that Facebook 
provides to microtarget ads be used by scammers to target and 
exploit vulnerable populations, exasperating these harms?
    And what steps are social media companies and the FTC 
taking to prevent such abuses?
    Ms. Rich. Well, the settlement you discussed between 
Facebook and the civil rights groups was Landmar, and it gave 
the civil rights groups--it prohibited advertising that would 
enable discriminatory ads on Facebook. And Facebook, in 
implementing its response to the settlement, announced changes 
to its platforms that would cut off certain demographic 
information to advertisers.
    It also--the settlement gave the civil rights groups 
certain rights to access and test the platforms to see if they 
were going to--working now better and complying with the 
settlement. And one question I have is whether this--how 
effective that is. You know, the civil rights groups don't have 
subpoena authority. They don't have law enforcement authority. 
And so it doesn't compare to a Federal investigation.
    So one thing I wondered when I was thinking about this is 
whether there should be a role given to the FTC here to look at 
this type of violation. The privacy bills from last year, both 
from this subcommittee and on the Senate side, Cantwell and 
Wicker, did give a role to the FTC in examining the use of 
algorithms and discrimination based on those algorithms. So I 
wonder if that should be revisited to give the FTC a role to 
help the civil rights groups to supplement what the civil 
rights groups are doing to try to solve this problem.
    Mrs. Dingell. Well, I would like to follow up after this 
with more--to see if there is something we should pursue. And 
that--with the chair, we would look at.
    Ms. Patten, since I only have 23 seconds, did you want to 
add anything? And I will do the rest of my questions for the 
record. Ms. Patten, any comments?
    Ms. Patten. No, I think Ms. Rich did a wonderful job of 
covering it. Thank you.
    Mrs. Dingell. Thank you. Madam Chair, with 7 seconds left, 
I have never been known to talk for a short period of time. I 
yield back.
    Ms. Schakowsky. Well, thank you. I want to be sure--is 
Congresswoman Fletcher still here?
    Mrs. Fletcher. Yes, Madam Chair.
    Ms. Schakowsky. OK, then you are recognized for 5 minutes.
    Mrs. Fletcher. Terrific. Well, thank you so much, 
Chairwoman Schakowsky and Ranking Member Bilirakis, for 
organizing today's hearing. I appreciate the opportunity to 
hear from these witnesses about protecting consumers from fraud 
during this health and economic crisis. I appreciate the 
insights and share so many of the information, the perspectives 
that many of my colleagues have shared about the damage that 
this fraud is creating in their own communities, and my 
community in Houston is no different. But I want to get to a 
couple of questions, just right off the bat.
    Ms. Patten, in your testimony you mentioned that there was 
a need for the civil penalty fund to compensate consumers who 
have been monetarily harmed. And can you expand on the 
potential for this type of fund, and how it would interact with 
settlements from individual cases?
    How can we ensure that this type of fund will be well-
funded enough to provide meaningful compensation?
    Ms. Patten. Yes, thank you. So, as it currently stands, 
when the FTC is able to use its penalty authority--for example, 
in the Facebook example, where it violated an order and they 
got billions of dollars, that money went into the general 
treasury.
    I would propose that what is absolutely needed is if that 
money was put into a fund that could reimburse victims of fraud 
and scams. So often the FTC, using 13(b) authority, comes upon 
a defendant that doesn't have the resources to reimburse 
victims. And so, if it had a fund, it could use that money to 
make victims whole that have been, you know, scammed from their 
money.
    Mrs. Fletcher. Thank you. That is helpful.
    And following up on that question, I think, Ms. Rich, you 
also mentioned Chairwoman Schakowsky's leadership in allowing 
the FTC to impose fines on perpetrators related to COVID-19 
fraud for the duration of the public health crisis. Other than 
this issue of 13(b), is there additional short-term legislative 
action needed to address the COVID fraud effectively?
    Ms. Rich. Oh, COVID fraud, specifically?
    Mrs. Fletcher. Sorry, yes.
    Ms. Rich. No, that is OK. I think--I am not sure about 
the--as Ms. Patten noted, there are gaps in the December 
legislation, but I--other than 13(b), I really am focused on 
the broader picture, too, of civil penalties more broadly.
    I would agree with Ms. Patten that a civil penalty fund 
would be enormously helpful, and it is something that the CFPB 
already has, so there is a model there that another consumer 
agency is already using. That also would help during this--
certainly would help during this period, as well as afterwards.
    Mrs. Fletcher. And I apologize. As Chairwoman Schakowsky 
noted, we have run back and forth to vote, so you may have 
answered this already and I may have missed it. And, if so, I 
apologize. But in putting together that fund, and in terms of 
there is a model at the CFPB, how would you imagine would be 
sort of the most effective way, if we were to design this kind 
of program, for that to be administered?
    Ms. Rich. The CFPB model allows you to take money that is 
obtained in a civil penalty case and use it to distribute 
redress to consumers in another case involving civil penalties. 
Now, I don't know why it is designed that way--maybe because to 
allow too much crossover between redress and civil penalty 
cases violates something. But the more flexibility that the FTC 
could have in using the money from these funds to compensate 
consumers, the better.
    Mrs. Fletcher. And is there any other--if this committee 
were to draft legislation to address this challenge, is there 
any other information or power you think the FTC would need to 
be granted legislatively to make this possible?
    Ms. Rich. I think you could enact it, and give--and it 
would happen in the same way that the Dodd-Frank Act gave this 
power to the CFPB.
    Mrs. Fletcher. OK. Well, thank you very much, Ms. Rich, for 
that.
    I have only got 22 seconds, but if I can go to Mr. Kovacic 
very quickly, given your experience with the United Kingdom's 
Competition Markets Authority, can you speak a little bit to 
the ability of the FTC to protect and fairly compensate 
Americans from international scams and fraud?
    And since I am running out of time, perhaps I will ask you 
that question for the record and get a written response from 
you following the hearing.
    Mr. Kovacic. That is great. Short answer: The SAFE WEB 
renewal is a very important part of that infrastructure. So 
thank you for doing that.
    Mrs. Fletcher. Thank you.
    Mr. Kovacic. I am happy to answer your questions too.
    Mrs. Fletcher. Thank you. And Madam Chairwoman, I yield 
back.
    Ms. Schakowsky. Thank you.
    So I see that Congresswoman Clarke is still here, and I 
want to thank you for that. And you are recognized for 5 
minutes.
    Ms. Clarke. Let me thank you, Madam Chair, and let me also 
thank my classmate, the new ranking member for the 
subcommittee, Mr. Bilirakis, for holding this very important 
and timely hearing on scams and fraud.
    During the public health and economic crisis, we must 
ensure that consumers are not taken advantage of by malicious 
actors--not only taken advantage of, but severely harmed. It is 
deeply troubling to me that, throughout the COVID-19 pandemic, 
there have been ongoing reports of coronavirus-related scams 
across the Nation. These fraudulent acts range from price 
gouging on essential products to scams that take advantage of 
struggling small businesses. This simply cannot continue. 
During this time of crisis, we must band together to stop these 
efforts to defraud the American people.
    I am particularly concerned about the disproportionate 
impact of these scams on vulnerable communities, communities 
who have already been struggling with the combined impacts of 
COVID-19 and economic crisis, and the deep systemic inequities 
that are pervasive in our civil society. According to the FTC's 
own research, folks who are Black and Latino are more likely 
than their White peers to be victims of fraud. And yet that 
suggests that there is also a serious underreporting of fraud 
from these very same communities.
    As my colleague Congresswoman Kelly mentioned earlier, the 
FTC launched its Every Community initiative to address 
underlying disparities of fraud. The FTC also released a report 
in 2016 that set forth a comprehensive framework to 
specifically tackle fraud in Black and Latino communities.
    So, Ms. Rich, one of the report's recommendations was to 
bolster fraud prevention strategies in Black and Latino 
communities through targeted education and awareness campaigns. 
What steps do you think the FTC could take to better implement 
these fraud prevention strategies in minority communities?
    Ms. Rich. Well, you are right that we had a very 
comprehensive plan. And I think the pandemic, if not other 
things, seriously impaired the ability to do that, because one 
part of the plan was meeting and connecting with different 
communities. And sometimes you really have to do that face to 
face.
    And so much of this is developing trusted relationships 
with different community organizations. And then they, in turn, 
can interact with their communities to encourage more 
information about fraud, and they can relay that back to the 
FTC. So I really do think it is time, even before the--even 
while we are still in a pandemic, we have got the videos, we 
have got all sorts of channels we can use to really ramp that 
initiative up.
    And it costs money, because it involves materials. It 
should involve more research because of those findings that you 
just referenced. That was about the Black and Latino 
communities. It was a small set of findings. There is a lot 
more research that needs to be done to figure out more 
effective ways to reach out into these communities. So----
    Ms. Clarke. I look forward to further discussing this.
    Ms. Rich. Yes.
    Ms. Clarke. And looking at ways that we can be nimble and 
creative in penetrating those communities that are most 
vulnerable. I would like to also add Native lands to that as 
well.
    Ms. Rich. Yes.
    Ms. Clarke. The FTC's 2016 report also highlighted law 
enforcement actions that can be taken to address these 
disparities, including bringing more cases against entities 
that intentionally target or disproportionately impact 
vulnerable communities, Black and Latino. Can you briefly 
provide some examples of how scammers target minority 
communities?
    Ms. Rich. Yes. Well, you know, one thing that is certain is 
that scams do target everybody. But, especially during this 
pandemic, when we are seeing that minority communities and 
people of color are being harder hit by COVID-19, we are seeing 
a corresponding exponential growth in scams targeting people 
that are suffering the most, economically and health-wise. And 
unfortunately, that means that many people of color and in 
minority communities are taking the brunt of a lot of the scams 
and schemes that are targeting these populations.
    Ms. Clarke. Well, thank you.
    And Madam Chair, I appreciate the time. I have additional 
questions that I would like to submit and get responses for.
    But this is an area that is very--it is very important that 
we drill down and come up with strategies for combating. With 
that, Madam Chair, I yield back, and I thank our witnesses for 
their expert testimony today. Thank you.
    Ms. Schakowsky. Thank you. There are two people that have 
waived on to the committee. I am going to first call on my 
buddy, Buddy Carter, for 5 minutes.
    The floor is yours.
    Mr. Carter. Thank you, Madam Chair, for allowing me to 
waive on. And let me add also that this is my favorite 
subcommittee that I am no longer on. So I appreciate it very 
much.
    Ms. Ponto, I wanted to ask you. I passed legislation--
bipartisan legislation, by the way--that was signed into law in 
January. It is called Combating Pandemic Scams Act. And it 
really instructs Health and Human Services, as well, to work 
with the Postal Service as well as with the FTC to come up with 
a user-friendly website so that people can go to it and read 
about these type of scams, and also to actually enter into the 
website their experiences with scams, so that they can become 
better educated as to what is going on here.
    Obviously, with your experience in your area, you have seen 
a lot of scams and other issues that have come up like this. 
And I was just going to ask you, could you tell us or share 
with me very quickly what are some of the most egregious scams 
that you have noticed?
    And how have they been--have they been internet-based, have 
they been phone-based, or what?
    Ms. Ponto. Thank you for that question. One of the--this is 
my first year. I just retired last year and took this position. 
So I am still kind of learning this whole game with identity 
theft and fraud.
    But I had a gentleman come in. He was a truck driver. And 
he had come in, he had purchased a security camera system 
online. He had gotten the equipment. It didn't work. It took 
him a couple of months, but he ended up with somebody reaching 
out to him and trying to walk him through the service of 
getting it fixed.
    When they were not able to get it fixed, they said that he 
qualified for a refund in the amount of $400. They put $4,400 
into his account. He actually got online, looked at his bank 
account. So he had to have shared routing numbers for them to 
make this refund. There it is, $4,400, kind of a generic name. 
He prints it out.
    And then, of course, that is when it starts. You know, 
``Oops, we accidentally sent you too much money. So you keep, 
you know, X dollar amount, and we would like you to go and get 
the rest of the refund in gift cards. We suggest you going to 
Fred Meyer's and Target.'' And again, it is these gift card 
scams that we are seeing, and we are not understanding where--
how do reasonable people think this sounds right? Why are we 
missing the flags?
    And so that is what he did. And he ended up losing X amount 
of dollars, because it was his own money that he was, you know, 
putting into these gift cards, scratching off the numbers, and 
giving it to the gentleman right over the phone, and done. This 
guy was calling him easily a dozen times a day.
    You see a lot of these scams coming in. And it is very 
alarming, because there is an online portion to that.
    He showed me his bank account. When he went to the bank, 
the bank told him that money had never been in there in the 
first place. And yet here we are, looking at his bank account, 
and there it is.
    Mr. Carter. Right.
    Ms. Ponto. So there is a sophistication level that we are 
not understanding. But common sense, people. This doesn't look 
right, these are so many red flags, and so how do we----
    Mr. Carter. Right.
    Ms. Ponto [continuing]. Get that out to our folks?
    Mr. Carter. And really, this was the reason for my--and for 
the--and the impetus, if you will, behind the legislation was 
to educate people as to these type of scams and to help them 
understand and learn from this. Not only that, but have them 
have the opportunity to share.
    Now, it was primarily aimed at scams during the pandemic, 
which we have seen: advertised ineffective PPE, we have seen 
advertised false cures and false preventions for the virus. 
That is primarily what was aimed at.
    Just wondering if you--what do you think is the best line 
of defense?
    What do you--Ms. Ponto, can you share with me very quickly 
what--how can we help people the most?
    Ms. Ponto. I truly believe in the service that we provide, 
this Community Oriented Policing Services. Like I said, we have 
nine COPS shops throughout our city of Spokane. They are in the 
neighborhoods. The neighbors, when they don't get the response 
that they are looking for from the police, or the police are 
unable to help them, they come to us because we are within 
blocks of them walking, and we are a fantastic first line to 
help them. And then we can actually walk them through the 
process of identity theft reporting. And I think that is a huge 
tool that other cities really need to take a look at.
    Mr. Carter. Good. Well, thank you very much for your help 
and for your testimony--for all of the witnesses.
    And again, it is the Combating Pandemic Scams Act, and it 
is a good piece of legislation. It is good law now that 
hopefully will help people, to educate people, and help them to 
share their experiences.
    And again, Madam Chair, thank you for allowing me to waive 
on, and I yield back.
    Ms. Schakowsky. Thank you. Well, I miss you, Representative 
Carter, on the committee. And I also really miss Congresswoman 
Rochester on the subcommittee.
    And I yield to you 5 minutes, and welcome both of you any 
time to waive on.
    Ms. Blunt Rochester. Thank you so much, Chairwoman 
Schakowsky, for allowing me to waive on to this vital 
subcommittee, and especially for your vision for the 21 Century 
Consumer Rights Agenda, a powerful, powerful vision.
    And I too want to congratulate Ranking Member Bilirakis for 
his new appointment.
    And thank you to the witnesses for testifying. As we all 
know, we are in the middle of the worst public health crisis in 
a century and a crippling recession. The last thing my 
constituents should be worried about is fraud and scams. Sadly, 
the stories we heard at our last hearing have, unfortunately, 
not stopped.
    Thankfully, at the end of the last Congress, we took 
action, and I was proud to colead the Combating Pandemic Scams 
Act and proud to support the COVID-19 Consumer Protection Act. 
I will soon reintroduce my bill, the Fraud and Scams Reduction 
Act, which will continue to make important reforms to empower 
the FTC and key stakeholders. We need to take action to address 
the prevalence of scamming in the U.S. And in that regard I 
would like to begin my questions with Ms. Rich, and I would 
like to follow up on Ms. Kelly's questions earlier.
    In your testimony, you identified the importance of 
reaching every community. Yet you mentioned a lack of 
demographic data in the FTC's current complaint database. From 
your experience, what kind of demographic data does the FTC 
currently collect, and what kind of data should they be able to 
collect that you believe is not being collected?
    Ms. Rich. Thank you. This is a very important issue. Well, 
I haven't been there for 4 years, and I know they are doing a 
lot with data. You can go to the website and now see all sorts 
of breakdowns, including by State and locality, et cetera.
    But when I was there, we did not collect the kind of 
demographic data that you need to figure out whether scams--or 
how scams are saturating different communities. And the 
findings that had been cited in this committee that scams--that 
people in African-American and Latino communities complained, 
but they are disproportionately victimized by fraud, was that--
that analysis was done through work-arounds using general fraud 
data and census data. And it was painstaking, and it was very 
time consuming. But much more of that work is needed.
    And so, you know, it is very sensitive to collect 
demographic data, so--and maybe the FTC has, you know, been 
giving this some thought since then. So I really encourage you 
to engage directly with the FTC to figure out how they can get 
this done, because we cannot--they cannot figure out what is 
going on on the ground without it. So it is very important.
    Ms. Blunt Rochester. Yes, I think one of the followup 
questions that we will have is about what authorities they 
would need to successfully expand this program.
    My next question is following up on Ms. Trahan's line of 
questioning as well. We were in--pretty similar questions 
regarding--this is to Mr. Kovacic.
    In your testimony, you suggested that the FTC could benefit 
from better data analytics. Can you give us some examples of 
the trends that the UK watchdog identified that we would not be 
identified--that you would not have identified without the 
better data tools that--and would have taken too long to 
identify?
    Mr. Kovacic. Yes, they were able to spot trends and 
patterns in episodes of misconduct and complaints within 2 or 3 
days instead of taking a month to sort through information.
    They were able to process, at least week by week, a very 
accurate profile of where the complaints were coming from, who 
the firms were so that, when you started your combination of 
warnings, lawsuits, and other publicity--publicity going out to 
consumers saying, ``Here are the problems.'' That is, ``Last 
week we saw this problem. It is happening right now. Watch out 
for this problem.'' They were able to compress that kind of 
analysis, outreach, enforcement, education into a couple of 
days, instead of it taking maybe a month.
    And on your question, Congresswoman, about doing the 
research, you can use--you can start to use this kind of 
capability as a platform to work with researchers who do this 
kind of analysis--academic institutions, intellectual hubs--to 
build a better understanding of how commerce and misconduct 
take place in disadvantaged communities. And you can build this 
capability to use those tools to get a better idea of what is 
going on. That is a useful partnership between the public 
agencies and academia.
    Ms. Blunt Rochester. Thank you. We would like to follow up 
with you on the lessons learned by the UK that Congress can 
learn, as well as the FTC.
    Thank you so much, Chairwoman, and I yield back.
    Mr. Kovacic. Thank you.
    Ms. Schakowsky. Well, thank you. I really appreciate the 
incredible testimony, and the Q and especially the A, the 
answers that we got. I think it is obvious, I hope, to all the 
witnesses that this is one of the most popular hearings that I 
have been at, and I think one of the most revealing, in terms 
of the suggestions that we got. That is always so important.
    So thank you. Thank you for what you have done. And I am 
sure you are going to get some followup questions, and I hope 
that you will--and expect that you will--answer them promptly.
    And without objection, I want to add into the record 
letters from--for the record, a letter from USTelecom, a letter 
from the FTC, a letter from the Coalition of Online 
Accountability, and a letter from the FTC to Representative 
Latta.
    And without objection, so ordered,
    [The information appears at the conclusion of the hearing.]
    Ms. Schakowsky. I remind Members that, pursuant to 
committee rules, they have 10 business days to submit 
additional questions to the record to be answered by the 
witnesses who have appeared. And, as I said before, I ask each 
witness to respond promptly to any question that they may 
receive.
    And, at this time, with enormous gratitude, the 
subcommittee is adjourned. Thank you.
    [Whereupon, at 3:15 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    
    
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