Consumer Protection: Federal Actions to Oversee the Household	 
Goods Moving Industry Are Unlikely to Have Immediate Impact	 
(12-JUL-01, GAO-01-819T).					 
								 
Consumer complaints against household goods carriers have	 
multiplied over the last five years, while the Department of	 
Transportation has conducted limited oversight of the industry.  
It does not collect nationwide information on consumer complaints
in the household goods moving industry, but estimates that it	 
receives about 4,000 complaints each year. The Department has	 
done little to carry out its responsibility for consumer	 
protection in the interstate household goods moving industry	 
because this is a relatively low priority compared with its	 
primary mission of promoting motor carrier safety. Although the  
Federal Motor Carrier Safety Administration (FMCSA) has recently 
begun activities that have potential to improve its ability to	 
oversee the industry and protect consumers, the agency has fallen
behind in completing these actions. FMCSA has not met the	 
milestones that were in effect only three months ago for	 
completing many of its planned activities and has extended the	 
milestones by several months to a year. In addition, the	 
Department did not conduct a study by mid-1997 of the		 
effectiveness of arbitration as a means of settling household	 
goods disputes, as required by the ICC Termination Act of 1995.  
The agency plans to conduct the study from fiscal year 2003	 
through fiscal year 2005. This testimony summarizes a March	 
report (GAO-01-318).						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-819T					        
    ACCNO:   A01388						        
  TITLE:     Consumer Protection: Federal Actions to Oversee the      
             Household Goods Moving Industry Are Unlikely to Have Immediate   
             Impact                                                           
     DATE:   07/12/2001 
  SUBJECT:   Consumer protection				 
	     Household goods					 
	     Motor carrier operations				 

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GAO-01-819T
     
CONSUMER PROTECTION

Federal Actions to Oversee the Household Goods Moving Industry Are Unlikely
to Have Immediate Impact

Statement of JayEtta Z. Hecker Director, Physical Infrastructure Issues

United States General Accounting Office

GAO Testimony Before the Subcommittee on Highways and Transit,

Committee on Transportation and Infrastructure, House of Representatives

For Release on Delivery Expected at 10: 00 a. m. EDT Thursday July 12, 2001

GAO- 01- 819T

Page 1 GAO- 01- 819T Household Goods Moving Industry

Mr. Chairman and Members of the Subcommittee: We appreciate this opportunity
to testify on the Department of Transportation?s performance in overseeing
the household goods moving industry over the last 5 years and the agency?s
recent efforts designed to improve consumer protection in this industry. Our
statement is based on a recent report we issued to you and updated
information from the modal administration within the Department with
specific responsibility for this issue, the Federal Motor Carrier Safety
Administration (FMCSA). 1 As you requested, we have also provided some ideas
on how to improve oversight and consumer protection for the household goods
moving industry.

In summary:

* Over the last 5 years, consumer complaints against household goods
carriers have multiplied while the Department has conducted limited
oversight of the industry. It does not collect nationwide information on
consumer complaints in the household goods moving industry, but estimates
that it receives about 4,000 complaints each year. The Department has done
little to carry out its responsibility for consumer protection in the
interstate household goods moving industry- such as taking enforcement
actions against carriers and providing information to consumers to enable
them to make more informed choices when they move- because this is a
relatively low priority compared with its primary mission of promoting motor
carrier safety.

* Although FMCSA has recently begun activities that have potential to
improve its ability to oversee the industry and protect consumers, the
agency has fallen behind in completing these actions. FMCSA has not met the
milestones that were in effect only 3 months ago for completing many of its
planned activities and has extended the milestones by several months to a
year. For example, FMCSA originally anticipated implementing a nationwide
consumer complaint database in April 2001 to, among other things, target
carriers for enforcement action in a timely manner; FMCSA now anticipates
implementing the database in early fiscal year 2002. In addition, the
Department did not conduct a study by mid- 1997 of the effectiveness of
arbitration as a means of settling household goods disputes, as required by
the ICC Termination Act of 1995. The agency plans to conduct the study from
fiscal year 2003 through fiscal year 2005.

* In our March 2001 report, we made a number of recommendations aimed at
improving FMCSA?s actions to oversee the household goods moving industry and
protect consumers. Additional actions by FMCSA and the Congress could
improve oversight and consumer protection in this industry without
detracting from FMCSA?s efforts to improve truck safety. For example, FMCSA
could establish performance measures, put in place specific strategies to
meet them, and follow through on the

1 Consumer Protection: Federal Actions Are Needed to Improve Oversight of
the Household Goods Moving Industry (GAO- 01- 318, Mar. 5, 2001).

Page 2 GAO- 01- 819T Household Goods Moving Industry

strategies to demonstrate to the Congress and the public the extent to which
it is improving oversight and consumer protection. FMCSA could also ask for
additional resources if it cannot meet its responsibility to protect
consumers without diverting resources from its safety- related activities.
In addition, continued and vigorous congressional oversight can focus
attention on this issue and provide a clear expectation for the agency to
fulfill its consumer protection responsibilities. Finally, the Congress
could take action to expand the states? role in regulating the household
goods moving industry, such as by authorizing the states to enforce federal
regulations. This has the potential to enhance consumer protection and
provide consumers more avenues to seek remedies for illegal practices by
household goods carriers. In our March 2001 report, we did not recommend
these legislative changes, but instead recommended that the Department
determine whether legislative changes are needed after it has implemented
our other recommendations. We continue to believe that effective federal
oversight and enforcement is critical to consumer protection. Therefore, if
the Congress decides to expand the states? role, it should be done in
conjunction with- not in lieu of- more effective federal efforts.

Background

Each year, between 1.3 million and 1.5 million households use commercial
moving firms to move their household goods to another state, according to
industry estimates. 2 There are approximately 2,900 motor carriers
registered with the Department of Transportation that transport household
goods across state lines.

Consumers are primarily responsible for preventing and resolving problems
that may occur during a move, while the federal government has a broader
role to oversee the household goods moving industry and enforce regulations.
However, most consumers seldom use moving companies for their household
goods, so they are less prepared to protect themselves financially than are
commercial shippers.

Until 1996, the Interstate Commerce Commission had regulatory responsibility
for interstate household goods carriers, including issuing regulations,
conducting oversight activities, and taking enforcement actions. The ICC
Termination Act of 1995 dissolved the Commission and transferred these
consumer protection functions to the Department of Transportation, where
they were assigned to the motor carrier safety office within the Federal
Highway Administration. The Motor Carrier Safety Improvement Act of 1999
moved these functions to a new organization- FMCSA- within the Department of
Transportation. In addition to its headquarters facilities, FMCSA maintains
a field office structure consisting of 4 service centers and 52 division
offices.

2 This estimate includes moves of individual households, moves arranged by
governments, and moves arranged by corporations for their employees because
industry officials do not separately track moves in these categories.
Industry estimates indicate that an additional 1. 3 million to 1. 5 million
households move themselves with their own or rented trucks each year.

Page 3 GAO- 01- 819T Household Goods Moving Industry Consumer Complaints
Have Increased While The Department Has Conducted

Limited Oversight

Even though the Department is responsible for overseeing the interstate
household goods moving industry, it has not collected nationwide information
on consumer complaints. Nonetheless, limited information from FMCSA?s
division offices and the Council of Better Business Bureaus shows that the
number of complaints they received from consumers about household goods
carriers has increased dramatically since 1996. For example, complaints
about interstate movers at the 12 division offices we visited doubled from
318 in 1996 to 659 in 1999. Meanwhile, complaints about both inter- and
intrastate movers to the Council of Better Business Bureaus increased from
about 3,000 in 1996 to about 4,900 in 2000. FMCSA officials estimate that
they receive about 4,000 complaints each year. These complaints cover a
range of issues, such as misunderstandings between consumers and carriers
about when payment was due, disagreements over settlements for lost or
damaged goods, or allegations of falsified charges on the final bill.

While complaints have been increasing, the Department has not taken basic
actions that are necessary to oversee the industry and protect consumers.
Specifically, the Department

* does not collect and analyze nationwide industry information, such as
complaint information, that would allow it to understand and oversee the
industry;

* has not finalized regulations implementing the ICC Termination Act and
addressing certain consumer protection issues;

* does not know how many reviews it has conducted to ensure that carriers
are complying with consumer protection regulations, but estimates that there
have been very few;

* has taken few enforcement actions against carriers- actions which might
also deter other household goods carriers from taking advantage of
consumers;

* has done little to educate consumers about their rights and
responsibilities when they move, apart from placing a booklet and a list of
most frequently asked questions on its Internet Web site; and

* has made little or no effort to reach out to consumer groups, law
enforcement agencies, and others. Fourteen of the 24 state agencies we
contacted during our review did not know which federal agency, if any,
regulates household goods movers and were therefore unable to forward
complaints they received about interstate moves to FMCSA.

Government, consumer organization, and industry officials whom we spoke with
believe that the Department?s lack of attention to its responsibility has
created a vacuum that

Page 4 GAO- 01- 819T Household Goods Moving Industry

has allowed unscrupulous carriers to prey on consumers. For example, some
consumers have complained that carriers have held their goods ?hostage? by
refusing to unload them from the moving truck until the customer paid a fee
above what is allowed by federal regulations. In other instances, carriers
have provided unreasonably low estimates that they had no intention of
honoring. Finally, some carriers have practiced

?weight bumping,? in which they artificially inflated the weight of a
shipment by including the weight of another household?s goods when
calculating the final bill. While officials we spoke with believe that most
moves are completed by reputable carriers with few or no problems, they also
believe that unscrupulous carriers are taking advantage of the lack of
oversight and are operating without concern for the regulations or the
rights of consumers.

According to FMCSA officials, the responsibility for household goods issues
is a low priority compared with the agency?s primary mission of preventing
fatalities and injuries from commercial motor vehicle crashes. Consequently,
the Department has devoted only 5 of about 760 full- time staff to household
goods moving issues. Moreover, the Department has not taken steps to
understand the nature and extent of problems in the industry and thereby
determine whether its limited approach to oversight and enforcement is
appropriate. Nor has it made more than minimal efforts to provide consumers
with information that would assist them in making more informed choices and
prevent some problems from occurring during their move.

FMCSA Has Fallen Behind in Actions to Address Problems

FMCSA has recently begun activities that have potential to improve its
ability to oversee the industry and protect consumers. These activities span
FMCSA?s oversight, compliance, enforcement, and public education
responsibilities. However, FMCSA has not met the milestones that were in
effect 3 months ago for completing many of these activities; completing
these activities will likely take from several months to a year longer than
expected. For example, FMCSA is implementing a complaint database to track
complaints, understand the nature and pattern of complaints, target carriers
for enforcement action, and evaluate the effectiveness of its enforcement
actions. The database was originally scheduled to be implemented in April
2001, but FMCSA officials now anticipate that the database will not be
available until early in fiscal year 2002. FMCSA is also planning to train
staff responsible for conducting household goods investigations to improve
their expertise in conducting compliance and enforcement activities. The
agency originally anticipated that initial training would occur in March
2001, but now anticipates that it will not occur until March 2002- one year
later than the original milestone. (See table 1.)

Page 5 GAO- 01- 819T Household Goods Moving Industry

Table 1: Status of Key FMCSA Actions to Improve Consumer Protection in the
Interstate Household Goods Moving Industry

Activity Status as of March 2001 Status as of June 2001 Oversight activities

Establish a 24- hour toll- free complaint hotline Established January 2001
Ongoing activity Develop a national consumer complaint database

To be completed April 2001 To be completed in early fiscal year 2002 Train
staff on handling hostage freight complaints To be completed March 2001 To
be completed August 2001 Report on the effectiveness of arbitration as a
means of settling household goods disputes, as originally required by the
ICC Termination Act of 1995; due date was June 1997

Study had not been conducted; no milestone established

Study to start in fiscal year 2003; to be completed in fiscal year 2005

Compliance and enforcement activities

Develop regulations to improve consumer protection

Proposed rule published in May 1998 Interim final rule to be published by
early fiscal year 2002 Develop policies and procedures to implement economic
and household goods regulations

No milestone established Draft policy and procedures manual to be completed
by November 2001

Update compliance review manual to include household goods regulations
Activity started January 2001 To be completed July 2001 Train staff in
conducting compliance and enforcement activities

Initial training to be completed by March 2001

Initial training to be completed by March 2002 Train new field safety
investigators on household goods regulations

Training provided in March 2001 Ongoing activity Develop letters of
agreement with the Surface Transportation Board and the Office of Inspector
General to coordinate compliance and enforcement support in the areas of
tariffs and criminal activities

To be completed April 2001 To begin August 2001 Develop an enforcement
strategy plan to identify carriers and brokers that engage in egregious
conduct, operations, and practices

To be completed March 2001 To be completed November 2001 Establish a
tracking and monitoring system to evaluate enforcement activities

To be completed May 2001 No revised milestone established Establish policies
and procedures for revocation of carrier operating authority

To be completed April 2001 To be completed October 2001

Public education activities

Develop a comprehensive marketing plan, including revising a booklet of
information for consumers and updating the agency?s Web site

To be completed June 2001 To be completed March 2002 Issue press releases
and articles for the public Ongoing activity Ongoing activity Notify trade
and industry associations, consumer groups, and other enforcement agencies
of FMCSA?s regulatory responsibilities

No milestone established Comprehensive announcement to be made in fiscal
year 2002

Source: GAO analysis of information from FMCSA.

Page 6 GAO- 01- 819T Household Goods Moving Industry

According to FMCSA officials, resource constraints- financial and staffing-
have caused these delays. For example, the officials told us they have
developed and tested the complaint database, but are waiting for fiscal year
2002 funds to implement the database in the division offices. Officials also
told us that the final rule on consumer protection issues has been delayed
because staff are focusing on proposed rules addressing the safe operation
of Mexican trucks in response to plans to allow increased operation of these
trucks in the United States beginning in January 2002 under the North
American Free Trade Agreement. FMCSA has emphasized that its primary mission
is to improve motor carrier safety and that it will do what it can to
improve its oversight and enforcement of the household goods moving industry
within available resources. However, FMCSA officials told us they have not
asked, and do not plan to ask, for additional staff for such consumer
protection efforts.

Further Actions by FMCSA and the Congress Could Improve Oversight and
Consumer Protection

In our March 2001 report, we made a number of recommendations aimed at
improving FMCSA?s actions to oversee the household goods moving industry and
protect consumers. There are additional actions that FMCSA could take to
improve its implementation of its oversight and consumer protection
responsibilities. To begin with, FMCSA needs to follow through with its
planned activities and demonstrate to the Congress and the public that it is
protecting consumers. Furthermore, the agency could establish performance
indicators, put in place specific strategies to meet them, and follow
through with the strategies to demonstrate the extent to which its
activities are improving oversight and consumer protection. According to
FMCSA officials, the agency does not have such indicators and will not be
able to establish them until after the national consumer complaint database
is operational. This database is key to improving FMCSA?s ability to make
informed decisions in all areas of household goods oversight, and its
implementation should not be delayed further. Finally, while safety is and
should be the top priority under its current charter, FMCSA could ask for
additional resources for household goods oversight if it believes it cannot
fulfill its responsibility to protect consumers without detracting from its
safety improvement efforts.

The Congress could also set a clear expectation for FMCSA to fulfill its
responsibility to oversee the household goods moving industry and protect
consumers. Congressional oversight- such as setting expectations for
performance and results- was very effective in persuading FMCSA to become
more aggressive in carrying out its commercial truck safety
responsibilities. Such oversight could also be effective in focusing
attention on this issue and motivating the agency to fulfill its consumer
protection responsibility. Even seemingly simple actions, such as including
a specific reference to household goods oversight in FMCSA?s authorizing
legislation, could encourage the agency to do more than devote minimal
effort to overseeing the household goods moving industry.

Finally, an expansion of the states? role in the regulation of interstate
household goods carriers has some potential to enhance protection for
consumers. One option for an expanded state role would be to enact
legislation authorizing the states to enforce federal statutes and
regulations for interstate household goods carriers. In fact, federal

Page 7 GAO- 01- 819T Household Goods Moving Industry

law currently allows the states to address abusive business practices that
extend beyond their borders in certain other areas of interstate commerce,
such as telemarketing. A 1994 statute required the Federal Trade Commission
to adopt rules prohibiting deceptive and abusive telemarketing practices and
authorized the states to take action against those engaging in patterns or
practices that violate these rules. The Commission also helps to ensure that
enforcement is conducted consistently among the states. If the Congress
decides to enact similar legislation for the household goods moving
industry, this action would need to coincide with federal activities
designed to improve household goods oversight. For example, if the states
are to enforce federal regulations for the household goods moving industry,
the regulations must address the problems faced by consumers. However, the
Department of Transportation has yet to finalize proposed regulations to
implement the ICC Termination Act and enhance consumer protection.

Another option to expand the states? role would be to enact legislation to
change the federal statute governing carriers? liability for loss or damage
in interstate shipments- the Carmack Amendment. 3 This statute established a
uniform scheme of liability for loss or damage to interstate shipments,
preempting a broad range of state law claims in order to eliminate the
uncertainty associated with conflicting state laws. Such legislation might
explicitly authorize the states to enforce their own consumer protection
statutes against interstate household goods carriers. Such legislation could
also authorize individual consumers to recover damages from interstate
household goods carriers under state law in some cases.

In our March 2001 report, we did not recommend these legislative changes,
but instead recommended that the Department determine whether legislative
changes are needed after it has implemented our other recommendations. We
recognize that expanding the states? role in the regulation of interstate
household goods carriers has the potential to improve consumer protection.
However, the extent to which allowing the states to enforce federal
regulations improves consumer protection depends on individual states?
willingness and resources to assume this responsibility. 4 Just as
important, strong federal leadership is needed to work with and guide the
states in their enforcement activities. This strong leadership has yet to be
exhibited by the Department of Transportation in its oversight of the
household goods moving industry.

- - - - Mr. Chairman, this concludes our testimony. We would be pleased to
answer any questions you or Members of the Subcommittee may have.

3 Section 14706 of title 49, U. S. Code. 4 As we reported in March 2001, the
Federal Trade Commission estimated that states have either led or
participated in numerous investigations of telemarketing fraud. However, an
official of the Commission also pointed out that states have generally not
yet used similar authority under the Federal Fair Credit Reporting Act and
may be allocating resources to other law enforcement priorities.

Page 8 GAO- 01- 819T Household Goods Moving Industry Contacts and
Acknowledgments

For information about this testimony, please contact JayEtta Z. Hecker at
(202) 512- 8984 or heckerj@ gao. gov. This statement is available on GAO?s
home page at http:// www. gao. gov. Individuals making key contributions to
this testimony were Helen Desaulniers, Judy Guilliams- Tapia, Elizabeth
McNally, James Ratzenberger, and Sara Vermillion.

(544002)
*** End of document. ***