U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Publishing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

28–381 PDF 2018

S. HRG. 115–139 

STAYING A STEP AHEAD: FIGHTING BACK 

AGAINST SCAMS USED TO DEFRAUD AMERICANS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CONSUMER PROTECTION, 

PRODUCT SAFETY, INSURANCE, 

AND DATA SECURITY 

OF THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

MARCH 21, 2017 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

JOHN THUNE, South Dakota, Chairman 

ROGER F. WICKER, Mississippi 

ROY BLUNT, Missouri 

TED CRUZ, Texas 

DEB FISCHER, Nebraska 

JERRY MORAN, Kansas 

DAN SULLIVAN, Alaska 

DEAN HELLER, Nevada 

JAMES INHOFE, Oklahoma 

MIKE LEE, Utah 

RON JOHNSON, Wisconsin 

SHELLEY MOORE CAPITO, West Virginia 

CORY GARDNER, Colorado 

TODD YOUNG, Indiana 

BILL NELSON, Florida, Ranking 

MARIA CANTWELL, Washington 

AMY KLOBUCHAR, Minnesota 

RICHARD BLUMENTHAL, Connecticut 

BRIAN SCHATZ, Hawaii 

EDWARD MARKEY, Massachusetts 

CORY BOOKER, New Jersey 

TOM UDALL, New Mexico 

GARY PETERS, Michigan 

TAMMY BALDWIN, Wisconsin 

TAMMY DUCKWORTH, Illinois 

MAGGIE HASSAN, New Hampshire 

CATHERINE CORTEZ MASTO, Nevada 

NICK ROSSI, Staff Director 

ADRIAN ARNAKIS, Deputy Staff Director 

JASON VAN BEEK, General Counsel 

KIM LIPSKY, Democratic Staff Director 

CHRIS DAY, Democratic Deputy Staff Director 

RENAE BLACK, Senior Counsel 

SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT SAFETY, 

INSURANCE, AND DATA SECURITY 

JERRY MORAN, Kansas, Chairman 

ROY BLUNT, Missouri 

TED CRUZ, Texas 

DEB FISCHER, Nebraska 

DEAN HELLER, Nevada 

JAMES INHOFE, Oklahoma 

MIKE LEE, Utah 

SHELLEY MOORE CAPITO, West Virginia 

TODD YOUNG, Indiana 

RICHARD BLUMENTHAL, Connecticut, 

Ranking 

AMY KLOBUCHAR, Minnesota 

EDWARD MARKEY, Massachusetts 

CORY BOOKER, New Jersey 

TOM UDALL, New Mexico 

TAMMY DUCKWORTH, Illinois 

MAGGIE HASSAN, New Hampshire 

CATHERINE CORTEZ MASTO, Nevada 

(III) 

C O N T E N T S 

Page 

Hearing held on March 21, 2017 ............................................................................ 1 

Statement of Senator Moran .................................................................................. 1 

Statement of Senator Blumenthal .......................................................................... 2 

Statement of Senator Thune ................................................................................... 26 

Statement of Senator Inhofe ................................................................................... 28 

Statement of Senator Udall .................................................................................... 30 

Statement of Senator Cortez Masto ....................................................................... 32 

Statement of Senator Hassan ................................................................................. 34 

Statement of Senator Klobuchar ............................................................................ 36 

Statement of Senator Markey ................................................................................. 38 

WITNESSES

Hon. Maureen K. Ohlhausen, Acting Chairman, Federal Trade Commission ... 5 

Prepared statement .......................................................................................... 6 

Hon. Terrell McSweeny, Commissioner, Federal Trade Commission ................. 7 

Prepared statement .......................................................................................... 9 

Hon. Mike DeWine, Ohio Attorney General .......................................................... 10 

Prepared statement .......................................................................................... 12 

Frank Abagnale, Author and Consultant, Abagnale & Associates ...................... 15 

Prepared statement .......................................................................................... 17 

Mike Schwanke, Reporter, KWCH–12 Eyewitness News .................................... 18 

Prepared statement .......................................................................................... 20 

APPENDIX

Letter dated March 17, 2017 to Hon. Deb Fischer from Scott Merritt, Executive Director, Nebraska Hotel & Lodging Association ...................................... 47 

Response to written questions submitted to Hon. Maureen K. Ohlhausen by: 

Hon. John Thune .............................................................................................. 51 

Hon. Deb Fischer .............................................................................................. 56 

Hon. Jerry Moran ............................................................................................. 57 

Hon. Dean Heller .............................................................................................. 61 

Hon. Todd Young .............................................................................................. 62 

Hon. Bill Nelson ............................................................................................... 63 

Hon. Richard Blumenthal ................................................................................ 64 

Hon. Amy Klobuchar ........................................................................................ 66 

Response to written questions submitted to Hon. Terrell McSweeny by: 

Hon. Jerry Moran ............................................................................................. 67 

Hon. Dean Heller .............................................................................................. 69 

Hon. Todd Young .............................................................................................. 70 

Hon. Bill Nelson ............................................................................................... 70 

Hon. Richard Blumenthal ................................................................................ 70 

Response to written questions submitted to Hon. Mike DeWine by: 

Hon. John Thune .............................................................................................. 72 

Hon. Jerry Moran ............................................................................................. 72 

Hon. Todd Young .............................................................................................. 72 

Hon. Bill Nelson ............................................................................................... 73 

Hon. Richard Blumenthal ................................................................................ 73 

Response to written questions submitted to Frank W. Abagnale, Jr. by: 

Hon. Bill Nelson ............................................................................................... 73 

Hon. Richard Blumenthal ................................................................................ 74 

Response to written question submitted by Hon. Richard Blumenthal to: 

Mike Schwanke ................................................................................................. 75 

(1) 

STAYING A STEP AHEAD: FIGHTING BACK 

AGAINST SCAMS USED TO DEFRAUD 

AMERICANS 

TUESDAY, MARCH 21, 2017 

U.S. SENATE, 

SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT

SAFETY, INSURANCE, AND DATA SECURITY, 

COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:33 p.m. in Room 

SR–253, Russell Senate Office Building, Hon. Jerry Moran, Chairman of the Subcommittee, presiding. 

Present: Senators Moran [presiding], Blumenthal, Inhofe, Young, 

Klobuchar, Markey, Booker, Udall, Hassan, Cortez Masto, and 

Thune. 

OPENING STATEMENT OF HON. JERRY MORAN, 

U.S. SENATOR FROM KANSAS 

The CHAIRMAN. The committee will come to order. Good afternoon, and welcome to our first hearing of this Subcommittee on 

Consumer Protection, Product Safety, Insurance, and Data Security, in this new Congress. I’m pleased that Ranking Member 

Blumenthal is here today. He has an especially busy schedule as 

a member of the Senate Judiciary Committee. And I look forward 

to working with him not only on this hearing, but throughout this 

Congress, as we try to address issues that are facing consumers 

and overseeing the work of the Federal consumer protection agencies that fall within this subcommittee’s jurisdiction. 

I am convening this hearing to discuss scams affecting American 

consumers. In the Commerce Committee, we often debate, and 

sometimes differ on, the proper role of government, the appropriate 

level of regulation, and the best way to protect the public without 

imposing unnecessary burdens on the private sector that would stifle their contribution to the economy. 

Today, however, the issue before the Committee is one on which 

there is broad consensus. Consumers need protection from those 

who seek to defraud them through scams, and the Federal Government must do everything it can to protect consumers from truly 

bad actors. American citizens are scammed out of billions upon billions of dollars every year with zero corresponding benefit to our 

Nation’s economy. With technology becoming more sophisticated, so 

also has the complexity of scams continued to make this circumstance even more difficult. From fake charity donation solicitaVerDate Nov 24 2008 10:19 Feb 20, 2018 Jkt 075679 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\GPO\DOCS\28381.TXT JACKIE
2 

tions calls, to phishing e-mail scams that lead to identity theft, a 

wide variety of scams that unduly harm Americans continue to bypass consumer protection enforcement measures at the Federal, 

state, and local levels. 

To that end, this committee oversees the Federal Trade Commission, and I am pleased that we are joined today by Acting Chairman Ohlhausen and Commissioner McSweeny, who together constitute the current FTC in its entirety. 

However, with all due respect to Chairman Ohlhausen and Commissioner McSweeny, I believe it’s important that the President act 

swiftly to restore the Commission to its full strength. The FTC’s 

work in support of consumers and competition is too important for 

an agency to continue operating shorthanded in weeks and months 

ahead. 

I would also like to extend a welcome to our former colleague, 

Ohio Attorney General Mike DeWine, Frank Abagnale, and Mr. 

Mike Schwanke. All three will provide unique perspectives today 

reflecting ways government protects citizens through fraud prevention, the perspectives of scam victims, and the mentality and common tactics of the scammers themselves. 

This is a wonderful witness panel for today’s hearing, which I 

hope will have a meaningful impact to raise awareness about this 

important issue, educate consumers about particular scams to 

watch for, and prevent future scams from continuing to harm consumers acting as a significant drag on our economy and all the personal challenges a scam creates. 

Thank you all for being here. And I turn now to the Ranking 

Member for his opening statement. 

STATEMENT OF HON. RICHARD BLUMENTHAL, 

U.S. SENATOR FROM CONNECTICUT 

Senator BLUMENTHAL. I join the Chairman in thanking you for 

being here. It is a great panel. And I want to thank the Chairman 

for holding this important hearing so that we and the consumers 

of America can stay one step ahead of scams, which have become 

so ubiquitous and threatening in our modern, technologically-driven life. 

Scams are a real hardship for individuals, but they’re also a 

scourge on our economy, unfairly victimizing consumers, compromising our trust in the marketplace, and siphoning millions of dollars from individuals and legitimate, honest businesses—not just 

individual consumers, but also businesses who suffer as a result of 

scams. In fact, the FTC has secured $14 billion in consumer relief 

since Fiscal Year 2014 alone. 

I am pleased that our former colleague, as Attorney General, Mr. 

DeWine is here with us, and that I am joined by two former Attorneys General on the panel today. And we know how pervasive 

these frauds are, not just the classic wire fraud schemes, but also 

the telephone technician scams targeting small and medium-sized 

businesses. 

The type of scheme is as endless as the human imagination and 

often as frustrating as a Whack-A-Mole game; you shut one scam 

down and dozens more arise. That’s why informed consumers are 

one of the most powerful tools we have, because the best prevenVerDate Nov 24 2008 10:19 Feb 20, 2018 Jkt 075679 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 S:\GPO\DOCS\28381.TXT JACKIE
3 

tion is consumer education and care and self-protection. But we 

also need swifter enforcement, and severe and appropriate punishment, to effectively deter bad actors and to ensure that any company complicit in a scam doesn’t simply write off a fine or a government lawsuit as the cost of doing business. My hope is that we will 

talk about stronger punishments against individuals so as to deter 

these scams and close some of the gaping holes in our present law. 

First, we ought to make sure that we’re pursuing enforcement 

actions against any and all aiders and abettors of fraud. Search engines, social media sites, and online generators ought to be on notice that they have a duty to implement checks to make sure that 

they are not complicit in connecting consumers to illegitimate businesses intent on fleecing people’s pocketbooks. 

Second, the FTC is currently limited in its ability to pursue cases 

against nonprofits. Considering that the nonprofit sector is estimated to account for 5 percent of the Nation’s GDP and 10 percent 

of the private sector workforce, there is also the vulnerability to 

fraud on the nonprofit side, and we’ve seen it occur in this sector. 

Third, in order to more effectively deter unlawful schemes, we 

ought to strengthen the FTC’s ability to seek civil penalties on first 

violations of Section 5. 

And fourth, the FTC shouldn’t just go after bad guys once they’ve 

already left a slew of victims in their wake; the FTC also ought to 

have the ability to set rules in appropriate circumstances that stop 

the bad behavior in the first place before consumers are harmed. 

Finally, there is no denying, no getting around the fact, that the 

hiring freeze has had consequences for the FTC, in effect inhibiting 

its ability to effectively crack down on fraud and protect consumers. 

And the recent actions, including the budget proposal that cuts 

government spending on enforcement efforts, can only have further 

bad consequences. 

I would also like to say a word about how Congress is on the 

verge of using the Congressional Review Act to rescind the Federal 

Communication Commission’s broadband privacy rules. Republican 

colleagues say they want to transfer privacy oversight of broadband 

back to the FTC, but the FTC doesn’t have jurisdiction over security and privacy practice of broadband, cable, and wireless carriers 

in their capacity as common carriers. 

And if the Ninth Circuit’s recent decision on FTC v. AT&T adopting a status-based instead of activity-based interpretation of the 

FTC’s common carrier exemption is upheld, the FTC’s jurisdiction 

and ability to improve privacy and security obligations would be 

even further curtailed. The elimination of the FCC’s rules would result in a yawning chasm where broadband and cable companies 

have no discernable regulation. That outcome would be devastating 

for consumers. 

My hope is that this committee, like the FTC, can continue working on a bipartisan basis, and I look forward to passing legislation 

like the Better Online Ticket Sales Act and the Consumer Freedom 

Review Act, as we did in the 114th Congress, that give the FTC 

additional authority to protect consumers. Thank you all for being 

here today. 

The CHAIRMAN. Senator, thank you very much. We welcome our 

panel of witnesses and thank them for their testimony. Our witVerDate Nov 24 2008 10:19 Feb 20, 2018 Jkt 075679 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 S:\GPO\DOCS\28381.TXT JACKIE
4 

nesses are the Honorable Maureen K. Ohlhausen, Acting Chairman 

of the Federal Trade Commission; the Honorable Terrell 

McSweeny, Commissioner of the Federal Trade Commission; the 

Honorable Mike DeWine, Attorney General of the State of Ohio; 

and I would turn to the gentleman from Oklahoma to introduce 

someone he claims is an Oklahoman. 

[Laughter.] 

The CHAIRMAN. But do ask him where his children went; to what 

university. 

[Laughter.] 

Senator INHOFE. Well, they couldn’t help that they couldn’t get 

in. 

[Laughter.] 

Senator INHOFE. Well, I’m just delighted to have Frank Abagnale 

here. And I’m very, very proud that he did raise a family in Oklahoma, and I see him on the plane all the time going back and forth. 

And I’m anxious to ask you the first question, but I won’t do that 

until it’s my turn. 

Mr. Abagnale, thank you for accepting the invitation to testimony before the Committee on the subject of fighting back against 

scams used to defraud Americans. Your perspective, as your life 

history, is unique among the witnesses. After your teenage years, 

you were made notorious by the movie ‘‘Catch Me If You Can,’’ 

which I just saw, and I’m just really excited about that. I know you 

in a different way than I have in the past. But, anyway, we’re looking forward to your unique perspective that we’ll enjoy very much. 

For over 40 years, financial institutions, corporations, and government agencies, including the Federal Bureau of Investigation, 

have benefited from your expertise in fraud-related crime. Because 

of you, countless Americans are better protected from scams because of their education and heightened awareness that you provide. The FBI has more than a generation of agents taught to detect, track, and solve fraud-related crimes against Americans. In 

recognition of fraud that is happening more and more online, you 

became AARP’s Fraud Watch Network Ambassador to educate consumers about the way to protect themselves from identity, and I 

think you had one just the other day in Oklahoma, such a meeting. 

So we look forward to your testimony this afternoon as we explore the challenges to educating and protecting Americans from 

fraud as well as the steps we can take to educate and empower 

those fighting against it. Welcome to you. 

Mr. ABAGNALE. Thank you, Senator. 

The CHAIRMAN. I’m not as constrained as the Senator from Oklahoma is. Your children went to what university? 

Mr. ABAGNALE. I have two sons who graduated from KU. 

The CHAIRMAN. Thank you. Our final witness on this panel is 

Mr. Mike Schwanke, of KWCH, the CBS affiliate in Wichita, Kansas, an investigative reporter. 

Let us begin with the testimony of the Chairwoman, and we’ll 

work our way to my right, to her left. 

Welcome. 

5 

STATEMENT OF HON. MAUREEN K. OHLHAUSEN, 

ACTING CHAIRMAN, FEDERAL TRADE COMMISSION 

Commissioner OHLHAUSEN. Thank you. Chairman Moran, Ranking Member Blumenthal, and members of the Subcommittee, I am 

pleased to appear before you today alongside my colleague, Commissioner Terrell McSweeny, and the other panelists to discuss the 

importance of combating consumer fraud. 

Protecting American consumers involves several factors, including market forces, private rights, and public law enforcement. The 

first factor is a competitive marketplace in which consumers have 

adequate information and a variety of choices. In these circumstances, most companies will care about their reputation and 

their ability to attract repeat customers. Companies therefore have 

incentives to be honest and keep the promises they make to consumers or else lose out to their competitors. 

The second factor is private legal rights as well as effective 

mechanisms to enforce those rights. The ability of consumers to 

bring legal action to enforce their rights in the face of, for example, 

a breach of contract is an important protection for consumers. 

The third factor is public law enforcement by the FTC, state attorneys general, and other entities. This is necessary in instances 

when a competitive marketplace and private litigation are not 

enough to protect consumers. A prime example of this is the subject 

of today’s hearing, consumer fraud. A fraudster is often immune to 

market forces because it doesn’t care about its reputation or attracting repeat customers. In addition, fraudsters will typically 

take steps to avoid detection of their scams or to dissipate assets, 

making it difficult for consumers to vindicate their rights in the 

court system. 

Many consumers are thus left without a viable recourse against 

fraudulent practices. In these circumstances, the FTC, as the Nation’s primary consumer protection agency, must step in. And as 

Acting Chairman, I’ve instructed Commission staff to focus our law 

enforcement efforts on stopping fraudulent practices, particularly 

those that are causing the largest consumer harm. In doing so, 

we’ll ensure that the Commission is using its resources for the 

maximum benefit of consumers. 

And I would like to touch briefly today on two populations in particular, military consumers and small businesses. 

Military consumers are an attractive target for fraudsters. They 

receive a regular paycheck, change addresses frequently, and belong to a close-knit community. In Calendar Year 2016, the FTC’s 

Consumer Sentinel Network database received over 103,000 complaints from military and veteran consumers, the vast majority of 

which were about imposter scams, identity theft, and other frauds. 

Protecting those consumers who are protecting our country is of 

paramount importance, but clearly there is still work yet to do. 

Small businesses are also attractive targets for fraud. The Better 

Business Bureau reports that thousands of small businesses are 

the targets of scams each year. Fraudsters often take advantage of 

the fact that small businesses lack a sophisticated recordkeeping 

system and thus are more susceptible to fake invoices, phishing attacks, and marketing scams. Frauds targeting small businesses, 

6 

1See, e.g., Timothy J. Muris, Chairman, Fed. Trade Comm’n, The Federal Trade Commission 

and the Future Development of the U.S. Consumer Protection Policy (Aug. 19, 2003), https:// 

www.ftc.gov/public-statements/2003/08/federal-trade-commission-and-future-development-usconsumer-protection. 

many of which are scrambling just to make ends meet, can have 

a stifling effect on innovation and competition in the marketplace. 

The Commission also actively works to help consumers recognize 

frauds before they fall victim. The Commission produces websites, 

brochures, and other materials to educate the public on common 

scams and how to avoid them. Often these materials are geared toward frequently targeted groups, such as seniors, Spanish speakers, and the two groups I mentioned, military consumers and small 

businesses. 

For example, we have a website, Military.Consumer.gov, devoted 

to educating military consumers about fraud issues. And I’ve also 

directed Commission staff to create a webpage for small businesses 

on which we will provide a one-stop shop for all of our guidance 

to small business on how to avoid scams. And I invite the Subcommittee to consider linking to our materials for the benefit of 

your constituents. 

Now, I’m proud of the work the FTC has done to combat fraud, 

but we can’t become complacent or distracted from that core mission. Fraudsters are always thinking up new scams, and the Commission must be and will be at the forefront of protecting American 

consumers. 

So thank you for your time, and I look forward to the discussion. 

[The prepared statement of Ms. Ohlhausen follows:] 

PREPARED STATEMENT OF HON. MAUREEN K. OHLAUSEN, ACTING CHAIRMAN, 

FEDERAL TRADE COMMISSION

Chairman Moran, Ranking Member Blumenthal, and members of the Subcommittee. I am pleased to appear before you today alongside my colleague Commissioner Terrell McSweeny and the other panelists to discuss the importance of combatting consumer fraud. 

Protecting America’s consumers involves several factors, including market forces, 

private rights, and public law enforcement.1

The first factor is a competitive marketplace in which consumers have adequate 

information and a variety of choices. In these circumstances, most companies will 

care about their reputation and their ability to attract repeat customers. Companies 

will therefore have incentives to be honest and keep the promises they make to consumers or else lose out to their competitors. 

The second factor is private legal rights, as well as effective mechanisms to enforce those rights. The ability of consumers to bring legal action to enforce their 

rights in the face of, for example, a breach of contract is an important protection 

for consumers. 

The third factor is public law enforcement by the FTC, state Attorneys General, 

and other entities. This is necessary in instances when a competitive marketplace 

and private litigation are not enough to protect consumers. A prime example of this 

is the subject of today’s hearing: consumer fraud. A fraudster is often immune to 

market forces because it does not care about its reputation or attracting repeat customers. In addition, fraudsters will typically take steps to avoid detection of their 

scams or to dissipate assets making it difficult for consumers to vindicate their 

rights in the court system. 

Many consumers are thus left without a viable recourse against fraudulent practices. In these circumstances, the FTC, as the Nation’s primary consumer protection 

agency, must step in. As Acting Chairman, I have instructed Commission staff to 

focus our law enforcement efforts on stopping fraudulent practices, particularly 

those that are causing the largest consumer harm. Doing so will ensure that the 

Commission is using its resources for the maximum benefit of consumers. 

7 

2See Major Cindie Blair, Solutions for Victims of Identity Theft: A Guide for Judge Advocates 

to Assist Servicemembers in Deterring, Detecting, and Defending Against this Growing Epidemic, 

2011–JUN Army Law. 24, 26–29 (2011). 3Fed. Trade Comm’n, Consumer Sentinel Network Report (2016), https://www.ftc.gov/enforcement/consumer-sentinel-network/reports. 4 Better Business Bureau, Scams that Target Small Businesses (2017), http://www.bbb.org/ 

wisconsin/news-events/news-releases/2017/01/scams-that-target-small-businesses. 5See id.; see also Fed. Trade Comm’n, Small Business Scams, https://www.ftc.gov/tips-advice/business-center/guidance/small-business-scams. 

I would like to touch briefly today on two populations in particular: military consumers and small businesses. 

Military consumers are an attractive target for fraudsters. They receive a regular 

paycheck, change addresses frequently, and belong to a close-knit community.2 In 

calendar year 2016, the FTC’s Consumer Sentinel Network database received over 

103,000 complaints from military and veteran consumers, the vast majority of which 

were about imposter scams, identity theft, and other frauds.3 Protecting those consumers who are protecting our country is of paramount importance, but clearly 

there is still work yet to do. 

Small businesses are also attractive targets for fraud. The Better Business Bureau reports that thousands of small businesses are the targets of scams each year.4

Fraudsters often take advantage of the fact that many small businesses lack a sophisticated recordkeeping system and are thus more susceptible to fake invoices, 

phishing attacks, and marketing scams.5 Frauds targeting small businesses, many 

of which are scrambling just to make ends meet, can have a stifling effect on innovation and competition in the marketplace. 

The Commission also actively works to help consumers recognize frauds before 

they fall victim. The Commission produces websites, brochures, and other materials 

to educate the public on common scams and how to avoid them. Often, these materials are geared towards frequently targeted groups, such as seniors, Spanish-speakers, and the two groups I mentioned: military consumers and small businesses. For 

example, we have a website, military.consumer.gov, devoted to educating military 

consumers about consumer fraud issues. I have also directed Commission staff to 

create a webpage for small businesses on which we will provide a one-stop shop for 

all of our guidance to small businesses on how to avoid scams. I invite the Subcommittee to consider linking to our materials for the benefit of your constituents. 

I am proud of the work the FTC has done to combat fraud, but we cannot become 

complacent or distracted from that core mission. Fraudsters are always thinking up 

new scams, and the Commission must be and will be at the forefront of protecting 

America’s consumers. Thank you and I look forward to your questions. 

The CHAIRMAN. Commissioner. 

STATEMENT OF HON. TERRELL MCSWEENY, COMMISSIONER, 

FEDERAL TRADE COMMISSION 

Ms. MCSWEENY. Thank you very much. Thank you, Mr. Chairman Moran, Ranking Member Blumenthal, and Senators, for holding this important hearing and your attention to this important set 

of issues. I’m Terrell McSweeny, and along with my colleague, Acting Chairman Ohlhausen, we are the current members of the U.S. 

Federal Trade Commission. 

The work of protecting American consumers from frauds and 

scams is bipartisan, and, in fact, I would go so far as to say it is 

nonpartisan. I would like to commend Acting Chairman Ohlhausen 

for her emphasis and commitment to this important part of the 

FTC’s mission. For more than 100 years, the FTC has protected 

consumers from dishonest practices, although the particular scams 

we see in the marketplace have changed over time. 

In 2016, we received more than 3 million consumer complaints. 

The top three categories of complaints were debt collection, imposter frauds, and identity theft. Since not all victims file complaints, these statistics likely understate the problem significantly. 

In fact, the FTC’s most recent national survey of fraud victimizaVerDate Nov 24 2008 10:19 Feb 20, 2018 Jkt 075679 PO 00000 Frm 00011 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\28381.TXT JACKIE
8 

tion estimated that 10.8 percent of all Americans over the age of 

18, or more than 25 million people, had been the victim of a fraud. 

The growth in imposter scam complaints is particularly striking. 

They surpass the number of identity theft complaints for the first 

time ever last year. In imposter scams, someone poses as a friend, 

family member, romantic interest, legitimate company, or even a 

government agency in order to obtain money or personal information from the victim. Government imposter scams, the most common type of imposter scam reported last year, run the gamut from 

callers claiming to be from the IRS and demanding payment of 

back taxes to debt collectors claiming to be from a law enforcement 

agency. 

Other imposters purport to be calling on behalf of a company, 

such as Microsoft or Apple. They convince consumers that their 

computers are infected with malware. In reality, no such virus exists, but consumers pay for costly technical support services with 

very little, if any, value at all. 

We are taking action to stop these scams at the FTC. Last year, 

we brought multiple cases against tech support scams as well as 

action against an entity that was impersonating the Department of 

Transportation. Stopping fraud, as Acting Chairman Ohlhausen 

has said, is a core FTC priority. This includes not just pursuing 

bad actors, who directly perpetuate the frauds, but also others who 

facilitate those scams. 

One example is our recent case against Western Union, which paid $586 million to settle charges that it failed to stop scammers 

from using its money transfer system to collect payments for numerous types of fraud, including many of the types of scams that 

we are talking about today. 

Protecting consumers is just too big a job for the FTC to do 

alone, and that’s why we partner with other government agencies, 

states, state attorney generals, and civic organizations in our antifraud work. And that is also why we invest heavily in consumer 

and business education. 

Educating American consumers is one of the best ways we can 

combat fraud. We produce materials in multiple languages for almost every demographic and make them available across all platforms to reach the broadest possible audience. We hold Ethnic 

Media Roundtables around the country to help diverse communities highlight frauds that are specifically affecting them. 

We also have a campaign to help older people learn about common scams and pass that information on to their peers. And we 

work closely with the Department of Defense and others to help the 

military community avoid frauds. 

It is vital that we continue this important outreach and ensure 

that we have sufficient resources to meet the demands for our materials. This is particularly true—and I am biased in this regard as 

a parent—for our educational materials for parents and children, 

which help parents keep their kids safe online. These materials 

need to be updated to remain relevant, including optimizing them 

for mobile platforms. 

The FTC must continue to stay abreast of emerging consumer 

protection issues. In our always-on, always-connected digital world, 

which is so full of marvelous innovations, we also have new opporVerDate Nov 24 2008 10:19 Feb 20, 2018 Jkt 075679 PO 00000 Frm 00012 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\28381.TXT JACKIE
9 

tunities for fraudsters and bad actors. Imposter scams are just one 

example of that trend. 

I am particularly concerned, for example, about the growth in 

ransomware attacks. Ransomware attacks on computers, both for 

individuals and businesses, are unfortunately already well known. 

But I worry that attacks on connected consumer devices will soon 

become more common, especially given wide-ranging industry data 

security practices. In the not-too-distant future, a consumer might 

turn on her smart TV only to see a message asking for $50 in 

Bitcoin if she wants to watch television again. 

In the world of cyber threats, the FTC must keep pace with 

changing technology, and we’ve been doing that by engaging with 

stakeholders and, most importantly, bringing technologists into our 

work. The FTC’s Office of Technology Research and Investigation, 

or OTech, is in its second year, and I am pleased that our talented 

interdisciplinary team of lawyers and computer scientists is continuing to provide important in-house capabilities supporting our 

mission. 

As our complaint data indicates, scammers are finding creative 

new ways to target consumers, so it is vital that the FTC continue 

to have proper resources to keep pace with them. As we’ll discuss 

today, our consumer protection mission has a big impact on people’s lives. Last year alone, we obtained orders that will return 

more than $11 billion directly to consumers in the form of redress. 

That’s more than 35 times our annual operating budget. Our enforcement actions not only provide American consumers with justice, they help strengthen consumer trust in the marketplace, 

strengthening the dynamism of the American economy itself. 

So thank you again for your attention and for holding this hearing. 

[The prepared statement of Commissioner McSweeny follows:] 

PREPARED STATEMENT OF HON. TERRELL MCSWEENY, COMMISSIONER, 

FEDERAL TRADE COMMISSION

Chairman Moran, Ranking Member Blumenthal: thank you for holding this important hearing. I am Terrell McSweeny, and along with Acting Chairman 

Ohlhausen, we are the current members of the Federal Trade Commission. 

The work of protecting American consumers from frauds and scams is bipartisan—in fact, I would call it non-partisan. For more than 100 years, the FTC has 

protected consumers from dishonest practices, although the particular scams we see 

in the marketplace change over time. 

In 2016, we received more than three million consumer complaints and the top 

three categories were debt collection, impostor frauds, and identity theft. Since not 

all victims file complaints, these statistics understate the problem. The FTC’s most 

recent national survey of fraud victimization estimated that 10.8 percent of all 

Americans over age 18—or 25.6 million people—had been a victim of fraud in 2011. 

The growth in impostor scam complaints is striking; they surpassed the number 

of identity theft complaints for the first time ever last year. In imposter scams 

someone poses as a friend, family member, romantic interest, legitimate company, 

or government agency, in order to obtain money or personal information. 

Government impostor scams—the most common type of imposter scam reported 

last year—run the gamut from callers claiming to be from the IRS and demanding 

payment for back taxes to debt collectors claiming to be from a law enforcement 

agency. 

Other impostors purport to be calling on behalf of a company such as Microsoft 

or Apple. They convince consumers that their computers are infected with malware. 

In reality no virus exists, but consumers pay for costly ‘‘technical support’’ services 

with little, if any, value. 

10 

We are taking action to stop these scams. Last year we brought multiple cases 

against tech support scams, as well as an action against an entity that was impersonating the Department of Transportation. 

Stopping fraud is a core FTC priority. This includes not just pursuing bad actors 

who are directly perpetrating the frauds, but also others whose facilitate scams. One 

example is our recent case against Western Union, which paid $586 million to settle 

charges that it failed to stop scammers from using its money transfer system to collect payments for numerous types of fraud. 

Protecting consumers is too big a job for the FTC to do alone. That’s why we partner with other government agencies, states, and civic organizations in our anti-fraud 

work—and why we invest in consumer and business education. 

Educating American consumers is one of the best ways we can combat fraud. We 

produce materials in multiple languages for almost every demographic and make 

them available across platforms to reach the broadest possible audience. We hold 

Ethnic Media Roundtables around the country to help diverse communities highlight frauds affecting them. 

We also have a campaign to help older people learn about common scams and 

pass that information on to their peers. And we work closely with the Department 

of Defense and others to help the military community avoid fraud. 

It is vital that we continue this important outreach—and ensure that we have the 

resources to meet the demand for our materials. This is especially true for our educational materials for parents and children, which help parents keep their kids safe 

online. It’s critical that we keep these materials relevant and up to date, including 

optimizing them for mobile platforms. 

The FTC must continue to stay abreast of emerging consumer protection issues. 

Our always-on, always-connected digital world is full of marvelous innovations—but 

it also creates some new opportunities for bad actors. 

I’m particularly concerned about the growth in ransomware attacks. Ransomware 

attacks on computers—both for individuals and businesses—are unfortunately already well known. But I worry that attacks on connected consumer devices will soon 

become more common—especially given wide-ranging industry data security practices. In the not-too-distant future a consumer might turn on her smart TV only to 

see a message that asks for $50 in Bitcoin if she wants to watch television again. 

In a world of new cyber threats, the FTC must keep pace with changing technology. We have been doing that by engaging with stakeholders—and, most importantly, bringing technologists on board. The FTC’s Office of Technology Research 

and Investigation, or OTech, is in its second year. 

OTech is a talented inter-disciplinary team of lawyers and computer scientists 

who provide us with in-house research capabilities and the expertise to understand 

cutting-edge technology—like cross-device tracking, or how algorithms impact consumer choice. As more of these technologies come into the marketplace, it is vital 

that the FTC continue to expand these capabilities. 

Unlike many other enforcement agencies, the Federal Trade Commission sends 

refund checks to individual consumers who are harmed by unfair and deceptive 

business practices. Last year, we obtained orders that will return more than $11 billion in redress to consumers. 

Our enforcement actions not only provide American consumers with justice, they 

help to strengthen consumer trust in the marketplace, strengthening the dynamism 

of the American economy itself. 

Thank you again for holding this hearing. I look forward to answering your questions. 

The CHAIRMAN. Mr. Attorney General. 

STATEMENT OF HON. MIKE DEWINE, 

OHIO ATTORNEY GENERAL 

Mr. DEWINE. Mr. Chairman, Chairman Moran, thank you very 

much for inviting us to be here today, and Ranking Member 

Blumenthal, and all the members of the Committee. 

You know, we’ve always had—I suppose time immemorial we’ve 

had con artists and crooks, swindlers, but what is really different 

today is they now have a very long arm, and, of course, that long 

arm is the Internet and long-distance telephone. The Internet and 

social media have really transformed the world we live in, and in 

some cases, for very, very good ways, FaceTime with one of your 

11 

grandchildren, something that my wife, Fran, and I enjoy. But, unfortunately, scammers also use these modern conveniences to commit fraud and to satisfy their greed. 

Now, grandparent scams are one of the most frequently reported 

and the most, I think, gut-wrenching scams that my office receives. 

Fran and I have 8 children and 22 grandchildren, and like all 

grandparents, there is nothing, nothing, we would not do for our 

grandkids, and that is exactly the mentality that the scammers 

prey upon. There is a reason they call grandparents and they don’t 

call parents. 

The scam often begins with a phone call telling grandparents 

that one of their grandchildren has been in a car accident, caught 

with drugs, or put in jail. The caller pretends either to be the 

grandchild or an attorney or a law enforcement officer, and tells 

the grandparent to send money immediately to have the charges 

dismissed, to cover court costs, or to allow the grandchild to return 

home. 

As part of the scheme, grandparents often are instructed not to 

talk to other people. In fact, that’s normally what the call is all 

about. They say, ‘‘Grandpa, this is Sara.’’ ‘‘Where are you, Sara? I 

thought you were at Miami University.’’ ‘‘No, Grandpa, I’m so-andso.’’ And then, ‘‘Do your parents know that?’’ ‘‘Don’t tell my parents.’’ And that’s always what they say. Many times the grandparents not only pay once, but they pay several different times, 

sometimes for attorneys’ fees or other unexpected costs. Eventually 

the grandparents discover that their grandchild was not truly in 

trouble, but by then, of course, it is much too late. The average loss 

to an individual Ohioan that’s been reported to us for this specific 

scam is over $5,000. 

Another popular scam is the romance scam. In a typical romance 

scam, the con artist meets the victim online through a dating or 

social networking site. The scammer often claims to live in the 

United States, but says he or she is temporarily located overseas 

due to a military assignment, business trip, or other reason. Eventually, he or she asks the victim to send money to help cover some 

type of cost, such as airfare to visit the victim, medical expenses, 

or fees associated with military leave. Not surprisingly, once the 

money is sent, it’s nearly impossible for anyone to recover. The average loss from this particular scam in the state of Ohio is over 

$26,000. 

As Attorney General, I’ve been committed to treating these 

scams as what they are, and that is crimes. Shortly after becoming 

Attorney General, I established an Economic Crimes Unit in my 

Consumer Protection Section. The unit includes seasoned prosecutors and investigators who are tasked with holding these fraudsters 

accountable and assisting local law enforcement and prosecutors in 

identifying, investigating, and prosecuting consumer fraud of a 

criminal nature. 

One of the reasons our Economic Crime Unit has been successful 

is that we’re able to see patterns of conduct occurring across multiple jurisdiction lines, across multiple counties. We can then make 

connections with law enforcement and victims and show the true 

scope of the criminal enterprise. 

12 

I think, Mr. Chairman and members of the Committee, that we 

need to apply that same logic to scams and economic crimes nationwide on the Federal level. To be successful, we need to break down 

barriers to communication. We need to have more sharing of information and resources, and we need to work together to combat 

crime on the national and the international level. 

We’ve all heard about the lottery scam, ‘‘You’ve won the lottery.’’ 

We’ve seen that model, though, of catching these people work in 

what’s called Project JOLT, where the U.S. Department of Homeland Security has partnered with a Jamaican police force, industry, 

and other law enforcement agencies to take down Jamaican lottery 

scammers, a number of whom have recently been extradited to the 

United States to face Federal charges. 

Mr. Chairman and members of the Committee, now is the time 

to apply those lessons to other scams and crimes because, simply 

put, there is strength in numbers. When multiple agencies put 

their resources, their intelligence, their ingenuity together, great 

things do in fact happen. I’m proud of the work my office has undertaken to go after the scammers that prey on Ohio families. My 

office will continue to provide support for local law enforcement in 

an ongoing effort to hold scammers accountable. We’re also committed to providing Ohioans with the information and education 

they need to avoid being victims in the first place. 

By doing these things, we are making progress. Thank you, Mr. 

Chairman and members of the Committee. And I look forward to 

questions. 

[The prepared statement of Mr. DeWine follows:] 

PREPARED STATEMENT OF MIKE DEWINE, OHIO ATTORNEY GENERAL

Thank you Chairman Thune, Subcommittee Chairman Moran, and Ranking Member Blumenthal for holding this important hearing today to discuss how scams are 

affecting families in my home state of Ohio and families all across our country. 

I have served now as Ohio Attorney General for just over six years. One of the 

things I am continually amazed by is both the number of scams that constituents 

report to my office and the increasing creativity of the scammers! As you all know, 

there have always been scam artists and cons. But, what is different today is that 

they now have the long arm of both the Internet and phones! 

The Internet and social media have transformed the world we live in and the way 

we communicate. For example, grandparents who live miles apart from their 

grandkids, can now see them with the touch of a button on their mobile devices. 

Unfortunately, scammers also use these modern conveniences to commit fraud and 

satisfy their greed. 

‘‘Grandparent scams’’ are one of the most frequently reported—and most gutwrenching—scams my office receives. My wife Fran and I are the parents of eight 

children—and now grandparents of 22 grandchildren. Like any grandparent, there 

is nothing we wouldn’t do for our grandkids. And that is exactly the mentality that 

the scammers prey upon. 

The scam often begins with a phone call telling grandparents that one of their 

grandchildren has been in a car accident, caught with drugs, or put in jail. The caller pretends either to be the grandchild, an attorney, or a law enforcement officer 

and tells the grandparent to send money to have the charges dismissed, to cover 

court costs, or to allow the grandchild to return home. 

There is always a sense of urgency with these scams. The grandparent is told to 

go to the store right away, to buy several gift cards, and to read the card numbers 

over the phone. Using this information, the scammer then drains the funds on the 

cards almost instantly. 

As part of the scheme, grandparents often are instructed not to talk to other people (such as the grandchild’s parents) about the problem. Callers may even threaten 

to shoot or harm the grandchild if the grandparent refuses to pay. 

13 

And, if grandparents pay once, they likely will receive additional calls seeking 

more money, supposedly for attorney’s fees or other unexpected costs. Eventually, 

grandparents discover that their grandchild was not truly in trouble. But by then, 

it is too late. The average loss to an individual Ohioan because of this scam is 

$5,309. And that’s just based on the cases reported to my office. Because so many 

go unreported, that figure is likely much higher. 

Another popular scam is the ‘‘romance scam!’’ In a typical romance scam, the con 

artist ‘‘meets’’ the victim online through a dating or social networking site. The 

scammer often claims to live in the United States, but says he or she is temporarily 

located overseas due to a military assignment, business trip, or personal vacation. 

One common theme of this scam is that the victim never actually meets the 

scammer face-to-face. Instead, the scammer may spend months developing a relationship with the victim online. Eventually, he or she asks the victim to send money 

to help cover some type of cost, such as airfare to visit the victim, medical expenses, 

or fees associated with military leave. The scammer often asks the victim to send 

the money via wire transfer or prepaid money card. Not surprisingly, once the 

money is sent, it is nearly impossible to recover. The average loss to an individual 

Ohioan for this scam is $26,518! And again, that number is just based on cases reported to my office. It, too, is likely much higher. 

As Attorney General, I have been committed to treating these scams as what they 

are—crimes. In 2011, I established an Economic Crimes Unit in my Consumer Protection Section. The unit includes seasoned prosecutors and investigators tasked 

with holding these fraudsters accountable and assisting local law enforcement and 

prosecutors in identifying, investigating, and prosecuting consumer fraud of a criminal nature. The unit consists of three attorneys and four investigators who are dedicated solely to criminal investigations. 

To assist even more in the fight against scams, my office sought additional investigative power from the Ohio General Assembly in 2012. The result was new telecommunications fraud subpoena authority that our investigators and lawyers use 

every day to obtain financial and electronic evidence that furthers investigations 

and leads to arrests and prosecutions. This subpoena power is crucial in investigating scams that are exclusively Internet or phone-based. 

Telephone and electronic communication are the major tools that scammers use 

to initiate contact with consumers. Unlike in the past, phone numbers are no longer 

a reliable indicator of where a call is coming from or who is making it. Voice over 

Internet Protocol (VoIP) phones allow callers to use area codes and phone numbers 

linked to a particular city or state, even though the person making the call is nowhere near there. 

These services use a computer or smartphone to make calls through the Internet. 

Calls can be made using WiFi hot spots commonly found in airports, restaurants, 

coffee shops, and libraries. Criminals use the perceived legitimacy these phone numbers provide to help persuade unsuspecting victims into sending them money. We 

commonly see this tactic being used in IRS scams where the call appears to be originating from Washington, D.C. or Northern Virginia, but is instead coming from 

overseas. 

Changes in how money is transferred have created additional challenges. Money 

transfer services, such as Western Union and Moneygram, were the traditional 

methods scammers used to get money. While those methods are still in use, we’ve 

learned that scammers now rarely receive the money directly. They tend to use 

‘‘Money Mules,’’ who are people who’ve often been duped into thinking they’re ‘‘Secret Shoppers’’ or getting an advance for a babysitting job or think they have a job 

processing payroll to receive the money and send it on—often to someone overseas. 

These multiple steps are used to frustrate law enforcement and throw them off the 

trail. Also, people picking money up are required to provide very little, if any, formal 

identification, which further impedes our efforts to identify them. 

Criminals have discovered another tool for moving money—prepaid gift cards and 

reloadable debit cards. Scam victims are instructed to purchase prepaid or 

reloadable cards, most recently iTunes cards. They then provide the unique identifying number from the back of the card to the scammer, and the money is transferred from the prepaid card or reload card to the scammer’s account almost immediately, leaving the victim holding nothing but a useless piece of plastic. 

My office recently spoke with a victim who received a call telling her that her 

grandson had been in a car accident and that the judge would drop the charges if 

she paid $4,500 to an insurance company to cover the damage to a rented vehicle. 

The victim purchased prepaid cards, provided the card numbers to the scammer 

over the phone, and then was told to mail the cards themselves to an ‘‘insurance 

office’’ in Columbus, Ohio. My investigators found the address. As you would suspect, there was no insurance company. 

14 

Separate, but related, it’s probably no surprise to you that many scam victims are 

targeted solely because of their age. To address this issue, my office created the 

Elder Justice Initiative and assigned staff to work with law enforcement, prosecutors, Adult Protective Services, and communities to identify, investigate, and prosecute elder abuse cases. We also host forums in local communities to educate seniors 

about how to protect themselves from cons. 

As much as we try to educate consumers about potential scams, these cons are 

good at what they do and continue to rip off the vulnerable. Though many times, 

our investigations lead to dead ends, sometimes our work pays off in getting these 

bad guys. In 2013, for example, my office indicted and convicted 18 defendants for 

a national telemarketing ring that stole more than $2 million from thousands of victims in 41 states over a five-year period. That group used dozens of VoIP phone 

numbers, seasoned telemarketers, false websites, elaborate lies, and multiple businesses in Ohio and Florida to prey on owners of vacant, nearly worthless land 

throughout the desert southwest. 

Also in 2013, attorneys from our Special Prosecutions Section convicted John Donald Cody of running a charity scam that stole millions of dollars intended for Navy 

veterans. Cody, who had assumed the identity of a man named Bobby Thompson, 

was sentenced in an Ohio courtroom to 28 years in prison and ordered to pay more 

than $6.3 million in fines. 

Just last month, my office partnered with local law enforcement and indicted a 

66 year-old-woman for her role in an alleged romance scam. According to investigators, the suspect lied to people about needing money for various reasons, such as 

claiming she had a serious illness or that she was at risk of losing her home. The 

victims, who included the suspect’s family and friends, believed her. Although the 

suspect generally promised to pay people back promptly, investigators determined 

that she sent the funds overseas to a man she had been communicating with online. 

This person’s lies and deception cost her friends and family over $730,000! 

This case comes on the heels of a 2014 investigation that my office initiated that 

led to a federally-convicted drug dealer pleading guilty to a running a romance scam 

that robbed over $1.1 million from unsuspecting victims across the country. The 

case began when my office received a complaint from an Ohio resident who had lost 

over $800,000 to a man she met online. My investigators tracked our victim’s money 

to accounts in Maryland. We then reached out to local law enforcement, shared 

what we had learned, and provided evidence linking a convicted drug dealer to the 

scheme. 

The drug dealer was the ringleader to a group of scammers who used a number 

of false stories and promises to convince the victims to give money, including stories 

about investing in fake gold that required payments for shipping and storage, fictitious sick family members who needed money, fake hospital bills, and fake plane 

trips to visit the victims. To help conceal the scheme and by using false documents, 

the conspirators were able to convince the victims to mail checks to a corporation 

that one of the cons had created and controlled or to wire money into bank accounts 

held in the name of that corporation. 

Because of that single lead, we were able to develop that case into a Federal investigation. It is that kind of state and Federal cooperation that has brought justice 

not only to our Ohio victim, but also to victims throughout the United States. 

As we approach April, IRS scams become more prevalent. The IRS scams and tax 

preparer frauds pose special challenges for law enforcement. Because of Federal law, 

the Internal Revenue Service cannot and will not share tax or taxpayer information 

with our state criminal investigators. Let me tell you why that’s important. 

Our investigators will receive a complaint about someone who is doing taxes and 

is alleged to be stealing part of the taxpayer’s refund by personally diverting the 

money. This single taxpayer can get his or her own records and provide them to 

us, but our investigators have no way of knowing how much larger the crime may 

be or how many more people may be being victimized because the IRS can’t tell us 

anything at all. State subpoenas won’t work, so our investigation ends up at a dead 

end. 

The individual loss for this type of scam is generally less than $2,500.00. But, because we can’t get access to information about other potential victims, that’s where 

the case stops. 

Whenever we receive an allegation of tax preparer fraud, IRS scam calls, or refund theft, we tell the consumer to contact the Treasury Inspector General for Tax 

Administration (TIGTA). Very few of these cases are ever likely to meet the dollar 

threshold required to get the attention of an IRS inspector, let alone a U.S. Attorney. Giving state and local law enforcement the ability to obtain the information 

needed to effectively investigate and prosecute tax preparer fraud, IRS scams, and 

15 

refund theft wouldn’t just protect taxpayers, it would conserve valuable Federal resources and help ensure the integrity of our tax collection program. 

There is strength in numbers. When multiple agencies put their resources, intelligence, and ingenuity together, great things can happen. 

Ohio is a home rule state, with 88 counties and 88 county sheriffs and prosecutors 

acting independently from the other 87. That local control ensures that those elected 

officials are accountable to the people in their communities. It also ensures that 

these sheriffs and prosecutors know what’s happening in their counties. 

But, there are also challenges. A law enforcement officer in Jackson County, for 

example, may know about the three people who were ripped off in that county, but 

may not know about the three people who were victimized in Greene County, or the 

two people who were victimized in Clark County, or the person who was conned out 

of her life savings in Ashtabula County. Imagine how much bigger that problem gets 

when you start talking about victims in multiple states and victims who are hundreds or even thousands of miles away. 

One of the reasons our Economic Crimes Unit has been successful is that we’re 

able to see patterns of conduct occurring across multiple counties, make connections 

with law enforcement and victims, and show the true scope of a criminal enterprise. 

We need to apply that same logic to scams and economic crime nationwide. To be 

successful, we need to break down barriers to communication, sharing information, 

and resources and work together to combat crime on the national and international 

level. 

We’ve seen that model work in Project JOLT, where the U.S. Department of 

Homeland Security has partnered with the Jamaican Constabulary Force, industry, 

and other law enforcement agencies to take down Jamaican lottery scammers—a 

number of whom have recently been extradited to the United States to face Federal 

charges. Now is the time to apply those lessons to others scams and crimes. 

I am very proud of the work my office has undertaken to go after the scammers 

that prey on Ohio families. My office will continue to provide support for local law 

enforcement in an ongoing effort to hold scammers accountable. We’re also committed to providing Ohioans with the information and education they need to avoid 

being victims in the first place. By doing these things, we are making a difference. 

Thank you, again, for the opportunity to testify here today. I’m happy to answer 

any questions. 

The CHAIRMAN. Thank you, Attorney General. 

Mr. Abagnale. 

STATEMENT OF FRANK ABAGNALE, AUTHOR AND 

CONSULTANT, ABAGNALE & ASSOCIATES 

Mr. ABAGNALE. Thank you, Chairman Moran and Ranking Member Blumenthal and members of the Committee. I am honored to 

be invited to testify before you today on the seriousness of identity 

theft and financial fraud against the elderly and all American citizens and the need for education to prevent individuals from falling 

victim to these multiple scams. 

I’m Frank Abagnale, subject of the book and movie ‘‘Catch Me If 

You Can.’’ I have a unique perspective, having committed fraud as 

a teenager some 50 years ago, and having spent the last 41 years 

of my life teaching at the FBI Academy and the field offices of the 

Federal Bureau of Investigation. 

Over the past 4 decades, I’ve conducted over 3,000 lectures and 

written four books on these subjects. During this time, I’ve worked 

to try to prevent fraud, forgery, cyber crimes, embezzlement, identity theft, and other scams perpetrated against consumers and 

small businesses. 

Serious issues we face are fraud and scams which are perpetrated against American citizens of all ages. They can be perpetrated by family members, financial advisers, home health care 

providers, friends, scam artists, and others. 

16 

Let me share with you some statistics that speak volumes as to 

why we need initiatives to help prevent these frauds against consumers. 

A new survey by Javlin Strategy & Research shows a 16 percent 

growth in fraud incidences in 2016. Fraud affected over 6 percent 

of U.S. consumers, the highest on record. The Consumer Sentinel 

Network, which collects consumer complaints from the Federal 

Trade Commission, state law enforcement agencies, and other Federal agencies received over 3 million complaints in 2016. Almost 

1.3 million of those complaints were fraud-related. Consumers reported paying over $744 million in those fraud complaints. 

The FBI’s Internet Crime Complaint Center issues an annual report based on reported complaints of Internet crime. The 2015 report—and that’s the latest available—shows that the center received nearly 270,000 online crime complaints in 2014, with a loss 

of about $800 million. State-by-state complaint data shows the 

largest losses are from individuals age 50 plus. 

These are probably low estimates because many times consumers 

are too embarrassed to admit that they have been defrauded, and, 

therefore, it goes unreported. Their families might not even be told. 

Identity theft, investment fraud, and scams rob millions of Americans of their hard-earned money every year. 

To help combat this threat, for the last 3 years, I’ve joined forces 

with AARP’s Fraud Watch Network as their Ambassador. The goal 

of the Fraud Watch Network is to arm Americans with tools they 

need to spot and avoid fraud and scams so they can protect themselves and their families. Last year, through my relationship with 

the Fraud Watch Network, we reached more than 43 million people 

through state office sponsored events, social media, e-mail alerts, 

and online advertising. We held more than 1,200 events on the 

topic of fraud in 2016 alone. In 2017, I will be appearing in more 

than one dozen cities across America to help educate people about 

current scams, their risk, and most important of all, how to protect 

themselves and their families from being victimized. 

What is truly amazing to someone like me is that what I did 50 

years ago as a teenager is 4,000 times easier to do today due to 

technology. Unfortunately, technology breeds crime; it always has 

and always will. At the same time, there is no technology, nor will 

there ever be any technology, that can prevent social engineering. 

Socially-engineered crimes can only be prevented through education. There will always be individuals who will use technology in 

a negative, self-serving way. 

Throughout my career, I have always believed that education is 

the best prevention. If you educate and explain to people their 

risks, in most cases, they are smart enough to take that information and reduce their risk. I believe education is the only approach 

to help eliminate consumer fraud. Education is not only important 

for our seniors, but it also helps bring awareness to all citizens so 

they can recognize the signs of fraud and how to protect themselves. 

I have always believed that the government should take the lead 

in education to combat these horrendous crimes. Consumers are 

hungry for information but do not know about legitimate resources 

where they can turn for help. Over the last 2 years, I have given 

17 

my time to film public service announcements for both U.S. Department of Justice and numerous state attorney generals to help the 

public awareness. 

As the Committee is aware, there is very little prosecution for 

these crimes and almost no restitution. Once you lose your money, 

your chance of getting it back is extremely slim. Unfortunately, 

many of these criminals are operating from other countries, where 

we do not have legal authority to make an arrest and follow 

through with prosecution. I believe that law enforcement and the 

Federal Trade Commission need to take these crimes against consumers more seriously and push for arrest and convictions of criminals making victims of innocent people when there is enforcement 

power to do so. 

Thank you for the opportunity. 

[The prepared statement of Mr. Abagnale follows:] 

PREPARED STATEMENT OF FRANK ABAGNALE, AUTHOR AND CONSULTANT, ABAGNALE & ASSOCIATES

Chairman Thune and members of the Committee, I am honored to be invited to 

testify before you today on the seriousness of identity theft and financial fraud 

against the elderly and all American citizens and the need for education to prevent 

individuals from falling victim to these multiple scams. 

I am Frank Abagnale, subject of the book and movie ‘‘Catch Me If You Can.’’ I 

have a unique perspective, having committed fraud as a teenager some 50 years 

ago, and having spent the last 41 years of my life teaching at the FBI Academy and 

field offices of the FBI. Over the past four decades, I have conducted over 3,000 lectures and written four books on these subjects. During this time, I have worked to 

try to prevent fraud, forgery, cybercrimes, embezzlement, identity theft and other 

scams perpetrated against consumers and small businesses. 

Serious issues we face are fraud and scams which are perpetrated against American citizens of all ages. These can be perpetrated by family members, financial advisers, home healthcare providers, friends, scam artists, and others. Let me share 

with you some statistics that speak volumes as to why we need initiatives to help 

prevent these frauds against consumers. 

A new survey by Javlin Strategy & Research shows a 16 percent growth in fraud 

incidence in 2016. Fraud effected over 6 percent of U.S. consumers—the highest on 

record. 

The Consumer Sentinel Network, which collects consumer complaints from the 

Federal Trade Commission, state law enforcement agencies and other Federal agencies, received over 3 million complaints in 2016. 

• Almost 1.3 million of those complaints were fraud-related. 

• Consumers reported paying over $744 million in those fraud complaints. 

• The FBI’s Internet Crime Complaint Center (IC3) issues an annual report based 

on reported complaints of Internet crime. The 2015 report (the latest available) 

shows that— 

• The center received nearly 270,000 online crime complaints in 2014 with a loss 

of about $800 million. 

• State-by-state complaint data shows the largest losses are from individuals age 

50+. 

These are probably low estimates because many times consumers are too embarrassed to admit that they have been defrauded, and therefore it goes unreported. 

Their families may not even be told. Identity theft, investment fraud and scams rob 

millions of Americans of their hard-earned money every year. To help combat this 

threat, for the last three years I have joined forces with AARP’s Fraud Watch Network as their ambassador. The goal of the Fraud Watch Network is to arm Americans with the tools they need to spot and avoid fraud and scams so they can protect 

themselves and their families. Last year through my relationship with the Fraud 

Watch Network we reached more than 43 million people through state office sponsored events, social media, e-mail alerts and online advertising. We held more than 

1,200 events on the topic of fraud in 2016 alone. In 2017, I will be appearing in 

more than one dozen cities across America to help educate people about current 

18 

scams, their risks and most important of all, how to protect themselves and their 

families from being victimized. 

What is truly amazing to someone like me is that what I did 50 years ago, as 

a teenager is 4,000 times easier to do today due to technology. Unfortunately, technology breeds crime, always has and always will. At the same time, there is no technology, nor will there ever be any technology that can prevent social engineering. 

Socially engineered crimes can only be prevented through education. There will always be individuals who will use technology in a negative, self-serving way. 

Throughout my career, I have always believed that education is the best prevention. If you educate and explain to people their risks, in most cases they are smart 

enough to take that information and reduce their risks. I believe education is the 

only approach to help eliminate consumer fraud. Education is not only important 

for our seniors, but it also helps bring awareness to all citizens so they can recognize the signs of fraud and know how to protect themselves. 

I have always believed that the government should take the lead in education to 

combat these horrendous crimes. Consumers are hungry for information but do not 

know about legitimate resources where they can turn for help. Over the last two 

years, I’ve given my time to film public service announcements for both the U.S. 

Department of Justice and numerous state attorneys general to help with public 

awareness. 

As the Committee is aware, there is very little prosecution for these crimes and 

almost no restitution. Once you lose your money, your chance of getting it back is 

extremely slim. Unfortunately, many of these criminals are operating from other 

countries where we do not have legal authority to make an arrest and follow 

through with prosecution. I believe that law enforcement and the Federal Trade 

Commission need to take these crimes against consumers more seriously and push 

for arrests and convictions of criminals making victims of innocent people when 

there is enforcement power to do so. 

Thank you. 

The CHAIRMAN. Mr. Schwanke. 

STATEMENT OF MIKE SCHWANKE, REPORTER, 

KWCH–12 EYEWITNESS NEWS 

Mr. SCHWANKE. Chairman Moran, Ranking Member Blumenthal, 

committee members, thank you for this incredible opportunity to 

talk about an issue that affects all Americans. In my 17 years as 

a journalist and investigative reporter, I have focused much of my 

time helping victims of scams, but also educating the public so they 

don’t fall victim. 

I am honored to be invited here today by Senator Moran. The 

Senator and I go back almost 2 decades now to my days as a bureau reporter in Dodge City. Then Congressman Moran would often 

stop by my office and talk about the issues affecting Kansans. But 

the issue we address today does not stop at a state line. Scams and 

those who perpetrate them stop at nothing. No person is immune, 

not even in our darkest times, because scammers wait to take advantage. 

This month, Kansas experienced our largest wildfire event in the 

state’s history. Homes and livestock were lost. And while Kansans 

and surrounding Midwest states all came together to help each 

other, shockingly, there were those who only saw an opportunity to 

steal. Instead of solely focusing on protecting lives and property, 

Reno County Sheriff Randy Henderson instead had to spend time 

warning his residents about a scam. During a time of disaster, victims of the fire were receiving calls from someone offering free Federal grants. All they had to do was send in an application fee. That 

scam was underway before most victims were even allowed back 

into their homes to survey the damage. 

19 

Scammers don’t see tragedy, they see opportunity, like when 

Wichita Police Officer Brian Arteburn was critically injured last 

month. He was run over by a fleeing suspect, but within days, we 

had to warn our viewers of a telephone scam collecting money in 

his name. 

Our seniors are most at risk because they often have the most 

to lose. They feel there is no one out there to protect them. Much 

of my time is spent in churches and senior organizations trying to 

educate. 

Those in our most trusting generation rarely go a single day 

without someone trying to trick them, scam them, and ultimately 

steal the money they have worked their lifetime to earn. I know because we talk to them. My producer now receives about a dozen 

calls from victims every week. Last week, that number grew to 20. 

I personally have told the stories who have wired away their entire 

life savings, and that money usually goes overseas, never to be 

seen again. That scammer starts again usually with another 

unsuspecting American. 

I could be here for hours sharing stories of victims, like the Wichita woman in her seventies we interviewed who was taking care of 

her elderly mother. She was targeted by a scammer looking to take 

advantage of her willingness to help others. She had about $25,000 

left to care for her mother, and lost every cent. 

There was another couple who fell for what is commonly referred 

to as the grandparents scam, which you’ve heard about today. 

Thinking he was helping his granddaughter in distress, the 88- 

year-old walked into two Wichita grocery stores and purchased 

$13,000 in iTune cards. The money was gone. The man’s wife told 

me she had just seen us do a story on that very scam, but the 

scammers were so convincing and she was so scared, she fell for 

it anyway. That same scam has also been used on our military 

families in Kansas. 

What’s more concerning are those we don’t know about, those 

who are too embarrassed or afraid they’ll lose their financial freedom if they share their stories. I often get calls from victims who 

want to share their story to protect others, but ask that I shield 

their identity. 

We often hear about seniors falling victim, but one of our investigative stories found that Millennials may be even more likely to 

fall for scams. The Better Business Bureau now backs that up, releasing a study this month that found consumers 18 to 24 years old 

are most likely to lose money in a scam. 

Alex Cook is one of them. The 19-year-old called me after she fell 

victim to a scam on Care.com. The teen, who was working three 

jobs at the time to pay the bills, lost $2,600, and it set her back 

6 months. 

Even our county government and businesses have lost hundreds 

of thousands of dollars to scams. The estimated loss to the American economy is in the billions, and some estimates show as many 

as 1 in 10 Americans will lose money to a phone scam every year. 

Top scams reported by the BBB last year include the tax collection, debt collection, lottery, and online purchase scams. Our District Attorney’s Consumer Protection Division fields now about 

20 

2,000 calls a year, so many the office had to develop a new system 

to handle the calls because they were overwhelmed. 

The Wichita Police Department has four detectives in its Financial Crimes Division, each one now has 60 active cases at any given 

time. In 2015, there were 3,800 cases; last year, 7,000. Rarely can 

local law enforcement or prosecutors do anything about the cases 

because they often take them out of their jurisdiction. 

In closing, what we have found in our reporting is many times 

scammers use fear and intimidation to steal from victims. Law enforcement and prosecutors can do little to stop it. The best weapon 

we have right now is education, but it has to be consistent because 

tomorrow there will be a new scam, new tactics, and Americans 

will lose more money. 

Again, I thank you for the invitation to be here today and look 

forward to any questions you may have. 

[The prepared statement of Mr. Schwanke follows:] 

PREPARED STATEMENT OF MICHAEL SCHWANKE, REPORTER, KWCH–12 EYEWITNESS NEWS

Chairman Moran, Ranking Member Blumenthal, and Committee members—I 

thank you for this incredible opportunity to talk about an issue that affects all 

Americans. 

My name is Michael Schwanke with KWCH TV in Wichita, Kansas. In my 17 

years as a journalist and investigative reporter I have focused much of time on helping victims of scams and educating the public so they don’t fall victim. 

I’m honored to be invited here today by Senator Moran. The Senator and I go 

back almost two decades to my days as a bureau reporter in Dodge City. Then Congressman Moran would routinely stop by my office and talk about the issues affecting Kansans. 

But, the issue we are addressing today doesn’t stop at a state line. Scams and 

those who perpetrate them, stop at nothing. No person is immune, and even in our 

darkest times scammers wait to take advantage. 

This month Kansas experienced the largest wildfire event in the state’s history. 

Homes and livestock were lost. While Kansans and surrounding Midwest states 

came together to help each other, shockingly there were those who saw an opportunity to steal. Instead of solely focusing on protecting lives and property, Reno 

County Sheriff Randy Henderson had to warn his residents about a scam. During 

a time of disaster, victims of the fire were receiving calls from someone offering free 

Federal grants. All they had to do was send in an application fee. The scam was 

underway before some victims of the fire were even allowed back in to survey what 

they’d lost. 

Scammers don’t see tragedy, they see opportunity like when Wichita Police officer 

Brian Arteburn was critically injured last month. He was run over by a fleeing suspect. Within days we had to warn viewers of telephone scam collecting money in 

his name. 

Our seniors are most at risk, because they often have the most to lose. They feel 

there is no one to protect them. Much of my time is spent in churches or senior 

organizations trying to educate. 

Those in our most trusting generation rarely go a single day without someone trying to trick them, scam them and ultimately steal the money they’ve worked a lifetime to earn. I know, because we talk them. My producer now receives up to a dozen 

calls from victims every week. Last week that number grew to more than 20. 

I personally have told the stories of those who have wired away their entire life 

savings. The money usually goes overseas never to be seen again. The scammer 

then starts again, with another unsuspecting American. 

I could be here for hours sharing stories of victims—like the Wichita woman in 

her 70s we interviewed who was taking care of her elderly mother. She was targeted 

by a scammer who took advantage of her willingness to help others. She had about 

$25,000 left to care for her mother and lost it all. 

There was another couple who fell for what’s commonly referred to as the grandparent scam. Thinking he was helping his granddaughter in distress, the 88-yearold walked into two Wichita grocery stores and purchased $13,000 in I-Tune cards. 

The money was gone. The man’s wife told me she had just seen me do a story on 

21 

this very scam. The scammers were so convincing and she was so scared, she fell 

for it anyway. The same scam has been used on military families in Kansas. 

What’s more concerning are those we don’t know about—those who are embarrassed and afraid they will lose their financial freedom if they share their stories. 

I often get calls from victims who want to share their story to protect others, but 

ask that I shield their identity. We often hear about seniors falling victim, but even 

one of our investigative stories found that millennials may be even more likely to 

fall for scams. The Better Business Bureau backs that up, releasing a study this 

month that found consumers 18–24 years old are most likely to lose money in a 

scam. 

Alex Cook is one of them. The 19-year-old called me after she fell victim to a scam 

on Care.com. The teen, who was working three jobs at the time, lost $2,600. It set 

her back six months. 

Even our county government and area businesses have lost hundreds of thousands to scams. 

The estimated loss to the American economy is in the billions. Some estimates 

show as many as one in 10 Americans will lose money to a phone scam every year. 

Just last year the Better Business Bureau worked with more than 5,000 victims 

who lost more than $42 million. 

The top scams reported to the BBB last year include tax collection, debt collection, 

lottery and online purchase scams. 

And what happens when they report it? Usually nothing. 

Our District Attorney’s Consumer Protection Division fields about 2,000 calls a 

year. So many the office had to develop a new system to handle the calls because 

they were overwhelmed. There is one attorney in the consumer protection division. 

The Wichita Police Department has four detectives in its financial crimes division. 

Each one has up to 60 active cases at any given time. In 2015 they were 3,800 cases. 

Last year 7,000. Rarely can local law enforcement or prosecutors do anything because the cases take them out of their jurisdiction or they simply don’t have the 

resources. By the time police are able to obtain proper warrants or subpoenas, the 

scammers have moved on. 

In closing, what we have found in our reporting is many times scammers use fear 

and intimidation to steal from victims. Law enforcement and prosecutors can do little to stop it. The best weapon we have at this point is education, but it has to be 

consistent. Tomorrow there will be a new scam, new tactics and Americans will lose 

money. Again, I thank you for the invitation to be here today and look forward to 

any questions you may have. 

The CHAIRMAN. Thank you very much. Let me start with Chairwoman Ohlhausen. Is there a reliable financial macro cost to scams 

in the United States? Do we know from the side of the personal aspects of this, what does it cost the economy? 


321BBB.eps
22 

Commissioner OHLHAUSEN. Well, based on the redress that the 

FTC has been able to get for consumers, even just last year, it cost 

billions and billions of dollars. So we get redress for consumers, 

and last year we were able to get more than a billion dollars, well, 

several billion dollars, a lot of that was driven by the VW settlement, which was about $10 billion or $11 billion. So it is billions 

and billions of dollars. 

The CHAIRMAN. Mr. Schwanke, in your investigations and your 

attempts to help Kansans, have you discovered any place that it 

makes most sense for a victim to go with his or her problem? Who 

is best at providing relief and satisfaction? 

Mr. SCHWANKE. I think that’s a lot of their frustration. I think 

once they’ve been a victim of a scam, they often turn to the Better 

Business Bureau or us to warn others, and oftentimes they understand that that is their only option at that point, is to stop it from 

happening to anyone else. Calling law enforcement often goes nowhere just because they can’t do anything. 

The CHAIRMAN. You indicated something that was discouraging 

to me because one of the conversations we’ve had already just in 

this hearing is the value of information, but you indicated that in 

a particular instance, the victim had seen the similar identical 

fraud being talked about on your program, but still felt necessary 

to respond to the cries of a grandchild. Do you have evidence that 

this consumer awareness actually makes a difference? Do you have 

instances in which you’ve been told, ‘‘I saw your program. It 

warned me, and the same thing about happened to me, but I knew 

not to fall for it’’? 

Mr. SCHWANKE. That’s one example. Oftentimes we do hear from 

victims who say, ‘‘I knew better,’’ and when they see these stories 

of victims, they sit back in their home and think, ‘‘How in the 

world could I ever fall for something like that?’’ In that case, she 

saw our story, and she explained it as tunnel vision. And I think 

that’s what these scammers depend on. When I talk to these senior 

groups and I lay out these scams, and even the crowd will say, 

‘‘Well, I would never fall for that,’’ but I used her as an example 

of once she thought that her granddaughter was in trouble, she 

said, ‘‘It was almost like I had blinders on, and that’s the only 

thing I could see at that point.’’ 

So in that story, that is really what she tried to get across to 

viewers, is you really have to stop and think because you are not 

going to be thinking clearly when someone calls for a grandparents 

scam or someone calls claiming to be with the IRS saying that 

they’re going to haul you off to jail if you don’t pay your taxes. 

Once you hear that, your mind shuts off oftentimes. That’s what 

we try to get across in our education. 

The CHAIRMAN. General, you’ve been involved in public service 

announcements. Is there evidence that they’re useful, successful, 

and prevent additional fraud? 

Mr. DEWINE. We do get calls, Mr. Chairman, from people, and 

sometimes I’ll actually see people who say, ‘‘I saw you on TV talking about the grandparents scam,’’ or, ‘‘I saw you on TV talking 

about the IRS scam.’’ So while we are successful in some prosecutions, the ones that are over the Internet, the ones that are long 

distance, are very, very difficult for all of the reasons that have alVerDate Nov 24 2008 10:19 Feb 20, 2018 Jkt 075679 PO 00000 Frm 00026 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\28381.TXT JACKIE
23 

ready been stated. And, frankly, we think that our prime job in 

this case is to really warn people, trying to warn them about this. 

So, yes, we have some results, but it’s the same, we’ve all, I 

think, had the same experience. You know, many times people say, 

‘‘I never would have thought I would fall for this, but I did,’’ and 

what I think the public sometimes thinks is, ‘‘Well, I wouldn’t do 

that,’’ or they think these are people who aren’t very smart. That’s 

not true. These are smart people. These are average just regular 

people who you find in Ohio, and because some button has been 

pushed, whether it is the compassion for your grandchild, or in the 

case of the IRS scam, where they call you up and threaten you, it’s 

just total fear, that emotion overrides. 

The CHAIRMAN. Mr. Abagnale, regarding the perpetrator of a 

fraud, what is it about them that allows them to be able to get 

that, elicit that, response from somebody who is apparently smart 

and has seen information about the potential scam and still falls 

for it? What’s the way to capture somebody? 

Mr. ABAGNALE. Well, first of all, thank God that the majority of 

Americans are honest, and because they’re honest, they don’t think 

in a deceptive way. So when the phone rings and the caller ID says 

it’s the Internal Revenue Service or U.S. Government or their local 

police department, they believe that to be true. They’re not aware 

that the caller ID is easily manipulated. So people believe at the 

start that the call is legitimate. And then the person on the other 

end of that call can be very, very persuasive in getting people to 

give them information or to get money from them with some of 

these scams that we’ve heard about here today that are very common. 

Now, we’ve said so much about the IRS scam over the last few 

years and have reached so many American citizens about it that 

the criminal is now changing gears a little bit realizing that a lot 

of people know that when you get a call from the IRS demanding 

money, that the IRS usually doesn’t make phone calls, that they 

would write you a letter. 

So the scammers in the last year have started writing letters on 

the IRS letterhead, postage paid by the Federal Government over 

on the right-hand corner of the envelope, and mailing out letters 

supposedly from the IRS with a reference number up in the top 

right corner, and simply saying to call this 800 number to speak 

with Agent So-and-so. And, of course, someone answers, ‘‘Internal 

Revenue,’’ they connect you to that person, who is not really that 

person. 

So, as you can see, they’re able to understand how it works. 

When it gets a little tight or they realize people are catching on, 

they switch gears a little bit and go to something a little more sophisticated. 

Again, through my entire career, I believe that if you explain to 

people these scams, you tell them how they work, that’s the best 

way to prevent those scams from occurring. When I go out with 

AARP Fraud Watch Network, I spend my afternoon on the phone 

speaking to about 15,000 people who call in to the AARP’s office, 

state office, and get on the line, and they hear about all these 

scams and get to ask me questions about things that have happened to them and how to understand how some of these work. I 

24 

find that it’s a very powerful tool of reaching people and getting 

that information. 

It’s interesting to me that back in the 1970s, before there was 

ever a book about me, I did some public service ads for the Department of Justice that were given to police departments across the 

country. Those ads ran for years on television. They were 30-second 

ads. The police department was able to put their logo at the end 

of it, sponsored from that police department. In the 1980s, only a 

book had been written about me, and those people didn’t know who 

I was, but I actually did millions of bank statement stuffers for 

banks that went out to people in their bank statement, and it had 

tips about protecting their checkbook, protecting their credit cards. 

Today, there is very little of that. We very rarely see public service ads on TV. We very rarely see that reaching out to explain to 

people what is going on. I think we need to get back to that. It’s 

very important, and it’s the only way to really fight crime, is 

through education. And I think that that’s the way that I try to approach it in the 40 years I’ve been doing this. 

I would remind you, the Committee, of one thing. I always teach 

FBI agents to follow the money, and have for 4 decades. So what 

we find is that most of these crimes that are committed by people 

living in Russia, India, China, that are making these calls in their 

pajamas or on their laptop from their kitchen, are stealing money 

from the American consumer. It is leaving our economy, but it will 

come back, it always comes back, because it will tend to boomerang 

and return to our country, but in the form of drug trafficking, 

human trafficking, child pornography, and much more hideous 

crimes. 

So it is very important that we try to prevent that money getting 

in the wrong hands of people who are going to do a lot worse—commit a lot worse crimes with that money. 

The CHAIRMAN. Thank you. 

Senator Blumenthal. 

Senator BLUMENTHAL. Thanks, Mr. Chairman. 

Let me ask you, Chairwoman Ohlhausen, as you know about mobile cramming, it is the unscrupulous practice by wireless carriers 

of allowing third parties to add charges onto their monthly bills 

without authorization by the consumer. And in many, many cases, 

the consumer receives nothing for those charges, or receives something they didn’t want, didn’t know they were going to get. And 

this practice has been a problem for 2 decades or more, and it’s 

really not much more or less than outright theft. 

In 2013, the FTC brought numerous enforcement actions then 

and since against wireless carriers, including T-Mobile and AT&T, 

for those corrupt practices, which I welcome and I’ve lauded and 

thank you for doing because the settlements have reached as high 

as $105 million and $90 million in refunds, fines, and penalties. 

The wireless industries and companies across the board should protect their consumers from these kinds of abuses. 

I’m hoping that you will commit that the FTC will continue to 

pursue these cases by holding both individuals and companies that 

may have aided and abetted them accountable no matter how insulated or big they may be. 

25 

Commissioner OHLHAUSEN. Ranking Member Blumenthal, thank 

you for mentioning those cases. I have been personally very supportive of the FTC’s cramming cases. I’m concerned about our ability to continue to act in that space given the Ninth Circuit’s decision on the common carrier exemption. 

Senator BLUMENTHAL. But given the legal ability to do so, will 

you commit to holding the aiders and abettors accountable to the 

maximum degree you can? 

Commissioner OHLHAUSEN. To the extent we are capable of doing 

that under our current authority, I would certainly commit to that. 

As you may recall, we’ve been able to reach certain actors, like particularly in the Western Union case, under our unfairness authority. 

Senator BLUMENTHAL. Commissioner McSweeny, do you agree? 

Ms. MCSWEENY. Yes, I strongly agree. I think that Congress has 

from time to time seen fit to give us assisting and facilitating authority, for example, in the Telemarketing Sales Rule Act, and I 

think that kind of authority is very, very helpful in making sure 

that we can not just play the game, as you alluded to, of ‘‘WhackA-Mole,’’ of going after fraudsters, but also making sure that we’re 

holding people accountable if they know that they are facilitating 

fraud and processing those payments. 

Cases like the Western Union case are very, very important, because a huge amount of the money that was transferred out in the 

kinds of scams you’ve just been hearing about out of our country 

to other countries was transferred through that system. And so 

having that entity have more accountability and, in fact, acknowledge that they are doing a much better job policing their own platforms is very, very important to protecting consumers in the first 

place. So I think that’s an important area, not just in cramming, 

but across all industries. 

Senator BLUMENTHAL. Thank you. A lot of consumers probably 

have no idea that new car dealers are prohibited from selling vehicles with open recalls, but used car dealers are free to do so, even 

though the defects can be deadly, and the recalls can be very, very 

important. In fact, used car dealers can advertise cars with 

unrepaired safety recalls saying they are, ‘‘safe,’’ or have passed 

‘‘rigorous inspection’’, even if they have defective Takata airbags 

that can explode and kill them or maim them, and other potentially 

deadly defects. 

This disclosure issue is extraordinarily important. And as long as 

I am a member of this committee, I am going to continue working 

to try to close that gap in the law. I disagree with the FTC’s proposed final orders against GM, Jim Koons, and Lithium Motors for 

their deceptive advertising actions. If you could tell me just very 

simply yes or no, in your opinion, to the two Commissioners, the 

Chairwoman and Commissioner McSweeny, in your opinion, is a 

car with an open unrepaired recall a safe car? 

Commissioner OHLHAUSEN. If it was advertised as safe, I would 

have a concern about that. 

Senator BLUMENTHAL. If it’s advertised as safe? 

Commissioner OHLHAUSEN. Right. If there is a claim made that 

this car is safe, then I would have a concern if it had an open recall 

without a disclosure about that. 

26 

Senator BLUMENTHAL. What about if it’s just—if it just has a 

deadly defect? Would you call it safe without any advertisement? 

Commissioner OHLHAUSEN. I’m not sure that this—that’s an FTC 

issue. I mean, I may not personally call it safe, but under the FTC 

Act, we have to look at the claims that are made. 

Senator BLUMENTHAL. Commissioner McSweeny? 

Ms. MCSWEENY. I strongly share your concerns about the sale of 

used vehicles with open safety recalls. This has resulted in documented tragedy. We struggled, I think, with the scope of the FTC 

authority in those cases, and I strongly support your efforts to provide a better solution to consumers to this problem. 

Senator BLUMENTHAL. Thank you both. And thank you to all the 

members of our panel. I apologize in advance. I probably will have 

to leave early because we have an ongoing confirmation hearing in 

the Judiciary Committee concerning Judge Gorsuch to the United 

States Supreme Court, so I will probably have to go back to that. 

But I want to thank again the Chairman of this Subcommittee, 

Senator Moran. And I also want to thank the Chairman of our 

Committee, Senator Thune, who has just arrived. And he has enabled us to go forward with it. It’s very important. And I hope we 

can continue this work. Thank you. 

The CHAIRMAN. Senator Blumenthal, thank you very much. We 

attempted to change the hearing. We would have lost our witnesses, and Senator Blumenthal was agreeable to us proceeding despite his demanding schedule, as a Member of the Senate Judiciary 

Committee now considering a nominee to the U.S. Supreme Court. 

I think you made that point, didn’t you? 

We are honored to have the Full Committee Chairman join us 

today, and I now recognize Chairman Thune. 

STATEMENT OF HON. JOHN THUNE, 

U.S. SENATOR FROM SOUTH DAKOTA 

Senator THUNE. Well, thank you, Mr. Chairman, and thank you, 

Senator Blumenthal, for having the hearing. I want to thank our 

panel, too. This is an important issue. It affects American consumers. And clearly consumers need protection from those who 

would seek to defraud them through scams. I think we can all 

agree the best use of the FTC’s resources is to pursue conduct and 

practices that cost Americans billions of dollars without any benefits. 

I just wanted to highlight one example of how this sort of plays 

out in the real world. Last summer, I participated in a telephone 

town hall that was sponsored by AARP where the bulk of the calls 

focused on these kinds of scams. 

And I, for instance, heard from a constituent named Louella from 

the town of Salem, South Dakota, who had twice been the victim 

of the so-called grandparents scam. In her case, not only did she 

receive a call from someone posing as a grandchild who claimed to 

be in jail and in desperate need of bail money, but when she 

wavered, she got a follow-up call from someone claiming to be a police officer verifying that her grandchild would remain in custody 

until the bill was paid. 

And in her case, fortunately, she talked to her son who assured 

her that her grandkids were home safe. But it’s still not hard to 

27 

imagine the grandparent hoping to save their grandkids from embarrassment and legal peril by wiring money to such a scammer. 

And so I appreciate the subject of this hearing. It is an important 

issue that does affect people all across our country and across our 

states, and very grateful, a great panel. 

And, Senator DeWine, so nice to have you back. Welcome. It’s 

good to see a former colleague. And so thank you for being here. 

I just want to ask one quick question because I know my colleague from Oklahoma I think has been waiting patiently, as have 

some of our colleagues on the other side. 

But, Mr. Abagnale, we’ve talked about several different types of 

scams that hurt American consumers. I guess the question I would 

have is, is there a particular scam that worries you the most that 

you would like to highlight in terms of the things that are out 

there? 

Mr. ABAGNALE. Obviously, I am very concerned about the 

breaches we read about literally every day without exaggeration, 

some reported, some not reported. We’ve had over a billion people 

have their identity stolen already. When I first started writing 

about identity theft, 750,000 victims filed a police report. Today, 

there’s a victim every 2 seconds in the United States. 

I’m a true believer that most all breaches occur because somebody in that company did something they weren’t supposed to do 

or somebody in that company failed to do something they were supposed to do, and that most of those breaches can be easily prevented. Again, there is social engineering that occurs, et cetera. 

I had a call at my home just a couple of days ago from the CFO 

of a large technology company on the West Coast, 4,000 employees. 

He said that someone in bookkeeping had received an e-mail from 

the CEO saying he needed all the W-2 files on all the 4,000 employees e-mailed up to him. The only reason they found out about 

it a couple of days later, someone from bookkeeping called up to the 

CEO or sent an e-mail to say, ‘‘I hope you got all the material you 

requested,’’ and he said, ‘‘I didn’t request that.’’ Four thousand employees’ information is now on the street. 

I’m a big believer you verify. So if I was in that accounting department, that would be an unusual request. I would have got up, 

walked up to the CEO’s office, and said, ‘‘Did you in fact send me 

this e-mail?’’ or if they’re out of state, to get in contact with them 

over the telephone and make sure I spoke to them. 

So all of these scams that we hear about, whether it be the 

grandparents scam, the sweepstakes scam, the IRS scam, is really 

that I tell people all the time, you just simply need to stop and 

verify. So if I call and I say I’m from the police department, it 

comes up on my caller ID I’m from the police department, I hang 

up the phone, I pick up the phone book, I don’t take the number 

they gave me, I look up the police department’s number in the 

phone book, I call the police department and say, ‘‘Do you in fact 

have my grandson in custody at the police department?’’ or, ‘‘Did 

you make a call to me for his bail?’’ 

And that’s the main message, that you prevent most of these 

crimes, just simply stop and verify, whether it’s a large corporation, 

a small business, or an individual, you teach people that you have 

to check things out. 

28 

We had 56 million phishing scams in 2016, 5,000 every single 

day of the week, 7 days a week, each day. People need to learn that 

just because an e-mail comes in, the e-mail looks legitimate, if it 

is specifying information or requesting information that could be 

devastating to the clients, to their customers, to their employees, 

they need to verify that that e-mail is correct. Those are the things 

that worry me the most, that these breaches happen every single 

day, and more and more information is given away every single 

day. 

Senator THUNE. Thank you. And thank you, Mr. Chairman, for 

your leadership on this issue and on our committee. And again 

thanks to the panel. My time is expired. And I’m sure you hear this 

all the time, but you really are better looking than Leo DiCaprio. 

[Laughter.] 

Senator THUNE. Thank you. 

The CHAIRMAN. The Senator from Oklahoma, Senator Inhofe. 

STATEMENT OF HON. JIM INHOFE, 

U.S. SENATOR FROM OKLAHOMA 

Senator INHOFE. Thank you, Mr. Chairman. 

All right, Mr. Abagnale, how close to reality was the movie? 

Mr. ABAGNALE. I didn’t have a lot to do with the movie. I obviously would have preferred not to have a movie made about my 

life. As you know, I raised my three sons in Oklahoma to keep 

them away from just that, even though I officed here in D.C., and 

commuted back and forth. I saw you on the plane all the time with 

your lovely wife. However, I thought that he did a very good job 

of telling the story. 

As he said many times, he loved the redemption side of the story. 

He had owned the rights for more than 20 years. He bought the 

rights back when he was making the movie with the shark, Jaws, 

and when Barbara Walters asked him why he waited so long to 

make the movie, he said, ‘‘I waited to see what Frank Abagnale did 

with his life before I immortalized him on film.’’ And so in the end, 

I think he was very much into the redemption side of the story, 

and I was probably very fortunate that it was he who told the 

story. 

Senator INHOFE. Yes. Well, thank you. You know, back in your 

scamming days, if there is any truth to the story, you were always 

one step ahead. You knew where to go if the old technology wasn’t 

used, working, you would try something else. As you apply that 

background to what’s out there now, you mentioned in your opening statement that there are things that shift around for a while, 

the technology we’ll be working on, maybe the grandparents. What 

do you see in the future now as a prospect for scamming in the future that is not there now? 

Mr. ABAGNALE. Well, you know, up until this—up until present 

day, cyber crime, for example, is all about money and getting information. I’m very concerned that cyber crime in the next few years 

is going to turn very black. So we have the ability now to shut 

someone’s pacemaker off, but we have to be within 35 feet of that 

individual to shut that pacemaker off or speed it up. We have the 

ability to get within 35 feet of an automobile, shut off the car, turn 

on the airbags, lock the person in the vehicle. Again, we need to 

29 

be within 35 feet. I believe that within the next 5 years you’ll be 

able to do that from 5,000 miles away. 

So I am very concerned about our infrastructure. I’m very concerned about our electrical grid. These are the things that I think 

eventually cyber crime will come to be more of a terrorist tool and 

more of as a tool to eliminate individuals, and that’s when it will 

get very, very scary. 

Senator INHOFE. Yes, and that is scary. It happens that the one 

sitting to your right is an old friend of mine from the House, and 

the two of us know more about grandkids than anybody else probably in this room, and he forgot to introduce his wife. So I’ll introduce her. 

Fran, hold your hand up. 

All right. Mr. Schwanke, I was fascinated, first of all, that was 

the worst wildfire in the history of Oklahoma and Kansas. And I 

got in my little plane last week and went up to Woodward. And 

then yesterday I was in Buffalo, Oklahoma, and we had over 300 

farmers and ranchers, half of them were from Kansas. And not one 

time in those meetings did it come up that anyone was scammed. 

And you mentioned that scamming was something that’s fairly 

common. Explain how it worked. I need this to take back to—— 

Mr. SCHWANKE. What they were doing was they were calling 

these victims and calling that area with those victims in it offering 

Federal grant money. So you would have thought—— 

Senator INHOFE. Well, pause right there. How would they expect 

money to be wired to them because—procedurally, how would that 

work? 

Mr. SCHWANKE. I don’t know how they were going to get the 

money, and I don’t think that we had anyone fall for it in that area 

because it was reported. 

Senator INHOFE. Oh. 

Mr. SCHWANKE. But they were asking for that money. You would 

have had to have paid—you would have had to have paid an application fee in order to receive this free Federal grant money for rebuilding after the fires. 

Senator INHOFE. Yes, that’s really, because that’s such a cruel 

thing. I mean, Mr. Abagnale, they were telling stories about how 

they were watching their livestock burn alive during this thing. It 

was really a tragedy, and that hasn’t come up as an issue in the 

meetings that we had. So I’ll maybe talk to you afterwards. And 

I want to visit with them out there because I’m sure if it was happening—it was taking place. 

Mr. SCHWANKE. Well, and I want to give a lot of credit. That’s 

an example where local law enforcement stepped out so quickly on 

it. In these scams, you can’t wait on something like that a week 

or 2 weeks. They stepped out that day, called a news conference, 

and talked about it. So they were able to get that information out 

quickly, both through the news, but also the incredible tool that we 

have in social media, and it passed around very quickly. 

Senator INHOFE. Yes. General DeWine, I remember so well recently, and you would have no way of knowing this, but OG&E, 

that’s in Oklahoma, Oklahoma Gas and Electric, they had their 

representatives make phone calls to customers and get them to 

make payments to the scammers. Is this something that has hapVerDate Nov 24 2008 10:19 Feb 20, 2018 Jkt 075679 PO 00000 Frm 00033 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\28381.TXT JACKIE
30 

pened other places where utilities and this type of group out there 

would be involved in scamming? 

Mr. DEWINE. Senator, I’m not—I don’t have any specific recollection that we had one of those cases. You know, most of these cases 

come down to some representation to you that you’re going to get 

something, you, the consumer are going to get something, and it’s 

usually, as we tell people, if it sounds too good to be true, it probably is not true. But they all kind of follow that, you’re going to 

get something, and to get something, we’ll send you a check, but 

you have to send us a check type thing. And it could be the attorneys’ fees or the cost of handling or something. 

Senator INHOFE. Yes, well, maybe it’s just particularly of concern 

in Oklahoma, but it did lead off into a lot of scams that were taking place just through that company. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Udall. 

STATEMENT OF HON. TOM UDALL, 

U.S. SENATOR FROM NEW MEXICO 

Senator UDALL. Thank you very much, Chairman Moran. And I 

also want to thank the panel and the witnesses today. I think this 

has been excellent. And clearly this is a critical issue for the American public. 

As State Attorney General in New Mexico, we brought many consumer protection cases in the areas that you all are talking about. 

One of them in particular was fraudulent telemarketers; we fought 

hard against them. These predators often targeted senior citizens. 

State Attorneys General were one of the key forces behind passing 

a Federal law that allows states to prosecute telemarketers who 

cross state lines, which I’m sure, Attorney General DeWine, you’re 

familiar with. 

Technology evolves and con artists adapt and deploy new techniques. Scammers also seem to quickly find ways to abuse Internet 

technologies. One example is credit card skimming. 

Chairwoman Ohlhausen, drivers in Albuquerque have had their 

credit cards compromised after purchasing gas at a pump. Local TV 

stations KRQE and KOB have reported that Albuquerque police believe 22 credit card skimmers were recently installed at gas station 

pumps across the city. These skimmers are hidden and can be especially hard to spot if you’re in a hurry to fill up your car with 

gas. And other skimmers are more sophisticated and read credit 

card information wirelessly, so you can just put them in a backpack, and I think there are pictures of those in front of you, both 

the first photo and the second photo, so: skimmers at a gas pump, 

and then the second one is a kind of skimmer that can get things 

wirelessly. 

A Russian company sells this type of skimmer, the wireless one, 

and gives directions on how to steal credit card information. The 

Russian seller’s website recommends targeting restaurants by hiding the skimmer in a backpack or in a car parked outside. This 

skimmer will, quote and they say in their advertisement ‘‘automatically connect to the network, can do all the job for you. You could 

probably get up to 20 card details from one restaurant depending 

on how busy the restaurant is.’’ 

31 

The FTC previously issued a warning to Americans traveling 

abroad to be alert for card skimmers at ATMs and gas stations, but 

these scams are now happening in New Mexico and across the Nation. 

And so, Madam Chair, what action will the FTC take to help 

stop credit card skimming scams at the gas pump? 

Commissioner OHLHAUSEN. Senator, thank you very much for 

your question. You raise a very important issue. In fact, it is happening across the country. And just locally recently WTOP reported 

that it was happening in Arlington, Virginia. And it is a problem, 

and we have issued consumer education for consumers, to tell them 

to be alert for things where it looks like it has been affixed overtop 

the regular card reader. And we give consumers advice about covering up with their hand as they’re putting in their PIN number. 

I certainly hope that as credit cards move toward the PIN and chip 

technology, that might help reduce the issue. 

Now, you also raised the point about the websites selling this. I 

will certainly look into it. It’s possible that it could be reached 

under our unfairness authority. We have a three-part unfairness 

test. But one of the challenges is when things are sold abroad, it 

can be difficult sometimes for us to get authority over a foreign 

seller, but we can certainly see what we can find out. 

Senator UDALL. Well, we hope you will work with the state attorney generals to try to shut these operations down. 

Commissioner OHLHAUSEN. Certainly. 

Senator UDALL. Now, for years, as you know, I’ve urged the FTC 

to take action against false marketing of so-called ‘‘anti-concussion 

sports equipment.’’ These false claims put children at greater risk 

of brain injury. And these false claims can put responsible companies at a competitive disadvantage. And tomorrow, in fact, is Brain 

Injury Awareness Day, and there is much greater awareness these 

days that concussions are a form of brain injury and should be 

treated seriously. So I was disappointed by President Trump’s 

tough guy comments at a campaign rally last year after an audience member fainted and then returned to the crowd, and he compared her favorably to an NFL player who sit on the bench after 

suffering a concussion. And Trump used to own his own professional football team, and he said, and I quote, These new and very 

much softer NFL rules, concussion, oh, oh, got to get a little ding 

on the head, no, no, you can’t play for the rest of the season, our 

people are tough. That’s the end of his quote. The President said 

that, I’m sure, for a laugh, but chronic traumatic encephalopathy, 

or CTE, and other forms of brain injury are no joke. 

So, Madam Chair, are you aware that these current state laws 

and Federal health guidelines from the Centers for Disease Control 

recommend that athletes should not return to play immediately 

after a concussion? 

Commissioner OHLHAUSEN. Senator, you raise a very, very important issue, and one that I care about deeply. I actually have 

four children, and two of them did suffer concussions playing 

sports. So I appreciate the attention that you’ve brought to this. 

And at the FTC, we have brought enforcement actions in this 

case, the brain guard case. We’ve had consumer ed. I will continue 

to pay close attention to this issue. And I was also pleased to see 

32 

that the university is doing a study about the possibility of the concussions in the soccer—the sport of soccer. So we will definitely 

continue to pay attention to this issue. 

Senator UDALL. Yes. Thank you for that answer. Thank you for 

the courtesies. I know I ran over a little bit. 

Thank you, Mr. Chairman. 

The CHAIRMAN. You’re welcome, Senator Udall. 

Senator Cortez Masto. 

STATEMENT OF HON. CATHERINE CORTEZ MASTO, 

U.S. SENATOR FROM NEVADA 

Senator CORTEZ MASTO. Thank you, Mr. Chairman. And I apologize, I have dualing committees going on, so I just had to run over 

real quick. 

First of all, let me say to my colleague, General DeWine, it’s good 

to see you. 

Mr. DEWINE. Good to see you. 

Senator CORTEZ MASTO. Had some important work we did together, and I thank you for continuing that work down the path 

of consumer protection. 

And then, Mr. Schwanke, it’s important what you do. We have 

a station in Nevada, KTNV, that does similar work to protect consumers and bring education and awareness, which I think is one 

of the most important pieces protecting consumers, that education 

and awareness piece, and it’s the first step in prevention. So thank 

you for what you do. 

I appreciate all the panelists here today. 

And to the FTC, great partners of mine when I was Attorney 

General in the state of Nevada. Thank you for all of that hard 

work, because I do believe, as Chairwoman Ohlhausen has said, 

that the FTC is the primary consumer protection agency, so are the 

AGs, and when we have a partnership together, that is the most 

important thing. And so that’s where I would like to start. 

And I really want to talk about and kind of get your position, 

Dr.—or excuse me, Chairwoman Ohlhausen, on your vision for the 

FTC. In your statement, upon your appointment as Acting Chair 

of the FTC, you stated, ‘‘I’m deeply honored that President Trump 

has asked me to serve as Acting Chairman of the FTC, and to preserve America’s true engine of prosperity, a free, honest, and competitive marketplace.’’ And then on January 24, 2017, at the Heritage Foundation, you said, ‘‘Although well-intentioned, the majority 

Commission, under President Obama, at times pursued an antitrust agenda that disregarded sound economics. It imposed unnecessary costs on businesses and substituted rigorous analysis of 

competitive effects for conclusory assertions of unfair competition.’’ 

With that said, I will tell you during that period of time, the 

FTC, they were wonderful partners of ours in the state of Nevada 

when we were addressing anticompetitive conditions in the marketplace that were there—we were there fighting to protect consumers. 

So I’m curious, exactly which policies do you believe the Obama 

administration pursued that disregarded sound economics? And 

can you elaborate on that for me? 

33 

Commissioner OHLHAUSEN. Certainly. So in those remarks, I was 

talking about the FTC’s antitrust enforcement. For the most part, 

I supported it, I voted in favor of most of our enforcement, particularly in the pharmaceutical space, hospital mergers, challenging a 

wide variety of mergers. But there were a few cases that I didn’t 

support, and I filed dissents in those because I didn’t think that on 

balance they would make consumers better off, and I didn’t believe 

that the economic evidence supported finding an anticompetitive 

impact from that behavior that was being challenged. 

Senator CORTEZ MASTO. OK. So can you commit that there won’t 

be a rollback of antitrust protections intended to protect consumers? 

Commissioner OHLHAUSEN. I think that all of our antitrust enforcement definitely should protect consumers. I certainly wouldn’t 

want to forego any enforcement that I think has accurately shown 

there is a likely impact on consumers, an anticompetitive effect. 

And I’ve generally been very supportive of antitrust enforcement in 

those areas, or I would say hospital mergers, pharmaceuticals, 

mergers that raise problematic overlaps. 

Senator CORTEZ MASTO. And have you spoken to the President 

or anyone else in the White House about your antitrust views? 

Commissioner OHLHAUSEN. I have not spoken to the President. 

I have spoken to members of the White House staff. 

Senator CORTEZ MASTO. OK. So to both commissioners, while I’m 

aware that the FTC’s authority does not specifically extend exclusively to banks, savings and loans, and Federal credit unions, you 

do work in concert with the CFPB. They were great partners of 

ours in the state of Nevada, as attorney general. How would you 

rate that cooperation in the CFPB’s ability to protect consumers? 

Commissioner OHLHAUSEN. So we—once the CFPB was created, 

we reached a Memorandum of Understanding with the CFPB so 

that there weren’t inappropriate overlaps or burdensome overlaps, 

and we used our resources effectively. So I believe that we worked 

well with the CFPB. They worked in their area, and the FTC continued to operate in the areas that Congress left to us. 

Senator CORTEZ MASTO. And do you think there is a good working relationship between the two of you in respecting those boundaries and then working together when necessary for consumer protection? 

Commissioner OHLHAUSEN. I have not been aware of any problems with our relationship with the CFPB pursuant to the MOU. 

Senator CORTEZ MASTO. OK. Thank you. And then to General 

DeWine. We have talked about this several times amongst our colleagues. But given the growing aging population, and you brought 

it up as well as constantly evolving technology that’s out there that 

you talked about, that we know that makes scams easier to perpetrate, what additional resources or innovations does law enforcement need to keep up with the financial threats posed to seniors? 

Mr. DEWINE. Senator, I think that the biggest challenge is lack 

of resources and prioritizing. We have been successful in the Attorney General’s Office in helping local law enforcement. Ohio has a 

very local law enforcement; we’re county by county, 88 counties. 

And where we have been able to be successful I think is when 

we’ve been able to see a pattern of crime that goes from county to 

34 

county to county, and we get involved, and then we work with local 

law enforcement. 

So I think it is, frankly, if there is one thing that is needed, it’s 

just more of that, more of that not only at the state level and the 

local level, but also with our partners at the Federal level. We work 

very closely every day with the DEA, with the FBI, other Federal 

agencies, but, again, as has been pointed out many times, when 

you have these cases that start, they’re on the Internet, some 

scammer may be sitting in halfway around the world, it’s a rare 

case, frankly, that we’re going to be able to be successful, and, 

quite candidly, I think what I would like to see is the Federal Government prioritize, we understand they can’t take every case, make 

some examples. It would be good just to have some high-profile 

cases where they say, ‘‘We’re going to go do what has to be done.’’ 

Because these scammers by and large are sitting offshore, and they 

don’t feel any heat. 

Senator CORTEZ MASTO. Right. 

Mr. DEWINE. They don’t feel any heat at all. So I think—I understand the lack of resources and prioritizing, and so maybe if we 

could do some of those cases for—you know, to make an example 

of them. 

Senator CORTEZ MASTO. Thank you. 

Mr. Chair, I see my time is up. Thank you for your indulgence. 

And thank you to the panelists. 

And, Mr. Abagnale, thank you for coming forward with your insight and helping those of us to protect consumers. I appreciate it. 

Mr. ABAGNALE. Thank you. 

The CHAIRMAN. Senator Hassan. 

STATEMENT OF HON. MAGGIE HASSAN, 

U.S. SENATOR FROM NEW HAMPSHIRE 

Senator HASSAN. Thank you, Mr. Chair. And I’ll add my thanks 

to all of the panelists. Thank you for being here today on this really important topic. And I just wanted to follow up on something my 

colleague just talked to you all about because your testimony and 

certainly the experience of our constituents makes clear that our 

consumers are facing threats from bad actors pretty much across 

the board. We have Federal entities in place in addition to the 

FTC, the CFPB, which Senator Cortez Masto just referenced, the 

FCC. 

So can you just—to the two commissioners here, can you talk a 

little bit about what you’re doing to make sure that there is excellent communication and coordination across the Federal Government on behalf of consumers? Are there any things in addition to 

what you’re already doing that are particular challenges or you 

need help with? 

Commissioner OHLHAUSEN. So we do work closely with our Federal partners across the government, and we also as well as working with the states as much as possible. So we do a Memorandum 

of Understanding with a variety of Federal agencies. I mentioned 

CFPB. We have the FCC. We have the FDA. We participate in task 

forces. We’re a part of the Robocall Strike Force Task Force and 

the Identity Theft Task Force, so we do try to leverage our resources and work cooperatively. 

35 

Senator HASSAN. Thank you. 

Commissioner? 

Ms. MCSWEENY. I would just add that I think your point really 

underscores the need for strong consumer protection enforcement 

agencies to collaborate in order to make sure that we can adequately protect consumers in this environment. We really don’t see 

the threat to consumers or the marketplace diminishing, in fact, we 

see it increasing, and so what we need to make sure we’re doing 

is all using the tools that we have to do the best job that can do, 

and I think the FTC has been working hard to do that and will 

continue to do that, but we need to make sure that we have strong 

partners at the Federal level, at the state level, and in the business 

community as well. 

Senator HASSAN. Thank you. And it has been part of my experience, as a Governor, that with all of this kind of law enforcement 

challenge, communication at all levels is just really, really important. So I appreciate your efforts. 

This is a question for the entire panel. Mr. Abagnale today discussed how much easier it is to commit the kind of fraud you did 

as a teenager because of the proliferation now of new technologies, 

and to be sure, technology has played a tremendous role in enabling nefarious actors to commit schemes and to prey on innocent 

Americans. 

So the question to all of you is technology is clearly part of the 

problem. Can it be part of the solution? And what should we be 

looking for it to do? Are state and Federal entities investing in the 

right kind of research and new technology that can help us prevent 

scams or identify them earlier? And can businesses help government do this? 

Go right ahead, Mr. Abagnale. 

Mr. ABAGNALE. I would just say absolutely. Technology can be 

used to fight crime. For example, as you know, a year ago the IRS 

paid out $5.8 billion in refunds to individuals who used someone 

else’s Social Security number. A simple technology that exists 

today and used by American corporations and banks every day in 

fraud detection would have prevented probably 70 percent of those 

payments being made. So the question is we have the technology, 

but it has to be used and it has to be implemented. 

I work on retainer to LexisNexis on government risk solutions; 

have for years. I work on retainer to Experian, and they operate 

in 80 countries around the world. Obviously, I know the technology 

exists; I know we use it in the commercial marketplace. So yes, you 

can prevent a lot of these things from occurring by simply using 

the right technology to do so, but you have to be willing to spend 

the money and take the time and effort to do so. 

Senator HASSAN. Right. Thank you. 

Anyone else want to add? 

Ms. MCSWEENY. I would just add one of the other ways we try 

to do that is by using our authority to run competitions to create 

new and innovative solutions to consumers. So in the past, we have 

used the authority to create apps that help consumers block unwanted calls, for example. Now we’re using it to create new tools 

to help consumers secure their home Internet of Things technology. 

36 

And that kind of entrepreneurial creative use of authorities can 

really spur innovation in the marketplace as well. 

Senator HASSAN. Thank you. 

And, Commissioner, do you have anything? 

Commissioner OHLHAUSEN. Yes. I just wanted to mention we at 

the FTC have tried to stay up-to-date on these things. We have an 

OTech, an Office of Technology, in our Bureau of Consumer Protection, and we also have a chief technologist at the agency. 

Senator HASSAN. Thank you very much. And, again—— 

Mr. DEWINE. Senator, very, very quickly. 

Senator HASSAN. Yes. 

Mr. DEWINE. As I’ve traveled around the state, a lot of business 

people have been saying to me, ‘‘What are you doing about identity 

theft and other problems?’’ 

Senator HASSAN. Right. 

Mr. DEWINE. And, quite frankly, I went back to my office and 

I said I’m not sure really what we’re doing. 

Senator HASSAN. Right. 

Mr. DEWINE. So what we have done is reached out to businesses 

and asked them to give us their best people literally to put on a 

group to start working on these issues. They’re going to be coming 

out with a report fairly quickly. Our concern is not the big companies, they have the resources to do it, but the vast majority of companies in Ohio are small and frankly don’t have the resources. So 

what we hope to do by getting people loaned frankly to us—and 

we’ve been very, very pleased with the quality of people the companies have given us, we think we’re going to come up with some recommendations, maybe some legislation, best practices, that will 

help small business. 

Senator HASSAN. Great. Thank you very much. Thank you all. 

Thank you, Mr. Chair. 

The CHAIRMAN. Senator Klobuchar. 

STATEMENT OF HON. AMY KLOBUCHAR, 

U.S. SENATOR FROM MINNESOTA 

Senator KLOBUCHAR. Thank you very much, Mr. Chair, and 

thank you to the Ranking Member as well for this important hearing. I apologize I was late. I was over at the Judiciary hearing, and 

I was telling Senator Moran I would use the very same tone and 

start asking you guys about things you wrote 10 years ago. 

[Laughter.] 

Senator KLOBUCHAR. So many of the witnesses today have highlighted the growing problem of senior fraud. I introduced the Senior Fraud Prevention Act with Senator Susan Collins, the Chair of 

the Senate Committee on Aging, to help the FTC more effectively 

combat senior fraud. The bill was passed by this committee in January. Chairman, thank you for being here. One provision of the bill 

would establish an office within the Bureau of Consumer Protection 

focused on senior fraud. Have efforts to provide specialized resources for other targeted groups, like Spanish speakers, military 

consumers, and small businesses been successful? 

Commissioner OHLHAUSEN. Thank you, Senator. We are very 

pleased to say that we also share your interest in focusing on fraud 

against seniors. We’ve developed a lot of consumer ed and help for 

37 

seniors in that area, we are doing the same for military, we have 

Military.Consumer.gov, and also for Spanish speakers. We think 

there are certain populations that might have particular needs, 

particular interests, and we want to reach out to them. 

Senator KLOBUCHAR. Very good. Thank you. 

Attorney General DeWine, thank you for being here. I wanted to 

hear more about your elder justice initiative. I actually embarked 

on such a thing when I was county attorney in Minnesota. And just 

one little aside, right after I announced it, 5 days later we started 

to prosecute an 88-year-old who had shot her boyfriend in the back, 

he survived, because she was mad he was dating someone else. 

And so people that were her friends accused me of that was my 

senior initiative. Of course, it was designed to help seniors. Could 

you talk about what you’ve done? 

Mr. DEWINE. Well, thank you, Senator, very much. As you know, 

and the members of the Committee know, a lot of these scams are 

targeted specifically at elderly. And I think it has been this way 

forever. You know, there’s a reason that mature neighborhoods are 

targeted that have the older trees and the older citizens, for the 

tree scams, where they roll in and tell you that your tree is about 

to fall on your house. They’re doing it also more sophisticated now, 

of course, and that is through the Internet. 

What we have done in the Attorney General’s Office is we have 

put together people from different parts of our office to really be 

kind of a strike force to respond when local law enforcement has 

a consumer instance where there has been elder abuse. Elder 

abuse, as you know, can be financial, it can be physical, and it also 

can be psychological. And what we find is that particularly the 

smaller jurisdictions simply do not have the resources to go after 

this, and sometimes it can take—— 

Senator KLOBUCHAR. Then you’re helping the smaller jurisdictions? 

Mr. DEWINE. We’re helping the smaller jurisdictions, so we can 

bring forensic accountants in, for example, if we’re dealing with 

something having to do with fraud, money fraud. As I indicated, 

Ohio is a very local government state, and we like it that way, but 

what happens sometimes is the local jurisdiction just does not have 

the resources. 

Senator KLOBUCHAR. OK. 

Mr. DEWINE. The other thing that we really have tried to put an 

emphasis on is getting cooperation from the banks and other people 

who are dealing with the seniors on issues of money, and to inform 

them, educate them, that they can really be an advocate and stop 

some of this stuff right there. 

Senator KLOBUCHAR. OK. Thank you. 

Madam Chair, one last question along that issue of money and 

deception. I’m Chair with Senator Blunt of the Travel Caucus, 

Tourism Caucus, and one of the trends that we’ve seen to threaten 

this huge industry, of course, which has so many jobs in our country, and certainly as Senator Cortez Masto knows, is the rise of deceptive online companies that imitate the websites of actual hotels 

or airlines in order to attract bookings. These fraudulent websites 

can leave consumers with airline itineraries or reservations that 

have errors and they can’t be honored. That’s why Senator Fischer 

38 

and I wrote to the FTC to ask you guys to investigate the matter, 

and why Senator Daines and Nelson and I introduced the Stop Online Booking Scams Act. What actions has the FTC taken in this 

area? 

Commissioner OHLHAUSEN. Senator, I am aware of your letter 

and appreciate you bringing that to the FTC’s attention. This is an 

important issue. We’re always concerned about deception for consumers. I can’t comment on whether we have any investigations 

ongoing, but we have looked into the issue and we’ve also issued 

consumer education on this. 

Senator KLOBUCHAR. OK. Very good. Thank you. I am now returning because my colleague, Senator Franken, is asking his questions, which would almost be as exciting as yours, Catherine. So 

thank you, everyone. Thank you. 

The CHAIRMAN. We’ll take a pause just for—right there, that 

length of time. We won’t take a pause any longer, although when 

he returns, I’ll be glad to—oh, he’s here. The Chair recognizes Senator Markey. 

STATEMENT OF HON. EDWARD MARKEY, 

U.S. SENATOR FROM MASSACHUSETTS 

Senator MARKEY. I apologize. I thought I was—— 

The CHAIRMAN. Senator Klobuchar was briefer than normal. 

[Laughter.] 

Senator MARKEY. Thank you. Commissioner McSweeny, last year 

the FCC wisely adopted broadband privacy rules that put consumers in control of their sensitive information, but now the 

broadband industry and their allies are fighting to strip away the 

fundamental privacy protections under the guise of harmonization 

of regulations. We could vote this week on a Congressional Review 

Act resolution rescinding these rules. When the industry says ‘‘harmonization,’’ they really mean self-regulation. 

Commissioner McSweeny, in a recent op-ed, you stated that efforts to rescind the broadband privacy rules through the CRA process will not actually harmonize regulations, but create a, quote, 

yawning chasm where broadband and cable companies have no 

discernable regulation. Could you explain? 

Ms. MCSWEENY. Thank you, Senator, for the question. The point 

that I’m trying to make is that both the FTC and the FCC have 

an important role to play in making sure that people have choices 

and control over their sensitive personal information. And in the 

always-on, always-connected environment that we now live, those 

choices are even more important than ever. Something like 91 percent of American consumers feel they have lost control of their 

data. So rather than rolling back rules that simply guarantee that 

they get a choice, we should be doing everything in our best efforts 

both at the FTC and at the FCC and other parts of the government 

to protect those choices and guarantee them. 

Senator MARKEY. So should we be allowing broadband companies 

to collect, to use, to sell sensitive information about subscribers’ 

health, finances, and children without first getting consent from 

those families? 

Ms. MCSWEENY. Well, the FTC’s perspective over 20 years of protecting consumer privacy—— 

39 

Senator MARKEY. No, I’m talking about the Federal Communications Commission. 

Ms. MCSWEENY. Right. And—— 

Senator MARKEY. Those rules should stay on the books. 

Ms. MCSWEENY. I strongly support those rules because they are 

consistent with what the FTC has required, which is choices be offered to people before their sensitive information is used. 

Senator MARKEY. Thank you. A last-minute provision in the 2015 

budget deal makes it easier for government debt collectors to harness tens of millions of consumers on their mobile phones. And last 

summer, the Federal Communications Commission, in response to 

a Supreme Court ruling, exempted the entire Federal Government 

and its contractors for key robocall protections. 

This carve-out for government robocallers coincides with a rise in 

tax and debt collection scams where criminals posing as IRS agents 

and debt collectors call innocent Americans telling them they must 

promptly wire them money or be subject to arrest, deportation, or 

revocation of driver licenses. Americans have lost millions of dollars because of these scams. 

A provision in the 2015 Surface Transportation Bill actually encourages the IRS to hire private debt collectors to collect certain 

unpaid taxes, private tax collectors that can now robocall and 

robotext consumers without their consent. I’m concerned that consumers could find it even more difficult to detect fraudulent calls 

because of these recent actions. 

Commissioner McSweeny, Commissioner Ohlhausen, do you 

agree with me, that there should be much concern about this 

change in law? 

Commissioner OHLHAUSEN. Senator, when the FCC proposed a 

Notice of Proposed Rulemaking about government debt collection, 

the FTC’s Bureau of Consumer Protection did file a comment raising some concerns. And when the FCC adopted the final rule, they 

did adopt several of the recommendations that the FTC staff had 

included, that things such as limiting the duration of the call, excluding any calls from that coverage that would have any marketing, requiring callers to affirmatively inform debtors of their 

right to make the request to stop calls. So I did share those concerns, and I was pleased to see that the FCC took those into account in the final rule. 

As for the IRS plan to use private debt collector contractors, I 

think it will raise an additional informational challenge and educational challenge for the FTC as they tell consumers how to be 

wary of imposter scams. 

Ms. MCSWEENY. I would just add I agree. I think consumer confusion here is a very strong possibility, and that could be problematic, and that our second most prevalent complaint is bad debt collection practices, and to the extent that we have debt collection occurring, we need to make sure that rules are followed that protect 

consumers’ interests in those proceedings. 

Senator MARKEY. Thank you. And earlier this month, Senator 

Lee, from Utah, and I introduced the bipartisan HANGUP Act, the 

Help Americans Never Get Unwanted Phone Calls Act. The bill 

closes these loopholes and ensures that consumers do not receive 

40 

unwanted robocalls and robotexts from Federal Government contractors without consent. 

Last year, the FTC received over 5 million complaints about unwanted calls. In light of this high volume of consumer complaints, 

would you support our legislation, Senator Lee and I—the HANGUP Act? 

Commissioner OHLHAUSEN. Senator, I haven’t seen the Act. I 

would certainly be happy to take a look at it, and I share the goals 

of that Act. I am concerned about consumer complaints, and it’s 

something we have paid close attention to at the FTC over the 

years. 

Senator MARKEY. Commissioner McSweeny? 

Ms. MCSWEENY. I agree. 

Senator MARKEY. OK. Thank you. 

I am the original House author of the Telephone Consumer Protection Act. And I’m going to oppose anything that undermines 

these fundamental protections, which people want in their homes 

from unwanted invasions of their privacy and compromise of information that is sensitive to their families. 

So I thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Markey. 

I have just a couple of wrap-up things. Maybe we can get this 

concluded quickly. It’s terribly warm in here. But you all never 

took your coats off, so I left mine on. 

Mr. Abagnale, is there any level of cooperation between those 

protecting consumers here in the United States and those abroad? 

What we heard today was a lot of things are beyond our reach, and 

what you indicated was the best opportunity we have is to prevent 

through education and consumer awareness and the actual enforcement, the ability to—the Attorney General said something very 

similar, the actual ability to prosecute, to put somebody out of business, or to get the funds restored is pretty limited, and I assume 

in part that’s because we no longer know the person who is perpetrating the fraud. I would guess in most instances there is no, any 

longer, any relationship between the victim and the perpetrator. Is 

that true? 

Mr. ABAGNALE. That’s true. And I think that there are, of course, 

some countries that we’re able to have cooperation with and be able 

to use enforcement tools to stop those individuals or arrest those 

individuals, but when you look at most of these scams that come 

over the phone, they’re coming out of China, they’re coming out of 

India, they’re coming out of Russia. We have gangs in Russia that 

bring in about $20 billion a year annually from these types of 

scams and crimes that are committed by these gangs, and there 

aren’t a lot of American companies that make $20 billion a year 

tax-free in that case. 

So I think there are some countries that we can work with. 

When I get calls—and what I wanted to comment on earlier is 

when people ask me, ‘‘I’ve been a victim. Where is the best place 

for me to call?’’ I always tell them the Attorney General of their 

state and to the office of their consumer protection. They’re the 

ones who really do the most about these things. They’re the ones 

who have the tools to help with those problems. So I always direct 

them there first. 

41 

Unfortunately, the FBI, as you know, has only 13,000 agents, 

and obviously those agents are dealing with kidnappings and counterintelligence items and things of that nature, so those crimes get 

to where there is a dollar amount has to exceed that amount before 

there is an investigation, and the U.S. Attorney only prosecutes 

when it exceeds a certain dollar amount. And I understand why 

that is done. 

So it’s best to probably try to deal with those things on the local 

level with the Attorney General and then get the cooperation when 

we know that someone might be out of state or somewhere we need 

Federal law enforcement to help investigate or apprehend that individual. 

The CHAIRMAN. Are there any successful instances in which the 

Internet provider or the phone carrier or the company has acted in 

a way that then shuts down or prevents additional fraud? 

Mr. ABAGNALE. Well, what happens, if the phone company was 

to shut down a phone number tomorrow, it’s just a throw-away cell 

phone, so they just have hundreds and hundreds of phones, and so 

a new number is a couple of seconds away, so it’s very difficult to 

do that. 

I would encourage, again, there probably is ability with technology to—phone companies could use to track a lot of those calls 

and then stop those calls from coming into an individual number, 

but I don’t know that there is anyone really doing that at this time. 

The CHAIRMAN. From an FTC point of view, where are you in the 

FY18 budget request? Anything transpiring in regard to what request the administration will make for your agency? 

Commissioner OHLHAUSEN. So we weren’t mentioned specifically 

in the President’s, quote, skinny budget, so we’re still waiting to 

see exactly how we’ll be treated. 

The CHAIRMAN. And let me ask while I’m visiting with you, 

Madam Chairman, it was mentioned earlier in Senator 

Blumenthal’s opening statement about the BOTS Act, that this 

subcommittee and full committee passed and was signed into law 

by the President, designed to rid us of the so-called ticket BOTS, 

who automatically have the ability to corner the market. 

Commissioner OHLHAUSEN. Yes. 

The CHAIRMAN. What’s the status of—any complaints, any inquiries made to the FTC, in regard to that law? 

Commissioner OHLHAUSEN. So I commend you for passing the 

Act. And we are currently talking to people and finding out if there 

are complaints that we can act upon. 

The CHAIRMAN. So nothing at this point. I mean, give me a little 

more detail of what that means. 

Commissioner OHLHAUSEN. So our staff is reaching out to other 

entities, other enforcers, finding out if there are violations of the 

Act ongoing and how we would track them down, finding out if 

there are consumer complaints, and using our usual tools to investigate whether there is a violation that we could pursue. 

The CHAIRMAN. Attorney General, that legislation also allows for 

state enforcement. And I would highlight that legislation for you, 

and maybe you’re aware of it, but the opportunity to try to rid us 

of those automatic acquisition of tickets then sold to, I don’t know, 

42 

Buckeye games or something that may be popular. Are you aware 

of that? 

Mr. DEWINE. No. I’ll take a look at that. Thank you, Mr. Chairman, very much. 

The CHAIRMAN. Thank you very much. 

Mr. Abagnale, tell me a bit, I’ll give you a chance to talk about 

perhaps your sponsor or your host, the AARP. So what is it that 

I can do with Kansans with AARP to further highlight how to 

avoid being scammed? 

Mr. ABAGNALE. You know, it’s interesting, I have spent most of 

my career dealing with crimes against businesses, business-to-business crimes, but I was well aware of all these consumer issues. 

Most of my time has been spent dealing with those crimes. A few 

years ago, AARP contacted me and asked me if I would work with 

them in helping educate their members and non-members about 

these scams that are being perpetrated, how they’re done, and how 

to prevent them. 

I found toward the end of my career that this would be something really worthwhile for me to do and spend my time helping 

consumers instead of just businesses deal with crime. And it has 

been absolutely amazing. Over the last few years, I have talked to 

people who have lost their life savings, 80 years old, they’ve lost 

their home, they lost their car, due to some scam. 

But I have found that the reach of the Fraud Watch Network to 

over 50 million people, the ability for me to go out and get on a 

phone and speak to 15,000 people on one phone call and reach 

those people and answer those questions, and when I do go out and 

do a presentation somewhere, the AARP does not allow for the sale 

of any items, they do not allow the promotion of their company, 

and they allow anyone to attend. So you don’t need to be an AARP 

member. 

And we’re amazed that when we sit there watching the people 

come in, and we get crowds of 1,500–2,000 people, we notice that 

a lot of them are people in their twenties and in their thirties, and 

then married couples that are very young, and we ask them later 

why they came, and they say, ‘‘Because I’m concerned about my 

identity being stolen, and I’m concerned about my information 

being taken or being scammed myself.’’ 

So it has been a great way to reach people, and I will continue 

to do so this year to reach consumers en masse and be able to help 

them understand these issues and how to help protect themself. 

I would like to add one thing that I didn’t get to comment on earlier. I am very concerned about children’s identities. If you are selling an identity on the black market today, and you told me in Envelope A I have a 62-year-old male who is a multi-millionaire, owns 

hotels, restaurants, office buildings, shopping malls, and I’ll sell 

you his identity complete, or I will sell you the identity of a 12- 

year-old that’s in junior high school and has no credit or any assets, I would take the 12-year-old. And the reason for that is that 

if I can become that 2-year-old, that 5-year-old, that 12-year-old, I 

can become that person for a long period of time before that person 

will ever realize I stole their identity. 

So when I was a child, you didn’t get your Social Security number until you got a job, so you were 16, 17 years old, only three 

43 

people knew it—the government, your employer, and you. Today, 

you don’t leave the hospital without that number, and if I can get 

that number as that child leaves that hospital or shortly thereafter, 

that means I have 18 years of reselling, reusing that identity of 

that child before anyone else would know that. So I think we need 

to start paying a little more attention. It’s not just the elderly, but 

it is also children’s identities that are very much at risk, and we 

need to be able to try to come up with some solutions for helping 

those individuals. 

The CHAIRMAN. There are increasing examples of fraud against 

Federal agencies and departments. Anybody have any feel for what 

that’s like? And are there departments that are taking the necessary steps to prevent that? 

Mr. ABAGNALE. That’s my area, and it’s quite amazing. I used to 

tell people that I worked in the millions, but I only work in the billions now. So last year, Medicare and Medicaid paid out $100 billion in fraudulent claims, that was 10 percent of their combined 

budget. So we mentioned earlier the IRS paid out $5.8 billion in 

fraudulent tax returns that people filed using someone else’s name, 

$7.7 billion in fraud from unemployment fraud, and almost $10 billion in fraud from food stamp fraud. 

This is billions and billions of dollars that in many cases leaves 

our country because it’s being stolen and benefits collected from 

people who are not even citizens or in this country. And what bothers me most about that is we have the ability to prevent a lot of 

that. 

So I know that in the private industry, you have a board of directors, and you have shareholders, and you have a profit to make. Inside the government, that’s not there, so consequently the criminals start to realize, ‘‘Who has all the money?’’ The government: 

Federal, county, state, and city. And, ‘‘Who’s the easiest target?’’ 

Unfortunately, the government, because they don’t have the proper 

infrastructure in place, let’s say, for example, Chase Bank, that 

spends more than $600 million a year to put technology in their 

bank to keep criminals out of their bank. 

So I would like to see the Federal Government, even if you were 

to cut those losses by 20 percent, 25 percent, that’s billions of dollars that go back into building roads, helping the homeless, and 

people who need that money. So I think the government can do a 

better job of preventing a lot of the crimes that are perpetrated 

against them; they just need to take the time, the money, and the 

effort to do so. 

The CHAIRMAN. I also serve on the Appropriations Committee, 

and it has been one of our standard questions to ask agency heads, 

Cabinet secretaries, chief information officers, ‘‘What is it that 

you’re doing to protect the data that you have authority over?’’ and 

we’re trying to improve the status. I hadn’t thought about states 

and local units of government, but it would be the same kind of 

challenge that we have. 

One thing you said today, among many others that was said by 

all of you that stands out with me, I thought about the consequences of fraud or scamming and the economic loss to the victim. What you said, Mr. Abagnale, that will stick with me is the 

consequences of the money then coming back and used in different 

44 

ways so damaging to our society, more than just a personal loss, 

the volume, the amount of dollars, that are accumulated can be 

used in nefarious and damaging ways. 

Mr. ABAGNALE. Absolutely. 

The CHAIRMAN. Ms. Cortez Masto? 

Senator CORTEZ MASTO. Mr. Chair, thank you. And let me just 

add because I completely agree, as somebody who oversaw the 

Medicaid Fraud Unit for the state of Nevada. It was so important 

to put resources into the staff, both the prosecutors and investigators, who can investigate and prosecute for that fraud. One case 

alone we were able to put $2 million back into the Medicaid system. 

So part of this process I believe is also funding those inspector 

generals or funding those agencies and their units within those 

agencies that can continue to go after the type of fraud and keep 

that money in the system to the benefit of the people who really 

need it. So I appreciate those comments. Thank you very much. 

The CHAIRMAN. Thank you very much. Anyone have anything 

they want to add that they felt like they didn’t get the chance to 

make because I was inarticulate in my questions? 

Mr. Schwanke. 

Mr. SCHWANKE. Real quickly, on the IRS law that’s going to 

allow the collection via phone that was brought up, I can tell you 

that I would have significant concern as over the past few years 

that’s all we have done, was try to educate consumers that the IRS 

will not call you. I think I echo concerns of the BBB that I talked 

to here, that there will have to be significant reeducation happening because over and over again we have told viewers that the 

IRS will not call you to collect any tax debt. So as—and the IRS 

has also gone on our air many times saying that. So that would be 

a concern. 

The CHAIRMAN. And another takeaway from the hearing for me 

is the lack of emphasis or the declining emphasis on public service 

announcements awareness campaigns that was described as used 

to be more prevalent than it is today. 

Anyone else? 

Mr. DEWINE. Mr. Chairman—— 

The CHAIRMAN. General. 

Mr. DEWINE.—just one last thing to follow up on what Mr. 

Abagnale said in regard to young people and the identity theft of 

young people. One of the things that we’ve done in Ohio is pass a 

law that provides that a parent can go to the credit reporting agencies and actually freeze that child’s credit, and once that credit is 

frozen, then obviously it is not as beneficial for someone to steal 

it, and if they do steal it, there is not a whole lot they can do with 

it, or not as much. So that’s one thing that we’re doing in Ohio and 

we think can help. 

The CHAIRMAN. Thank you very much. 

Mr. Schwanke, you’re the Kansan on the panel; therefore, you’re 

the expert. Anything you want to make certain I know before I conclude this hearing? 

Mr. SCHWANKE. I would just say we’re getting—I think there has 

to be better communication from government agencies to private 

businesses, not that there has to be more regulation, but we’ve 

45 

seen drastic improvement really over the past year or two. It was 

brought up by one of the members of up here that when they go 

to the banks or when they go to these businesses, especially the 

senior citizens, to withdraw money, or in my example, purchase 

$13,000 in iTunes cards, that a lot of times private business, 

through their education efforts, can stop this. That same grocery 

store that had that happen now has had multiple cases where their 

clerks have stopped the scam from happening, as have banks. 

Banks in the past I think have been concerned with privacy, not 

prying into people’s personal lives and finances when someone 

comes to withdraw $20,000 cash, but I think that’s getting better 

that they’re able to ask some of those important questions to seniors when they go to make those type of withdrawals, whether it 

be a gift card or a cash withdrawal from a bank. 

The CHAIRMAN. You and I both grew up in small towns, and 

you’re too young to know this, but in days gone by, everybody knew 

each other, and you knew when somebody might be doing something that made no sense to you, and you had enough of an awareness of their lives, their person, and their family, that you were 

willing to say, ‘‘Are you sure you know what you’re doing?’’ And we 

have fewer of those personal barriers and opportunities in today’s 

global economy. 

Thank you all very much. We appreciate the time that you’ve 

spent with us this afternoon. We appreciate the education that 

we’ve received. This hearing record will remain open for 2 weeks. 

During that time, Senators are asked to submit any questions for 

the record. Upon receipt, the witnesses are requested to submit 

their written answers to the Committee as soon as possible. And 

with that necessary announcement, I bring this hearing to a conclusion. Thank you all very much. 

[Whereupon, at 4:26 p.m., the hearing was adjourned.] 

(47) 

A P P E N D I X 


321NHLA1.eps
48 


321NHLA2.eps
49 


321NHLA3.eps
50 


321NHLA4.eps
51 

1 Consumer Fraud in the United States, 2011: The Third FTC Survey (March 2013), available 

at https://www.ftc.gov/sites/default/files/documents/reports/consumer-fraud-united-states2011-third-ftc-survey/130419fraudsurvey_0.pdf. 2 In at least some cases, the figures that result from the FTC’s survey likely understate the 

prevalence of fraud. This is because fraud here involves paying for a product or service that the 

consumer had not agreed to purchase. This could occur, for example, if a consumer was deceptively offered a free trial of some service—perhaps a buyers’ club—and the seller then converted 

the free-trial to a regular paid subscription if the consumer did not cancel the membership during the free-trial period. (These types of offerings are often referred to as ‘‘negative option’’ offers.) However, if the charges just appear on consumers’ credit card or telephone bills and consumers do not realize that the charges are unauthorized, they will not be able to correctly report 

that they have been victimized. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN THUNE TO

HON. MAUREEN K. OHLHAUSEN

Question 1. You have stated your interest in combating scams as a top priority 

for the FTC’s Bureau of Consumer Protection. What specific practices do you intend 

to target? Can we expect to see increased FTC enforcement activity in this area? 

Answer. Fighting fraud is at the core of the FTC’s consumer protection mission. 

Our anti-fraud program tracks down and stops some of the most pernicious frauds 

that prey on U.S. consumers, often on those who can least afford to lose money. The 

Commission will target the most egregious scams that cause significant economic injury to consumers, including imposter scams, such as government and business imposters; tech support scams which may disproportionately impact the elderly; 

robocall and other telemarketing scams; fake debt relief services and phantom debt 

collection schemes; and miracle cure scams. The agency also will work to combat 

scams that defraud small businesses, such as fake business directory services, as 

well as scams that deceive aspiring entrepreneurs, including business opportunity 

scams. I also will increase our efforts to fight scams that target members of the military and veterans. 

Question 2. At the hearing, you testified that the annual macroeconomic cost of 

scams to the U.S. economy is ‘‘billions and billions of dollars.’’ Apparently, you based 

this figure on the redress FTC received in 2016, which included a settlement order 

the Commission secured against Volkswagen Group of America in excess of $10 billion. Presumably, however, this redress represents only a small fraction of the total 

cost of scams to the economy. 

a. Has the Commission’s Bureau of Economics examined these costs? If so, what 

conclusions did it reach? 

Answer. Over the last 15 years, the Bureau of Economics has conducted three surveys to study the degree to which consumers are affected by consumer fraud. Because of the limitations of the data available to the Bureau and other resources constraints, these studies researched the number of consumers affected by fraud, but 

did not address the question of the total costs such frauds impose on the economy. 

The most recent survey, which was conducted in 2011, asked about 15 specific 

types of fraud, as well as two more general types.1 The types of fraud included in 

the survey are among the most common frauds perpetrated by mass-market 

fraudsters, based on information gathered from consumer complaints submitted to 

the Commission’s Consumer Sentinel database and Commission enforcement actions. 

The 2011 survey found that 10.8 percent of U.S. consumers polled—which translates to an estimated 25.6 million American adults—had been victims of one of the 

frauds about which the survey asked.2 The most frequently experienced of these 

frauds were weight loss products that were marketed as making it easy for consumers to lose weight or as enabling weight loss without diet or exercise, and that 

did not deliver what consumers had expected. An estimated 2.1 percent of American 

adults had purchased such weight loss products during 2011. Fraudulent prize promotions—a situation where a consumer paid money, purchased a product, or attended a sales promotion to obtain a promised prize and then did not receive the 

prize or found that the prize was not what they thought they had been promised— 

was the second most prevalent of the studied frauds, having been experienced by 

an estimated 1.0 percent of U.S. consumers. 

b. Do you believe it is important to establish a baseline of the economic impact 

of scams to assess the effectiveness of FTC’s enforcement and education efforts? 

Answer. To fulfill its goal of protecting consumers, the FTC must identify consumer protection problems and trends in the fast-changing, increasingly global marketplace. The agency strives to understand the issues affecting consumers, including 

any newly emerging methods of fraud or deceit, so that it can target its enforcement, education, and advocacy on those areas where consumers suffer the most 

52 

3FTC Policy Statement on Deception (Oct. 14, 1983) (appended to Cliffdale Associates, Inc., 

103 F.T.C. 110, 174 (1984)) (‘‘Deception Policy Statement’’), available at https://www.ftc.gov/ 

public-statements/1983/10/ftc-policy-statement-deception. 4 Id. 

5See also FTC Policy Statement on Unfairness (Dec. 17, 1980) (appended to Int’l Harvester 

Co., 104 F.T.C. 949 (1984)) (‘‘Unfairness Statement’’), available at https://www.ftc.gov/publicstatements/1980/12/ftc-policy-statement-unfairness. 

harm or where there will be the greatest impact. I am committed to continuing to 

improve the effectiveness of the FTC’s enforcement and education efforts, including 

by setting appropriate baselines against which to measure those efforts. 

A number of external factors pose significant obstacles to establishing a baseline 

of the economic impact of scams. For example, many injured consumers do not report when they have been harmed, whether out of embarrassment or for other reasons, and some consumers may not even realize that they have been victimized. 

Nevertheless, I do believe it is important for the Commission to attempt to measure the economic impact that its enforcement and education efforts have on consumers and the economy, and the agency does set performance goals that can be 

used as a proxy for consumer harm. For example, in the FTC’s current strategic 

plan, the agency has set baselines from past performance, as well as goals designed 

to improve that performance. These baselines and goals apply several different 

measures, including the percentage of the FTC’s consumer protection law enforcement actions that targeted the subject of consumer complaints to the FTC; the total 

estimated consumer savings compared to the amount of FTC resources allocated to 

consumer protection law enforcement; and the amount of money the FTC returned 

to consumers or forwarded to the U.S. Treasury. The agency also has set performance measures for providing the public with knowledge and tools to prevent harm 

to consumers. For example, the agency has set performance goals for the rate of consumer satisfaction with FTC consumer education websites; the number of federal, 

state, local, international, and private partnerships to maximize the reach of consumer and business education campaigns; the number of workshops and conferences 

the FTC convened that address consumer protection problems; and the number of 

consumer protection reports the FTC released. 

Question 3. In April 2016, the American Medical Association adopted a resolution 

supporting a ‘‘requirement that attorney advertising, which may cause patients to 

discontinue medically necessary medications have appropriate and conspicuous 

warnings that patients should not discontinue medications without seeking the advice of their physician.’’ Could attorney advertising, which induces a patient to stop 

taking a prescribed medicine, be actionable under Section 5 of the FTC Act? Has 

the Commission examined any recent cases involving such advertising, and has 

Commission staff been in contact with the American Medical Association and the 

American Bar Association regarding this matter? 

Answer. Section 5 of the FTC Act prohibits ‘‘unfair or deceptive acts or practices 

in or affecting commerce.’’ 15 U.S.C. § 45(a). Whether the advertising that you describe would constitute an unfair or deceptive act or practice is a factual question 

that can only be answered on a case-by-case basis. However, I am happy to provide 

a general overview of the factors the Commission would consider in making such 

a determination. 

The Commission has explained that a deceptive act or practice is a representation, 

omission, or practice that is likely to mislead a consumer acting reasonably under 

the circumstances and that is material.3 If a representation, omission, or practice 

targets a particular group, the Commission will examine reasonableness from the 

perspective of that group. Further, a representation, omission, or practice is material if it ‘‘is likely to affect the consumer’s conduct or decision with regard to a product or service.’’ 4 Pursuant to Section 5(n) of the Act, an act or practice may be 

deemed unfair if (1) it ‘‘causes or is likely to cause substantial injury to consumers’’; 

(2) the injury ‘‘is not reasonably avoidable by consumers themselves’’; and (3) the 

injury is ‘‘not outweighed by countervailing benefits to consumers or competition.’’ 

15 U.S.C. § 45(n).5

The first element of unfairness is that the act causes or is likely to cause substantial injury to consumers. Accordingly, an inquiry would consider how likely is it that 

a particular ad would cause consumers to discontinue their medication and what 

consequences would likely follow if that happened, in order to obtain an overall understanding of the level of risk and harm to which consumers are exposed in a particular case. These factors would likely vary depending on the particular claims 

made in the ad, as well as the type of medication at issue. 

53 

6 Unfairness Statement n.12. 

7The Commission’s very first data security case, in 2002, addressed lax data security procedures that caused disclosure of the e-mail addresses of Prozac users. See Eli Lilly & Co., No. 

C–4047 (May 10, 2002), available at https://www.ftc.gov/enforcement/cases-proceedings/012- 

3214/eli-lilly-company-matter. More recently, the Commission has brought cases against a company that disclosed notes of medical examinations on the internet, GMR Transcription Servs., 

Inc., No. C–4482 (Aug. 14, 2014), available at https://www.ftc.gov/enforcement/cases-proceedings/122-3095/gmr-transcription-services-inc-matter, and a company that solicited consumer 

healthcare reviews without indicating that the reviews would be publicly posted on the internet, 

Practice Fusion, Inc., No. C–4591 (Aug. 16, 2016), available at https://www.ftc.gov/enforcement/cases-proceedings/142–3039/practice-fusion-inc-matter. 

The next element asks whether the injury would be reasonably avoidable by consumers themselves. Again, the answer to this question would likely depend on the 

claims made in the advertising, the medication involved, and the condition at issue. 

The final element is whether the consumer injury is outweighed by countervailing 

benefits to consumers or competition. Attorney advertising advising consumers who 

might have suffered injury to seek legal consultation can serve an important public 

purpose. Moreover, required disclosures impose at least some cost on advertisers. 

However, when there is a substantial injury to health, or the likelihood of such injury, that is not reasonably avoidable by consumers, a cost-benefit analysis will generally favor disclosure, if such disclosure will mitigate the injury. 

At this point in time, no specific cases involving patients discontinuing medically 

necessary medication in response to attorney advertising have been brought to our 

attention. We plan to contact the AMA to request additional information. 

Question 4. Under Democrat leadership, the FTC sought to introduce novel harms 

into its ‘‘substantial injury’’ analysis, for example recognizing intangible harm as the 

basis for unfairness cases. A prime example of this is in the FTC’s LabMD enforcement, which you supported. Previously, the Commission tended to find substantial 

injury in cases of actual or likely economic harm, and in other instances, where 

physical health and safety is threatened. 

a. Do you agree that the Commission should consider intangible harm as part of 

its unfairness analysis? 

Answer. In order to effectively and efficiently protect consumers, the FTC must 

focus its enforcement efforts on stopping conduct that causes or is likely to cause 

substantial consumer harm. Public exposure of sensitive information of the type frequently used to facilitate identity theft can be likely to cause substantial economic 

injury. And it may create a significant risk of a concrete harm, which the Commission has also long considered to constitute substantial injury.6 Furthermore, the 

Commission’s longstanding view has been that an invasion of a consumer’s highly 

sensitive medical information can itself constitute an actual, concrete consumer 

harm under the FTC Act.7

I do believe, however, that the FTC needs to examine more rigorously what constitutes substantial injury in privacy cases. This is one of the reasons I have asked 

the FTC’s Bureau of Economics to study the economics of privacy and data security. 

I expect that this work will help ensure our data security and privacy program 

stands on a strong policy foundation. 

b. If economic or physical harm is not required, what is the predictable limiting 

factor on the types of harm that will result in enforcement? 

Answer. As required by the first prong of Section 5(n) of the FTC Act and noted 

in the Unfairness Statement, the harm in question must constitute a substantial injury. Trivial, speculative, or certain subjective harms, such as those that offend the 

tastes or social beliefs of particular consumers, do not meet the first prong of Section 5(n). Unfairness Statement, 104 F.T.C. at 1073. In addition, for there to be a 

violation that may result in enforcement, the other prongs of Section 5(n) must also 

be satisfied, i.e., the harm must not be reasonably avoidable by consumers or outweighed by countervailing benefits to consumers or competition. 

Question 5. In the FTC’s recent enforcement action in the matter of Vizio, Inc., 

you supported Count II of the complaint, alleging that Vizio deceptively omitted information about its data collection and sharing program, stating that ‘‘[e]vidence 

shows that consumers do not expect televisions to collect and share information 

about what they watch.’’ On this basis, you found that the company’s omission to 

be material, because ‘‘[c]onsumers who are aware of such practices may choose a different television or change the television’s settings to reflect their preferences.’’ 

Could, and if so, should, the FTC apply a similar theory of deception to data collection and sharing in other contexts—for instance by Internet service providers, 

websites, or applications—where consumer may have lower expectations about the 

treatment of their data? 

54 

8Press Release, FTC Approves Final Order Settling Charges Against Flashlight App Creator 

(April 9, 2014) available at https://www.ftc.gov/news-events/press-releases/2014/04/ftc-approves-final-order-settling-charges-against-flashlight-app. 9Press Release, FTC Approves Final Order Settling Charges Against Epic Marketplace, Inc. 

(March 19, 2013) available at https://www.ftc.gov/news-events/press-releases/2013/03/ftc-approves-final-order-settling-charges-against-epic. 10Press Release, FTC Approves Final Consent Order Requiring Sears to Disclose the Installation of Tracking Software Placed on Consumers Computers; FTC Approves Final Consent Order 

in Matter Concerning Enhanced Vision Systems, Inc. (September 9, 2009) available at https:// 

www.ftc.gov/news-events/press-releases/2009/09/ftc-approves-final-consent-order-requiringsears-disclose. 11The guidance is available at https://www.ftc.gov/tips-advice/business-center/guidance/consumer-review-fairness-act-what-businesses-need-know. 12Maureen Ohlhausen, Comm’r, Fed. Trade Comm’n, Remarks at the CES 2017 FTC Commissioner Roundtable (Jan. 5, 2017). 

Answer. Any determination of whether a specific act or practice is deceptive is a 

factual question that must be made on a case-by-case basis. As noted above, a deceptive representation, omission, or practice is one that is material and likely to 

mislead a consumer acting reasonably under the circumstances. A representation is 

material if it is likely to affect the consumer’s conduct or decision with respect to 

the product or service. As explained in the Commission’s Deception Policy Statement, in making such a determination, the Commission will analyze the ‘‘net impression’’ of the representation being made from the perspective of a reasonable consumer. 

The Commission has previously challenged deceptive omissions in other contexts 

involving data collection and sharing. For example, in Goldenshores Technologies,8

the FTC alleged that the makers of a popular free flashlight app deceived consumers about how their geolocation information would be shared with advertising 

networks and other third parties. While the company’s privacy policy told consumers 

that any information collected by their Brightest Flashlight app would be used by 

the company, it deceptively failed to disclose that the app transmitted users’ precise 

location and unique device identifier to third parties, including advertising networks. Likewise, in its case against Epic Marketplace,9 the FTC settled charges that 

the online advertising company used ‘‘history sniffing’’ to secretly and illegally gather data from millions of consumers about their interest in sensitive medical and financial issues ranging from fertility and incontinence to debt relief and personal 

bankruptcy. According to the complaint, while Epic did disclose its privacy and behavioral advertising practices, it deceptively omitted that it engaged in history sniffing. Finally, in Sears Management Corp.,10 the FTC settled allegations that the 

company failed to disclose adequately the scope of consumers’ personal information 

it collected via a downloadable software application. Sears allegedly represented to 

consumers that the software would track their ‘‘online browsing,’’ but only disclosed 

the full extent of the tracking in a lengthy user license agreement, available to consumers at the end of a multi-step registration process. According to the FTC, the 

software would also monitor consumers’ online secure sessions—including sessions 

on third parties’ websites—and collect information transmitted in those sessions, 

such as the contents of shopping carts, online bank statements, drug prescription 

records, video rental records, library borrowing histories, and the sender, recipient, 

subject, and size for web-based e-mails. 

Question 6. On December 14, 2016, the Consumer Review Fairness Act became 

the law of the land. This legislation, which I introduced in the Senate, addresses 

so-called ‘‘gag clauses’’ in form contracts that are designed to stop consumers from 

providing public feedback that criticizes a company, even when that feedback is an 

honest reflection of the customer experience. Among other things, this law provides 

for enforcement by the FTC, and set a deadline of February 12, 2017, for the FTC 

to begin education and outreach for business to provide them with non-binding best 

practices for compliance with the law. Please provide an update with respect to the 

Commission’s activities under this new authority. 

Answer. In February 2017, the FTC issued ‘‘Consumer Review Fairness Act: What 

Businesses Need to Know,’’ a guidance document that informs businesses of the conduct prohibited by the statute and provides information on how to comply with the 

law.11 The FTC and states can enforce the law as to contracts in place on or after 

December 14, 2017. 

Question 7. This hearing included discussion of the Commission’s role with respect 

to promoting motor vehicle safety. In a recent panel discussing regulatory and policy 

issues facing the Commission, you stated your interest in the ‘‘safety benefits’’ of autonomous vehicles and connected cars.12 Earlier this month, FTC announced a joint 

55 

13Press Release, FTC and NHTSA Seek Input on Benefits and Privacy and Security Issues 

Associated with Current and Future Motor Vehicles (March 20, 2017) available at https:// 

www.ftc.gov/news-events/press-releases/2017/03/ftc-nhtsa-conduct-workshop-june-28-privacy-security-issues. 14See, e.g., ASUSTeK Computer Inc., No. C–4587 (July 28, 2016), available at https:// 

www.ftc.gov/enforcement/cases-proceedings/142–3156/asustek-computer-inc-matter (alleging that 

critical security flaws in computer hardware company ASUS’ routers put the home networks of 

hundreds of thousands of consumers at risk); Credit Karma, Inc., No. C–4480 (Aug. 13, 2014), 

available at https://www.ftc.gov/enforcement/cases-proceedings/132–3091/credit-karma-inc (alleging mobile app disabled a critical default process necessary to ensure that apps’ communications were secure); Fandango, LLC, No. C–4481 (Aug. 13, 2014), available at https:// 

www.ftc.gov/enforcement/cases-proceedings/132–3089/fandango-llc (same); TRENDnet, Inc., 

No. C–4426 (Jan. 16, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/ 

122–3090/trendnet-inc-matter (alleging that, due to the company’s failure to properly secure its 

IP cameras, hackers were able to access and then post hundreds of online private video and 

even audio feeds); HTC America, Inc., No. C–4406 (June 25, 2013), available at https:// 

www.ftc.gov/enforcement/cases-proceedings/122-3049/htc-america-inc-matter (mobile device 

manufacturer HTC for failing to secure its mobile devices). 

workshop with the National Highway Traffic Safety Agency (NHTSA), seeking 

stakeholder input on modern motor vehicle technologies that ‘‘promote safety.’’ 13

a. Should the Commission defer to the expert Federal agencies, such as NHTSA 

and the National Transportation Safety Board, on the issue of motor vehicle safety? 

Answer. The FTC would generally defer to Federal agencies such as NHTSA and 

the National Transportation Safety Board (NTSB) regarding motor vehicle safety. 

At the same time, however, the line between issues of safety and non-safety are not 

necessarily clear. For example, a data security vulnerability may both expose consumers’ personal information, as well as raise vehicle safety concerns. The Commission brings much experience to bear on the former. For example, on the privacy 

side, several automakers have voluntarily made commitments to adhere to industry 

privacy principles, and we have unique experience in enforcing self-regulatory codes. 

On the security side, the Commission has significant expertise in examining software security issues, such as failure to test for the presence of reasonably foreseeable vulnerabilities.14

Nonetheless, I share your concern and I am committed to working with other Federal agencies to ensure that the FTC not impose duplicative, overlapping, or conflicting requirements on car companies. 

b. Does the Commission have jurisdiction over motor vehicle safety under its unfairness authority, which recognizes that ‘‘[u]nwarranted health and safety risks 

may also support a finding of unfairness,’’ or would such actions rely primarily on 

public policy considerations? 

Answer. It is possible that, in certain contexts, the FTC’s Section 5 unfairness jurisdiction could apply where a motor vehicle presented unreasonable health and 

safety risks to consumers. As noted above, I remain committed to working with 

other Federal agencies to ensure that the FTC not impose duplicative, overlapping, 

or conflicting requirements on automotive companies. 

Question 8. The Senate Commerce Committee has also focused its attention on the 

issue of the marketing of anti-concussion sports equipment. Does the Commission 

have sufficient authority under the FTC Act, 15 U.S.C. §§ 41–58, to pursue enforcement actions against companies that engage in false or misleading advertising with 

respect to these products? 

Answer. Section 5 of the FTC Act, 15 U.S.C. § 45(a), prohibits false or misleading 

advertising, including false or misleading advertising of the anti-concussion benefits 

of sports equipment. I believe this authority is sufficient to allow the Commission 

to pursue enforcement actions against companies that engage in false or misleading 

advertising with respect to these products. 

Question 9. In the FTC’s written testimony, the Commission noted scams targeting small commercial trucking businesses wherein scammers impersonate government agencies to solicit payment for Federal motor carrier registration. Small, 

family-owned trucking companies are an important part of the South Dakota transportation sector. These companies, along with their larger counterparts, must register with the U.S. Department of Transportation (DOT) and re-register periodically. 

As part of this process, registrant contact information is routinely made available 

online where it can be accessed by anyone, including scammers. I have heard from 

South Dakota trucking companies who are concerned about the illegitimate requests 

for payment and other solicitations for unnecessary services they receive. Sometimes, these requests and solicitations come from companies with official-sounding 

websites such as ‘‘DOTcompliance.com’’ and ‘‘ExpressDOTService.com.’’ Particularly 

56 

15See FTC Press Release, FTC Charges Operators of Scheme That Used Fake Government Affiliation to Sell Commercial Trucking Registration Services, (Oct. 17, 2016) available at https:// 

www.ftc.gov/news-events/press-releases/2016/10/ftc-charges-operators-scheme-used-fake-government-affiliation. 16See, e.g., United States v. KFJ Marketing, LLC et al., 2:16–cv–01643 (C.D. Cal. Mar. 20, 

2016); FTC et al., v. All Us Marketing LLC, et al., 6:15CV1016–0RL–28GJK (M.D. Fla. June 

29, 2015) ; FTC et al., v. Lifewatch Inc. et al., 1:15–cv–05781 (N.D. Ill. June 20, 2015); FTC 

et al., v. Caribbean Cruise, Inc. et al., 0:15–cv–60423 (S.D. Fla. Mar. 4, 2015). Each of these 

actions sought relief for the defendants’ use of illegal spoofing and failure to provide legitimate 

Caller ID information in violation of the Telemarketing Sales Rule, 16 C.F.R. § 310.4(a)(8). 17 Caller ID authentication refers to standards to verify and authenticate caller identification 

for calls carried over an Internet Protocol (IP) network. These standards are known as SHAKEN 

(Signature-based Handling of Asserted information using toKENs) and STIR (Secure Telephony 

Identity Revisited). Wide-spread adoption of Caller ID authentication standards would enable 

for smaller companies, it is difficult to discern legitimate requests from illegitimate 

ones. 

a. What steps has the FTC taken to combat this fraudulent behavior? How will 

the Commission address future incidents? 

b. To what extent has the FTC worked with DOT to address these scams? 

Answer. The FTC is concerned about this possible misconduct and has been working with the U.S. Department of Transportation (USDOT) to address it. In 2015, 

USDOT approached the FTC about the deceptive marketing of registration services 

by companies pretending to be affiliated with government agencies to small, familyowned trucking companies. Since then, the FTC has offered guidance to USDOT on 

consumer warnings and education measures to combat government-imposter registration solicitations. In addition, USDOT and the FTC worked together to identify 

and investigate relevant consumer complaints. As a result, this past Fall, the FTC 

filed an action alleging that several interrelated companies, including 

DOTAuthority.com, Inc., deceived small commercial trucking businesses into paying 

them for Federal and state motor carrier registrations by impersonating government 

transportation agencies. Our complaint alleges that the defendants have taken in 

more than $17 million from thousands of small businesses by sending misleading 

robocalls, e-mails, and text messages that create and reinforce the false impression 

that they are, or are affiliated with, the USDOT, the Unified Carrier Registration 

system, or another government agency. As alleged in the complaint, the defendants 

used official-sounding names, official-looking websites, warnings of civil penalties or 

fines for non-compliance, and threats of imminent law enforcement to trick companies into using their registration services instead of using official government 

website services. The USDOT submitted two declarations in support of the FTC’s 

complaint. The court has entered a preliminary injunction against the defendants 

and the litigation in this case is on-going.15

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. DEB FISCHER TO

HON. MAUREEN K. OHLHAUSEN

Question 1. Acting Chairman Ohlhausen, in both this Congress and the last, I introduced the Spoofing Prevention Act with Ranking Member Nelson and Senators 

Blunt and Klobuchar. That bill would take steps to close loopholes in the Truth in 

Caller ID Act so we can better combat spoofing scams against seniors, law enforcement, and members of our military. What do you see as the Federal Trade Commission’s role in eliminating spoofing, and what more needs to be done to fix this problem? 

Answer. The FTC uses every tool at its disposal to combat illegal spoofing and 

fraudulent and deceptive calls to consumers, including aggressive law enforcement, 

initiatives to spur technological solutions, and robust consumer education. We have 

brought more than 130 law enforcement actions shutting down operations responsible for billions of illegal calls, as well as numerous enforcement actions targeting 

fraudulent ‘‘impostors.’’ Many of our law enforcement actions specifically target defendants that engage in illegal spoofing.16

In addition to continuous law enforcement in this area, the FTC is committed to 

working with industry to encourage and facilitate the development and deployment 

of network-level technological solutions to illegal spoofing. The FTC provided input 

to support the industry-led Robocall Strike Force, which is working to deliver comprehensive solutions to filter unwanted robocalls and to prevent illegal spoofing. The 

Robocall Strike Force highlighted two technological solutions that have been underway that will help thwart illegal spoofing: (1) a ‘‘do-not-originate’’ list and (2) Caller 

ID authentication standards.17 A ‘‘do-not-originate’’ list allows the owner of a numVerDate Nov 24 2008 10:19 Feb 20, 2018 Jkt 075679 PO 00000 Frm 00060 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\28381.TXT JACKIE
57 

blocking and/or flagging of calls attempting to transmit unverified Caller ID information. See 

the October 21, 2016 Robocall Strikeforce Report available at https://transition.fcc.gov/cgb/ 

Robocall-Strike-Force-Final-Report.pdf. 18See Scam Alerts: What to know and do about scams in the news, available at https:// 

www.consumer.ftc.gov/scam-alerts. 19See Scammers can fake caller ID info (May 4, 2016), available at https:// 

www.consumer.ftc.gov/blog/scammers-can-fake-caller-id-info. 

ber to specify that it should only be used to accept incoming calls and never to place 

outgoing ones. In furtherance of the development of a ‘‘do-not-originate’’ list, the 

FTC worked with a major carrier and Federal law enforcement partners to help 

block IRS scam calls that were spoofing well-known IRS telephone numbers. 

The FTC also engages with technical experts, academics, and others through industry groups, such as the Messaging, Malware and Mobile Anti-Abuse Working 

Group (‘‘M3AAWG’’) and the Voice and Telephony Abuse Special Interest Group 

(‘‘VTA SIG’’). The FTC serves in a leadership role in VTA SIG, which currently 

works to support various initiatives that tackle voice spam, including Caller ID authentication standards. 

We also arm consumers with the tools and information they need to protect themselves against fraudulent calls that often use spoofed numbers. The FTC provides 

consumer information in English and Spanish in many forms including print and 

online articles, fact sheets, blog posts, brochures and videos with tips for avoiding 

scams and unwanted calls. One of our most popular features is a ‘‘Scam Alert’’ page 

that is frequently updated with blog posts about new scams.18 We also remind consumers in our guidance that they need to be wary of scammers using fake Caller 

ID information.19

Question 2. Acting Chairman Ohlhausen, as you may know, there have been many 

recent reports of travel company booking scams. These involve fraudulent companies 

imitating the websites of hotels or airlines to attract bookings and trick consumers 

into paying fees for services they do not receive. I have one such account from a 

hotel in Kearney, Nebraska, that I entered into the hearing record. Last fall, Senator Klobuchar and I sent you a letter regarding this fraudulent practice. Does the 

FTC frequently hear about these types of complaints? If so, what would be an appropriate response? 

Answer. The FTC has a strong interest in protecting consumer confidence in the 

online marketplace for travel and other services. The FTC has received complaints 

about websites that mimic those of well-known travel companies from Members of 

Congress, industry associations, and consumers. The Consumer Sentinel complaint 

database, which includes complaints received directly by the FTC as well as complaints contributed by the Better Business Bureau and other agencies, contains approximately 60 complaints since 2012 indicating that consumers had booked a hotel 

through a third-party site when they thought they were booking directly with a 

hotel. 

In July 2015, the FTC issued consumer education cautioning consumers about 

third-party websites that may deceptively mimic hotel websites. We also have met 

with Members of Congress to discuss the issue of deceptive travel sites and have 

provided technical assistance and comments on proposed legislation. Although the 

existence and details of investigations are non-public, I can assure you that the FTC 

staff has taken these complaints seriously and will take law enforcement action if 

appropriate. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JERRY MORAN TO

HON. MAUREEN K. OHLHAUSEN

Question 1. During the hearing, one of the issues raised by both panel members 

and witnesses was the rise of ransomware, especially targeted at small business 

owners. One of the devious ways that hackers can gain access to a computer is by 

baiting Internet users with the prospect of free movies, TV shows or music. Recent 

studies have found that 1 in 3 so-called pirate websites expose consumers to 

malware. Given the rise of piracy as a means to bait and infect computers, and increase in ransomware, what is the FTC doing to warn consumers about the connection between piracy and malware? 

Answer. I share your concerns about malware on consumers’ computers and the 

potential harm such malware may cause consumers. Related to the specific practice 

you have highlighted, last week, the Commission issued a consumer education blog 

post warning consumers that downloading pirated content is illegal and websites ofVerDate Nov 24 2008 10:19 Feb 20, 2018 Jkt 075679 PO 00000 Frm 00061 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\28381.TXT JACKIE
58 

20Free movies, costly malware (Apr. 12, 2017), available at https://www.consumer.ftc.gov/ 

blog/free-movies-costly-malware. 21 How to Defend Against Ransomware (Nov. 10, 2016), available at https:// 

www.consumer.ftc.gov/blog/how-defend-against-ransomware. 22See FTC Consumer Information, Identity Theft, available at https://www.consumer.ftc.gov/ 

topics/identity-theft. 23 Netcetera: Chatting with Kids About Being Online (Jan. 2014), available at https:// 

www.onguardonline.gov/articles/pdf-0001-netcetera.pdf. 24 ASUSTeK Computer, Inc., No. C–4587 (July 28, 2016), available at https://www.ftc.gov/enforcement/cases-proceedings/142–3156/asustek-computer-inc-matter. 25Got an ASUS router at home? Read this. (Feb. 2016), available at https:// 

www.consumer.ftc.gov/blog/got-asus-router-home-read. 26 Event Description, Fall Technology Series: Ransomware (Sept. 7, 2016), available at 

www.ftc.gov/news-events/events-calendar/2016/09/fall-technology-series-ransomware. 27 Blog Post, Free movies, costly malware (Apr. 12, 2017), available at www.consumer.ftc.gov/ 

blog/free-movies-costly-malware. 28See, e.g., Press Release, FTC Charges Tech Support Companies With Using Deceptive PopUp Ads to Scare Consumers Into Purchasing Unneeded Services (Oct. 12, 2016), available at 

www.ftc.gov/news-events/press-releases/2016/10/ftc-charges-tech-support-companies-using-deceptive-pop-ads-scare; Press Release, Tech Company Settles FTC Charges It Unfairly Installed 

Apps on Android Mobile Devices Without Users’ Permission (Feb. 5, 2016), available at 

www.ftc.gov/news-events/press-releases/2016/02/tech-company-settles-ftc-charges-it-unfairly-installed-apps; Press Release, FTC Permanently Shuts Down Notorious Rogue Internet Service Provider (May 19, 2010), available at www.ftc.gov/news-events/press-releases/2010/05/ftc-permanently-shuts-down-notorious-rogue-internet-service. 

fering such content often hide malware that can bombard them with ads, take over 

their computers, or steal their personal information.20

Consumer education is a central part of the FTC’s mission. Our outreach includes 

publications, online resources, workshops, and social media. These outreach efforts 

cover many topics, including malware, tech support scams, spyware, phishing, peerto-peer file sharing, and social networking. We work closely with local, state, and 

Federal Government entities, industry representatives, and consumer groups to 

maximize the impact of these efforts. 

The FTC has many consumer education resources that provide additional information to consumers about dangers associated with malware. For example, the 

Commission has published blog posts and videos on ransomware 21 and identity 

theft.22 In addition, our Net Cetera publication helps parents, teachers, and other 

adults talk to children about how to be safe, secure, and responsible online.23

Relevant resources also include education materials relating to individual enforcement actions the Commission has taken. For example, last year the Commission settled an action with ASUSTeK Computer, Inc. in which the Commission alleged that 

the company’s routers had security bugs that allowed malware to commandeer consumers’ web traffic.24 In connection with this settlement, the Commission published 

a blog post with tips on router security.25

Question 2. Another theme of the hearing was the economic loss caused by scams. 

A recent investigation by security company RiskIQ found that hackers are paying 

pirate website operators $70 million a year to infect computers. What role should 

the FTC play in warning consumers and encouraging those who facilitate online activity—such as domain sellers, hosting companies, search engine companies and 

payment processors—in combatting these piracy/malware operators? For example, 

should the FTC post warnings on their website, produce public service announcements or work with digital platforms to raise awareness and combat this new 

threat? 

Answer. The FTC‘s robust law enforcement and consumer education platforms 

combat online threats, such as the unwanted installation of malware and other software. Last Fall, the FTC held a workshop with numerous industry participants to 

discuss the ransomware threat, including how consumers can avoid—and respond 

to—ransomware.26 And, as noted in response to the previous question, the FTC recently published a blog post on its website entitled ‘‘Free movies, costly malware’’ 

to educate consumers about the possibility that pirate websites will infect their computers and devices with malware if they download copyrighted content.27

In addition, the Commission has brought several enforcement actions to stop companies from installing malware and other unwanted software on consumers’ computers and devices.28 The Commission will continue to use its investigative, legal, 

and public outreach tools to protect consumers from unwanted and harmful software. Moreover, the Commission will continue, as it has done in the past, to work 

with high tech companies, service providers, and industry participants to combat online threats. 

59 

29See, Press Release, Court Orders Ringleader of Scam Targeting Seniors Banned From Telemarketing (Mar. 12, 2015), available at https://www.ftc.gov/news-events/press-releases/2015/ 

03/court-orders-ringleader-scam-targeting-seniors-banned. 30See, Press Release, $126M Banners Broker pyramid scheme dismantled by Toronto police 

(Dec 02, 2015) available at http://www.cbc.ca/news/canada/toronto/pyramid-scheme-toronto1.3356905. 31See, Press Release, FTC Returns $1.87 Million to Consumers Harmed by Debt Relief Scam 

(May 09, 2016), available at https://www.ftc.gov/news-events/press-releases/2016/05/ftc-returns-187-million-consumers-harmed-debt-relief-scam. 32See, e.g., Press Release, FTC Halts Online ‘Yellow Pages’ Scammers (Dec. 02, 2015), available at https://www.ftc.gov/news-events/press-releases/2015/12/ftc-halts-online-yellow-pages- scammers; Press Release, FTC and Florida Halt Internet ‘Yellow Pages’ Scammers (July 17, 

2014), available at https://www.ftc.gov/news-events/press-releases/2014/07/ftc-florida-haltinternet-yellow-pages-scammers. 33See,e.g., Press Release, Jesta Digital Settles FTC Complaint it Crammed Charges on Consumers’ Mobile Bills Through ’Scareware’ and Misuse of Novel Billing Method (Aug 21, 2013), 

available at https://www.ftc.gov/news-events/press-releases/2013/08/jesta-digital-settles-ftccomplaint-it-crammed-charges-consumers; Press Release, Telus customers to receive $7.34 million 

in rebates as part of Competition Bureau agreement (Dec 30, 2015), available at http:// 

www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04017.html. 

Question 3. In the FTC’s prepared testimony, the agency discusses the challenges 

associated with offshore scammers, including international telemarketing fraud 

rings. The Committee is also aware that so-called Jamaican lottery scams have proliferated in recent years. One tool available to FTC is the U.S. SAFE WEB Act, 

which allows the Commission to address consumer protection matters, particularly 

those with an international dimension, providing for increased cooperation with foreign law enforcement authorities, confidential information sharing and investigative 

assistance. 

a. How has FTC used the SAFE WEB Act in its fight against scams? 

Answer. The FTC has used the Act’s powers extensively in cross-border fraud 

cases and other matters to protect Americans. Between FY 2012 and FY 2016, for 

example, the FTC used the Act to share information in response to almost 65 requests from foreign agencies, and issued nearly 65 civil investigative demands to aid 

28 foreign investigations. These efforts have enabled foreign counterparts to investigate conduct that directly harms American consumers, and, in many instances, 

also helped to advance FTC investigations. Here are a few examples since Congress 

reauthorized the Act in 2012: 

The FTC used its SAFE WEB powers to work with Canadian law enforcement to 

stop a telemarketing scam that targeted senior citizens. On the U.S. side, the FTC 

obtained an order for more than $10 million in consumer redress and the Justice 

Department charged some of the defendants criminally. On the Canadian side, the 

Royal Canadian Mounted Police (RCMP) brought its own case, arresting the Canadian-based defendants and seizing evidence.29

The FTC used its SAFE WEB powers to obtain evidence for the Toronto Police 

Service’s investigation of a sham business that scammed $93 million from consumers by purporting to sell banner ads for websites. The scheme had thousands 

of victims worldwide, including in the United States. Canadian law enforcement 

broke up the scam and arrested two of its leaders.30

The agency used its SAFE WEB authority in another telemarketing scam to repatriate, with Justice Department help, nearly $2 million of the defendant’s assets 

from Canadian bank accounts frozen by the RCMP; the FTC has now sent redress 

checks to 1,630 victims totaling $1.8 million.31

The FTC has used SAFE WEB in a number of business directory scams that prey 

on small businesses, non-profits, and churches to share evidence with counterparts 

in Canada and other jurisdictions. This has led to several FTC judgments and law 

enforcement actions in Canada.32

SAFE WEB also allowed the FTC to exchange information with Canadian law enforcement about a company that put unauthorized charges on consumers’ phone 

bills using phony virus-scan scareware and led to law enforcement actions involving 

that conduct on both sides of the border.33

Apart from scams, the Act also supports FTC enforcement of the EU–U.S. Privacy 

Shield Framework, which enables transatlantic data flows for many U.S. companies. 

The FTC’s SAFE WEB powers provide for stronger cooperation with European data 

protection authorities on investigations and enforcement against possible Privacy 

Shield violations, a point cited in the European Commission’s Privacy Shield adequacy decision. 

60 

34 In 1914 when the FTC Act was passed, Section 4 of the Act defined ‘‘Acts to regulate commerce’’ as the Interstate Commerce Act; Congress later added the Communications Act. See 15 

U.S.C. § 44. 35See, e.g., FTC v. Verity Int’l, Ltd., 443 F.3d 48 (2d Cir. 2006). 36See, e.g., America Online, Inc., 125 F.T.C. 403 (1998); CompuServe, Inc. 125 F.T.C. 451 

(1998); Prodigy, Inc., 125 F.T.C. 430 (1998). 

b. This legislation is scheduled to sunset in 2020. Do you support its reauthorization? Will you commit to provide technical assistance to the Committee, including 

any modifications to improve the FTC’s ability to go after international scammers? 

Answer. I strongly support SAFE WEB reauthorization and commit to providing 

technical assistance to the Committee for that process. FTC staff worked closely 

with the Committee to develop the original legislation passed in 2006, and to support reauthorization in 2012. We would be pleased to work with the Committee to 

continue strengthening our ability to go after international scammers. We in particular suggest repealing the sunset provision entirely: greater certainty for the 

agency and our international partners about the FTC’s enforcement tools going forward improves our ability to develop enduring cooperation agreements and enforcement projects with foreign counterparts. Congress granted the Securities and Exchange Commission and the Commodities and Futures Trading Commission similar 

enforcement powers over 25 years ago, without a sunset provision. Their positive enforcement cooperation experience, and the FTC’s successful experience with SAFE 

WEB over the past decade, confirms the value of this legislation to our enforcement 

mission. 

Question 4. The FTC’s prepared statement for the hearing raised concerns with 

the controversial ‘‘common carrier’’ exception from Title II of the Communications 

Act and its impact on the FTC’s efforts to protect consumers from unfair or deceptive acts or practices. Could you please elaborate on how this provision is harming 

the FTC’s mission? Additionally, how did the Court of Appeals for the Ninth Circuit’s recent decision holding that the ‘‘common carrier’’ exception is ‘‘status based’’ 

affect the FTC’s ability to protect consumers? 

Answer. Section 5 of the FTC Act prohibits ‘‘unfair or deceptive acts or practices’’ 

in or affecting commerce and directs the FTC to prevent such conduct. 15 U.S.C. 

§ 45(a). Section 5, however, excepts from FTC enforcement authority ‘‘common carriers subject to the Acts to regulate commerce.’’ 34 The FTC has long interpreted this 

exception to be ‘‘activity based’’—that is, a company that engaged in both common 

carriage and non-common carriage activities would still be within the FTC’s enforcement authority with regards to the non-common carriage activities. Even with this 

limiting interpretation, however, the FTC, on a bipartisan basis, has for many years 

called for repeal of the exception as outdated, unnecessary, and a hindrance to consumer protection efforts. 

The common carrier exception poses several obstacles to the FTC effectively carrying out its consumer protection mission. For example, some companies have objected to an FTC enforcement action on the basis of the common carrier exception.35

Even when such objections are meritless, the FTC is forced to litigate this issue in 

the court systems, which diverts FTC resources from other consumer protection efforts and can delay redress to fraud victims. 

Furthermore, consumers should be protected from unfair or deceptive acts or practices in the entire marketplace. But the common carrier exception effectively excludes a subset of consumers’ activities in the marketplace from this protection. This 

problem has been put into sharper focus as a result of the Federal Communications 

Commission’s action in 2015 reclassifying the provision of broadband Internet service as a common carrier activity. Prior to this action, provision of Internet services 

was considered a non-common carrier activity and the FTC was able to enforce consumer protection laws against Internet service providers, even in the early days of 

the internet. For example, in 1998, the FTC brought an action against AOL and 

other ISPs for allegedly deceptive ‘‘free’’ trial periods.36 However, the FCC’s reclassification created an enforcement gap in which the FTC may now be unable to protect 

consumers from unfair or deceptive practices by ISPs. 

The Ninth Circuit’s recent decision has further exacerbated the problem by applying a ‘‘status based’’ interpretation to the common carrier exception. Under this interpretation, if a company has the status of common carrier, all of its activities, even 

those not related to common carriage, could be immune from FTC enforcement authority. This would further weaken consumer protection efforts, including in areas 

in which the FTC has taken significant law enforcement actions in the past. For 

example, the agency sued AT&T and T-Mobile in 2013 for placing unauthorized 

61 

37See FTC Alleges T-Mobile Crammed Bogus Charges onto Customers’ Phone Bills (July 1, 

2014), available at https://www.ftc.gov/news-events/press-releases/2014/07/ftc-alleges-t-mobile- crammed-bogus-charges-customers-phone-bills; AT&T to Pay $80 Million to FTC for Consumer 

Refunds in Mobile Cramming Case (Oct. 8, 2014), available at https://www.ftc.gov/news-events/ 

press-releases/2014/10/att-pay-80-million-ftc-consumer-refunds-mobile-cramming-case. 38See, e.g., Press Release, Telemarketing Defendants Charged by FTC in Tech Support Scheme Will Pay $10 Million for Consumer Redress (Dec. 22, 2016), available at www.ftc.gov/newsevents/press-releases/2016/12/telemarketing-defendants-charged-ftc-tech-support-scheme-willpay (case brought by FTC and the Florida Attorney General); Press Release, FTC and Florida 

Charge Tech Support Operation with Tricking Consumers into Paying Millions for Bogus Services (July 8, 2016), available at www.ftc.gov/news-events/press-releases/2016/07/ftc-floridacharge-tech-support-operation-tricking-consumers; Press Release, Tech Support Operators Settle 

FTC, State of Florida Charges They Misled Consumers (Feb. 12, 2016), available at www.ftc.gov/ 

news-events/press-releases/2016/02/tech-support-operators-settle-ftc-state-florida-charges-they. 39See, e.g., Press Release, FTC, Florida Attorney General Take Action Against Illegal Robocall 

Operation (June 14, 2016), available at www.ftc.gov/news-events/press-releases/2016/06/ftcflorida-attorney-general-take-action-against-illegal-robocall; Press Release, FTC and Ten State 

Attorneys General Take Action Against Political Survey Robocallers Pitching Cruise Line Vacations to the Bahamas (Mar. 4, 2015), available at www.ftc.gov/news-events/press-releases/2015/ 

03/ftc-ten-state-attorneys-general-take-action-against-political. 40See Press Release, FTC, All 50 States and D.C. Charge Four Cancer Charities With Bilking Over $187 Million from Consumers (May 19, 2015), available at www.ftc.gov/news-events/pressreleases/2015/05/ftc-all-50-states-dc-charge-four-cancer-charities-bilking-over. 41See, e.g., Press Release, FTC and Illinois Attorney General Halt Chicago-Area Operation 

Charged with Collecting and Selling Phantom Payday Loan Debts (Mar. 30, 2016), available at 

www.ftc.gov/news-events/press-releases/2016/03/ftc-illinois-attorney-general-halt-chicago-areaoperation-charged. 42See, e.g., Press Release, FTC and Federal, State and Local Law Enforcement Partners Announce Nationwide Crackdown Against Abusive Debt Collectors (Nov. 4, 2015), available at 

www.ftc.gov/news-events/press-releases/2015/11/ftc-federal-state-local-law-enforcement-partners-announce; Press Release, FTC, Multiple Law Enforcement Partners Announce Crackdown 

on Deception, Fraud in Auto Sales, Financing and Leasing (Mar. 26, 2015), available at 

www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-law-enforcement-partners-announce-crackdown; Press Release, FTC and Dozens of Law Enforcement Partners Halt Travel 

and Timeshare Resale Scams in Multinational Effort (June 6, 2013), available at www.ftc.gov/ 

news-events/press-releases/2013/06/ftc-dozens-law-enforcement-partners-halt-travel-timeshareresale; Press Release, FTC Leads Joint Law Enforcement Effort Against Companies that Allegedly Made Deceptive ‘‘Cardholder Services’’ Robocalls (Nov. 1, 2012), available at www.ftc.gov/ 

news-events/press-releases/2012/11/ftc-leads-joint-law-enforcement-effort-against-companies. 43See, e.g., Events Calendar, FTC & NASCO Host a Conference Exploring Consumer Protection Issues and Charitable Solicitations (Mar. 21, 2017), available at www.ftc.gov/news-events/ 

events-calendar/2017/03/give-take-consumers-contributions-charity; Events Calendar, Working 

Continued 

charges for purported third-party services on consumers’ mobile phone bills.37 Those 

and similar cases have recovered hundreds of millions of dollars for injured consumers. The Ninth Circuit decision calls into question the agency’s ability to take 

similar actions in the future. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. DEAN HELLER TO

HON. MAUREEN K. OHLHAUSEN

Question. Last Congress, Microsoft came before the Senate Aging Committee and 

told us about partnerships they had with states to combat tech scams. For Nevadans, consumer protection is a top issue, especially because of the impact that scams 

can have on an individual’s finances or even their privacy. 

Are there any FTC initiatives in coordination with State Attorneys General that 

are models for protecting consumers from scams? 

Answer. The Commission has robust, collaborative relationships with state law 

enforcers, including through the National Association of Attorneys General. The 

FTC’s collaboration with its state partners takes many forms, including sharing information and targets, assisting with investigations, and working collaboratively on 

long-term policy initiatives. 

Over the last two years, the FTC has collaborated with its state partners on dozens of investigations and numerous joint enforcement actions, including investigations and enforcement actions concerning tech support scams,38 robocalls,39 charity 

scams,40 and debt collection practices,41 among other deceptive and unfair practices. 

The FTC also leads law enforcement ‘‘sweeps’’—coordinated, simultaneous law enforcement actions—in conjunction with state and local partners.42 To supplement its 

law enforcement efforts, the FTC and its state partners also co-host consumer protection conferences and workshops designed to protect consumers from fraud and 

provide guidance on how to identify and avoid scams.43

62 

Together to Protect Midwest Consumers: A Common Ground Conference (Oct. 25, 2016), available 

at www.ftc.gov/news-events/events-calendar/2016/10/working-together-protect-midwest-consumers-common-ground; Events Calendar, Working Together to Protect Michigan Consumers: A 

Common Ground Conference (July 13, 2016), available at www.ftc.gov/news-events/events-calendar/2016/07/working-together-protect-michigan-consumers-common-ground; Events Calendar, 

Utah Consumer Protection Summit (Oct. 22, 2015), available at www.ftc.gov/news-events/eventscalendar/2015/10/utah-consumer-protection-summit. 44See Did you book that night at the hotel’s site? (July 14, 2015), available at https:// 

www.consumer.ftc.gov/blog/did-you-book-night-hotels-site. 45 15 U.S.C. § 801 et seq. 46 16 C.F.R. Part 310. 47 16 C.F.R. Part 322. 48Press Release, Operators of Online ‘High Schools’ Settle FTC Charges That They Misled 

Tens of Thousands Consumers with Fake Diplomas (Feb. 10, 2017), available at https:// 

www.ftc.gov/news-events/press-releases/2017/02/operators-online-high-schools-settle-ftc-chargesthey-misled-tens. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. TODD YOUNG TO

HON. MAUREEN K. OHLHAUSEN

Question 1. Acting Chairman Ohlhausen and Commissioner McSweeny, has the 

FTC focused on the issue of travel booking scams beyond issuing consumer alerts? 

Answer. As you note, in July 2015, the FTC issued consumer education cautioning 

consumers about third-party websites that may deceptively mimic hotel websites.44

In addition, we have met with Members of Congress to discuss the issue of deceptive 

travel sites and have proposed technical assistance and comments on proposed legislation. Because the existence and details of investigations are non-public, we cannot 

comment on any specific matters. However, the FTC will take law enforcement action in appropriate cases. 

Question 2. Acting Chairman Ohlhausen and Commissioner McSweeny, what 

plans does the FTC have to notify and coordinate with State Attorney Generals 

prior to peak travel season this year, including summer, Thanksgiving, and the 

Christmas holidays? 

Answer. The FTC has worked closely with the State Attorneys General on many 

issues, including most recently during National Consumer Protection week. The 

FTC will explore whether there are opportunities to coordinate with the states to 

protect consumers from scams that affect them during these peak travel periods. 

Question 3. Acting Chairman Ohlhausen: In your testimony, you noted that military consumers are often attractive targets of fraudsters in part because they receive a regular paycheck and move relatively frequently. As a former Marine myself, 

I can imagine there is also a certain amount embarrassment among our service men 

and women when they are taken advantage of and therefore there might be even 

be lower reporting from victims in this community. 

Answer. I agree. In addition to the points you raise, some fraudsters have customized their scams to play on the particular fears of military consumers, such as 

threatening action under the Uniform Code of Military Justice, which may also lead 

to under-reporting by this community. 

Question 4. Acting Chairman Ohlhausen, in looking at this particular community, 

do you need additional authority from Congress to work with our service branches 

to protect military members from potential scams? 

Answer. At this time, the Commission has not asked for any specific additional 

legislation for protecting military members from potential scams. We would, however, be happy to review and provide assistance on any specific piece of proposed 

legislation. 

We have used our existing tools, including the FTC Act, the Fair Debt Collection 

Practices Act,45 the Telemarketing Sales Rule,46 and the Mortgage Assistance Relief 

Services Rule,47 to protect military consumers, and we will continue to do so. For 

example, earlier this year, the Commission announced settlements with two online 

high schools that claimed their diplomas could be used to join the military and that 

their programs conformed to the Department of Defense’s SCORM standards for the 

training of military and civilian personnel.48 The FTC alleged that these diploma 

mills violated the FTC Act by failing to provide the promised valid high school 

equivalency degrees. As part of our investigation, we worked with DoD to provide 

evidence that the program was not SCORM-conformant. 

In other instances, the FTC has brought actions against scammers that target the 

general population but tailor their practices to deceive military consumers. In one 

recent case against a fraudulent debt collector, we talked to a consumer whose family was harassed while he was on active duty, and who was threatened with action 

under the Uniform Code of Military Justice, all about a debt he did not actually 

63 

49Press Release, Court Halts Debt Collector’s Operations, Freezes Assets (July 21, 2014), available at https://www.ftc.gov/news-events/press-releases/2014/07/court-halts-debt-collectors-operations-freezes-assets. 50See Press Release, FTC Mails Refund Checks Totaling Nearly $3 Million to Consumers Victimized by Alleged Mortgage Relief Scam (May 28, 2014), available at https://www.ftc.gov/newsevents/press-releases/2014/05/ftc-mails-refund-checks-totaling-nearly-3-million-consumers. 51Press Release, FTC Announces 2017 Military Consumer Financial Workshop: Protecting 

Those Who Protect Our Nation (Apr. 12, 2017), available at https://www.ftc.gov/news-events/ 

press-releases/2017/04/ftc-announces-2017-military-consumer-financial-workshop. 

owe.49 The FTC was able to obtain a court order banning these collectors from the 

debt collection industry and imposing monetary judgments against them. In another 

case, the FTC brought an action alleging that a sham non-profit claimed it would 

provide legal representation to struggling homeowners trying to avoid foreclosure 

but failed to provide the promised services.50 One consumer we talked to was an 

elderly veteran amputee who had paid almost $10,000 to the scammers to obtain 

a mortgage loan modification and received nothing of value in return. The FTC obtained an order banning the scammers from the mortgage and debt relief industries 

and returned approximately $3 million to alleged victims of the scam. 

Question 5. Acting Chairman Ohlhausen, what specific efforts has the FTC undertaken with our service branches to help protect our service men and women? 

Answer. Protecting military consumers through law enforcement and education is 

a top priority of the Commission, and we work closely with military partners to help 

the military community avoid frauds. Military Consumer is the FTC’s longstanding 

campaign to reach service members and their families. The FTC website I mentioned in my testimony, Military.Consumer.gov, is a joint initiative with Department of Defense, the CFPB’s Office of Servicemember Affairs, Military Saves, 

FINRA Investor Education Foundation, the National Military Family Association 

and other partners to empower active duty and retired servicemembers, military 

families, veterans, and civilians in the military community. The site’s Military Consumer Toolkit offers free materials on topics that allow personal financial managers, 

counselors, command, and others in the military community to share practical financial readiness tips. 

While Military Consumer is a year-round campaign, each July the FTC hosts the 

Month of the Military Consumer with the Department of Defense to bring additional 

focus to consumer issues affecting servicemembers and military families. This year, 

the FTC will be hosting a free workshop on July 19, 2017, to examine financial 

issues and scams that can affect military consumers, including active duty 

servicemembers in all branches and veterans. Topics of discussion at the daylong 

event will include auto purchasing, financing, and leasing; student and other lending; information security issues; financial literacy and capability, including identity 

theft; and avoiding scams.51 We are working closely with our military partners in 

planning this event that will bring together all service branches, military consumer 

advocates, military legal services, government representatives, and industry representatives. 

The agency regularly disseminates short tips through social media and hosts periodic Twitter chats with federal, state, and military partners. In addition to our online materials, the FTC also has presented webinars and made presentations for 

personal financial managers in conjunction with the Army, the Navy, the Department of Veterans Affairs, Military One Source, the Military Family Learning Network (and USDA Cooperative Extension), and military contractors serving as counselors to military families. 

The Commission will continue to work with our military partners to protect our 

service men and women from unfair and deceptive acts and practices. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. BILL NELSON TO

HON. MAUREEN K. OHLHAUSEN

Question. The FTC already operates on a tight budget. It is a small agency with 

a huge mandate: to police the American economy and enforce against ‘‘unfair or deceptive acts or practices.’’ The Trump Administration has proposed irresponsible 

cuts to virtually every aspect of the government that helps the average American. 

While we have yet to see a specific budget proposal for the FTC, the ‘‘skinny’’ budget 

did reference a vague 9.8 percent cut to ‘‘other agencies’’ that were not specifically 

mentioned. It seems safe to say that funding cuts may well be coming to the FTC. 

How would a possible budget cut—say, along the lines of a 9.8 percent cut—affect 

the FTC’s ability to protect American consumers from scams and fraud? 

64 

1 16 C.F.R. Part 314, implementing 15 U.S.C. § 6801(b). 

2 15 U.S.C. § 1681e. 

3 Id. at § 1681w. The FTC’s implementing rule is at 16 C.F.R. Part 682. 4 15 U.S.C. §§ 6501–6506; see also 16 C.F.R. Part 312 (‘‘COPPA Rule’’). 5 15 U.S.C. § 45(a). If a company makes materially misleading statements or omissions about 

a matter, including data security, and such statements or omissions are likely to mislead reasonable consumers, they can be found to be deceptive in violation of Section 5. Further, if a company’s data security practices cause or are likely to cause substantial injury to consumers that 

is neither reasonably avoidable by consumers nor outweighed by countervailing benefits to consumers or to competition, those practices can be found to be unfair and violate Section 5. 6See generally FTC Business Center, Legal Resources available at http://www.ftc.gov/tipsadvice/business-center/legal-resources?type=case&field_consumer_protection_topics_tid=249. 

Answer. We are currently working with OMB to determine what the President’s 

2018 budget will recommend for the Commission and we are optimistic that it will 

not propose a significant cut for the agency. However, if the FTC faced a significant 

budgetary cut, we would strive to minimize its effect on the Commission’s ability 

to enforce consumer protection and competition laws, though it would likely have 

some impact. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. RICHARD BLUMENTHAL TO

HON. MAUREEN K. OHLHAUSEN

Question 1. In March, the DOJ indicted four individuals, including two Russian 

spies, for hacking into Yahoo’s systems in 2014 and obtaining access to at least 500 

million Yahoo accounts. According to the indictment, defendants spied on U.S. government officials and private-sector employees of financial companies, among others. 

One defendant also exploited the data for financial gain. He searched user e-mail 

accounts for gift card numbers, redirected Yahoo search traffic so he could make 

commissions, and stole the contacts of at least 30 million Yahoo accounts to conduct 

a spam marketing scheme. What are the chances of the United States taking these 

Russian spies into custody for their crimes? 

Answer. The FTC does not have criminal law enforcement authority, but it works 

closely with its criminal and foreign law enforcement partners to achieve a broader 

impact and further its mission of protecting consumers. For example, as noted during the March 21, 2017, hearing before this Subcommittee, the Commission created 

the Criminal Liaison Unit in 2003, and FTC prosecution referrals have led to hundreds of fraudsters facing criminal charges and prison time. 

While the FTC encourages criminal authorities to pursue hackers, we also believe 

it is important for companies to shore up the security of their systems, so that they 

can help protect against unauthorized access to, and misuse of, consumer data. Unfortunately, reports of data breaches like the one you cite affect millions of Americans. The Commission is deeply concerned about the risk of fraud, identity theft, 

and other harm that consumers face as a result of such breaches, which is why promoting data security has long been, and will continue to be, a priority. 

The Commission enforces several civil statutes and rules that impose security obligations upon businesses that collect and maintain consumer data. The Commission’s Safeguards Rule, which implements the Gramm-Leach-Bliley Act, for example, provides data security requirements for financial institutions within the Commission’s jurisdiction.1 The Fair Credit Reporting Act (‘‘FCRA’’) requires consumer 

reporting agencies to use reasonable procedures to ensure that the entities to which 

they disclose sensitive consumer information have a permissible purpose for receiving that information,2 and imposes safe disposal obligations on entities that maintain consumer report information.3 The Children’s Online Privacy Protection Act 

(‘‘COPPA’’) requires reasonable security for children’s information collected online.4

In addition, the Commission enforces Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices, such as businesses making false or misleading 

claims about their data security procedures, or failing to employ reasonable security 

measures and, as a result, causing or likely causing substantial consumer injury.5

Since 2001, the Commission has used its authority under these laws to take enforcement action and obtain settlements in approximately 60 cases against businesses 

that it charged with failing to provide reasonable and appropriate protections for 

consumers’ personal information.6

In addition to bringing enforcement actions, the Commission engages in significant educational efforts discussed in more detail below. In all of its efforts, the Commission looks forward to continued cooperation and collaboration with its law enforcement partners, and with private industry, to protect the security of consumers’ 

data. 

65 

7See, e.g., Start with Security: A Guide for Business (June 2015), available at https:// 

www.ftc.gov/tips-advice/business-center/guidance/start-security-guide-business; Start with Security: Free Resources for Any Business (Feb. 2016), available at https://www.ftc.gov/newsevents/audio-video/business; Protecting Personal Information: A Guide for Business (Oct. 2016), 

available at https://www.ftc.gov/tips-advice/business-center/guidance/protecting-personal-information-guide-business; Data Breach Response: A Guide for Business (Oct. 2016), available at 

https://www.ftc.gov/tips-advice/business-center/guidance/data-breach-response-guide-business. 8Free movies, costly malware (Apr. 12, 2017), available at https://www.consumer.ftc.gov/ 

blog/free-movies-costly-malware. 9 How to Defend Against Ransomware (Nov. 10, 2016), available at https://www.con 

sumer.ftc.gov/blog/how-defend-against-ransomware. 

Question 2. So, despite our country and the Department of Justice’s best efforts, 

our country remains vulnerable to outside threats seeking to infiltrate our systems 

and prey on our consumers. The New York Times has also reported that despite 

DOJ’s indictment against the individuals responsible for these attacks, one billion 

Yahoo accounts—stolen in another attack on the company a year earlier—continue 

to be found for sale on underground hacker forums as recently as last Friday, for 

$200K. This is a stark reminder that while Federal prosecutors are taking steps 

they can to hold the criminals and perpetrators accountable, private consumer information is still available and vulnerable for abuse. Do you think Yahoo has implemented reasonable security standards to protect its customers? 

Answer. The Commission can only determine whether a company’s practices are 

reasonable after conducting an investigation. Because Yahoo has made our investigation public in a filing with the Securities and Exchange Commission, I can confirm that we are investigating the company. But Commission rules prevent me from 

making any further comments about the details of our investigation. 

More generally, through its enforcement actions and education materials,7 the 

Commission has publicly provided the core principles that it applies when looking 

at a company’s data security practices. For example, the Commission does not require perfect data security and the mere fact that a breach occurred does not mean 

that a company has violated the law. Rather, a company’s security must be reasonable under the circumstances. There is no one-size-fits-all approach to what constitutes reasonable data security and what is reasonable will vary, depending on the 

size and complexity of a company’s operations, the amount and sensitivity of the 

data it collects, and the availability of low-cost tools to mitigate threats. Thus, a 

large company collecting vast amounts of sensitive data will need to have different 

measures in place than a company collecting small amounts of non-sensitive data. 

Reasonable security should also include a continuous process of assessing and addressing risks. 

The FTC will continue to apply these principles as it uses its civil law enforcement authority to promote data security in the private sector. 

Question 3. According to a recent study, one out of three content theft sites expose 

consumers to malware, leading to compromised bank accounts, identity theft, and 

‘‘ransomware’’ that locks a consumer out of their data until they pay the criminals 

the required ransom. This study showed that 45 percent of malware was delivered 

by ‘‘drive-by-downloads,’’ which invisibly download to a user’s computer without requiring them to click on a link. What is the FTC doing to inform and educate consumers about the link between content theft sites and malware? 

Answer. I share your concerns about malware on consumers’ computers and the 

potential harm such malware may cause consumers. Related to the specific practice 

you have highlighted, last week the Commission issued a consumer education blog 

post warning consumers that downloading pirated content is illegal and cautioning 

that websites offering such content often hide malware that can bombard them with 

ads, take over their computers, or steal their personal information.8

Consumer education is a central part of the FTC’s mission. Our outreach includes 

publications, online resources, workshops, and social media. These outreach efforts 

cover many topics, including malware, tech support scams, spyware, phishing, peerto-peer file sharing, and social networking. We work closely with local, state, and 

Federal Government entities, industry representatives, and consumer groups to 

maximize the impact of these efforts. 

The FTC has many consumer education resources that provide additional information to consumers about dangers associated with malware. For example, the 

Commission has published blog posts and videos on ransomware 9 and identity 

66 

10See FTC Consumer Information, Identity Theft, available at https://www.consumer.ftc.gov/ 

topics/identity-theft. 11 Netcetera: Chatting with Kids About Being Online (Jan. 2014), available at https:// 

www.onguardonline.gov/articles/pdf-0001-netcetera.pdf. 12 ASUSTeK Computer, Inc., No. C–4587 (July 28, 2016), available at https://www.ftc.gov/enforcement/cases-proceedings/142–3156/asustek-computer-inc-matter. 13Got an ASUS router at home? Read this. (Feb. 2016), available at https:// 

www.consumer.ftc.gov/blog/got-asus-router-home-read. 14Free movies, costly malware (Apr. 12, 2017), available at https://www.consumer.ftc.gov/ 

blog/free-movies-costly-malware. 15 How to Defend Against Ransomware (Nov. 10, 2016), available at https:// 

www.consumer.ftc.gov/blog/how-defend-against-ransomware. 16See FTC Consumer Information, Identity Theft, available at https://www.consumer.ftc.gov/ 

topics/identity-theft. 17 Netcetera: Chatting with Kids About Being Online (Jan. 2014), available at https:// 

www.onguardonline.gov/articles/pdf-0001-netcetera.pdf. 18 ASUSTeK Computer, Inc., No. C–4587 (July 28, 2016), available at https://www.ftc.gov/enforcement/cases-proceedings/142–3156/asustek-computer-inc-matter. 19Got an ASUS router at home? Read this. (Feb. 2016), available at https:// 

www.consumer.ftc.gov/blog/got-asus-router-home-read. 

theft.10 In addition, our Net Cetera publication helps parents, teachers, and other 

adults talk to children about how to be safe, secure, and responsible online.11

Relevant resources also include education materials relating to individual enforcement actions the Commission has taken. For example, last year the Commission settled an action with ASUSTeK Computer, Inc. in which the Commission alleged that 

the company’s routers had security bugs that allowed malware to commandeer consumers’ web traffic.12 In connection with this settlement, the Commission published 

a blog post with tips on router security.13

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. AMY KLOBUCHAR TO

HON. MAUREEN K. OHLHAUSEN

Question. Malware that gives fraudsters access to consumers’ computers can be 

a powerful tool for scams. In one model, websites that offer pirated content, bogus 

coupons, or fake products are paid to infect computers with malware. Sometimes 

just visiting one of these websites—without even clicking on anything—can be 

enough to infect your computer with malware. Scammers can then use the infected 

computers to access financial information, launch cyberattacks, or even take over 

the computer’s camera. 

Chairman Ohlhausen, what is the FTC doing to educate consumers about the 

danger of websites designed to infect their computers with malware? 

Answer. I share your concerns about malware on consumers’ computers and the 

potential harm such malware may cause consumers. Related to the specific practice 

you have highlighted, last week, the Commission issued a consumer education blog 

post warning consumers that downloading pirated content is illegal and websites offering such content often hide malware that can bombard them with ads, take over 

their computers, or steal their personal information.14

Consumer education is a central part of the FTC’s mission. Our outreach includes 

publications, online resources, workshops, and social media. These outreach efforts 

cover many topics, including malware, tech support scams, spyware, phishing, peerto-peer file sharing, and social networking. We work closely with local, state, and 

Federal Government entities, industry representatives, and consumer groups to 

maximize the impact of these efforts. 

The FTC has many consumer education resources that provide additional information to consumers about dangers associated with malware. For example, the 

Commission has published blog posts and videos on ransomware 15 and identity 

theft.16 In addition, our Net Cetera publication helps parents, teachers, and other 

adults talk to children about how to be safe, secure, and responsible online.17

Relevant resources also include education materials relating to individual enforcement actions the Commission has taken. For example, last year the Commission settled an action with ASUSTeK Computer, Inc. in which the Commission alleged that 

the company’s routers had security bugs that allowed malware to commandeer consumers’ web traffic.18 In connection with this settlement, the Commission published 

a blog post with tips on router security.19

67 

1 Blog Post, Free movies, costly malware (April 12, 2017), available at www.consumer.ftc.gov/ 

blog/free-movies-costly-malware. 2 Event Description, Fall Technology Series: Ransomware (Sept. 7, 2016), available at 

www.ftc.gov/news-events/events-calendar/2016/09/fall-technology-series-ransomware. 3 Blog Post, Free movies, costly malware (April 12, 2017), available at www.consumer.ftc.gov/ 

blog/free-movies-costly-malware. 4 Video & Media, Protect Your Computer from Malware, (Oct. 3, 2012) available at 

www.consumer.ftc.gov/media/video-0056-protect-your-computer-malware. 5See, e.g., Press Release, FTC Charges Tech Support Companies With Using Deceptive PopUp Ads to Scare Consumers Into Purchasing Unneeded Services (Oct. 12, 2016), available at 

www.ftc.gov/news-events/press-releases/2016/10/ftc-charges-tech-support-companies-using-deceptive-pop-ads-scare; Press Release, Tech Company Settles FTC Charges It Unfairly Installed 

Apps on Android Mobile Devices Without Users’ Permission (Feb. 5, 2016), available at 

www.ftc.gov/news-events/press-releases/2016/02/tech-company-settles-ftc-charges-it-unfairly-installed-apps; Press Release, FTC Permanently Shuts Down Notorious Rogue Internet Service Provider (May 19, 2010), available at www.ftc.gov/news-events/press-releases/2010/05/ftc-permanently-shuts-down-notorious-rogue-internet-service. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JERRY MORAN TO

HON. TERRELL MCSWEENY

Question 1. During the hearing, one of the issues raised by both panel members 

and witnesses was the rise of ransomware, especially targeted at small business 

owners. One of the devious ways that hackers can gain access to a computer is by 

baiting Internet users with the prospect of free movies, TV shows or music. Recent 

studies have found that 1 in 3 so-called pirate websites expose consumers to 

malware. Given the rise of piracy as a means to bait and infect computers, and increase in ransomware, what is the FTC doing to warn consumers about the connection between piracy and malware? 

Answer. The Commission recently published a blog post on the FTC’s website entitled ‘‘Free movies, costly malware’’ to educate consumers about the possibility that 

pirate websites will infect their computers and devices with malware if they 

download copyrighted content.1 We also have posted the blog to military.consumer.gov. The FTC will continue to warn consumers about the risks associated with downloading content from pirate websites, as appropriate. I am very concerned about ransomware and fear the danger to businesses and consumers will 

only grow. This is an issue that the FTC, Congress, and law enforcement at every 

level must collaborate on to provide better solutions to American consumers and 

businesses. 

Question 2. Another theme of the hearing was the economic loss caused by scams. 

A recent investigation by security company RiskIQ found that hackers are paying 

pirate website operators $70 million a year to infect computers. What role should 

the FTC play in warning consumers and encouraging those who facilitate online activity—such as domain sellers, hosting companies, search engine companies and 

payment processors—in combatting these piracy/malware operators? For example, 

should the FTC post warnings on their website, produce public service announcements or work with digital platforms to raise awareness and combat this new 

threat? 

Answer. The FTC has a robust law enforcement and consumer education platform 

designed to combat online threats, such as the unwanted installation of malware 

and other software. For instance, last fall, the FTC held a workshop with numerous 

industry participants to educate consumers about how to avoid—and respond to— 

ransomware.2 And, as noted in response to the previous question, the FTC recently 

published a blog post on the its website entitled ‘‘Free movies, costly malware’’ to 

educate consumers about the possibility that pirate websites will infect their computers and devices with malware if they download copyrighted content.3 The FTC 

also produced a consumer education video about how to avoid, detect, and remove 

malware.4

In addition, the Commission has brought several enforcement actions to stop companies from installing malware and other unwanted software on consumers’ computers and devices.5 The Commission will continue to use its investigative, legal, 

and public outreach tools to protect consumers from unwanted and harmful software. Moreover, the Commission will continue, as it has done in the past, to work 

with high tech companies, service providers, and industry participants to combat online threats. 

Question 3. In the FTC’s prepared testimony, the agency discusses the challenges 

associated with offshore scammers, including international telemarketing fraud 

rings. The Committee is also aware that so-called Jamaican lottery scams have proliferated in recent years. One tool available to FTC is the U.S. SAFE WEB Act, 

68 

6See, Press Release, Court Orders Ringleader of Scam Targeting Seniors Banned From Telemarketing (March 12, 2015), available at https://www.ftc.gov/news-events/press-releases/2015/ 

03/court-orders-ringleader-scam-targeting-seniors-banned 7See, Press Release, $126M Banners Broker pyramid scheme dismantled by Toronto police 

(Dec 02, 2015) available at http://www.cbc.ca/news/canada/toronto/pyramid-scheme-toronto1.3356905 8See, Press Release, FTC Returns $1.87 Million to Consumers Harmed by Debt Relief Scam 

(May 09, 2016), available at https://www.ftc.gov/news-events/press-releases/2016/05/ftc-returns-187-million-consumers-harmed-debt-relief-scam 9See, e.g., Press Release, FTC Halts Online ‘Yellow Pages’ Scammers (Dec 02, 2015), available 

at https://www.ftc.gov/news-events/press-releases/2015/12/ftc-halts-online-yellow-pages- scammers; Press Release, FTC and Florida Halt Internet ‘Yellow Pages’ Scammers (July 17, 

2014), available at https://www.ftc.gov/news-events/press-releases/2014/07/ftc-florida-haltinternet-yellow-pages-scammers 10See,e.g., Press Release, Jesta Digital Settles FTC Complaint it Crammed Charges on Consumers’ Mobile Bills Through ’Scareware’ and Misuse of Novel Billing Method (Aug 21, 2013), 

available at https://www.ftc.gov/news-events/press-releases/2013/08/jesta-digital-settles-ftccomplaint-it-crammed-charges-consumers; Press Release, Telus customers to receive $7.34 million 

in rebates as part of Competition Bureau agreement (Dec 30, 2015), available at http:// 

www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04017.html 

which allows the Commission to address consumer protection matters, particularly 

those with an international dimension, providing for increased cooperation with foreign law enforcement authorities, confidential information sharing and investigative 

assistance. 

a. How has FTC used the SAFE WEB Act in its fight against scams? 

Answer. The FTC has used the Act’s powers extensively in cross-border fraud 

cases and other matters to protect Americans from cross-border fraud. Between FY 

2012 and FY 2016, for example, the FTC used the Act to share information in response to almost 65 requests from foreign agencies, and issued nearly 65 civil investigative demands to aid 28 foreign investigations. These efforts have enabled foreign 

counterparts to investigate conduct that directly harms American consumers, and 

also helped to advance FTC investigations in many instances. Here are a few examples since Congress reauthorized the Act in 2012: 

The FTC used its SAFE WEB powers to work with Canadian law enforcement to 

stop a telemarketing scam that targeted senior citizens. On the U.S. side, the FTC 

obtained an order for more than $10 million in consumer redress and the Justice 

Department charged some of the defendants criminally. On the Canadian side, the 

Royal Canadian Mounted Police (RCMP) brought its own case, arresting the Canadian-based defendants and seizing evidence.FTC v. First Consumers)6

The FTC used its SAFE WEB powers to obtain evidence for the Toronto Police 

Service’s investigation of a sham business that scammed $93 million from consumers by purporting to sell banner ads for websites. The scheme had thousands 

of victims worldwide, including in the United States. Canadian law enforcement 

broke up the scam and arrested two of its leaders. (RCMP action against Banners’ 

Broker)7

The agency used its SAFE WEB authority in another telemarketing scam to repatriate, with Justice Department help, nearly $2 million of the defendant’s assets 

from Canadian bank accounts frozen by the RCMP; the FTC has now sent redress 

checks to 1,630 victims totaling $1.8 million. (FTC v. Expense Management of 

America)8

The FTC has used SAFE WEB in a number of business directory scams that prey 

on small businesses, non-profits and churches to share evidence with counterparts 

in Canada and other jurisdictions. This has led to several FTC judgments and law 

enforcement actions in Canada. (E.g., FTC v. Medical Yellow Directories, FTC v. 

Modern Technology)9

SAFE WEB also allowed the FTC to exchange information with Canadian law enforcement about a company that put unauthorized charges on consumers’ phone 

bills using phony virus-scan scareware and led to law enforcement actions involving 

that conduct on both sides of the border. (FTC v. Jesta Mobile Media, Competition 

Bureau Canada action against Telus)10

Apart from scams, the Act also supports FTC enforcement of the EU-U.S. Privacy 

Shield Framework, which enables transatlantic data flows for many U.S. companies. 

The FTC’s SAFE WEB powers provide for stronger cooperation with European data 

protection authorities on investigations and enforcement against possible Privacy 

Shield violations, a point cited in the European Commission’s Privacy Shield adequacy decision. 

69 

11See, e.g., Press Release, Telemarketing Defendants Charged by FTC in Tech Support Scheme Will Pay $10 Million for Consumer Redress (Dec. 22, 2016), available at www.ftc.gov/newsevents/press-releases/2016/12/telemarketing-defendants-charged-ftc-tech-support-scheme-willpay (case brought by FTC and the Florida Attorney General); Press Release, FTC and Florida 

Charge Tech Support Operation with Tricking Consumers into Paying Millions for Bogus Services (July 8, 2016), available at www.ftc.gov/news-events/press-releases/2016/07/ftc-floridacharge-tech-support-operation-tricking-consumers; Press Release, Tech Support Operators Settle 

FTC, State of Florida Charges They Misled Consumers (Feb. 12, 2016), available at www.ftc.gov/ 

news-events/press-releases/2016/02/tech-support-operators-settle-ftc-state-florida-charges-they. 12See, e.g., Press Release, FTC, Florida Attorney General Take Action Against Illegal Robocall 

Operation (June 14, 2016), available at www.ftc.gov/news-events/press-releases/2016/06/ftcflorida-attorney-general-take-action-against-illegal-robocall; Press Release, FTC and Ten State 

Attorneys General Take Action Against Political Survey Robocallers Pitching Cruise Line Vacations to the Bahamas (March 4, 2015), available at www.ftc.gov/news-events/press-releases/ 

2015/03/ftc-ten-state-attorneys-general-take-action-against-political. 13See Press Release, FTC, All 50 States and D.C. Charge Four Cancer Charities With Bilking Over $187 Million from Consumers (May 19, 2015), available at www.ftc.gov/news-events/pressreleases/2015/05/ftc-all-50-states-dc-charge-four-cancer-charities-bilking-over. 14See, e.g., Press Release, FTC and Illinois Attorney General Halt Chicago-Area Operation 

Charged with Collecting and Selling Phantom Payday Loan Debts (Mar. 30, 2016), available at 

www.ftc.gov/news-events/press-releases/2016/03/ftc-illinois-attorney-general-halt-chicago-areaoperation-charged. 15See, e.g., Press Release, FTC and Federal, State and Local Law Enforcement Partners Announce Nationwide Crackdown Against Abusive Debt Collectors (Nov. 4, 2015), available at 

www.ftc.gov/news-events/press-releases/2015/11/ftc-federal-state-local-law-enforcement-partners-announce; Press Release, FTC, Multiple Law Enforcement Partners Announce Crackdown 

on Deception, Fraud in Auto Sales, Financing and Leasing (March 26, 2015), available at 

www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-law-enforcement-partners-announce-crackdown; Press Release, FTC and Dozens of Law Enforcement Partners Halt Travel 

and Timeshare Resale Scams in Multinational Effort (June 6, 2013), available at www.ftc.gov/ 

news-events/press-releases/2013/06/ftc-dozens-law-enforcement-partners-halt-travel-timeshareresale; Press Release, FTC Leads Joint Law Enforcement Effort Against Companies that AllegContinued 

b. This legislation is scheduled to sunset in 2020. Do you support its reauthorization? Will you commit to provide technical assistance to the Committee, including 

any modifications to improve the FTC’s ability to go after international scammers? 

Answer. I strongly support SAFE WEB reauthorization and commit to providing 

technical assistance to the Committee for that process. FTC staff worked closely 

with the Committee to develop the original legislation passed in 2006, and to support reauthorization in 2012. We would be pleased to work with the Committee to 

continue strengthening our ability to go after international scammers. We in particular suggest repealing the sunset provision entirely: greater certainty for the 

agency and our international partners about the FTC’s enforcement tools going forward improves our ability to develop enduring cooperation agreements and enforcement projects with foreign counterparts. Congress granted the SEC and the CFTC 

similar enforcement powers over 25 years ago, without a sunset provision. Their 

positive enforcement cooperation experience, and the FTC’s successful experience 

with SAFE WEB over the past decade, confirms the value of this legislation to our 

enforcement mission. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. DEAN HELLER TO

HON. TERRELL MCSWEENY

Question. Last Congress, Microsoft came before the Senate Aging Committee and 

told us about partnerships they had with states to combat tech scams. For Nevadans, consumer protection is a top issue, especially because of the impact that scams 

can have on an individual’s finances or even their privacy. Are there any FTC initiatives in coordination with State Attorneys General that are models for protecting 

consumers from scams? 

Answer. The Commission has robust, collaborative relationships with state law 

enforcers, including through the National Association of Attorneys General. The 

FTC’s collaboration with its state partners takes many forms, including sharing information and targets, assisting with investigations, and working collaboratively on 

long-term policy initiatives. 

Over the last two years, the FTC has collaborated with its state partners on dozens of investigations and numerous joint enforcement actions, including investigations and enforcement actions concerning tech support scams,11 robocalls,12 charity 

scams,13 and debt collection practices,14 among other deceptive and unfair practices. 

The FTC also leads law enforcement ‘‘sweeps’’—coordinated, simultaneous law enforcement actions—in conjunction with state and local partners.15 To supplement its 

70 

edly Made Deceptive ‘‘Cardholder Services’’ Robocalls (Nov. 1, 2012), available at www.ftc.gov/ 

news-events/press-releases/2012/11/ftc-leads-joint-law-enforcement-effort-against-companies. 16See, e.g., Events Calendar, FTC & NASCO Host a Conference Exploring Consumer Protection Issues and Charitable Solicitations (March 21, 2017), available at www.ftc.gov/news-events/ 

events-calendar/2017/03/give-take-consumers-contributions-charity; Events Calendar, Working 

Together to Protect Midwest Consumers: A Common Ground Conference (Oct. 25, 2016), available 

at www.ftc.gov/news-events/events-calendar/2016/10/working-together-protect-midwest-consumers-common-ground; Events Calendar, Working Together to Protect Michigan Consumers: A 

Common Ground Conference (July 13, 2016), available at www.ftc.gov/news-events/events-calendar/2016/07/working-together-protect-michigan-consumers-common-ground; Events Calendar, 

Utah Consumer Protection Summit (Oct. 22, 2015), available at www.ftc.gov/news-events/eventscalendar/2015/10/utah-consumer-protection-summit. 

law enforcement efforts, the FTC and its state partners also co-host consumer protection conferences and workshops designed to protect consumers from fraud and 

provide guidance on how to identify and avoid scams.16

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. TODD YOUNG TO

HON. TERRELL MCSWEENY

Question 1. Commissioner McSweeny, has the FTC focused on the issue of travel 

booking scams beyond issuing consumer alerts? 

Answer. As you note, in July 2015, the FTC issued consumer education cautioning 

consumers about third-party websites that may deceptively mimic hotel websites. In 

addition, we have met with members of Congress to discuss the issue of deceptive 

travel sites and have proposed technical assistance and comments on proposed legislation. Because the existence and details of investigations are non-public, we cannot 

comment on any specific matters. However, the FTC will take law enforcement action in appropriate cases. 

Question 2. Commissioner McSweeny, what plans does the FTC have to notify and 

coordinate with State Attorney Generals prior to peak travel season this year, including summer, Thanksgiving, and the Christmas holidays? 

Answer. The FTC has worked closely with the State Attorneys General on many 

issues, including most recently during National Consumer Protection week. The 

FTC will explore whether there are opportunities to coordinate with the states to 

protect consumers from scams that affect them during these peak travel periods. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. BILL NELSON TO

HON. TERRELL MCSWEENY

Question. The FTC already operates on a tight budget. It is a small agency with 

a huge mandate: to police the American economy and enforce against ‘‘unfair or deceptive acts or practices.’’ The Trump Administration has proposed irresponsible 

cuts to virtually every aspect of the government that helps the average American. 

While we have yet to see a specific budget proposal for the FTC, the ‘‘skinny’’ budget 

did reference a vague 9.8 percent cut to ‘‘other agencies’’ that were not specifically 

mentioned. It seems safe to say that funding cuts may well be coming to the FTC. 

How would a possible budget cut—say, along the lines of a 9.8 percent cut—affect 

the FTC’s ability to protect American consumers from scams and fraud? 

Answer. The FTC is still working with OMB to determine what the President’s 

budget will recommend for us in 2018. We are optimistic that the budget will not 

propose a significant cut for the Commission. To respond to your question, however, 

were the FTC’s appropriation to be cut by 9.8 percent, this could significantly affect 

the Commission’s ability to enforce consumer protection and competition laws. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. RICHARD BLUMENTHAL TO

HON. TERRELL MCSWEENY

Question 1. Last year, the FTC successfully finalized settlements with two re- maining sham cancer charities—out of four—that had siphoned more than $187 million from donors. This marked the largest joint enforcement effort ever by the FTC 

and state charity regulators. These fraudulent charities—named ‘‘Cancer Fund of 

America’’ and ‘‘Cancer Support Services,’’ claimed to help cancer patients. 

However, the overwhelming majority of donations were lavishly spent on the fake 

charities’ operators and their families and friends, as well as on fundraisers who 

shamelessly spent donations on cars, trips, luxury cruises, college tuition, gym memberships, Jet Ski outings, sporting event and concert tickets, and dating site memVerDate Nov 24 2008 10:19 Feb 20, 2018 Jkt 075679 PO 00000 Frm 00074 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\28381.TXT JACKIE
71 

1See Press Release, FTC, FTC, States Settle Claims Against Two Entities Claiming to Be Cancer Charities; Orders Require Entities to Be Dissolved and Ban Leader from Working for NonProfits (March 30, 2016) available at https://www.ftc.gov/news-events/press-releases/2016/03/ 

ftc-states-settle-claims-against-two-entities-claiming-be-cancer. 2FTC Consumer Blog, How to Defend Against Ransomware (Nov. 10, 2016), available at 

https://www.consumer.ftc.gov/blog/how-defend-against-ransomware. 

berships. According to the 2015 FTC complaint, this misappropriation of consumer 

donations dated back to 2008. How were these sham charities able to rob donors 

of so much money and for so long? 

Answer. As you note, in March 2016, the FTC, all 50 states and the District of 

Columbia resolved litigation against the remaining defendants in Cancer Fund of 

America, resulting in, among other things, a dissolution of the sham charities and 

a ban on the companies president’s ability to profit from any charity fundraising in 

the future.1 These sham outfits were quite adept at masking their charade. For example, they hid their wrongdoing by manipulating their financial reporting and 

using deceptive and invalid accounting techniques to claim huge donations of giftsin-kind. This allowed them to inflate their reported revenue and program spending 

by $223 million, which allowed the organizations to appear both larger and more 

efficient with donors’ money than they really were. It was not obvious from their 

public financial reports to the IRS or the states that less than 3 percent of donated 

cash was being spent on any program services (collectively). 

In addition, charity fraud is easy to miss and underreported. The average donation to the sham cancer charities was less than $30, and the vast majority of those 

donations were made in response to telephone solicitations. Consumers who gave in 

response to the promise that their donation would help cancer patients never knew 

that their money did not go to that cause—and thus did not complain. Further, 

based on our experience, we believe that few donors take the time to research a $20 

to $30 donation before giving, and in this case, the sham charities’ false reporting 

would have hidden any red flags from even the most diligent consumers. 

Question 2. In what way has the nonprofit exemption in the FTC Act hamstrung 

the Commission’s ability to act swiftly to prevent or stop illegal conduct in the nonprofit sector? 

Answer. Since nonprofit entities fall outside of the FTC’s jurisdiction, we cannot 

take action when a ‘‘legitimate’’ charity crosses the line and engages in deceptive 

or unfair acts and practices. Instead, we can only reach illegal conduct if we can 

establish that the charity is a ‘‘sham.’’ A sham charity is one that operates primarily 

to profit individuals and private interests over its beneficiaries. Proving that a charity is a sham requires significant probing into the internal operations of the organization, including detailed review and analysis of bank records and other financial 

records, board meeting minutes, and employment practices among other things. Not 

surprisingly, making this threshold proof is difficult, and in some cases impossible— 

leaving some charitable entities that engage in deceptive practices beyond our reach. 

Question 3. According to a recent study, one out of three content theft sites expose 

consumers to malware, leading to compromised bank accounts, identity theft, and 

‘‘ransomware’’ that locks a consumer out of their data until they pay the criminals 

the required ransom. This study showed that 45 percent of malware was delivered 

by ‘‘drive-by-downloads,’’ which invisibly download to a user’s computer without requiring them to click on a link. What is the FTC doing to inform and educate consumers about the link between content theft sites and malware? 

Answer. I share your concerns about malware on consumers’ computers, which 

can lead to anything from nuisance adware that delivers pop-up ads, to software 

that causes sluggish computer performance, to keystroke loggers that capture sensitive information. The Commission will soon issue a blog post warning consumers 

that websites offering free content often hide malware that can bombard them with 

ads, take over their computers, or steal their personal information. More generally, 

the FTC uses a variety of methods to provide consumers with information about the 

privacy and security implications of new and existing technologies, and how to avoid 

and detect malicious software. 

Our outreach includes publications, online resources, workshops, and social 

media. Among the many topics we cover are malware, tech support scams, spyware, 

phishing, peer-to-peer file sharing, and social networking. Among the resources we 

have that may be useful are a blog post and video describing the nature of the 

ransomware threat, how to defend against ransomware, and essential steps for victims to take.2

72 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. JOHN THUNE TO

HON. MIKE DEWINE

Question. One of the biggest challenges Federal agencies face is to fulfil their missions while making the most of limited resources. This is certainly true of the FTC 

and its mandate to protect American consumers. Can you share your views on how 

the FTC uses its relationships with state and local law enforcement both to provide 

assistance and to bolster its own consumer protection efforts? Is there a good level 

of coordination, or would you like to see more from FTC? 

Answer. The relationship between my office and the Federal Trade Commission’s 

(FTC) Cleveland Regional Office has historically been very strong. Our Assistant Attorneys General are in fairly regular communication with the FTC’s staff and have 

participated in a number of coordinated sweeps. That being said, there is always 

room for improvement. 

Like many Federal agencies, the FTC is hesitant to share investigative work product with state and local officials. Some of this may be by necessity. However, by promoting more open lines of communication and sharing of information, we could 

avoid duplicative work and, perhaps, end up with better results for consumers. 

In certain cases, the FTC also keeps attorneys general informed of Federal legislation related to consumer protection issues. This is helpful for states to use as a 

guide to create their own legislation if necessary. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. JERRY MORAN TO

HON. MIKE DEWINE

Question. There are a number of state attorneys general that have made public 

service announcements (PSAs) warning consumers of the dangers to their finances 

and cybersecurity from visiting pirate websites, and many are in the process of 

amending their websites to reflect this. Do you think the state Attorneys General, 

as well as the FTC, has a role in these efforts? 

Answer. My office does a tremendous amount of outreach and education relating 

to cybersecurity and online scams of all types. In spite of our efforts, Ohioans continue to be victimized by pirated websites, phony friend requests, and bogus online 

offers. 

There are nearly endless opportunities to reach consumers in their homes, on 

their mobile devices, and through traditional and social media. Having a diversity 

of sources and voices can be very beneficial to our efforts to help consumers protect 

themselves from frauds and scams. 

Messages from Attorneys General can be reinforced by messages from the Federal 

Trade Commission, and vice versa. There is plenty of room in this arena for state 

Attorneys General and for the Federal Trade Commission. Each brings value and 

consumers deserve that maximum opportunity to learn about risks they may face 

while online. The FTC has always promoted states using the FTC resources—such 

as publications and videos—at no cost to the state. With the FTC’s abilities to make 

high-end videos, it’s helpful to the states who have limited resources to produce videos; the same can be said about their publications. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. TODD YOUNG TO

HON. MIKE DEWINE

Question 1. Mr. DeWine, what have you experienced in neighboring Ohio relative 

to travel booking scams and what additional support do you believe you could use 

from the FTC? 

Answer. We have experienced some travel booking scams or complaints, but we 

do not see a large majority of complaints from this specific category. That’s not to 

say we don’t take action. In 2013, we had a number of complaints against an individual who accepted money for vacations booked through her, but she provided 

nothing. In that case, we worked with the local prosecutor to prosecute her for two 

counts of theft, one of which she eventually plead guilty. 

While Ohio has the ability to bring cases on its own, as well as with other states, 

the FTC could be instrumental in helping curb bad practices of larger nation-wide 

businesses. For example, the FTC could help set best practices for third-party booking sites, vacation club memberships, or additional fees imposed by travel booking 

sites. 

Question 2. Mr. DeWine, has the FTC focused in on the issue of travel booking 

scams beyond issuing consumer alerts? 

73 

Answer. Currently, I’m unaware of any cases the FTC is involved with regarding 

travel booking scams; that is not to say, however, that there are not cases. I do 

know that in January 2017, the FTC took a strong stance against and suggested 

legislation regulating additional fees imposed by hotels and resorts in which the 

hotel or resort was advertising a lower rate but then adding on an additional fee 

as ‘‘resort fee.’’ 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. BILL NELSON TO

HON. MIKE DEWINE

Question. On this Committee, we often consider consumer-protection bills in which 

state attorneys general play a role in enforcement. For me, I believe multiple ‘‘cops 

on the beat’’ are a good thing, and I always support legislation where state attorneys general can partner with Federal agencies to work on the American people’s 

behalf. However, some bills we consider in this Committee attempt to preempt state 

consumer-protection laws and clip the wings of state attorneys general’s authorities. 

Can you comment on how important it is to preserve the prerogatives of state attorneys general to protect consumers from scams and fraud? 

Answer. It is imperative that the states’ authority to protect consumers is preserved. The attorneys general are uniquely situated to address scams and unfair or 

deceptive practices at the regional, state, and local levels. Many times bad actors 

target specific geographic areas or populations within a state to take advantage of 

a disaster, weather event, or unique market. The attorneys general can react to 

these problems much more quickly and decisively than a Federal agency. 

In many ways, the attorneys general are the first line of defense for all Americans, as the enforcement actions taken on the state level influence practices across 

the spectrum of businesses inside our states and out. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. RICHARD BLUMENTHAL TO

HON. MIKE DEWINE

Question. The FTC’s ‘‘Every Community Initiative’’ recognizes that fraud affects 

every community, and creates consumer education materials for vulnerable and 

often targeted communities, including older adults, military families, immigrants, 

and members of the Latino community. 

Would it be fair to say that if our efforts to educate consumers and small businesses about scams were reduced or discontinued, the American economy would suffer even more financial loss as a result of scams? 

Answer. I can’t speak to the value of any single program, but I can talk about 

consumer education as a whole. I believe in the value of having staff assigned to 

helping people understand how they can avoid falling victim to a scam or making 

a bad purchasing decision and assisting them with recovering after it’s happened. 

In Ohio, we put a lot of effort into finding ways to communicate with our consumer and business communities, including our immigrant and non-English speaking communities. We do this through social media, targeted outreach, and by having 

staff out in the field meeting people where they live. We are, first and foremost, 

public servants and we must do what it takes to protect the families and businesses 

we serve. 

Although we appreciate the efforts the FTC has made, the attorneys general understand that it’s our job to educate our consumers. We will continue to fulfill our 

obligations no matter what happens to any specific Federal program. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. BILL NELSON TO

FRANK W. ABAGNALE, JR. 

Question 1. In your various writings over the years, you make a passionate case 

about the growth and harms of identity theft and the need for Federal legislation 

to tackle the problem. For instance, in The Art of the Steal, you wrote, ‘‘If we’re serious about combating identity theft, it’s going to take a Federal solution [. . .].’’ In 

Stealing Your Life—in a chapter titled, ‘‘Write Your Company and Congressperson— 

Now!’’—you wrote, ‘‘Congress and state legislatures need to provide consumers with 

more protection.’’ Do you continue to believe that there must be a Federal solution? 

Answer. Yes, I do. I believe there needs to be Federal laws on the books that hold 

companies, corporations and financial institutions liable for breaches that occur due 

to their negligence. The same way I feel very strongly that companies that produce 

software and hardware be responsible when their technology does not protect indiVerDate Nov 24 2008 10:19 Feb 20, 2018 Jkt 075679 PO 00000 Frm 00077 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\28381.TXT JACKIE
74 

viduals, as well as businesses, when they claim it was designed to do so. Having 

no legal recourse, individuals, as well as businesses, are left in harm’s way when 

companies do not take the adequate and necessary steps to make sure that there 

are no loop holes in their technology. For example, over the past 20 years I have 

worked as an advisor on two great fraud prevention technologies. The first one was 

called the 41st Parameter, eventually sold to Experian and now used in 80 countries 

around the world by governments, banks, corporations, airlines, and retailers. I am 

currently finishing a technology called Trusona (www.trusona.com) which does away 

with passwords and has become the only insured verification technology in the 

world insured by an A+ insurance company. We were able to obtain this insurance 

because we allowed the insurance company to spend over a year testing the technology in various labs around the world to see if it could be defeated before allowing 

it to be insured. Even in the paper/print side, more than 10 years ago I designed 

a high security check for a California security printer known today as the 

Supercheck (www.safechecks.com). Today, that check is used by thousands of corporations, state and city governments and has never been counterfeited, altered or 

forged. 

I work with technology companies because they can’t think like a criminal. 

Though I can’t write code, I can play ‘‘chess’’ with them until I’ve taken away every 

possibility of defeating the technology. I know this can be done, having done it, so 

I believe all companies should be responsible for taking the necessary steps to insure their technology works instead of rushing to market just to make a buck at 

the consumer’s risk. 

Question 2. As you may or may not know, I introduced legislation with Senator 

Blumenthal last Congress—S. 177, the Data Security and Breach Notification Act 

of 2015—that would require companies holding large amounts of personal information to take reasonable security measures and would establish a uniform Federal 

standard for breach notification. In concept, what are your thoughts, if any, on this 

type of Federal solution? 

Answer. I would be absolutely 100 percent behind this bill. Again, there is no reason that companies cannot take the time and expense to educate their employees 

about the most important job they have. That is protecting the private and sensitive 

information they have that has been entrusted to them by their customers and clients. This means training everyone from the custodian to the CEO. Over the last 

40 years, I’ve had the opportunity to make presentations to many Fortune 500 Companies who understand that education is the most powerful tool to fight fraud and 

cybercrimes. If I company or institution is not willing to put the interest and protection of their clients and customers first, then they should be held responsible. I support this bill. 

As a way of example, the Federal Government could do a much better job of protecting the taxpayers’ money and information. I always believe that the government 

should take the lead and the rest of the country will follow. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. RICHARD BLUMENTHAL TO

FRANK W. ABAGNALE, JR. 

Question. The FTC’s ‘‘Every Community Initiative’’ recognizes that fraud affects 

every community, and creates consumer education materials for vulnerable and 

often targeted communities, including older adults, military families, immigrants, 

and members of the Latino community. 

Would it be fair to say that if our efforts to educate consumers and small businesses about scams were reduced or discontinued, the American economy would suffer even more financial loss as a result of scams? 

Answer. Yes, it would and already has. As I mentioned in my testimony, in the 

last 1970s I was featured in a number of public service ads sponsored by the DOJ 

that were sent out to law enforcement agencies on tips for protecting consumers on 

subjects like protecting their check book, their credit cards, and personal assets. I 

donated my time to this project as I knew how important it was. Those PSAs ran 

for a number of years and were very effective. 

In the mid-1980s I allowed by intellectual property to be used by a large bank 

financial printer for bank statement stuffers with tips for consumers. Hundreds of 

banks sent these statement stuffers to hundreds of thousands of individuals as just 

a public service message from their bank. In both of those projects, I was not known 

by very many people but they were still very effective. 

I strongly believe that the government, through agencies like the FTC, should 

begin a public awareness program about consumer crimes and safety in the cyber 

world. As in the past, I will always be willing to provide my services and intellectual 

75 

property to a government initiative like this at absolutely no cost or travel expenses 

to accomplish this. Whether the government choses me as their spokesman or not, 

I absolutely stand behind the initiative to create consumer educational materials 

targeted to communities, older adults, military families, immigrants and members 

of the Latino community. 

I’d like to make one final point. In the last couple of years, I have actually donated my time and travel to film some public service ads for the DOJ National Advocacy Center (NAC), as well as the Association of State Attorneys General. Unfortunately, there was no money put behind these ads, they were poorly filmed and 

produced and consequently, ended up being shown only on government websites. If 

the government decides to create a campaign for public awareness, they must put 

the money behind it so it is professionally done so that network and cable TV will 

show it. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. RICHARD BLUMENTHAL TO

MIKE SCHWANKE

Question. The FTC’s ‘‘Every Community Initiative’’ recognizes that fraud affects 

every community, and creates consumer education materials for vulnerable and 

often targeted communities, including older adults, military families, immigrants, 

and members of the Latino community. 

Would it be fair to say that if our efforts to educate consumers and small businesses about scams were reduced or discontinued, the American economy would suffer even more financial loss as a result of scams? 

Answer. My name is Michael Schwanke with KWCH TV in Wichita, Kansas. In 

my 17 years as a journalist and investigative reporter I have focused much of time 

on helping victims of scams and educating the public so they don’t fall victim. 

To answer your question, I believe that education is the best weapon we have to 

prevent scams. Enforcement is often impossible as the scammers change tactics 

daily and operate from other countries. 

As I stated in my testimony, the education has to be consistent. We have seen 

viewers fall for scams even after they’d been warned. 

I personally have seen seniors wire away their entire life savings to scammers. 

Everyone, including the Federal Government, has a role in preventing the next person from falling victim. 

I appreciate the opportunity to share my experience. 

Æ