CONSUMER

PROTECTION

Federal Actions to

Oversee the Household

Goods Moving Industry

Are Unlikely to Have

Immediate Impact

Statement of JayEtta Z. Hecker

Director, Physical Infrastructure Issues

United States General Accounting Office

GAO Testimony

Before the Subcommittee on Highways and Transit,

Committee on Transportation and Infrastructure, House of

Representatives

For Release on Delivery

Expected at

10:00 a.m. EDT

Thursday

July 12, 2001

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

Mr. Chairman and Members of the Subcommittee:

We appreciate this opportunity to testify on the Department of Transportation’s

performance in overseeing the household goods moving industry over the last 5 years

and the agency’s recent efforts designed to improve consumer protection in this industry.

Our statement is based on a recent report we issued to you and updated information

from the modal administration within the Department with specific responsibility for this

issue, the Federal Motor Carrier Safety Administration (FMCSA).1

 As you requested, we

have also provided some ideas on how to improve oversight and consumer protection for

the household goods moving industry.

In summary:

ï Over the last 5 years, consumer complaints against household goods carriers have

multiplied while the Department has conducted limited oversight of the industry. It

does not collect nationwide information on consumer complaints in the household

goods moving industry, but estimates that it receives about 4,000 complaints each

year. The Department has done little to carry out its responsibility for consumer

protection in the interstate household goods moving industry—such as taking

enforcement actions against carriers and providing information to consumers to

enable them to make more informed choices when they move—because this is a

relatively low priority compared with its primary mission of promoting motor carrier

safety.

ï Although FMCSA has recently begun activities that have potential to improve its

ability to oversee the industry and protect consumers, the agency has fallen behind in

completing these actions. FMCSA has not met the milestones that were in effect only

3 months ago for completing many of its planned activities and has extended the

milestones by several months to a year. For example, FMCSA originally anticipated

implementing a nationwide consumer complaint database in April 2001 to, among

other things, target carriers for enforcement action in a timely manner; FMCSA now

anticipates implementing the database in early fiscal year 2002. In addition, the

Department did not conduct a study by mid-1997 of the effectiveness of arbitration as

a means of settling household goods disputes, as required by the ICC Termination Act

of 1995. The agency plans to conduct the study from fiscal year 2003 through fiscal

year 2005.

ï In our March 2001 report, we made a number of recommendations aimed at

improving FMCSA’s actions to oversee the household goods moving industry and

protect consumers. Additional actions by FMCSA and the Congress could improve

oversight and consumer protection in this industry without detracting from FMCSA’s

efforts to improve truck safety. For example, FMCSA could establish performance

measures, put in place specific strategies to meet them, and follow through on the

 1

Consumer Protection: Federal Actions Are Needed to Improve Oversight of the Household Goods

Moving Industry (GAO-01-318, Mar. 5, 2001).
Page 2 GAO-01-819T Household Goods Moving Industry

strategies to demonstrate to the Congress and the public the extent to which it is

improving oversight and consumer protection. FMCSA could also ask for additional

resources if it cannot meet its responsibility to protect consumers without diverting

resources from its safety-related activities. In addition, continued and vigorous

congressional oversight can focus attention on this issue and provide a clear

expectation for the agency to fulfill its consumer protection responsibilities. Finally,

the Congress could take action to expand the states’ role in regulating the household

goods moving industry, such as by authorizing the states to enforce federal

regulations. This has the potential to enhance consumer protection and provide

consumers more avenues to seek remedies for illegal practices by household goods

carriers. In our March 2001 report, we did not recommend these legislative changes,

but instead recommended that the Department determine whether legislative changes

are needed after it has implemented our other recommendations. We continue to

believe that effective federal oversight and enforcement is critical to consumer

protection. Therefore, if the Congress decides to expand the states’ role, it should be

done in conjunction with—not in lieu of—more effective federal efforts.

Background

Each year, between 1.3 million and 1.5 million households use commercial moving firms

to move their household goods to another state, according to industry estimates.2 There

are approximately 2,900 motor carriers registered with the Department of Transportation

that transport household goods across state lines.

Consumers are primarily responsible for preventing and resolving problems that may

occur during a move, while the federal government has a broader role to oversee the

household goods moving industry and enforce regulations. However, most consumers

seldom use moving companies for their household goods, so they are less prepared to

protect themselves financially than are commercial shippers.

Until 1996, the Interstate Commerce Commission had regulatory responsibility for

interstate household goods carriers, including issuing regulations, conducting oversight

activities, and taking enforcement actions. The ICC Termination Act of 1995 dissolved

the Commission and transferred these consumer protection functions to the Department

of Transportation, where they were assigned to the motor carrier safety office within the

Federal Highway Administration. The Motor Carrier Safety Improvement Act of 1999

moved these functions to a new organization—FMCSA—within the Department of

Transportation. In addition to its headquarters facilities, FMCSA maintains a field office

structure consisting of 4 service centers and 52 division offices.

 2

This estimate includes moves of individual households, moves arranged by governments, and moves

arranged by corporations for their employees because industry officials do not separately track moves in

these categories. Industry estimates indicate that an additional 1.3 million to 1.5 million households move

themselves with their own or rented trucks each year.
Page 3 GAO-01-819T Household Goods Moving Industry

Consumer Complaints Have Increased While The Department Has Conducted

Limited Oversight

Even though the Department is responsible for overseeing the interstate household

goods moving industry, it has not collected nationwide information on consumer

complaints. Nonetheless, limited information from FMCSA’s division offices and the

Council of Better Business Bureaus shows that the number of complaints they received

from consumers about household goods carriers has increased dramatically since 1996.

For example, complaints about interstate movers at the 12 division offices we visited

doubled from 318 in 1996 to 659 in 1999. Meanwhile, complaints about both inter- and

intrastate movers to the Council of Better Business Bureaus increased from about 3,000

in 1996 to about 4,900 in 2000. FMCSA officials estimate that they receive about 4,000

complaints each year. These complaints cover a range of issues, such as

misunderstandings between consumers and carriers about when payment was due,

disagreements over settlements for lost or damaged goods, or allegations of falsified

charges on the final bill.

While complaints have been increasing, the Department has not taken basic actions that

are necessary to oversee the industry and protect consumers. Specifically, the

Department

ï does not collect and analyze nationwide industry information, such as complaint

information, that would allow it to understand and oversee the industry;

ï has not finalized regulations implementing the ICC Termination Act and addressing

certain consumer protection issues;

ï does not know how many reviews it has conducted to ensure that carriers are

complying with consumer protection regulations, but estimates that there have been

very few;

ï has taken few enforcement actions against carriers—actions which might also deter

other household goods carriers from taking advantage of consumers;

ï has done little to educate consumers about their rights and responsibilities when they

move, apart from placing a booklet and a list of most frequently asked questions on

its Internet Web site; and

ï has made little or no effort to reach out to consumer groups, law enforcement

agencies, and others. Fourteen of the 24 state agencies we contacted during our

review did not know which federal agency, if any, regulates household goods movers

and were therefore unable to forward complaints they received about interstate

moves to FMCSA.

Government, consumer organization, and industry officials whom we spoke with believe

that the Department’s lack of attention to its responsibility has created a vacuum that
Page 4 GAO-01-819T Household Goods Moving Industry

has allowed unscrupulous carriers to prey on consumers. For example, some consumers

have complained that carriers have held their goods “hostage” by refusing to unload

them from the moving truck until the customer paid a fee above what is allowed by

federal regulations. In other instances, carriers have provided unreasonably low

estimates that they had no intention of honoring. Finally, some carriers have practiced

“weight bumping,” in which they artificially inflated the weight of a shipment by

including the weight of another household’s goods when calculating the final bill. While

officials we spoke with believe that most moves are completed by reputable carriers with

few or no problems, they also believe that unscrupulous carriers are taking advantage of

the lack of oversight and are operating without concern for the regulations or the rights

of consumers.

According to FMCSA officials, the responsibility for household goods issues is a low

priority compared with the agency’s primary mission of preventing fatalities and injuries

from commercial motor vehicle crashes. Consequently, the Department has devoted

only 5 of about 760 full-time staff to household goods moving issues. Moreover, the

Department has not taken steps to understand the nature and extent of problems in the

industry and thereby determine whether its limited approach to oversight and

enforcement is appropriate. Nor has it made more than minimal efforts to provide

consumers with information that would assist them in making more informed choices

and prevent some problems from occurring during their move.

FMCSA Has Fallen Behind in Actions to Address Problems

FMCSA has recently begun activities that have potential to improve its ability to oversee

the industry and protect consumers. These activities span FMCSA’s oversight,

compliance, enforcement, and public education responsibilities. However, FMCSA has

not met the milestones that were in effect 3 months ago for completing many of these

activities; completing these activities will likely take from several months to a year

longer than expected. For example, FMCSA is implementing a complaint database to

track complaints, understand the nature and pattern of complaints, target carriers for

enforcement action, and evaluate the effectiveness of its enforcement actions. The

database was originally scheduled to be implemented in April 2001, but FMCSA officials

now anticipate that the database will not be available until early in fiscal year 2002.

FMCSA is also planning to train staff responsible for conducting household goods

investigations to improve their expertise in conducting compliance and enforcement

activities. The agency originally anticipated that initial training would occur in March

2001, but now anticipates that it will not occur until March 2002—one year later than the

original milestone. (See table 1.)
Page 5 GAO-01-819T Household Goods Moving Industry

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

Moving Industry

Activity Status as of March 2001 Status as of June 2001

Oversight activities

Establish a 24-hour toll-free complaint

hotline

Established January 2001 Ongoing activity

Develop a national consumer

complaint database

To be completed April 2001 To be completed in early fiscal year

2002

Train staff on handling hostage freight

complaints

To be completed March 2001 To be completed August 2001

Report on the effectiveness of

arbitration as a means of settling

household goods disputes, as

originally required by the ICC

Termination Act of 1995; due date

was June 1997

Study had not been conducted; no

milestone established

Study to start in fiscal year 2003; to be

completed in fiscal year 2005

Compliance and enforcement activities

Develop regulations to improve

consumer protection

Proposed rule published in May 1998 Interim final rule to be published by

early fiscal year 2002

Develop policies and procedures to

implement economic and household

goods regulations

No milestone established Draft policy and procedures manual to

be completed by November 2001

Update compliance review manual to

include household goods regulations

Activity started January 2001 To be completed July 2001

Train staff in conducting compliance

and enforcement activities

Initial training to be completed by

March 2001

Initial training to be completed by

March 2002

Train new field safety investigators on

household goods regulations

Training provided in March 2001 Ongoing activity

Develop letters of agreement with the

Surface Transportation Board and the

Office of Inspector General to

coordinate compliance and

enforcement support in the areas of

tariffs and criminal activities

To be completed April 2001 To begin August 2001

Develop an enforcement strategy plan

to identify carriers and brokers that

engage in egregious conduct,

operations, and practices

To be completed March 2001 To be completed November 2001

Establish a tracking and monitoring

system to evaluate enforcement

activities

To be completed May 2001 No revised milestone established

Establish policies and procedures for

revocation of carrier operating

authority

To be completed April 2001 To be completed October 2001

Public education activities

Develop a comprehensive marketing

plan, including revising a booklet of

information for consumers and

updating the agency’s Web site

To be completed June 2001 To be completed March 2002

Issue press releases and articles for

the public

Ongoing activity Ongoing activity

Notify trade and industry associations,

consumer groups, and other

enforcement agencies of FMCSA’s

regulatory responsibilities

No milestone established Comprehensive announcement to be

made in fiscal year 2002

Source: GAO analysis of information from FMCSA.
Page 6 GAO-01-819T Household Goods Moving Industry

According to FMCSA officials, resource constraints—financial and staffing—have caused

these delays. For example, the officials told us they have developed and tested the

complaint database, but are waiting for fiscal year 2002 funds to implement the database

in the division offices. Officials also told us that the final rule on consumer protection

issues has been delayed because staff are focusing on proposed rules addressing the safe

operation of Mexican trucks in response to plans to allow increased operation of these

trucks in the United States beginning in January 2002 under the North American Free

Trade Agreement. FMCSA has emphasized that its primary mission is to improve motor

carrier safety and that it will do what it can to improve its oversight and enforcement of

the household goods moving industry within available resources. However, FMCSA

officials told us they have not asked, and do not plan to ask, for additional staff for such

consumer protection efforts.

Further Actions by FMCSA and the Congress Could Improve Oversight and

Consumer Protection

In our March 2001 report, we made a number of recommendations aimed at improving

FMCSA’s actions to oversee the household goods moving industry and protect

consumers. There are additional actions that FMCSA could take to improve its

implementation of its oversight and consumer protection responsibilities. To begin with,

FMCSA needs to follow through with its planned activities and demonstrate to the

Congress and the public that it is protecting consumers. Furthermore, the agency could

establish performance indicators, put in place specific strategies to meet them, and

follow through with the strategies to demonstrate the extent to which its activities are

improving oversight and consumer protection. According to FMCSA officials, the agency

does not have such indicators and will not be able to establish them until after the

national consumer complaint database is operational. This database is key to improving

FMCSA’s ability to make informed decisions in all areas of household goods oversight,

and its implementation should not be delayed further. Finally, while safety is and should

be the top priority under its current charter, FMCSA could ask for additional resources

for household goods oversight if it believes it cannot fulfill its responsibility to protect

consumers without detracting from its safety improvement efforts.

The Congress could also set a clear expectation for FMCSA to fulfill its responsibility to

oversee the household goods moving industry and protect consumers. Congressional

oversight—such as setting expectations for performance and results—was very effective

in persuading FMCSA to become more aggressive in carrying out its commercial truck

safety responsibilities. Such oversight could also be effective in focusing attention on

this issue and motivating the agency to fulfill its consumer protection responsibility.

Even seemingly simple actions, such as including a specific reference to household

goods oversight in FMCSA’s authorizing legislation, could encourage the agency to do

more than devote minimal effort to overseeing the household goods moving industry.

Finally, an expansion of the states’ role in the regulation of interstate household goods

carriers has some potential to enhance protection for consumers. One option for an

expanded state role would be to enact legislation authorizing the states to enforce

federal statutes and regulations for interstate household goods carriers. In fact, federal
Page 7 GAO-01-819T Household Goods Moving Industry

law currently allows the states to address abusive business practices that extend beyond

their borders in certain other areas of interstate commerce, such as telemarketing. A

1994 statute required the Federal Trade Commission to adopt rules prohibiting deceptive

and abusive telemarketing practices and authorized the states to take action against

those engaging in patterns or practices that violate these rules. The Commission also

helps to ensure that enforcement is conducted consistently among the states. If the

Congress decides to enact similar legislation for the household goods moving industry,

this action would need to coincide with federal activities designed to improve household

goods oversight. For example, if the states are to enforce federal regulations for the

household goods moving industry, the regulations must address the problems faced by

consumers. However, the Department of Transportation has yet to finalize proposed

regulations to implement the ICC Termination Act and enhance consumer protection.

Another option to expand the states’ role would be to enact legislation to change the

federal statute governing carriers’ liability for loss or damage in interstate shipments—

the Carmack Amendment.3 This statute established a uniform scheme of liability for

loss or damage to interstate shipments, preempting a broad range of state law claims in

order to eliminate the uncertainty associated with conflicting state laws. Such legislation

might explicitly authorize the states to enforce their own consumer protection statutes

against interstate household goods carriers. Such legislation could also authorize

individual consumers to recover damages from interstate household goods carriers

under state law in some cases.

In our March 2001 report, we did not recommend these legislative changes, but instead

recommended that the Department determine whether legislative changes are needed

after it has implemented our other recommendations. We recognize that expanding the

states’ role in the regulation of interstate household goods carriers has the potential to

improve consumer protection. However, the extent to which allowing the states to

enforce federal regulations improves consumer protection depends on individual states’

willingness and resources to assume this responsibility.4

 Just as important, strong

federal leadership is needed to work with and guide the states in their enforcement

activities. This strong leadership has yet to be exhibited by the Department of

Transportation in its oversight of the household goods moving industry.

- - - - -

Mr. Chairman, this concludes our testimony. We would be pleased to answer any

questions you or Members of the Subcommittee may have.

 3

Section 14706 of title 49, U.S. Code.

4

As we reported in March 2001, the Federal Trade Commission estimated that states have either led or

participated in numerous investigations of telemarketing fraud. However, an official of the Commission

also pointed out that states have generally not yet used similar authority under the Federal Fair Credit

Reporting Act and may be allocating resources to other law enforcement priorities.
Page 8 GAO-01-819T Household Goods Moving Industry

Contacts and Acknowledgments

For information about this testimony, please contact JayEtta Z. Hecker at (202) 512-8984

or heckerj@gao.gov. This statement is available on GAO’s home page at

http://www.gao.gov. Individuals making key contributions to this testimony were Helen

Desaulniers, Judy Guilliams-Tapia, Elizabeth McNally, James Ratzenberger, and Sara

Vermillion.

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