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ENHANCING FTC CONSUMER PROTECTION IN

FINANCIAL DEALINGS WITH

TELEMARKETERS AND THE INTERNET

HEARING

BEFORE THE

SUBCOMMITTEE ON COMMERCE, TRADE,

AND CONSUMER PROTECTION

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

OCTOBER 23, 2007

Serial No. 110–72

(

Printed for the use of the Committee on Energy and Commerce

energycommerce.house.gov
COMMITTEE ON ENERGY AND COMMERCE

JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, JR., New Jersey

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

DIANA DEGETTE, Colorado

Vice Chairman

LOIS CAPPS, California

MIKE DOYLE, Pennsylvania

JANE HARMAN, California

TOM ALLEN, Maine

JAN SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

TAMMY BALDWIN, Wisconsin

MIKE ROSS, Arkansas

DARLENE HOOLEY, Oregon

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

G.K. BUTTERFIELD, North Carolina

CHARLIE MELANCON, Louisiana

JOHN BARROW, Georgia

BARON P. HILL, Indiana

JOE BARTON, Texas

Ranking Member

RALPH M. HALL, Texas

J. DENNIS HASTERT, Illinois

FRED UPTON, Michigan

CLIFF STEARNS, Florida

NATHAN DEAL, Georgia

ED WHITFIELD, Kentucky

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

SUE WILKINS MYRICK, North Carolina

JOHN SULLIVAN, Oklahoma

TIM MURPHY, Pennsylvania

MICHAEL C. BURGESS, Texas

MARSHA BLACKBURN, Tennessee

PROFESSIONAL STAFF

DENNIS B. FITZGIBBONS, Chief of Staff

GREGG A. ROTHSCHILD, Chief Counsel

SHARON E. DAVIS, Chief Clerk

DAVID L. CAVICKE, Minority Staff Director

(II)
(III)

SUBCOMMITTEE ON COMMERCE, TRADE, AND CONSUMER PROTECTION

BOBBY L. RUSH, Illinois, Chairman

JAN SCHAKOWSKY, Illinois

Vice Chairman

G.K. BUTTERFIELD, North Carolina

JOHN BARROW, Georgia

BARON P. HILL, Indiana

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

DIANA DEGETTE, Colorado

CHARLES A. GONZALEZ, Texas

MIKE ROSS, Arkansas

DARLENE HOOLEY, Oregon

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

CHARLIE MELANCON, Louisiana

JOHN D. DINGELL, Michigan (ex officio)

CLIFF STEARNS, Florida,

Ranking Member

J. DENNIS HASTERT, Illinois

ED WHITFIELD, Kentucky

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

GEORGE RADANOVICH, California

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

LEE TERRY, Nebraska

SUE WILKINS MYRICK, North Carolina

MICHAEL C. BURGESS, Texas

MARSHA BLACKBURN, Tennessee

JOE BARTON, Texas (ex officio)

(V)

C O N T E N T S

Page

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois,

opening statement ................................................................................................ 1

Hon. Cliff Stearns, a Representative in Congress from the State of Florida,

opening statement ................................................................................................ 3

Hon. Jan Schakowsky, a Representative in Congress from the State of Illinois, opening statement ....................................................................................... 5

Hon. Joe Barton, a Representative in Congress from the State of Texas,

opening statement ................................................................................................ 6

Hon. John Barrow, a Representative in Congress from the State of Georgia,

opening statement ................................................................................................ 6

Hon. Darlene Hooley, a Representative in Congress from the State of Oregon,

opening statement ................................................................................................ 7

Hon. Lee Terry, a Representative in Congress from the State of Nebraska,

opening statement ................................................................................................ 7

Hon. Michael C. Burgess, a Representative in Congress from the State of

Texas, opening statement .................................................................................... 8

Hon. Marsha Blackburn, a Representative in Congress from the State of

Tennessee, opening statement ............................................................................ 10

Hon. Mike Doyle, a Representative in Congress from the State of Pennsylvania, opening statement .................................................................................... 11

Hon. G.K. Butterfield, a Representative in Congress from the State of North

Carolina, prepared statement ............................................................................. 12

WITNESS

Lydia B. Parnes, Director, Bureau of Consumer Protection, Federal Trade

Commission ........................................................................................................... 13

Prepared statement .......................................................................................... 15
(1)

ENHANCING FTC CONSUMER PROTECTION

IN FINANCIAL DEALINGS WITH

TELEMARKETERS AND THE INTERNET

TUESDAY, OCTOBER 23, 2007

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COMMERCE, TRADE,

AND CONSUMER PROTECTION,

COMMITTEE ON ENERGY AND COMMERCE,

Washington, DC.

The subcommittee met, pursuant to call, at 10:10 a.m., in room

2123, Rayburn House Office Building, Hon. Bobby L. Rush (chairman) presiding.

Present: Representatives Barrow, Ross, Hooley, Stearns, Pickering, Radanovich, Pitts, Terry, Burgess, Blackburn, and Barton.

Also present: Representative Doyle.

Staff present: Consuela Washington, Judith Bailey, Christian

Fjeld, Peter Goodloe, Andrew Woelfling, Valerie Baron, Sharon

Davis, Erin Bzymek, Megan Mann, Brian McCullough, William

Carty, and Chad Grant.

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. RUSH. The subcommittee will come to order.

Today we are holding a legislative hearing on three consumer

protection bills involving the Federal Trade Commission. As is the

case with most of the business conducted in this subcommittee,

each bill represents bipartisan cooperation in consultation with the

germane expert regulatory agency, in this case the FTC.

Subsequent to today’s hearing, we will immediately move to

markup all three bills and, I hope, report them favorably to the

subcommittee.

The first bill before us today is H.R. 2601, introduced by my

friend, the distinguished ranking member of the subcommittee, Mr.

Stearns, a bill to extend the authority of the Federal Trade Commission to collect fees, to administer and enforce the provisions relating to the National Do-Not-Call Registry.

In 2003, Congress passed the Do-Not-Call Implementation Act,

which authorized the FTC to establish fees sufficient to implement

the National Do-Not-Call Registry as originally authorized by the

Telecommunications and Consumer Fraud and Abuse Prevention

Act of 1994. I do not think it is hyperbole to say that this may

quite possibly be one of the most popular laws and Government initiatives in recent history. Consumers have registered more than
2

146 million telephone numbers since the registry began in operation in 2003.

The FTC’s authority to annually establish the appropriate level

of fees to charge telemarketers for access to the registry expires in

2007, and Mr. Stearns’ bill extends that authority through fiscal

year 2012.

No doubt, if Members of Congress wish to avoid the wrath of millions of angry constituents who are being called by telemarketers,

it is in our best interest to facilitate the continuing operation of the

Do-Not-Call Registry. We are not dumb. We do know what we are

doing, and we do not want to have the anger and angst of all our

constituents breathing down our neck.

Second, the subcommittee will deliberate on H.R. 3461, the Safeguarding America’s Families by Enhancing and Reorganizing New

and Efficient Technologies Act of 2007, or the SAFER Net Act, introduced by my friend and colleague from Illinois, Congresswoman

Melissa Bean.

The bill directs the FTC to carry out a nationwide public awareness campaign about Internet safety and directs the Commission to

annually report to Congress on its activity to promote Internet

safety. In addition, the bill authorizes $10 million for 1 year to

carry out this public awareness campaign.

Finally, the last bill the subcommittee will take up is H.R. 3526,

a bill to include all banking agencies within the existing regulatory

authority under the Federal Trade Commission Act with respect to

depository institutions. Chairman Barney Frank of the Financial

Services Committee introduced the bill, and he has asked the Energy and Commerce Committee to expedite the exercise of its jurisdiction in order to facilitate its consideration on the House floor’s

suspension calendar. Today’s hearing, followed by an immediate

markup, is the first step in this expedited process.

Under section 5 of the FTC Act, banks are exempted from the

Commission’s broad enforcement authority to prevent unfair methods of competition and deceptive financial practices, and under section 18 of the Act it is the Federal Reserve that has the sole authority to write consumer protection bills affecting depository institutions.

Unfortunately, the Fed has been, quite frankly, asleep at the

switch and negligent in its duties. Despite a joint letter from Chairman Dingell and Chairman Frank on May 11th, complaining about

the lack of consumer protection rules, Federal regulators continue

to lack even a strategy for better Federal protection of financial

consumers. In response, H.R. 3526 will allow both the Comptroller

of the Currency and the FDIC to write consumer protection rules

governing depository institutions in addition to the Federal Reserve’s existing authority.

The Financial Services Committee already held 2 days of hearings in July on consumer protection in the financial services industry, and it is my intent to hold further hearings on this matter next

year in addition to the hearings we are conducting today.

I fully support Chairman Frank’s bill, but as I have said, the

lack of consumer protection at depository and other financial institutions is a problem, and I hope to effect closer scrutiny by Congress and this committee during the next session.
3

Lastly, I want to thank our witness today, Ms. Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection, who is no

stranger to this subcommittee, appearing before us today, and I

look forward to hearing her opinions and insights on these three

consumer protection bills.

With that, I yield back the balance of my time, and I recognize

the ranking member, Mr. Stearns of Florida.

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA

Mr. STEARNS. Good morning and thank you, Mr. Chairman.

I also want to thank Ms. Parnes for being here this morning.

These three bills, my colleagues, fall under our jurisdiction. The

Federal Trade Commission is under our jurisdiction as well as the

Consumer Protection Agency.

Now, the first bill reauthorizes, as the chairman mentioned, one

of the most popular bills that we have ever enacted, the Do-NotCall Act. I would stipulate that, if we could pass one of these bills

every other month, the approval of Congress, Mr. Chairman, would

rise significantly. So that is how popular this bill has been.

It has been clear that since the last inception that many Americans like having a means to make their home phone numbers free

from telemarketing phone calls. The legislation I introduced with

yourself, Chairman Dingell and Ranking Member Barton reauthorizes the Do-Not-Call Act. I have an amendment, Mr. Chairman,

that I plan to offer, and will provide more detail on it when we go

to markup.

The Do-Not-Call Registry implemented a list maintained by the

FTC containing home phone numbers of consumers voluntarily

placed on the list. Telemarketers then paid to access the list to

know which numbers they cannot call under the Do-Not-Call Act.

This is a straightforward program, and has benefited both the consumers and the telemarketers. The telemarketers, in this case, do

not waste time calling households that are not interested in receiving unsolicited business offers over the phone, and consumers have

a means to stop calls they do not want. I have heard some arguments for improvement to the list to make it more effective and to

keep it current. I welcome our Director of the Bureau of Consumer

Affairs at the FTC, and look forward to discussing the suggestions

that we have with her.

My colleagues and Mr. Chairman, the other two pieces of legislation that we will discuss today are H.R. 3461, the SAFER Net bill,

sponsored by our colleague from the Financial Services Committee,

Ms. Bean, and H.R. 3526, sponsored by another of our Financial

Services’ colleagues, in fact, the chairman of the Financial Services,

Mr. Frank, from Massachusetts, which addresses consumer protection regulation for financial institutions.

The first one, H.R. 3461, I support the intent of creating a wellinformed consumer-base by raising awareness of the problems and

dangers that await uninformed users on the Internet. A global communication network that permits anonymity, fake identities and

criminal enterprises to exist and to gain access to anyone at any

time is obviously a threat to everyone and anyone who interacts on

the Internet. We should take this very seriously. We have seen
4

through our work on spyware by Mrs. Bono and Mr. Towns, that

many criminals have Web sites disguised to hide their intent so

they can take over a user’s computer or can load malicious software

on it to steal their identities.

Of course, the dangers that are inherent on the Internet do not

stop with dangers to consumers’ identities. The Internet is a serious danger for our young people if precautions are not taken. We

learned through this consumer investigation and through this committee’s investigation into online child pornography that the safety

of one’s home can be invaded through the Internet by predators

using the tools to access our kids even when we think they are safe

under the roofs of our very own homes. Because of this danger, parental supervision is necessary, and parents must be vigilant in

educating and in communicating with their children about maintaining their guard. We do not require a license to surf the Internet

nor should we. Whether a parent permits their child to access the

Internet is their choice, but parents should be aware of the dangers

of the Internet to their children and the tools that are available to

combat these threats.

I look forward to hearing more from the FTC about their efforts

to help educate the consumers on this front.

Finally, we are here to discuss H.R. 3526, a bill to include the

Federal financial regulators within the authority of the FTC. While

banks and most financial institutions are not within this committee’s jurisdiction, direct jurisdiction, consumer protection is. I agree

with the premise that banks and other financial institutions should

be penalized for violating consumer trust if they engage in unfair,

deceptive acts. We are watching the housing boom quickly deflate

for many reasons, and there is much blame, obviously, to go

around.

Among the stories coming out of the subsequent spike in foreclosures are examples of people trying unsuccessfully to speculate

on homes in the hopes of a quick profit as well as many who

bought homes they just could not afford. Well, I believe everyone

has to take responsibility for their personal finances. I welcome the

opportunity to discuss what regulations currently exist to protect

these consumers at the Federal level and what regulations exist at

the State level where many of the nondepository mortgage brokers

are regulated outside the reach of the Federal banking regulators.

Just on a closing note, Mr. Chairman, and perhaps as a note of

caution, we are moving on these last two bills very quickly, perhaps in a couple of days to the full committee, and it appears to

me it might be a forced march to some people who want to have

amendments. We have not had a chance to discuss them. I would

suggest that we tell Mr. Dingell that perhaps we might need a little more time between a markup and going to full committee if

there are others who want to contribute.

With that caution of mine, I am very pleased that we are having

this hearing, and I thank you for the time.

Mr. RUSH. The Chair thanks the gentleman from Florida and

now recognizes the gentlelady from Illinois, Ms. Schakowsky, for 5

minutes of opening statements.
5

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

Ms. SCHAKOWSKY. Thank you, Chairman Rush and Ranking

Member Stearns.

It would be hard to overstate just how important today’s hearing

is given that the issues that we are looking at today affect the lives

of millions of Americans across the country. Politicians sometimes

talk about kitchen table politics, and we should all remember that

the National Do-Not-Call Registry has 145 million telephone numbers representing millions of Americans who do not want to be disturbed by telemarketers when they are at their kitchen tables, eating dinner.

Likewise, we have all heard the disturbing stories of predators

using the Internet to lure children away from their homes, and as

a grandmother of four, I am proud to be a cosponsor of H.R. 3461,

the Safeguarding America’s Families by Enhancing and Reorganizing New and Efficient Technologies Act of 2007, and the clever acronym, the SAFER Net Act. This legislation will, among other

things, promote safe online activity among children, something that

is so crucial as more and more of our children at earlier and earlier

ages go online.

Finally, we are all distressed by the prevalent stories about predatory lending, subprime mortgages, hidden outlandish fees, and

other deceptive and unfair practices that financial institutions can

use to take advantage of consumers, especially with low and marginal incomes, who simply do not have access to the information

they need to make informed decisions. The negative consequences

to our entire economy are growing more obvious, and I am, therefore, glad that the subcommittee is acting today on Chairman

Frank’s legislation to include banking agencies under the Federal

Trade Commission Act to ensure that depository institutions are

regulated to prevent these unfair and deceptive financial practices

from continuing.

I would like to welcome and look forward to hearing from our

witness today, Lydia Parnes, the Director of the Bureau of Consumer Protection at the Federal Trade Commission.

I would like to underscore that I stand ready to work with my

colleagues and with the Commission to ensure that you have the

resources to fulfill your mission. I was particularly pleased to read

in your testimony that the FTC has committed itself not to purge

any telephone numbers from the Do-Not-Call Registry, pending any

Congressional action, and I look forward to working with my colleagues, especially Representative Doyle, to ensure that, once

someone registers his phone number with the registry, it stays on

that list.

I thank you, Mr. Chairman, and I yield back my time.

Mr. RUSH. The Chair thanks the gentlelady.

The Chair now recognizes the ranking member of the full committee, the gentleman from Texas, Mr. Barton, for 5 minutes of

opening statements.

OPENING STATEMENT OF HON. JOE BARTON, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BARTON. Thank you, Mr. Chairman.
6

I am glad we are having a legislative hearing on these three

bills. They all seem to be bills that address a need. It is a little

unusual to do three at one time, but I guess people in Chicago are

just more efficient, so I look forward to hearing from the witnesses

and in working together on follow-up in terms of moving the legislation.

Mr. RUSH. The Chair thanks the ranking member.

The Chair now recognizes the gentleman from Georgia, Mr. Barrow, for 5 minutes.

OPENING STATEMENT OF HON. JOHN BARROW, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA

Mr. BARROW. Thank you, Mr. Chairman. I want to thank you

and the ranking member for your expeditious action on these three

bills, and I have a special word on the subject of H.R. 3526, the

financial services consumer protection legislation, the spectacle of

a Federal regulator that has the monopoly on regulatory authority

basically objecting to the States as they move into the void created

by the Feds doing nothing. Basically, you cannot regulate in this

area. Only we can regulate in this area, and then not regulate in

that area or protecting anybody brings to mind Aesop’s fable of the

dog in the manger. You know, he is the fellow who made his bed

in the straw, and in the manger. He would snap and snarl at the

animals that could eat the hay, but he could not eat it himself. But

he was going to make sure nobody else could enjoy it though.

Coming right from where I come from down in bird hunting

country, it brings to mind a more homely metaphor. It is, you

know, working with a Federal agency that does not know its authority, does not care about its authority, is not going to exercise

its authority. It is a little bit like going bird hunting and having

to tote the dog.

Well, the object of this legislation about a couple of other Federal

regulators with current responsibility to move, to get into the act

and to see what they can do, I think, is a message to the Federal

Reserve. The message is very simple: Lead, follow or get out of the

way. We need some protection in this area, and if you are going

to stop those who are trying to do the right thing by the consumers,

we are going to try and open up the playing field to some folks who

will.

With that, I yield back the balance of my time, but I thank you

for allowing us to move quickly on this legislation. I yield back.

Mr. RUSH. The Chair thanks the gentleman.

The Chair now recognizes the gentleman from Pennsylvania, Mr.

Pitts, for 5 minutes.

Mr. PITTS. Thank you, Mr. Chairman.

I would just like to say thank you for holding this hearing on this

important legislation to discuss these important issues.

As a cosponsor of H.R. 2601, I strongly believe we must protect

the privacy of our constituents, and I appreciate your urgency in

addressing these issues.

I yield back.

Mr. RUSH. The Chair thanks the gentleman.

Now the Chair recognizes the gentlelady from Oregon, Ms.

Hooley, for 5 minutes.
7

OPENING STATEMENT OF HON. DARLENE HOOLEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON

Ms. HOOLEY. Thank you, Mr. Chairman, for holding this important hearing, and thank you, Ms. Parnes, for being here today and

for providing your testimony.

The Do-Not-Call program, Internet safety and giving select financial regulatory agencies rulemaking authority are three timely and

important issues that I am glad we are taking up today.

The National Do-Not-Call Registry has been very successful. The

registry now includes over 145 million telephone numbers and has

prevented unwanted telemarketing calls to the grateful millions

who have signed up for it. Reauthorizing the Do-Not-Call Implementation Act is the right thing to do and will ensure that millions

of consumers who have signed up for the registry will remain protected from unwanted calls.

Directing and funding the FTC to implement a national education campaign on Internet safety is also important. H.R. 3461

will expand the scope in educating computer users of basic but important computer security. The FTC is currently working to educate consumers with their OnGuardOnline program, and this bill

will help immensely in those efforts by giving them the additional

funds they need.

Lastly, expanding the number of bank regulatory agencies that

may issue rules will strengthen Federal level consumer protections

and enforcement. The two primary changes proposed in H.R. 3526

will strengthen Federal level consumer protections by allowing

agencies to work together in developing meaningful strategies to

improve consumer protections.

I support these three bipartisan bills and look forward to their

passage on the House floor.

Thank you, Mr. Chairman.

Mr. RUSH. The Chair thanks the gentlelady.

The Chair now recognizes the gentleman from Nebraska, Mr.

Terry, for 5 minutes for an opening statement.

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

Mr. TERRY. Thank you, Mr. Chairman.

I think this could, actually, be a more interesting discussion than

some anticipate, especially on 3461 and 3526.

In regard to the Do-Not-Call list, let me admit that I am one of

the Do-Not-Call eight—those are the eight people who voted

against this program in the first place—and I did so on philosophical grounds of creating a new Federal program where the market,

through devices, was already blocking phone calls or, through caller ID, you have an option of not answering when it comes up ‘‘out

of area’’ or ‘‘private.’’ I have an unlisted number, and I just dial

star 82 before I call several of my friends so it will be unblocked

and so they will know who is calling them. I still feel that way, but

as my colleagues have all professed, rightfully so, it is now ingrained into the consumer’s mind, and so the issue then is whether

there are ways to improve the efficiencies of this program, and

those are some of the issues I have dealt with, which is in the timing of the information and the costs of having to implement that.
8

In Omaha, we are the telemarketing capital of the world. The

shift has already occurred. The small mom and pop organizations

just could not keep up, so the Wests, the Cytels, the biggies, that

can keep up with the monthly requirements now have whatever

outbound telemarketing is left, of which there is very little.

So, in H.R. 3526, let me just say before I yield back that I respect

and appreciate the arguments by my friends in criticizing the Feds

for not implementing some consumer protections. Let me just say

that, as I understand the Fed, the philosophy of the Fed under

both Greenspan and Bernanke has been to not regulate financial

institutions. They have had a hands-off philosophy, so there is a

difference of opinion on the impact of regulations as opposed to just

being remiss. Please keep in mind that the focus of the Fed is monetary policy, so maybe there should be a discussion of whether or

not they should have the consumer protection rights. So I will

stand up or at least defend those who I do not even know, but I

do appreciate their less regulation stance in the past.

With that, I yield back.

Mr. RUSH. The Chair thanks the gentleman.

The Chair now recognizes the gentleman from Texas, Mr. Burgess, for 5 minutes of opening statements.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BURGESS. Thank you, Mr. Chairman. I appreciate the consideration, and I want to thank you for bringing these bills to us

today.

We are here to discuss three important pieces of legislation that

concern the Federal Trade Commission. I must admit that is not

my favorite Federal agency, but I am glad to be here doing this

today.

Along with Chairman Dingell and Chairman Rush and Ranking

Member Barton, I am an original cosponsor of the bill originally introduced by Ranking Member Stearns, H.R. 2601. This bill will extend the Federal Trade Commission’s authority to collect fees and

to administer and to enforce the Do-Not-Call Registry. While I

firmly believe in a free market society and that businesses should

be able to formulate their own business practices and plans, I also

firmly believe that Americans have a right to privacy.

As Director Lydia Parnes so eloquently stated in her written testimony, the Do-Not-Call Registry helps to restore the sanctity of

the American dinner hour. People should be able to have the option

of whether or not they want to receive phone calls from telemarketers in the privacy of their own homes. I should know, parenthetically, that politicians are excluded, and thanks to the DoNot-Call Registry, consumers can sign up and are afforded that decision. In fact, since the creation of the registry, 146 million telephone numbers have been registered. However, the authority for

the Do-Not-Call Registry was only authorized for 5 years time;

therefore, it is imperative that we act swiftly to pass this important

legislation and to further extend the protection and privacy for

Americans.

Two other bills are before us today, H.R. 3526, a bill to include

all banking agencies within the existing regulatory authority under
9

the Federal Trade Commission Act with respect to depository institutions. In a time of widespread allegation regarding unfair and deceptive financial practices in the field of mortgage lending, I agree

with some of my colleagues that banking agencies should have this

authority, and I must admit that I was a little surprised to learn

that they did not have this authority. I, actually, look forward to

discussing that with Director Parnes today.

While I do realize that the House Financial Services Committee

has held hearings on this issue, I do support Chairman Rush’s intent of holding a more extensive hearing on this matter in the near

future.

Finally, today we will be discussing H.R. 3461, the SAFER Net

Act. Last year, on our Oversight Investigations Subcommittee. We

had extensive investigation into one of the most disturbing topics,

I think, I have ever encountered in my life—child exploitation over

the Internet—and I will never forget the story of Masha Allen, who

sat right here at our witness table. She was a brave, little girl who

told about the evils and the exploitations encountered at both the

hands of here adoptive father and the Internet. Her story was

heartbreaking, and we must never let another child go through the

same type of horror. It is crucial for the safety of our children for

all of us to know about these evils so we can help end this abuse

of a dangerous practice. Pedophiles are our enemy—they are our

biggest enemy—but so also is lack of information, and I support the

intent of this legislation.

Mr. Chairman, I want to thank you for holding this hearing and

for responding in such a bipartisan manner. This committee does

do its best work when we function in a bipartisan manner. Last

week and, really, in the last 2 weeks, we have seen Congress at

its worst, and unfortunately, because of the political impasse we

have been unable to pass sensible reauthorization of the State Children’s Health Insurance Program.

Mr. Chairman, this committee has some of the greatest intellectual firepower of any committee in the free world, and when we do

not respect the committee process, when we take a bill through like

we took the SCHIP bill through, that violates the whole sanctity

of this committee. Mr. Chairman, I hope you will speak with your

leadership and will let us get back to the table to renegotiate on

the area of children’s health insurance because it is too important

a program to be left only to the political consideration.

With that, Mr. Chairman, I will yield back the balance of my

time.

Mr. RUSH. The Chair thanks the gentleman for his remarks.

Now the Chair recognizes the gentlelady from Tennessee, Mrs.

Blackburn, for 5 minutes of opening statements.

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

Mrs. BLACKBURN. Thank you, Mr. Chairman.

I want to thank you for holding the hearing today and want to

thank you for the bipartisan work that we have had on these bills.

Ms. Parnes, I want to welcome you. I want to thank you for your

very well-done and very well-presented testimony. We are looking
10

forward to hearing from you after we return from votes, so we do

welcome you.

I am pleased that we are taking up the bills. I am particularly

interested, Mr. Chairman, in the SAFER Act. I find this to be imperative, and for the sake of brevity, I am going to submit my full

statement for the record. I do want to make a couple of comments

primarily about the SAFER Act.

We all know that there is a plethora of new technologies and new

platforms that are available for our constituents and for their families, and we are familiar that many individuals who do not seek to

do good are availing themselves of these platforms, and that is of

concern to us for the sake of our children and for our families, and

we have all seen the work on the fake check scam that is out there

and the Web site that is now attached to that. We have heard

about it.

Mr. Chairman, I think I would like to submit this article for the

record if I may. It is in today’s Washington Post. It is about some

of the Internet security ads that are being run.

Ms. Parnes, I will talk with you as we get into Q&A about that.

It is about some of the work that is there to help protect our families and our children, and I was particularly touched, and I think

this is something that we have to pay very close attention to. People are very concerned about how to get this out of their homes and

how to keep it from inside the four walls of their homes. Mr. Chairman, I do thank you for the work on this bill that will help address

that. Ms. Parnes, I am looking forward to working with you more

about that.

I yield back the balance of my time.

Mr. RUSH. Does the gentlelady seek unanimous consent to enter

her documents into the record?

Mrs. BLACKBURN. Mr. Chairman, I do. I ask unanimous consent

to enter into the record the Washington Post article today.

Mr. RUSH. Without objection, so ordered.

Mr. DOYLE. Mr. Chairman.

Mr. RUSH. The Chair understands that there is a vote going on

on the floor. We have got 4 minutes before the vote is concluded.

The Chair will recess the subcommittee, and we will return for the

participation of Mr. Doyle, the full participation of Mr. Doyle, in

these hearings.

[Recess.]

Mr. RUSH. The hearing will come to order again. The Chair seeks

unanimous consent at this moment to allow the gentleman from

Pennsylvania, Mr. Doyle, to participate fully in this subcommittee’s

hearing.

Without objection, the Chair now recognizes Mr. Doyle for 5 minutes of opening statements.

OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF PENNSYLVANIA

Mr. DOYLE. Yes. Mr. Chairman, thank you very much and thank

you to Ranking Member Stearns for your unanimous consent. I

really appreciate your letting me speak today. My friend and colleague, Mr. Chip Pickering, with whom I have introduced H.R.

3541, I thought initially would be unable to join us. He is a mem-
11

ber of the committee, and I do understand that he is finally on the

ground and making his way over here. And hopefully he will be

here in time to participate in the hearing and markup. But I appreciate your allowing me to ask a few questions and make a brief

opening unanimous consent.

Mr. Chairman, as you have said, the Do-Not-Call list is one of

the most popular consumer protections ever created. It is so popular frankly because it works. It is easy to sign up your number and

stop telemarketers from calling your home day and night. That is

why after all the success of the program many of us in Congress

were surprised to learn that the 132 million numbers on the list

expire after 5 years and that the first 52 million numbers will expire before September 30, 2008.

Now, the people who own those numbers, Mr. Chairman, will

first need to be aware that their numbers expire, and that is no

easy task to notify these 52 million people, and then they have to

resubmit their numbers.

So picture millions of numbers expiring right around Labor Day

next year, and that is not only the time the 2008 election will heat

up, but it is also in the middle of the digital television transition.

That will minimize the television time available to broadcast the

message that consumers need to sign up again.

Mr. Chairman, no matter how many articles are written and stories broadcast, I suspect that millions won’t know that they need

to act to stay on the Do-Not-Call list. That is why I am glad to be

joined by my friend and colleague, Chip Pickering, and dozens of

cosponsors on H.R. 3541, which will make the numbers on the DoNot-Call list permanent.

I have been working closely with committee staff on both sides

of the aisle, as well as the FTC, and I am grateful for their hard

work on seeing that this language is enacted at the end of the day.

I am also proud to tell you that the bill has the complete support

of the AARP, Consumers Union and Consumers Federation of

America. I am hopeful that negotiations with other interested parties prove fruitful and the bill will move quickly.

Mr. Chairman, once you go through that process of calling up or

going on-line and putting your number on the Do-Not-Call list, saying I do not wish to hear from telemarketers, you shouldn’t have

to re-up every 5 years. I think once is plenty.

I think this is a good improvement to the law. I thank you for

letting me participate in this hearing and I yield back my time.

Mr. RUSH. The Chair thanks the gentleman from Pennsylvania.

Other statements for the record will be accepted at this time.

[The prepared statement of Mr. Butterfield follows:]

PREPARED STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF NORTH CAROLINA

Thank you Chairman Rush and Ranking Member Stearns for holding this important hearing on ‘‘Enhancing FTC Consumer Protection in Financial Dealings with

Telemarketers, and on the Internet.’’ I commend this committee’s leadership in assembling this timely hearing.

I would like to welcome Lydia Parnes who serves as Director of the Bureau of

Consumer Protection at the Federal Trade Commission. I look forward to her testimony and appreciate the work she and the Commission are doing in order to safeguard Americans from predatory consumer practices.
12

The National Do Not Call registry has been widely successful and I was encouraged to learn that over 90 percent of American adults had heard of the registry and

that over 75 percent had signed up for the free service. I am also pleased to learn

that the enforcement mechanism has not gone overlooked. I commend the Commission in initiating nearly 30 cases where there have been near $9 million in damages

awarded.

The FTC has also stepped up efforts to educate Americans about online computer

safety. They have established a Web site called onguardonline.gov which includes

tips, articles, quizzes, and videos which aim to educate consumers about spam and

scam practices. Over 4 million people have visited the Web site in the past 2 years.

I thank Ms. Parnes and her staff as well as the FTC as a whole for the work they

do for the betterment of all Americans.

We will also have the opportunity to mark up three important legislative items

which will expand the authority of the Federal Trade Commission. They seek to (1)

protect consumers against unfair and deceptive financial practices, (2) continue to

implement the National Do Not Call Registry, and (3) continue to educate Americans about the potential dangers online. I support the three bills we are considering

today and look forward to this subcommittee discharging them favorably.

Chairman Rush, I thank you for your work on this issue and look forward to

working with you and the other members of the committee as these issues progress.

I yield back the balance of my time.

Mr. RUSH. And now the Chair welcomes the witness for this

hearing, Ms. Lydia Parnes, who is the Director of the Bureau of

Consumer Protection for the U.S. Federal Trade Commission. Ms.

Parnes will discuss ongoing efforts by the Federal Trade Commission under section 5 of the Federal Trade Commission Act and

other applicable laws to protect consumers with reference to the

three bills that we will consider today.

Again, Ms. Parnes, we welcome you to this committee hearing

and we recognize you now for 5 minutes of opening statements.

STATEMENT OF LYDIA B. PARNES, DIRECTOR, BUREAU OF

CONSUMER PROTECTION, FEDERAL TRADE COMMISSION

Ms. PARNES. Thank you, Chairman Rush and Ranking Member

Stearns. I appreciate the opportunity to appear before you today to

present the Commission’s view on these three bills.

As Congress considers legislation to reauthorize the Do-Not-Call

Registry and also to make consumers’ Do-Not-Call registrations

permanent, let me assure the subcommittee that the Commission’s

support for Do-Not-Call has not wavered one bit since 2002, when

the Do-Not-Call list was first proposed. We will implement any legislative measures to strengthen consumers’ Do-Not-Call rights with

the same skill and dedication that have made Do-Not-Call such an

unqualified success for the American public.

The first bill I understand you are considering on the issue is

H.R. 2601, which would reauthorize the Do-Not-Call Implementation Act of 2003. The FTC appreciates Ranking Member Stearns’

and Chairman Rush’s introduction of this bill. Reauthorizing the

DNCIA demonstrates Congress’ continued commitment to protecting consumers from unwanted intrusions into their homes.

The Commissions does believe that the bill can be strengthened

by statutorily setting the fees charged to telemarketers accessing

the registry at an amount sufficient to enable the Commission to

maintain the registry and enforce the telemarketing sales rules. A

congressional amendment setting the fee would provide the Commission with a stable funding source for its telemarketing rule en-
13

forcement activities. A stable fee structure also would benefit telemarketers, sellers and service providers who access the registry.

Congress also is considering H.R. 3541, which would make DoNot-Call registration permanent. In the 2003 rulemaking that establishes the registry, the Commission believed that a 5-year reregistration mechanism, coupled with periodic purging was necessary to maintain the accuracy of the list. Since 2003, several

changes have taken place, including the increased popularity of

telephone number portability, more clarity in the legal landscape

and an explosion of public support for the registry.

As a result of these changes, the Commission now commits that

it will not drop any telephone numbers from the registry based on

the 5-year expiration period, pending final congressional or agency

action on whether to make registration permanent. In any event,

the Commission will continue its robust efforts to maintain the registry’s accuracy and ensure the continued success of the Do-NotCall program.

The second bill on which the Commission is submitting its views

is H.R. 3461, which would direct the Commission to implement a

new national education campaign on Internet safety. As you know,

the Commission has extensive expertise in educating consumers

and businesses on a variety of issues, including Internet safety. We

appreciate the sponsors of H.R. 3461 who have the confidence in

the FTC to entrust it with launching a new educational campaign

and we support the legislation.

Finally, H.R. 3526 would allow two additional banking agencies,

the FDIC and the OCC, the power to issue rules under section 18

of the Federal Trade Commission Act with respect to the depository

institutions they regulate. They would have this authority along

with the existing authority that the Federal Reserve Board, the Office of Thrift Supervision, and the National Credit Union Administration have under section 18.

The FTC supports amending section 18 in this manner, but recommends two modifications. First, these agencies should be required to consult with the Commission in any rulemaking they undertake under section 18 of the FTC Act, as the FTC is the expert

agency responsible for ensuring appropriate and consistent interpretation of the Federal Trade Commission Act.

Second, the FTC suggests that the bill be modified so that whenever the Federal banking agencies and the NCUA commence rulemaking under the FTC Act for the entities they regulate the Commission has the option to promulgate consistent and comparable

rules for the entities it regulates.

The bill also should state that in such rulemaking the FTC

should be able to use the relatively streamlined and expedited notice and comment procedures of the APA that are used by the other

agencies, rather than the more lengthy rulemaking procedures set

forth in section 18 of the FTC Act.

The Commission has proposed language that I have with me

here that would make these changes, and we look forward to working with the subcommittee on this issue, as well as the other legislative initiatives being considered at this hearing.

Thank you very much, and I would be pleased to answer any

questions that you have.
14

[The prepared statement of Ms. Parnes follows:]
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Mr. RUSH. The Chair thanks the witness and the Chair recognizes himself for 5 minutes of questioning.

Ms. Parnes, the FTC has been very active in protecting consumers from unfair and deceptive acts and practices. In your opinion,

what is the track record of the Federal Reserve Board and the

other bank regulators in likewise protecting consumers?

Ms. PARNES. Mr. Chairman, it is really very difficult for me to

assess the track record of the bank regulatory agencies in this

area. They are addressing issues that are very, very different from

the kinds of institutions that the FTC deals with.

As you know, the institutions that they regulate, they are dealing with both consumer issues and also safety and soundness

issues, and I think it is just very hard for me to express a view

on that.

Mr. RUSH. I can appreciate your remarks. Please provide details

how the FTC’s usual rulemaking procedures under section 18 are

more cumbersome than APA rulemaking procedures.

Do I understand correctly that when the FTC coordinated with

the banking agencies on the Gramm-Leach-Bliley rulemaking that

it could do a more streamlined, APA-like rulemaking?

Ms. PARNES. Yes, sir, in fact Congress has given the Commission

authority under Gramm-Leach-Bliley, under the FACT Act, where

we are working closely with the bank regulatory agencies. The telemarketing sales rule, we were given APA rulemaking authority.

The CAN-SPAM Act. There are any number of areas where we

have been given specific authority to use APA rulemaking. It is a

much more expedited process.

Magnuson Moss rulemaking, as it is called, under section 18 has

many, many more procedural hoops that the Commission needs to

comply with.

Mr. RUSH. Ms. Parnes, your testimony as it relates to the DoNot-Call Registry states that the DNC Registry contains 145 million telephone numbers. Now what percentage of existing residential phone numbers in the U.S. is that, approximately what percentage?

Ms. PARNES. I don’t believe that we have that information. We

simply take telephone numbers. We don’t screen those numbers, so

we just know how many telephone numbers are on the registry.

Mr. RUSH. Are you familiar with the Harris poll survey that

shows widespread consumer satisfaction with the DNC Registry

that dates back to January 2006; are you familiar with that?

Ms. PARNES. We are extremely familiar with that survey and

very proud.

Mr. RUSH. Very proud.

Ms. PARNES. Of how successful the program has been.

Mr. RUSH. Does the FTC have any plans to update that survey

in the future?

Ms. PARNES. The Harris survey was not an FTC-initiated survey,

it was a survey that Harris Interactive did on its own and at this

moment we don’t have plans to update the survey. We think right

now there is widespread understanding of Do-Not-Call and widespread consumer satisfaction. And really when you consider the

number of consumers on the registry, there are comparatively very

few complaints about the way in which it is working.
33

Mr. RUSH. We are up against a deadline in terms of the reauthorization of the DNC. Is it correct that the FTC’s new position

is that it will not drop any phone numbers at the end of the 5 years

on the registry while you wait for Congress to act to make the registry permanent? At this point would you caution that consumers

not be concerned or worried about re-registering?

Ms. PARNES. Absolutely, Mr. Chairman. The Commission will not

drop any numbers off of the registry pending final action by Congress or by the agency itself on whether to make the registration

permanent.

Mr. RUSH. Lastly, I have about 25 seconds remaining in my time,

can you be more specific about the Internet safety programs that

the Federal Trade Commission could launch with the added funds

proposed by H.R. 3461?

Ms. PARNES. Right now the Commission has several really excellent consumer education campaigns and business education campaigns as well on Internet issues. OnGuardOnline is the number

of one of our key Internet safety programs.

There are a couple of things that we would do if this bill is enacted. First of all, there are issues that you mentioned, child safety,

exploiting children, child pornography that don’t come within the

FTC’s jurisdiction and they are not issues that we necessarily have

the best expertise on. And what we would do at the outset is reach

out to the partners that we have already worked with to get the

best information on our Web sites. That is No. 1.

The second thing that we would do that we have had a lot of success with is creating what we call a tool kit. We have done this in

the identity theft area where we are basically putting together a

consumer or a business education campaign in a package. You can

ask for this package if you are a member of a civic group, if you

have a business, and you can put on your own consumer education

program essentially. It has PowerPoint presentations, speech, consumer education material that can be distributed. So it is really a

way of putting together a program and then pushing it out very effectively to what we hope are millions of consumers.

Mr. RUSH. My time is up.

The Chair recognizes the gentleman from Florida, Mr. Stearns

for 5 minutes.

Mr. STEARNS. Thank you, Mr. Chairman.

Ms. Parnes, I never got a solicitation over my cell phone. Is it

illegal to solicit over the cell phone?

Ms. PARNES. It is——

Mr. STEARNS. Just yes or no.

Ms. PARNES. Oh, that is so hard.

Mr. STEARNS. Is it yes or no?

Ms. PARNES. It is not illegal specifically to solicit over the cell

phone, but it is illegal to use a predictive dialer.

Mr. STEARNS. Computerized?

Ms. PARNES. Yes.

Mr. STEARNS. I think the FTC advertises that you can put your

cell phone in the list.

Ms. PARNES. No, we don’t. We say that you don’t have to because

you are not likely to get telemarketing calls, but that you can put

your cell phone number on the registry.
34

Mr. STEARNS. So you tell them they can if they want, but cell

phones generally, if you do it through a computerized telemarketing, it is illegal.

Ms. PARNES. Under a FCC rule.

Mr. STEARNS. Does the FCC check the Do-Not-Call Registry for

invalid numbers on a regular basis?

Ms. PARNES. We purge the registry on a monthly basis, a contractor that we work with——

Mr. STEARNS. A subcontractor goes out and you say run this

against a database and see if there are invalid numbers. How

about you check numbers reassigned, you have Joe Smith and suddenly you find out it is not Joe Smith anymore, it is John Doe?

Ms. PARNES. We purge numbers that have been disconnected and

reassigned. Our contractor gets this information from what they

tell us are all of the Local Exchange Carriers throughout the country, and when numbers are disconnected and then reassigned they

are purged from the registry.

Mr. STEARNS. Mr. Doyle has talked about his bill. The question

I have is if you have to keep these numbers indefinitely, over a period of years, is it possible that almost every phone number 20

years, 30 years, every phone number will be in there? Well, let me

ask you how you feel about that, that when John Doe puts his

number in it remains permanently, in perpetuity, how do you feel

about that?

Ms. PARNES. Well, the accuracy of the registry is something that

has been key for the Commission since it enacted the registry. The

5-year re-registration requirement, as I mentioned, along with

purging were the two mechanisms that the Commission relied on

to ensure accuracy. And we will be vigilant working with our contractor to make sure that disconnected and——

Mr. STEARNS. Do you think you need legislation? Do you think

you need a stipulation that John Doe, once he registers with you,

remains there in definitely, forever?

Ms. PARNES. Well, I think that we would need either legislation

or some agency act——

Mr. STEARNS. Do you think it is a good idea?

Ms. PARNES. Registry permanent?

Mr. STEARNS. As it stands now it is every 5 years?

Ms. PARNES. Every 5 years.

Mr. STEARNS. So every 5 years you would notify John Doe or

John Doe’s number would be gone and he or she would have to reenter it, right.

Ms. PARNES. We don’t notify John Doe specifically. What we

would do more generally is tell the public that the 5-year re-registration——

Mr. STEARNS. But John Doe and his family don’t keep track, they

don’t know. The first time they would know is if after 5 years they

would start to get solicited calls and they would call you again. But

I am just trying to see, wouldn’t this be a pretty big database after

20 years if all the numbers are just kept there? Is there another

way to do this other than making a permanent John Doe forever?

Ms. PARNES. Well, I think that—kind of three things. First, John

Doe can always unregister his telephone number.

Mr. STEARNS. But he’s not going to do that probably, OK.
35

Ms. PARNES. The second thing is that the list is pretty big now.

Mr. STEARNS. It is 145 million.

Ms. PARNES. That is right. I don’t know that we expected that

when we first rolled this out.

Mr. STEARNS. No, no.

Ms. PARNES. We will work to make this manageable and continue to purge the list.

The third thing is we will be happy to work with the subcommittee to address any concerns about accuracy.

Mr. STEARNS. So do you think it is necessary or wise to pass legislation that John Doe’s name be put in there in perpetuity, forever? Just yes or no, I need your opinion.

Ms. PARNES. Well, I think that I absolutely understand——

Mr. STEARNS. I know you understand, but can you make a position on this, because we are going to probably mark this bill up in

2 days. The amendment sounds good. And my question is, is there

another way do it through this cross-check that you mentioned earlier through the subcontractors? You run the databases to check

Do-Not-Call for invalid numbers, one, and, two, people who have

been reassigned—is that enough so that if John Doe puts his name

in there forever you just leave it there? Here is your chance to tell

us what you think.

Ms. PARNES. I think that it will be enough and I think that we

will continue. None of this is static. The technology is constantly

changing concerning the phones and I think we will keep on top

of this.

Mr. STEARNS. I am taking your opinion to say you support keeping it in there forever.

Ms. PARNES. Yes. What I think I see the legislation doing is making registration permanent, but still giving consumers choice.

Mr. STEARNS. Thank you, Mr. Chairman.

Mr. RUSH. The Chair now recognizes the gentlelady from Illinois,

Ms. Schakowsky, for 5 minutes.

Ms. SCHAKOWSKY. Thank you, Ms. Parnes. Your testimony said

that the FTC has been very active in protecting consumers in the

financial services marketplace and that 21 actions against bad actors were taken in the past decade; is that right?

Ms. PARNES. Yes.

Ms. SCHAKOWSKY. So that is about two a year. And so if that is

active, do you feel that is sufficiently active?

Ms. PARNES. The context that I would put this in, while this is

a very high priority for the FTC, these are actions that—it is a part

of what we do in the consumer protection area.

Ms. SCHAKOWSKY. In the financial services marketplace, because

that is what you are referring to that you have been active there.

Ms. PARNES. Well, right. I do think that we have been active in

that area. I think that we have done, in financial services generally—I believe we have brought more, that doesn’t include, for

example, debt collection cases that we have brought, it doesn’t include cases involving credit cards that are marketed to consumers,

advance fee loan credit cards. I think it is focusing on a very specific segment in the financial sector.

Ms. SCHAKOWSKY. What resources do you need that you don’t

currently have to do it and then even more?
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Ms. PARNES. Well, I am really not prepared to talk about what

resources, additional resources that we need in this area. I would

say that we are pretty flexible in terms of the Bureau of Consumer

Protection and we are adding resources to our financial practices

division on a regular basis, because it is an important area for us.

Ms. SCHAKOWSKY. Thank you. I yield back.

Mr. RUSH. The Chair thanks the gentlelady.

The Chair now recognizes the gentleman from Pennsylvania, Mr.

Pitts, for 5 minutes.

Mr. PITTS. Thank you, Mr. Chairman.

Ms. Parnes, are cell phone numbers included in the registry?

Ms. PARNES. Cell phone numbers can be registered, yes, they

can, although under FCC rules you can’t use the typical computer

technology. Telemarketers are prohibited from using that technology to call cell phones.

Mr. PITTS. So there are other laws that govern telemarketing

practices with regard to cell phone numbers?

Ms. PARNES. That is correct.

Mr. PITTS. Of the 145 million numbers in the registry, how many

are cell phone numbers?

Ms. PARNES. We do not know. We don’t ask consumers who are

registering to indicate whether it is a cell phone or a land line.

Mr. PITTS. Does the FTC advertise on their Web site that consumers can register their cell phone number?

Ms. PARNES. We don’t, we simply say you can register a telephone number on the registry.

Mr. PITTS. With cell phones replacing land lines more and more,

are you seeing a decline in the percentage of the land lines registered? Will the registry be necessary in 20 years?

Ms. PARNES. We actually don’t have information on whether the

numbers that are registered are cell phone lines or land lines so

we really can’t make that judgment about whether the percentage

of land lines are going down and the percentage of cell phones is

going up.

Mr. PITTS. Do you keep any type of database specifically for cell

phones?

Ms. PARNES. We do not. We have the Do-Not-Call Registry and

we only keep telephone numbers that are registered. We don’t separate it out by cell phone or landline.

Mr. PITTS. So you don’t take any steps to remove cell phone numbers from the registry?

Ms. PARNES. No, we do not.

Mr. PITTS. Should the Commission do that?

Ms. PARNES. I am actually not certain about that. Initially when

consumers were told kind of periodically there will be maybe something that goes around on-line or people hear that some cell phone

registry will be published and telemarketers will get cell phones

and they will be able to call their cell phones. We typically respond

by issuing some kind of consumer education release assuring them

that that will not happen, but that if they are concerned they can

register their cell phones.

So that while I believe that now consumers have nothing to be

concerned about with respect to cell phones, I would hate to drop

cell phones from our registry and then find that telemarketers have
37

developed some way of reaching these numbers through some other

system that is permitted. I just think that we need to know more

about how cell phones may be reached.

Mr. PITTS. The FTC is currently not obligated by law to purge

disconnected or invalid numbers from the database; is that correct?

Do you believe that the law should mandate this? If so, why or

why not?

Ms. PARNES. We are not currently required to do so. We do it.

I don’t think that we would object to a requirement that we purge

numbers, but we are certainly committed to purging numbers. Our

contract that we just entered into, a 5-year contract, calls for

monthly purging of the registry.

Mr. PITTS. So you believe the law should mandate that?

Ms. PARNES. I think it could. I don’t necessarily think that it has

to, but I don’t see that we would object to that.

Mr. PITTS. Thank you, Mr. Chairman.

Mr. RUSH. The Chair thanks the gentleman.

The Chair now recognizes the gentlelady from Oregon, Ms.

Hooley, for 5 minutes of questioning.

Ms. HOOLEY. Thank you, Mr. Chairman.

Ms. Parnes, how frequently does the FTC currently scrub or

check for accuracy in the numbers on the Do-Not-Call Registry?

Ms. PARNES. We do it on a monthly basis.

Ms. HOOLEY. How accurate would you say the registry is?

Ms. PARNES. We understand that we use the best contractor in

the country to do purging. So we think it is probably as accurate

as it can be.

Ms. HOOLEY. And you have to renew every 5 years?

Ms. PARNES. As the law stands right now, you do have to renew

every 5 years, but the Commission today is stating that it will not

drop any individual off the registry pending a final congressional

or agency decision on whether to make the registry permanent.

Ms. HOOLEY. Because I think a lot of people when they sign up

don’t realize that they have to renew and my next question was

going to be, how do you let people know that they have to renew

if in fact you don’t do something different with the rules where

they can stay on the registry?

Ms. PARNES. I think if no change were made we would do a very

aggressive consumer education campaign. As it stands right now,

we will put something on our Web site just telling consumers not

to worry about this, that no number will be taken off the registry.

Ms. HOOLEY. On the Internet safety question, what department

in the FTC will be spending authorized funds?

Ms. PARNES. It will be a division within the Bureau of Consumer

Protection.

Ms. HOOLEY. What is their current annual budget and how many

employees do they have currently?

Ms. PARNES. Our Division of Consumer and Business Education

has about somewhere between 16 and 18 employees. And I do not

know the budget numbers specifically. We would have to get you

that.

Ms. HOOLEY. And in this process where they are trying to educate people, how are they intending to spend the money?
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Ms. PARNES. Well, I would say that the people in our Division

of Consumer and Business Education are among the most creative

people around. We spend the money in a variety of ways. We spend

a lot of it simply on printing material that gets out to civic organizations, and senior organizations. We do a tremendous amount of

outreach and partnering with consumer advocates, with businesses.

Ms. HOOLEY. So you try to go through organizations mostly of

some sort?

Ms. PARNES. Absolutely, we do a lot of partnering.

Ms. HOOLEY. Do you have any idea how effective your efforts are

in educating consumers? Are we really reaching the numbers that

we need to reach and are we being effective?

Ms. PARNES. I think that the consumer and business education

material that we put out is praised very highly. It is award winning material.

Does it reach every consumer? Absolutely not. We really do our

best to try and push it out whenever we can. But I think that consumer and business education certainly is not, even on consumer

issues, it is not the sole property of the Federal Trade Commission.

We encourage others to take this information and use it as their

own. We work very closely with States, for example, on doing consumer education on a more retail level.

Ms. HOOLEY. OK. If I wanted to send something out to the people

in my district, do you have a perfect piece of information to send

out?

Ms. PARNES. Well, we actually work very closely with Members

of Congress as well linking to our Web sites. So I think we would

have good information for you to send out to your constituents, absolutely.

Ms. HOOLEY. Thank you. I have no more questions.

Mr. RUSH. The Chair recognizes the gentleman from Nebraska,

Mr. Terry, for 5 minutes.

Mr. TERRY. Thank you, Mr. Chairman.

Ms. Parnes, are you aware whether the FCC has programs that

educates the constituents and folks and businesses on threats to juveniles, cyber predators and materials that are inappropriate for

minors?

Ms. PARNES. We do not. These are issues that fall outside of the

FTC’s jurisdiction.

Mr. TERRY. The question was FCC. Are you aware whether they

have programs, FCC?

Ms. PARNES. The FCC?

Mr. TERRY. I know it is outside of your jurisdiction.

Ms. PARNES. Right. I don’t know. We can certainly get that information.

Mr. TERRY. I do know they do. And so my follow-up question of

whether you know how duplicative the suggested programs would

be is meaningless. So I will go on.

The gentlelady from Oregon asked a good question about the

FTC’s current program of being effective. I am not sure you answered that directly, but obviously the authors of this bill is assuming that you have not been effective and need further guidance as

well as more money. Do you agree with that assumption?
39

Ms. PARNES. I think we have been effective in this area and I

would like to think that the authors are looking to us because they

think that we would use this money wisely and effectively.

Mr. TERRY. I missed the answer to the gentlelady from Oregon’s

question about how much does the FTC spends on communicating

to people right now.

Ms. PARNES. I don’t know the exact number. We would have to

get that for the subcommittee.

Mr. TERRY. Do you have any clue, is it $10 million like this bill

authorizes? Do you already spend that much money?

Ms. PARNES. I just hesitate to guess at the number.

Mr. TERRY. Would you identify within the FTC the group who

would be in charge of identifying, promoting and encouraging best

practices for Internet safety?

Ms. PARNES. It would be a division within the Bureau of Consumer Protection.

Mr. TERRY. Best practices is something that you already do?

Ms. PARNES. Yes, we do, in terms of Internet security.

Mr. TERRY. What is the already established best practice for encouraging, for identifying best practices for Internet safety? Would

you run those down for me?

Ms. PARNES. Well, I cannot run down all of the best practices.

We have a Web site that deals—it is called onguardonline.gov and

it has just dozens and dozens of tips for consumers and business

on Internet security.

Mr. TERRY. OK, very good.

Mr. RUSH. Would you please submit that list for the record,

please?

Ms. PARNES. Absolutely.

Mr. TERRY. You are already able to carry out a national outreach

and education campaign using various media and Internet, you already do that?

Ms. PARNES. We do it on the Internet and we work very closely

with partners in other Federal agencies, industry members, State

and local governments.

Mr. TERRY. All right. I want to go back to jurisdiction then. Does

the FTC have current jurisdiction to establish best practices for

Internet safety for cyber predators? In regard to cyber predators,

that is something that already exists in your jurisdiction?

Ms. PARNES. No. As we were discussing, it is outside of the FTC’s

jurisdiction. And if we were charged with doing a consumer education campaign in this area, we would certainly look to our partners who have the expertise in this area, the FBI being one of

them.

Mr. TERRY. All right. So since it is not in your jurisdiction today,

you don’t have best practices established regarding safety from

cyber predators?

Ms. PARNES. That is correct.

Mr. TERRY. I was confused on the extent of the established programs.

How about determining material that is inappropriate for minors; is that already established within your jurisdiction?

Ms. PARNES. No, our——
40

Mr. TERRY. I am over my time, appreciate your answer, and I am

not sure I am comfortable with expanding the FTC’s jurisdiction

here, especially when the FCC already has jurisdiction over these

matters.

Mr. RUSH. The gentleman’s time is up.

The Chair recognizes the gentleman from Georgia, Mr. Barrow,

for 5 minutes.

Mr. BARROW. No questions.

Mr. RUSH. The Chair now recognizes the gentleman from Texas,

Mr. Burgess, for 5 minutes.

Mr. BURGESS. I thank the chairman and thank you for being

here today. We are reauthorizing this bill that was previously authorized for 5 years. What would be the effect of just indefinitely

reauthorizing this program and not revisiting it from time to time?

Is there value in revisiting from time to time?

Ms. PARNES. Well, it is my understanding that most reauthorization is time limited and certainly if Congress wanted to do a permanent reauthorization, I don’t think the FTC would have an objection.

Mr. BURGESS. We were talking an awful lot about cell phones a

moment ago. I guess I didn’t really understand. What prohibits a

computer from calling cell phones? Is it technology or is there actually a FCC violation involved there?

Ms. PARNES. The FCC has a rule that says that you can’t use the

computerized technology, predictive dialers, automated dialers to

call cell phones. And since predictive dialers, automated dialers are

the standards in the telemarketing industry for placing calls, in effect it is prohibiting those calls to cell phones.

Mr. BURGESS. I will tell you it doesn’t happen with every carrier

I have used, but I have received telemarketing calls on my cell

phone as well as telemarketing text messages just like you receive

spam on your computer. I guess the system is not perfect, but I did

not ever register that number on the Do-Not-Call list.

What about the newer stuff? I even forget what the technology

is called, but Vonage where you use your computer as your telephone.

Ms. PARNES. The Voice over Internet Protocol?

Mr. BURGESS. That is it.

Ms. PARNES. I believe that that would not be covered by the registry.

Mr. BURGESS. It would not be covered by the registry; it would

be bound by the same rules that the FCC has for cell phones?

Ms. PARNES. I am not certain. I think that this truly is a different technology. Certainly from the FTC’s perspective it wasn’t

something envisioned when the registry was adopted.

Mr. BURGESS. So in actuality the Voice over Internet Protocol

could be under the radar screen as far as the Do-Not-Call list is

concerned and those families would not be protected under the DoNot-Call?

Ms. PARNES. It could be, it could be. I think we certainly haven’t

gotten complaints yet from users of VoIP about telemarketing calls.

Mr. BURGESS. What would happen if someone tried to put their

number on a Do-Not-Call list who used Voice over Internet Protocol?
41

Ms. PARNES. We don’t screen any telephone numbers, if you want

to register a number with us, you can.

Mr. BURGESS. I think the question was asked a minute ago about

enforcement. What is the enforcement if someone violates the DoNot-Call list?

Ms. PARNES. We have a very aggressive enforcement program.

The details of it are in the Commission’s full testimony, but, for example, since the Do-Not-Call Registry was passed I believe we

brought over 27 or 28 cases that would be since 2003, cases that

include Do-Not-Call violations. Our highest civil penalty has been

over $5.3 million against DirecTV for violating the Do-Not-Call

rule.

Mr. BURGESS. Oh, they were the ones that called me on my cell

phone.

Ms. PARNES. Oops.

Mr. BURGESS. What do you do if a company has outsourced its

telemarketing to Bombay or Shanghai?

Ms. PARNES. Our position is that the company in the U.S., the

seller, is responsible regardless of where the telemarketing calls

are coming from.

Mr. BURGESS. But if it was a true overseas or multinational corporation, they may be outside the reaching grasp of the Commission?

Ms. PARNES. I don’t know that we have ever had that question

posed to us.

Mr. BURGESS. Well, what would happen?

Ms. PARNES. I would imagine——

Mr. BURGESS. Well, you know, down in Texas we used to have

radios that violated—the FCC would broadcast these mega stations

across the border at night. What would you do if you had a corporation that set up shop specifically to market to Do-Not-Call numbers

and was exclusively overseas?

Ms. PARNES. If we weren’t applying the Do-Not-Call Registry,

and we might because these are calls made to U.S. Consumers. So

I think we would need to certainly research this and I would be

happy to get back to you. But if we couldn’t reach that seller, we

would certainly rely on new authority that Congress gave us under

the U.S. SAFE Web Act to work with colleagues in other countries

to try and address that issue.

Mr. BURGESS. Mr. Terry asked the question about funding on the

SAFE Internet Act. Could you provide the committee at some later

date, perhaps, Mr. Chairman, before we go to full committee markup on this bill exactly how the allocations there run, what amount

of money you are spending now on these types of programs, how

is a $5 million or $10 million authorization going to change things

for you, will we simply be moving dollars around in your baseline

budget, are we identifying real dollars going into real work, which

is the intent, the congressional intent, of the bill?

I yield back, Mr. Chairman.

Ms. PARNES. Absolutely, absolutely.

Mr. RUSH. The Chair recognizes the gentlelady from Tennessee

for 5 minutes.

Mrs. BLACKBURN. Thank you.
42

Ms. Parnes, on the Do-Not-Call Registry Mr. Burgess mentioned

to you the VoIP, Voice over Internet Protocol. One of the things we

talked about many times in the Telecom Subcommittee is looking

at end use. And as we look at expanded platforms and look at new

uses, new technologies and as more of our constituents move to

VoIP, I would highlight with you that there may be a need for you

all to consider that and to focus more on the end use and less on

a specific technology.

To the Internet SAFER bill and Internet safety, how many individuals and how much of your budget is spent on chasing down

these scams; do you know? How many people do you have that are

investigators?

Ms. PARNES. How many resources do we devote towards Internet

scams?

Mrs. BLACKBURN. Right.

Ms. PARNES. A considerable amount.

Mrs. BLACKBURN. Can you give me a number of people or the

amount of your budget dollar-wise what you are spending?

Ms. PARNES. I would need to get back to you on that.

Mrs. BLACKBURN. That is fine, I think that that would be helpful

as we look at legislation that would change the funding mechanism. Many of us, we hear about this especially from our moms

and teachers, and those that are working with young people, and

those that are working with families, many times about the intrusion of Internet scams into the homes, into family lives, et cetera.

So I would really like an answer if you could help provide us with

that.

Just a couple of quick points. In your testimony on page 13 you

talk about the organizations that you all work with

onguardonline.gov. And the FCC is not listed as one of these. As

we look at the Internet and as we look at some of the scams that

are coming in there and they already have some items that are in

place and as you all look at working on the best practices, which

you do not have available for us, I would recommend some shared

resources or shared information.

Ms. PARNES. To the extent, yes, we can absolutely do that and

certainly to the extent that we have overlapped with the FCC we

do work closely with them.

Mrs. BLACKBURN. OK. That is great.

And then just for clarification for me, you said that your national

education campaign as is designated in the legislation would be

done by the Consumer Protection Division; is that correct?

Ms. PARNES. It would be a division within the Bureau of Consumer Protection.

Mrs. BLACKBURN. I think that is all that I have at this point.

Mr. BURGESS. Will the gentlelady yield?

Mrs. BLACKBURN. I will be happy to yield to the gentleman.

Mr. BURGESS. I just had a general knowledge question, I think

is probably something I should know but I don’t. How come we are

exempt from this? How come political calls, robo-calls, do not fall

under the Do-Not-Call jurisdiction?

Ms. PARNES. Well, the Do-Not-Call list applies to telemarketing.

It was a provision in the Telemarketing Sales Act and it applies
43

only to telemarketing, which is a call that is made to induce the

purchase of a product or service.

Mr. BURGESS. Do you ever get complaints from consumers who

receive robo-calls and political calls and have to explain that to

them because I get it when I go to Town Halls, and they say how

come you call me and I was on a Do-Not-Call list?

Ms. PARNES. I don’t know that calls come to us complaining

about political calls.

Mr. BURGESS. Do you make it apparent in the literature that you

provide instructional material? As you said, you have some good

materials available. Do you provide that material that this will not

stop MoveOn.org from calling you nightly?

Ms. PARNES. We don’t say what it won’t do, we say what it will

do. We explain that it will stop telemarketing calls, it will stop

calls that are selling you something.

Mr. BURGESS. Thank you, Mr. Chairman.

Mr. RUSH. The Chair now recognizes the gentleman from Mississippi, Mr. Pickering, for 5 minutes.

Mr. PICKERING. Thank you, Mr. Chairman. I thank you for having this hearing. This is one of the most successful pieces of legislation that we have done since I have been here. It is very popular,

as indicated by 146 million people, I believe, that have signed up

for the Do-Not-Call Registry.

I want to thank Congressman Stearns for his work and leadership on the legislation that we are having a hearing on, and I especially want to thank my friend and colleague from Pennsylvania,

Mr. Doyle, for his good work and allowing me to join him on a simple straightforward shot to extend and end a 5-year expiration date

that is before us.

That was not in the original legislation, but I believe it was

adopted by regulation and we do not want to have all the disruption of having that expire without prior warning and prior information to individuals that they would have to re-up and extend their

Do-Not-Call status.

My question to you is, if that were to occur, if we were not to

move quickly on legislation, what does the FTC have in place to notify individuals that the Do-Not-Call regulation is expiring and

their status as far as being on a list that would no longer protect

them from calls?

Ms. PARNES. Well, as of today the Commission has said that it

will not take any number off the list pending final congressional or

agency action on whether to make the registry permanent.

Mr. PICKERING. Currently as I understand it, you all clean or

scrub lists and update approximately every 30 days; is that correct?

Ms. PARNES. Yes, we do.

Mr. PICKERING. Is there a way you can do that more quickly?

Ms. PARNES. We could. We could do it on a basis that is more

regular than 30 days. Scrubbing the list more frequently would cost

more money. So that is really the only factor that we would need

to weigh.

Mr. PICKERING. What would increase the cost, additional staff or

resources?

Ms. PARNES. We use a contractor to scrub the lists. So we would

need to go back to the contractor and find out how much more it
44

would cost. I am certain it would depend on how frequently the

scrubbing was done.

Mr. PICKERING. If you were to do it every 15 days, would that

create a significant cost increase?

Ms. PARNES. We would need to talk to the contractor about what

the cost increase would be.

Mr. PICKERING. OK. If we were to address this issue of more regular cleaning or scrubbing or other proper term, would you advocate us simply working with you to find the appropriate timetable

of being able to do that?

Ms. PARNES. Absolutely, absolutely. We can get information from

the contractor and work with the subcommittee staff so that everybody has all of the information in terms of cost and frequency and

can make the best decision.

Mr. RUSH. Would the gentleman yield for a moment?

Would you get us a copy of the estimate from the contractor to

the committee, please?

Ms. PARNES. Absolutely, Mr. Chairman, yes.

Mr. RUSH. OK.

Mr. PICKERING. Mr. Chairman, I have no further questions other

than to say I look forward to working with you and Mr. Doyle and

Mr. Stearns so that as we move through the subcommittee to the

full committee that we find the right vehicle to move it as quickly

as possible.

Mr. RUSH. The Chair thanks the gentleman. The Chair now recognizes the gentleman from Pennsylvania for 5 minutes.

Mr. DOYLE. Thank you, Mr. Chairman.

Ms. Parnes, first of all, I want to praise you for committing not

to purge numbers from the Do-Not-Call list pending congressional

action. That is a really smart consumer friendly move, and I am

glad you are doing it.

When I first introduced the Do-Not-Call List Improvement Act

with my good friend Chip Pickering, we heard some concern from

people and I think the ranking member expressed the same concern that this list would become something like the Do-Not-Call

roach motel. Numbers go in, but they don’t come out.

And I think it is important that we clear the record on this. The

only numbers that would stay there permanently are those numbers of individuals who, A, it is their telephone number and, B,

they want to be there permanently. Numbers that are no longer

John Doe’s number will be scrubbed from the list. And any number

that isn’t currently somebody’s telephone number, and if somebody

wants to go back on the list because they want to start getting telemarketing calls at dinner time, they just have to call the Do-NotCall Registry and say, we want to take our number from the list.

So it will not be an accumulation of a bunch of numbers that are

not valid numbers anymore, because you have a contractor scrubbing those lists.

Is that correct?

Ms. PARNES. Yes, it is. The only caveat that I would add is that

the agreement that we have with our contractor calls for scrubbing

telephone numbers that have been disconnected and reassigned,

and we have taken a very cautious approach there. Not simply saying scrub numbers that have been disconnected, because sometimes
45

numbers are disconnected when consumers, for example, go on vacation for a month. They may disconnect their number, or if they

have been delinquent in a bill, their number may be recorded by

the LEC as disconnected. And we didn’t want consumers to drop

off the registry in those circumstances.

Mr. DOYLE. Right. That is the only one contention here, that the

list isn’t scrubbed until the number is reassigned so you have a

bunch of numbers that sit on that list that have maybe been abandoned or maybe some of the instances that you just suggested, and

those numbers aren’t purged until they are reassigned to somebody

else; is that correct?

Ms. PARNES. That is correct.

Mr. DOYLE. I think that is something maybe we can look at or

maybe the Commission can look at. We are not trying to create a

situation where telemarketers don’t have access to numbers that

don’t want to be on the list. But I think it is very important that

once you go through the process of going on-line or picking up a

phone and saying, you know, I don’t want to get these calls in my

home, that that should be respected.

Let me ask you about the cell phones. It is against the law for

telemarketers to use auto dialers to call cell phones. What you

were saying is in a practical sense most people won’t get telemarketing calls on their cell phones because the telemarketers all

use auto dialing technology. So it is not absolutely necessary, but

technically a telemarketer could call a cell phone if they are not

using that technology; is that correct?

Ms. PARNES. That is exactly right.

Mr. DOYLE. And so people can register their cell phones on the

Do-Not-Call list?

Ms. PARNES. Yes, they can.

Mr. DOYLE. I think Mr. Pitts brought up an interesting point

that more and more people are using cell phones exclusively, especially younger people. I have four children and none of them have

land lines in their homes. They just have cell phones. So we encourage people to register their cell phones as well as their land

lines on the Do-Not-Call list because, like you said, there may be

something else come down the line that we don’t foresee right now

and telemarketers might be able to access those calls.

Just for the record, Mr. Chairman, this is not a list that will

grow simply because someone puts their number on the list. The

monthly purging of numbers will take care of any John Does that

no longer have that number. They will come off the list. If not, they

will not be on there permanently if our amendment is adopted, because that is what the scrubbing is about each month and there

seems to be a willingness on the part of the Commission to work

with the contractor to maybe even scrub that list more frequently,

if the costs allow it, more than 30 days. So we are keeping a list

that is current and numbers that are no longer people’s numbers

are being taken off that list, and so it won’t grow into millions. But

the people who don’t want to get these calls, I think once they do

that, that should be respected and that is why we introduced the

legislation and I just want to get those points on the record.
46

Ms. Parnes, I thank you for your consumer friendly move on behalf of the people to keep that intact until we act one way or the

other.

Thank you, Mr. Chairman. Thank you for your courtesy and,

Ranking Member Stearns, thank you for your courtesy also.

I yield back.

Mr. RUSH. The Chair thanks the gentleman. This concludes the

hearing for this morning and the Chair will recess now for 10 minutes and we will reconvene at 12:15 for the markup. The subcommittee’s hearing is adjourned.

[Whereupon, at 12:05 p.m., the subcommittee was adjourned.]

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