[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
FRAUD ON THE ELDERLY: A GROWING CONCERN FOR A GROWING POPULATION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MAY 16, 2013
__________
Serial No. 113-41
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
U.S. GOVERNMENT PRINTING OFFICE
82-193 WASHINGTON : 2014
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC
20402-0001
COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana JIM MATHESON, Utah
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington JOHN BARROW, Georgia
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin
BILL CASSIDY, Louisiana Islands
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
CORY GARDNER, Colorado BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas PETER WELCH, Vermont
ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Commerce, Manufacturing, and Trade
LEE TERRY, Nebraska
Chairman
JANICE D. SCHAKOWSKY, Illinois
LEONARD LANCE, New Jersey Ranking Member
Vice Chairman G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee JOHN P. SARBANES, Maryland
GREGG HARPER, Mississippi JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky PETER WELCH, Vermont
PETE OLSON, Texas JOHN D. DINGELL, Michigan
DAVE B. McKINLEY, West Virginia BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas JIM MATHESON, Utah
ADAM KINZINGER, Illinois JOHN BARROW, Georgia
GUS M. BILIRAKIS, Florida DONNA M. CHRISTENSEN, Virgin
BILL JOHNSON, Missouri Islands
BILLY LONG, Missouri HENRY A. WAXMAN, California, ex
JOE BARTON, Texas officio
FRED UPTON, Michigan, ex officio
C O N T E N T S
----------
Page
Hon. Lee Terry, a Representative in Congress from the State of
Nebraska, opening statement.................................... 1
Prepared statement........................................... 2
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 3
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 5
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 6
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 87
Witnesses
Kay Brown, Director, Education, Workforce, and Income Security,
U.S. Government Accountability Office.......................... 8
Prepared statement........................................... 11
Answers to submitted questions............................... 92
Joseph S. Campbell, Deputy Assistant Director, Criminal
Investigation Division, Federal Bureau of Investigation........ 28
Prepared statement........................................... 30
Charles Harwood, Acting Director, Bureau of Consumer Protection,
Federal Trade Commission....................................... 37
Prepared statement........................................... 39
Answers to submitted questions............................... 97
Gail Hillebrand, Associate Director, Consumer Education and
Engagement, Consumer Financial Protection Bureau............... 52
Prepared statement........................................... 54
Answers to submitted questions............................... 108
William H. Sorrell, Attorney General, State of Vermont........... 58
Prepared statement........................................... 60
Submitted Material
Letter of May 16, 2013, from the National Consumers League to the
subcommittee, submitted by Mr. Terry........................... 89
FRAUD ON THE ELDERLY: A GROWING CONCERN FOR A GROWING POPULATION
----------
THURSDAY, MAY 16, 2013
House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:47 a.m., in
room 2322, Rayburn House Office Building, Hon. Lee Terry
(chairman of the subcommittee) presiding.
Present: Representatives Terry, Lance, Blackburn, Harper,
Guthrie, Olson, McKinley, Bilirakis, Johnson, Long, Schakowsky,
Butterfield, Sarbanes, Welch, Barrow, Christensen, and Waxman
(ex officio).
Staff Present: Kirby Howard, Legislative Clerk; Nick
Magallanes, Policy Coordinator, Commerce, Manufacturing and
Trade; Brian McCullough, Senior Professional Staff Member,
Commerce, Manufacturing and Trade; Gib Mullan, Chief Counsel,
Commerce, Manufacturing and Trade; Shannon Weinberg Taylor,
Counsel, Commerce, Manufacturing and Trade; Michelle Ash,
Minority Chief Counsel, Commerce, Manufacturing and Trade; and
Will Wallace, Minority Professional Staff Member.
OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEBRASKA
Mr. Terry. So good morning. Welcome to the Commerce,
Manufacturing, and Trade Subcommittee on elderly fraud. I am
pleased to have a distinguished panel of witnesses before us
today, including representatives of four separate Federal
entities, and a State attorney general. By the way, nice
timing.
The hearing title today goes a long way to explaining why
we are here. It is absolutely a growing concern for an
expanding population. The fact is America's population is
growing older. According to the Census Bureau, from 2000 to
2010, the percentage of Nebraskans over age 65 rose 6.2 percent
and the percentage of those over the age 85 jumped by 15.8
percent.
The trend is set to continue and accelerate. By 2050, the
number of Americans over age 65 is expected to double. Thanks
to medical innovation and better standards of living, folks are
living longer. And this population tends to be a little
wealthier and have better credit than the average American.
According to the 2010 Census data, the median net worth of
households of those 65 years or older was 4.9 times that of
households age 35 to 44, and 25.5 times the net of those under
age 35.
This fact is not lost on many of the people in this room
here today. Unfortunately, neither is it lost on those seeking
to take advantage of our seniors, who tend to be more
vulnerable and susceptible to some of the many different types
of frauds that are being perpetrated.
The testimony submitted for today's hearing only scratch
the surface in describing the multitude of fraud schemes out
there. The threat is very real and does not appear to be just
small-time crooks. Everything from home equity theft, letter
fraud originating in foreign countries seems to be occurring.
Clearly there is no shortage of individuals or perhaps
organized crime groups working to trick, abuse and steal from
our American senior citizens.
One of the reasons we are here today, besides to shed light
on this awful trend, is to conduct oversight on the agencies
sitting before us and make sure they are doing their best to
protect seniors as effectively and efficiently as possible.
When reviewing the testimonies, I counted at least five
separate task forces spread out amongst DOJ, FTC, CFPB alone,
some agencies specific and other intra agency. My concern is
whether or not we are using our resources as effectively as
possible, and not duplicating them when several agencies have
separate working groups set up that may duplicate the work
being done at another agency.
Additionally, there--are all the agencies communicating
with each other? For example, what happens when a phone company
sends over a list of numbers that have been connected to
fraudulent phone calls like in the widely reported 876 Jamaica
phone scam? Does the FBI share this list with the FTC? Does FTC
share this with private companies within its jurisdiction?
Stealing from individuals who have worked and saved their
entire lives so that they may live in dignity during their
golden years is nothing less than appalling, and we need to
make sure government is doing everything it can as efficiently
as possible to protect the most vulnerable adults.
[The prepared statement of Mr. Terry follows:]
Prepared statement of Hon. Lee Terry
Welcome to the Commerce, Manufacturing, and Trade
Subcommittee's hearing on elderly fraud. I am pleased to have a
distinguished panel of witnesses before us today, including
representatives of four separate federal entities and a state
attorney general.
The hearing title today goes a long way to explaining why
we here. This is absolutely a growing concern for a growing
population. The fact is, America's population is growing older.
According to the Census Bureau, from 2000 to 2010 the
percentage of Nebraskans over age 65 rose 6.2% and the
percentage of those over age 85 jumped by 15.8 percent. This
trend is set to continue and accelerate. By 2050, the number of
Americans over age 65 is expected to double. Thanks to medical
innovation and better standards of living, folks are living
longer.
And this population tends to be wealthier and have better
credit than the average American. According to the 2010 census
data, the median net worth of households of those 65 years and
older was 4.9 times that of households aged 35-44 and 25.5
times than that of those under age 35. This fact is not lost on
many of the people in this room today.
Unfortunately, neither is it lost on those seeking to take
advantage of our seniors who tend to be more vulnerable and
susceptible to some of the many different types of frauds that
are being perpetrated.
The testimonies submitted for today's hearing only scratch
the surface in describing the multitude of fraud schemes out
there. The threat is very real and does not appear to be just
small-time crooks. Everything from home equity theft, to letter
fraud originating in Nigeria seems to be occurring--clearly,
there is no shortage of individuals or perhaps organized crime
groups working to trick, abuse, and steal from American senior
citizens.
One of the reasons we are here today, besides to shed light
on this awful trend, is to conduct oversight on the agencies
sitting before us, and to make sure they are doing their job to
protect seniors as effectively and efficiently as possible.
When reviewing the testimonies, I counted at least five
separate tasks forces spread out amongst DOJ, FTC, and CFPB
alone--some agency specific and others intra-agency. My concern
here is whether or not we are using are resources as
effectively as possible and not duplicating them, when several
agencies have separate working groups set up that may duplicate
the work being done at another agency.
Additionally, are all the agencies communicating with each
other? For example, what happens when a phone company sends
over a list of numbers that have been connected to fraudulent
phone calls--like in the widely reported ``876 Jamaica phone
scam?'' Does FBI share this list with FTC? Does FTC share this
with private companies within its jurisdiction? Stealing from
individuals who have worked and saved their entire lives so
that they may live in dignity during their golden years is
nothing less than appalling and we need to make sure government
is doing everything it can as efficiently as possible to
protect these vulnerable individuals.
# # #
Mr. Terry. I look forward to today's hearing, today's
testimonies, and thank everyone for being part of this hearing.
And I now yield to the ranking member of the subcommittee, the
gentlelady from Illinois, Ms. Schakowsky.
OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. I really thank the chairman so much for
having this hearing. Much of my adult life has been as an
advocate for seniors. For 5 years, I was director of the
Illinois State Council of Senior Citizens. The issues of fraud
are very important to our older population, in particular for
many of the reasons that my chairman mentioned.
Seniors represent the fastest growing segment of our
population. Every day 10,000 Americans turn 65. Happy birthday
to 10,000 people. Many seniors have certain characteristics
that make them an attractive target for criminal behavior.
According to The Scam Foundation, more than one in four seniors
who live alone have difficulty with activities of daily living
or some cognitive impairment. According to the FBI, seniors
generally have higher net worth, the tendency to be trusting,
and are less likely to report fraud.
I do want to say that although I agree that the net worth
of seniors is higher, the median income of people over 65 is
$22,000 a year, so many tend to be cash poor, but perhaps house
rich, which again makes them vulnerable.
We have seen an uptick in the numbers of products and
services that are targeted toward the elderly: anti-aging
products, I am well aware, health-related products, prize
promotions and reverse mortgages. I am incredibly concerned
about the negative consequences associated with some of those
products and services.
Reverse mortgages allow homeowners over the age of 62 to
borrow against their homes to receive either a cash payment or
a line of credit. And while reverse mortgages, if they are
structured fairly, can offer financial security to seniors,
they can also lead to unforeseen foreclosures and financial
hardship. Many former subprime lenders have entered the reverse
mortgage market, and the results have been devastating for
seniors. According to The New York Times, the rate of default
on reverse mortgages reached a record high of 9.4 percent last
year.
I offered an amendment, which is adopted to the Dodd-Frank
Wall Street Reform Consumer Protection Act that allows the
Consumer Financial Protection Bureau to better regulate reverse
mortgages. I look forward to hearing from Associate Director
Hillebrand about the status of that rule making.
This subcommittee must ensure that our Federal agencies
have the capacity to root out fraud where the problems are so
clear and the solutions are within reach. We should especially
do so for our senior citizens who have done so much for our
country.
Again, I thank the witnesses for appearing today. I look
forward to working collaboratively with Chairman Terry, as we
have, I don't know about uniquely in this Congress, but
certainly on this committee, and members of the subcommittee to
address the issue of senior fraud. And I yield now to Mr.
Welch.
Mr. Welch. I thank Mr. Terry, Ms. Schakowsky. They have
been leaders on senior fraud issues and protecting seniors in
general. I really appreciate the bipartisan approach.
We have today my friend, Bill Sorrell, who is the attorney
general of the State of Vermont. He has been attorney general
since 1997. Before that, he was secretary of administration in
the administration of Governor Howard Dean. Before that, he was
the State's attorney in our largest county, Chittenden County.
And he has done an extraordinary job of putting the focus on
protecting consumers, with a particular focus on seniors.
And you may remember, Mr. Chairman, we had Mike Smith, who
is the executive from Fair Point Communications, and actually
his successor as secretary of administration in Vermont to a
Republican governor, Jim Douglas, who had a real concern about
fraud, and he testified about the Jamaican scams, telephone
scams that are really ripping off seniors in Vermont, and Mr.
Sorrell has been very active and aggressive on this.
And what we need to provide at our level, as both of you so
well know, are the tools that our attorney generals and our
local prosecutors need back home. So this has got to be a
partnership, the policy has to allow you to do your job, but
the hard work actually is right at where you all are doing it.
So, Mr. Sorrell, I really appreciate it.
Also, my first job in politics, his mom was on the Senate
Government Operations Committee, and was the godmother of all
politicians Democratic in Vermont. Now, you may not like that,
but we all have very fond memories of----
Mr. Terry. Is there another type of politician in Vermont?
Mr. Welch. We are trying to--we are trying to keep it
clean, you know what I mean? But his mom was a big--was a
mentor of Howard Dean and many of us, and we really just admire
the Sorrell family going back generations in Vermont. So thanks
for letting him be here.
Mr. Terry. Thank you. And now I yield 2 minutes to the
gentlelady from Tennessee, the vice chairman of the full
committee, Ms. Blackburn.
OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Mrs. Blackburn. Thank you, Mr. Chairman. And thank you for
what I think is a really important hearing. As we look at the
issue of fraud and the elderly fraud abuse, it is a very
complex problem, and the more I have delved into it, the more
complex it seems to become. Of course, I appreciate the fact
that much of this I am learning firsthand, as I have a mom, who
is in her late 80s, and just lost my dad, who was in his late
80s. So we are going through this and living it every single
day, and I appreciate the good work that you all are doing to
help us get to the bottom of it.
As we were preparing for this hearing today, I looked at a
TBI, Tennessee Bureau of Investigation report that actually
pulled together the numbers of what had occurred from 2009 to
2011 in the elderly fraud offenses, and there were over 6,200,
nearly 6,300 that were reported, and it accounted for nearly a
third of all the fraud victims. The most frequently reported
offense was the credit card ATM fraud. And I know you are
dealing with that.
The majority of the elderly individuals that reported these
crimes were related to or acquainted with their offender. And,
sadly, the number of reported fraud cases we have on hand might
only be the tip of the iceberg, because one of the things that
I have learned is that many of the elderly are embarrassed to
report that this has happened to them, or they are not sure how
to report it or how it happened. So there are a lot of factors
that come into play in this.
And I think there is one other thing that contributes to
this, and it is the rogue Web sites. These rogue Web sites with
rogue financial networks that continue to target our seniors
with free goodies and with pirated content and it is so
inexpensive, so affordable. We all know the come-ons that they
put out there. Cracking down on those pirated Web sites is
going to be essential to protecting our seniors and allowing
them to protect what I term the virtual you, their virtual
presence online.
And I am hoping that our hearing today will help clarify
the roles that each agency has in preventing elderly fraud and
possibly identifying areas of duplicative efforts so that we
can more effectively target the problems. I yield back.
Mr. Terry. Thank you. Mr. Lance, the vice chairman of the
committee, subcommittee, you are recognized for the remainder
of the time.
Mr. Lance. Thank you, Mr. Chairman. Fraud perpetrated on
the elderly is often a terrible crime of opportunity. With
America's baby boomers beginning to enter retirement age, I am
happy that Chairman Terry and this subcommittee are examining
the Federal role in anticipating and preventing this trend.
My office receives requests to assist in combating fraud on
a weekly basis. With technological advancements, the criminal
element becomes more sophisticated and more difficult to
combat. Many scammers prey on American senior citizens, many of
whom must navigate a complicated bureaucracy on their own,
perhaps as new users of computers or the Internet.
It is my hope that Congress, and in particular this
subcommittee, can provide the needed tools and resources to
prevent current and future fraud threats.
Fraud against senior citizens has risen consistently in New
Jersey. Nearly 6,400 cases of elder abuse were reported
throughout the State in 2010, up from the 2 previous years.
About one in five cases of fraud in New Jersey involves
financial exploitation. This is intolerable.
I commend groups such as AARP and the law enforcement
community for their aggressive defense on behalf of senior
citizens. I also commend the New Jersey Division of Aging and
Community Services for its work as well.
It is my hope that these partners and our witnesses here
today will educate the public on the trends and threats
regarding this issue. I look forward to hearing your testimony
this morning. Thank you, Mr. Chairman.
Mr. Terry. Thank you, Mr. Vice Chairman. We will yield back
our time and would like to recognize the full committee, I
almost said----
Mr. Waxman. She has already gone?
Mr. Terry. Yes. So Mr. Waxman, you have the 5 minutes.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, Mr. Chairman. I want to
thank you for holding this hearing on fraud affecting older
Americans.
Imagine getting an email from a dear friend that she had
gotten mugged while on vacation, that her cash and credit cards
were taken at gunpoint, and she needs you to wire money so that
she can pay her hotel bill. After you wire the money, you find
out that the mugging never occurred. Unfortunately, this
emergency scam happened to a senior in my district, and many
other similar frauds are committed each day around the country.
One may think that fraud is easy to spot, but in the case I
just mentioned, the email was sent from the friend's actual
email account, now hacked, and included her actual address and
phone number. And with the prevalence of social media sites,
one can easily imagine a fraudster knowing that a victim's or
grandchild or friend is on vacation.
Last month the Federal Trade Commission released the
results of its most recent survey on fraud, reflecting data
from 2011. This report estimated that over 25 million Americans
were victims of surveyed frauds, including those that preyed on
consumers' desire to improve their health, find a job or save
money on everyday needs.
According to the FBI, older Americans possess certain
characteristics that make them attractive targets for
fraudulent activity. Many seniors have accumulated retirement
savings, tend to be polite and trusting, and are unable or
reluctant to report fraud or serve as criminal witnesses. They
are also targeted disproportionately for certain scams like
those involving prize promotions, health-related products and
services, and reverse mortgages.
And appallingly, older Americans are also exploited
financially by those close to them, including by trusted people
like family members, friends, attorneys or financial advisors.
Fraud against the elderly is a very serious crime with the
potential for severe harm, including lost retirement funds,
ruined credit, and an emotional toll on victims and their
families that is not easy to overcome.
I commend President Obama for recognizing this through his
administration's significant efforts to educate consumers about
fraud and through his establishment of the financial fraud
enforcement task force.
Federal, State, and local authorities must remain vigilant
in the fight against fraud occurring on consumers of any age,
and Congress must ensure that law enforcement has the tools it
needs to win that fight. This hearing on fraudulent activities
is a good start. Thank you, Mr. Chairman.
I thank the witnesses for being here. I do want to
apologize in advance, because I will be required to be at
another subcommittee at the same time, and while cloning is a
possibility, it still hasn't, God forbid, come to the level of
making another me.
And I have some time left. Anybody on our side or either
side want the time?
Mrs. Blackburn. If the gentleman would yield for just----
Mr. Waxman. The gentlelady from the Virgin Islands. I yield
to her.
Mrs. Christensen. I wanted to just say for my part that
fraud committed against the elderly--and I thank you for
yielding--against our seniors is an egregious crime, and so I
want to thank the chairman and ranking member for holding this
hearing.
In my district, people over 60 are a sizeable population
and we have a fair number of people in their 90s, and so in a
place where services are not readily available, they are
particularly vulnerable to insurance and other financial crimes
even, easy repairs on homes and any number of fraudulent offers
that seem attractive, and so they take advantage of them and
find themselves in difficulty, so I am glad we are having this
hearing. And thank you to the witnesses for being here. I yield
back.
Mr. Waxman. I have a few minutes left. I want to yield to
the gentlelady from Tennessee.
Mrs. Blackburn. I thank the gentleman from California. I
was just going to encourage you to send your avatar to the
other hearing and then you can stay with us. You know, I
thought that----
Mr. Waxman. A good idea.
Mrs. Blackburn. Yes.
Mr. Waxman. Another good idea.
Mrs. Blackburn. Absolutely. Yield back.
Mr. Waxman. Thank you.
Mr. Terry. Thank you. All right. We do not need avatar
testimony.
We appreciate all of you here. I am going to introduce the
entire panel, and appreciate all of you being here, and we will
go right to left. When you start, Ms. Brown. You are the
director of Education, Workforce and Income Security with GAO.
Appreciate you being here.
Joseph Campbell, criminal investigation division of the
Federal Bureau of Investigation. And I had mentioned to him
earlier that it is always nice that we invite you in instead of
you just showing up. That has a little bit different
connotation.
Gail Hillebrand, associate director----
Oh. Charles Harwood. We are going to let you testify as
well. Acting director, Bureau of Consumer Protection, Federal
Trade Commission.
And Gail Hillebrand, associate director, Consumer Education
and Engagement, the Consumer Financial Protection Bureau.
And last, and already introduced by our good friend from
Vermont, we have the AG of Vermont, Mr. Bill Sorrell.
So appreciate all of you here. And we will go from my left
to right. So Ms. Brown, you get to start. You are now
recognized for 5 minutes.
STATEMENTS OF KAY BROWN, DIRECTOR, EDUCATION, WORKFORCE, AND
INCOME SECURITY, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; JOSEPH
S. CAMPBELL, DEPUTY ASSISTANT DIRECTOR, CRIMINAL INVESTIGATION
DIVISION, FEDERAL BUREAU OF INVESTIGATION; CHARLES HARWOOD,
ACTING DIRECTOR, BUREAU OF CONSUMER PROTECTION, FEDERAL TRADE
COMMISSION; GAIL HILLEBRAND, ASSOCIATE DIRECTOR, CONSUMER
EDUCATION AND ENGAGEMENT, CONSUMER FINANCIAL PROTECTION BUREAU;
AND HON. WILLIAM H. SORRELL, ATTORNEY GENERAL, STATE OF VERMONT
STATEMENT OF KAY BROWN
Ms. Brown. Thank you. Chairman Terry, Ranking Member
Schakowsky, and members of the subcommittee, thank you for this
opportunity to discuss our work on elder financial
exploitation. My remarks today are based on a year-long GAO
study completed last November.
Financial exploitation can result from foreign lottery
scams, unscrupulous financial advisors, betrayal by trusted in-
home caregivers, or multiple other causes. This exploitation
can undermine the health, dignity and independence of older
adults, leading to far-reaching effects for the victims in
particular, but for society in general. Victims who lose their
ability to support themselves can put additional pressure on
scarce health care and social service resources.
Much of the responsibility for combating elder financial
exploitation falls on State and local social service, criminal
justice and consumer protection agencies. And the problem is
large and likely growing.
The Federal Government has an important role to play, and
today I will mention four key areas that can benefit from
Federal attention.
First, officials at all levels of government need to better
understand the nature and extent of the problem. Data from
FTC's Consumer Sentinel Network, FBI's Internet Crime Complaint
Center, and FinCEN's suspicious activity reports can be
analyzed to shed light on current trends and schemes to help
agencies better determine how to best direct Federal resources.
In our report, we made recommendations to FTC that we believe
would improve the usefulness of the consumer sentinel data for
these purposes.
Second, identifying and preventing financial exploitation
that is before victims have lost their entire life savings
requires marshalling the efforts of those who interact with
older adults regularly in the community, such as bank tellers
and medical professionals. In our field work, we were told that
bank staff in particular may be reluctant to report their
suspicions of exploitation for fear of violating important
privacy rules. We recommended that CFPB takes steps to help
employees of financial institutions recognize signs of
exploitation and understand their reporting options.
Third, regarding investigating and prosecuting financial
exploitation, State and local criminal justice officials told
us they could benefit from additional training and support from
the Federal agencies that have specialized expertise. This is
especially true for interstate and international mass marketing
scams. We have recommended that Justice launch its planned Web
site that would make resources, such as training and primary
litigation materials, available to State and local officials,
and also that Justice conduct outreach to clarify the process
for requesting assistance or referring cases to the Federal
level.
And fourth, possibly the best way to fight this problem is
through education. Older adults, family members and the public
in general need more information about what constitutes
financial exploitation and how to avoid it. This information
could range from tips on avoiding scams, to shedding light on
the many designations used by financial service professionals.
Each of the seven Federal agencies we reviewed
independently produces educational materials, but we believe
these efforts would be more effective if they were part of a
broader, more coordinated national public awareness campaign.
As you will hear from others today, multiple Federal
agencies are working to address financial exploitation in ways
that are consistent with each of their individual missions.
Also, agency representatives have participated in various
working groups and collaborated through task forces over time;
however, we believe a more cohesive and deliberately planned
national strategy is needed to increase the likelihood of
success and to optimize the use of scarce Federal resources.
The recently formed Elder Justice Coordinating Council,
charged by law with setting priorities and coordinating Federal
elder justice efforts, can be an appropriate vehicle for this.
We recommended that the council develop this national strategy
along with a clear set of goals and assignments for completing
these goals. The council met this week for the second time and
received a set of recommendations from its working group that,
if approved and implemented, would begin to address many of the
issues I have raised today.
This concludes my prepared statement. I am happy to answer
any questions.
Mr. Terry. Well timed. Much appreciated.
[The prepared statement of Ms. Brown follows:]
[GRAPHIC] [TIFF OMITTED]
Mr. Terry. Mr. Campbell, you are now recognized for your 5
minutes.
STATEMENT OF JOSEPH S. CAMPBELL
Mr. Campbell. Thank you. Chairman Terry, Ranking Member
Schakowsky----
Mr. Terry. Is your microphone on?
Mr. Campbell. Chairman Terry, Ranking Member Schakowsky and
members of the subcommittee, I am pleased to appear before you
today to discuss the FBI's efforts to combat fraud against our
Nation's seniors.
At the beginning of 2011, the first of our Nation's baby
boomers reached the age of 65. Since then, thousands a day also
reach that milestone. They have many reasons to celebrate.
Senior citizens are most likely to have a nest egg, to own
their home, and to have excellent credit. Unfortunately, these
are also many of the same qualities which make them so
attractive to con artists.
Unscrupulous loan officers, investors, appraisers,
developers and others are exploiting home equity conversion
mortgages, HECMs, also known as reverse mortgages, to defraud
senior citizens. HECM-related fraud is occurring in every
region of the United States and reverse mortgage schemes have
the potential to increase substantially as demand for these
products rises in demographically dense senior citizen
jurisdictions.
For its part, the FBI continues to develop new ways to both
detect and combat these fraudsters. We are working with our
partners at all levels of law enforcement and within regulatory
agencies and using the full array of investigative techniques
to find and stop criminals before the fact rather than after
the damage has been done.
Most recently, Nigerian letter frauds combined the threat
of impersonation fraud with a variation of an advanced fee
scheme in which correspondence from Nigeria offers the
recipient the opportunity to share in a percentage of millions
of dollars that the author, a self-proclaimed government
official, is trying to transfer illegally out of Nigeria. The
scheme relies on convincing a willing victim to send money to
the author of the letter in Nigeria in several installments of
increasing amounts for a variety of reasons.
To combat the numerous fraudsters who would do our citizens
harm, the Federal Bureau of Investigation and the National
White Collar Crime Center established the Internet Crime
Complaint Center, IC-3. The IC-3 serves as a vehicle to
receive, develop and refer criminal complaints regarding the
rapidly expanding arena of Internet fraud. It gives the victims
of Internet fraud a convenient and easy-to-use reporting
mechanism that alerts authorities of suspected criminal or
civil violations.
Through the IC-3, we are also establishing effective
alliances with industry, allowing us to leverage both
intelligence and subject matter expert resources. In 2012, IC-3
received complaints from more than 42,000 victims over the age
of 60 with total reported losses of more than $115 million.
The more prevalent scams reported to IC-3 which target the
elderly are romance scams, lottery scams, 419-type letters,
also referred to as Nigerian scams, and the grandparent scam.
The grandparent scam is a telephone scam targeting grandparents
and involved fraudsters calling elderly individuals claiming to
be a grandson, granddaughter or other young relative in a legal
or financial crisis. The crisis generally involves a claim of
being arrested or in a car accident in another country. The
callers create a sense of urgency and make a desperate plea for
money, begging the grandparents not to tell the parents, while
often crying on the phone to help prevent the potential victims
from discovering the scam.
With jurisdiction over both Federal and private insurance
programs, the FBI is also actively involved in the health care
fraud prevention partnership and the cabinet level health care
fraud prevention and enforcement team. Since the inception of
the Medicare fraud strike force, prosecutors filed more than
700 cases, charging more than 1,400 defendants, who
collectively billed the Medicare program more than $4 billion.
Over 900 defendants pleaded guilty and over 100 others were
convicted in jury trials, and more than 700 defendants were
sentenced to imprisonment for an average term of more than 45
months.
By working together to stop fraud, we can ensure America's
hard earned dollars are used to care for the sick and we can
keep our Nation's health care system strong for those who need
it both now in and in the future.
Chairman Terry, Ranking Member Schakowsky, I would like to
thank you again for this opportunity to discuss the FBI's
efforts to combat fraud against our nation's senior citizens. I
am now happy to answer any questions that you may have.
Mr. Terry. Thank you very much.
[The prepared statement of Mr. Campbell follows:]
[GRAPHIC] [TIFF OMITTED]
Mr. Terry. Now, Mr. Harwood, you are recognized for 5
minutes.
STATEMENT OF CHARLES HARWOOD
Mr. Harwood. Thank you, Chairman Terry, Ranking Member
Schakowsky and members of the subcommittee. I am Charles
Harwood, acting director of the Bureau of Consumer Protection
at the Federal Trade Commission. The FTC has submitted an
official statement for the record. My remarks and responses to
questions are based on that statement, but they are my views.
Seniors are among the many victims of the consumer fraud
schemes targeted by the FTC. Three Commission efforts, one
concerning work-at-home scams, one concerning prize or lottery
fraud, and one concerning identity theft illustrate our law
enforcement and education efforts on behalf of senior
consumers.
Many Americans, including seniors, living on fixed income
or with limited ability to work outside the house look for ways
to supplement their incomes by working from home. Opportunistic
scam artists take advantage of this market by selling bogus
work-at-home programs that in reality, just deplete the
consumer's resources even further.
This past February, the Commission sent out redress checks
to more than 50,000 consumers as a result of our successful law
enforcement action against the deceptively named Real Wealth
Program, a work-at-home scheme that targeted seniors. In its
mailings to consumers, Real Wealth claimed ``All I do is mail
30 postcards every day and I make an extra $350 a week,'' and,
``collect up to $9,250 with my simple 3-minute form. In fact,
consumers who responded received nothing, or at most, they
received a booklet on how to pitch the very same scam to other
consumers.
The case highlights our work with partners. First, it was
referred to us by AARP legal counsel for the elderly, a local
legal services provider here in D.C. And second, we partnered
with the AARP Fraud Fighter Call Center to offer interested
consumers one-on-one counseling about the fraud.
Prize and lottery fraud is also on the Commission's radar
scream. Consumers between 65 and 74 years of age are more
likely to be victims of such scams, according to the
Commission's recent fraud report, which has already been
referred to, and which was a survey of common consumer fraud
schemes.
On the enforcement side, the Commission has not only gone
after the perpetrators of such lottery frauds, but it has also
pursued a money transfer company, Money Gram, that allegedly
allowed its system to be used by telemarketers pitching prize
and lottery fraud.
Complementing our law enforcement efforts, an innovative
partnership with the AARP foundation enables the Commission to
refer individuals for peer counseling who are over the age of
60, and who have called the FTC complaining they have been the
victim of certain frauds, including prize and lottery frauds.
The Commission is the Federal clearinghouse for consumer
identity theft complaints, which we share with other Federal,
State and local criminal prosecutors, and we have been the
leaders in identify theft education for both business and
consumers. Just last week, the Commission held a workshop to
collect information about the extent to which seniors are
vulnerable to identify theft. In particular, the Commission is
concerned about tax, Medicare and nursing-home related identity
theft. The Commission has invited public comment on the issues
discussed at the workshop, and as we learn more, we will share
our findings with our civil and criminal law enforcement
partners and use the information to advance our education and
outreach efforts.
As a part of our consumer protection mission, the
Commission tries to anticipate how fraud schemes may evolve and
we watch for emerging threats. We are watching closely two
developments that may give rise to frauds directed towards
seniors in the coming years.
One development relates to health care coverage. We know
from experience that changes in government programs create
fertile conditions for fraud schemes. Scams involving
questionable national medical discount plans have been around
for a while now and have been the target of a number of FTC and
State law enforcement actions.
As the Affordable Care Act is implemented, the discount
plan scam could easily evolve into an ACA-related scam sewing
confusion and tricking consumers, including seniors, into
paying for worthless products or divulging financial account
information.
The second development concerns the Internet. A recent Pew
study shows that the number of adults over 65 who use the
Internet is increasing rapidly. As more seniors use the
Internet, more will be exposed to fraudulent online offers. We
see more Internet fraud affecting--we will see more Internet
frauds in the future affecting seniors, we think. Indeed it is
conceivable that the Internet scammers will actually target the
online seniors as their numbers increase.
Finally, education is an essential part of our consumer
protection and fraud prevention work. The Commission is widely
known for its plain language information on dozens of issues,
including family emergencies, which Mr. Campbell talked about,
also known as the grandparent scam and which at least one
member talked about, fraudulent prize offers, and government
imposter scams.
We have partnered with other government agencies, State and
local law enforcement agencies and community resources to
disseminate the information.
In addition to our broad-based outreach efforts, in a new
initiative, the Commission is turning to activities directors
and other professionals in facilities where boomers and seniors
live and visit for guidance on the kinds of information that
people will find useful, the messengers they trust, and the
delivery mechanisms they are likely to pay attention to.
Ultimately we expect to provide these professionals with fraud
awareness materials and activities that they can tailor to and
share with their particular communities.
Thank you for the opportunity to describe the Commission's
consumer protection work on behalf of older Americans.
Mr. Terry. Thank you.
[The prepared statement of Mr. Harwood follows:]
[GRAPHIC] [TIFF OMITTED]
Mr. Terry. Ms. Hillebrand, you are recognized for your 5
minutes.
STATEMENT OF GAIL HILLEBRAND
Ms. Hillebrand. Thank you, Chairman Terry, Ranking Member
Schakowsky and distinguished members for the opportunity to
speak with you today about the Consumer Financial Protections
Bureau's work to address the devastating problem of elder
financial exploitation.
The CPB's division of consumer education and engagement
includes our office for the financial protection for older
Americans. This office for older Americans is specifically
dedicated to the financial health of Americans aged 62 and
older.
Older Americans have assets that make them attractive
targets for fraudsters. The net worth of U.S. households aged
65 and older was approximately $18 trillion in 2009. And these
individuals and families may be victimized by a broad range of
perpetrators, including scam artists, family members,
caregivers, financial advisors, home repair contractors, and
even fiduciaries.
One national prevalence study found that an estimated 5.2
percent of Americans, 60 and over experienced financial
mistreatment by a family member, and other studies indicate
that most incidents of elder financial abuse are never reported
to authorities, but remain under the radar. After a fraud,
older Americans have very little time and few opportunities to
recoup those lost savings.
So to address elder financial exploitation, we recognize
that collaboration across and among levels of government is
critical. We participate in the congressionally mandated Elder
Justice Coordinating Council as a venue for that collaboration.
I would like to discuss a few of the current initiatives at
the CFPB to address financial issues and problems faced by
older Americans. First, older Americans can lose money because
they trust the wrong person to give them financial advice.
There are a bewildering array of titles for persons claiming
special expertise in providing financial advice to seniors, and
it can be very hard to distinguish those persons holding an
easy-to-obtain credential from a fully-trained professional.
To begin to address this challenge, we studied the variety
of so-called senior designations and issued a report discussing
the risks for older consumers who may rely on these
designations. That report is entitled Senior Designations for
Financial Advisors: Reducing Consumer Confusion and Risks.
Second, we are helping seniors, caregivers and others in
the community avoid fraud and scams. We have partnered with the
FDIC to build a new module for the FDIC's Money Smart Program,
called Money Smart for Older Adults. The new material
identifies common financial issues that face seniors, including
how to spot scams and frauds, and we will we jointly issuing
that material for use across the Nation this summer.
Third, older Americans who experience declining mental
capacity and capacity to handle their finances face special
challenges. Even mild cognitive impairment can disastrously
reduce an older adult's ability to detect a fraud or scam. 22
percent of Americans over 70 experience mild cognitive
impairment, and experts say that the ability to handle finances
is one of the very first life skills to go, often well before
family members observe the more visible signs of diminished
capacity. This means some seniors need a family member or other
person to handle their money, and those legally authorized
fiduciaries are a critical source of support, but they often
have no training in how to handle someone else's money. Some
may fall victim to fraud or even engage in it.
So for the untrained person, often a family member who is
asked to step in and handle someone else's money, the CFPB is
developing a set of guides for lay fiduciaries. These guides
will explain what a fiduciary does, how to properly segregate
and account for funds, and how to protect the assets of seniors
from frauds by others.
Fourth, there is a role for financial institutions and for
those who regulate them. Bank tellers may be among the first
persons to observe signs that an older adult may be the victim
of financial abuse, but the bank may be unsure whether Federal
privacy laws permit them to report their suspicion to social
service or law enforcement agencies. So the CFPB is developing
strategies for clearly communicating with financial
institutions that the Gramm-Leach-Bliley Act does not prohibit
them from sharing these suspicions with law enforcement and
adult protective services.
Finally, I would like to mention two resources that CFPB
offers to all consumers that are of use to older Americans. At
our Web site, consumerfinance.gov, we offer Ask CFPB. Ask CFPB
is an interactive online tool. It provides consumers with
short, unbiased answers to their financial questions and
includes a special tag for issues that may be of particular
interest to seniors.
We also accept consumer complaints through our Consumer
Response program. And Consumer Response is handling complaints
on a wide variety of financial products, including things like
credit cards, mortgages and credit reports.
Elder financial exploitation is a serious problem for our
country. I commend you, Chairman Terry, Ranking member
Schakowsky, and all of the members of the subcommittee for
holding this hearing to put this issue in the spotlight. Thank
you.
[The prepared statement of Ms. Hillebrand follows:]
[GRAPHIC] [TIFF OMITTED]
Mr. Terry. Mr. Attorney General, appreciate your efforts to
get here, and you are now recognized for 5 minutes.
STATEMENT OF HON. WILLIAM H. SORRELL
Mr. Sorrell. Thank you very much, Mr. Chairman. My thanks
to the subcommittee, and particularly to Congressman Welch for
the invitation to be here and speak to these issues today. I am
not here speaking on behalf of the National Association of AG's
nor individual attorneys general, but I would be very surprised
if General Madigan or General Bruning, General Cooper, General
Koster, would disagree with what I have to say as to what we
are seeing in Vermont, or disagree with the requests I make for
Federal assistance.
We have a very real problem in the State of Vermont right
now with scams preying on seniors, and as has been discussed
with the aging demographic in this country, it is just going to
get worse.
Just some of the reasons why seniors are particularly
preyed upon by certain scam artists, we have talked about the
fact that they tend to have more resources or assets than
others, but seniors tend to be more trusting than others. They
want to believe that you have their best intentions at heart.
They are more polite. They don't as readily hang up or close
the door. And not just in rural Vermont. Seniors frequently
tend to find themselves socially isolated, and a lot of seniors
report that they appreciate the call from Jamaica or whatever
to interact and talk about religion or the family or whatever.
And then, of course, we have to take into account that
seniors, some seniors suffer from dementia or related diseases,
but otherwise, normal aging processes can have an impact on
seniors in terms of making reasoned decisions about their
financial affairs.
My remarks go not to home repair fraud or caregivers or
family members who perpetrate frauds. We see that. I want to
focus a little bit on the stranger frauds, particularly those
that come in from outside the country. We have talked about
Jamaica a little bit, but we see a lot of the so-called
grandparents scams, the grandson or granddaughter who has
supposedly been in an auto accident or has been arrested. They
will say, I have a cold. That is why I don't sound like--or I
got punched in the mouth or I hit the steering wheel in the
auto accident, so I don't sound like myself.
We had the lottery and sweepstakes cases. We had a
Vermonter who took out a home equity loan on her house to send
the port fees or taxes off to Australia or Canada to get the
lottery winnings.
We see the romance or relationship scams coming in from out
of the country, pen pals that leads to more. And just to bring
it more immediately, just in the last 10 days to our consumer
assistance program, we had an 83-year-old man suffering from
dementia who lost $8,000 in an investment scam and a 79-year
old woman who wired $29,000 to her dear friend in Ghana. All
scams.
Truth is, States are struggling, we need Federal help. The
Vermont State Police, let alone the Burlington Police
Department or the Montpelier Police Department are not in the
position to identify the scam artists from out of the country.
We don't have the jurisdiction to arrest them or prosecute
them. And the likelihood that we will get the Vermont
consumer's money back is virtually nil. We really need Federal
help on that. So there are three main issues I would like to
very quickly mention.
We need Federal assistance to support research and
development of evidence-based programs that go beyond simple
consumer education, the fliers, the posters in banks and
whatever, of what will work on a sustainable way to help
seniors avoid being scammed, put together training materials,
send to the States where at the ground level we can use those.
So we are looking for effective and sustaining programs,
research-based, to change consumer behavior.
Second of all, and related to the first, is once we have
those training materials and that research, we are looking for
the support of State or local networks of individuals who work
in senior meal sites, Social Security offices, banks, senior
housing sites, to help prevent through interactions with
seniors scams, identify it when they see it is happening, and
then be able to effectively intervene to avoid further harm.
And third and finally, we ask the Congress and look forward
to working with our Federal partners to take a look at those
players in the marketplace that in their legal carrying out of
their business unknowingly, or at least facilitate the
perpetration of the frauds. And particularly we would look to
those wire service industries. And just in 2002, the States had
a survey where 58 percent of the money wired to Canada over the
period of the survey was fraudulent. I believe the FTC had a
2007 report where of wire transfers of over $1,000 into Canada
during the survey period, 79 percent were fraudulent.
So we would ask the Congress to look at some things at this
industry and others and give protection from antitrust
restrictions on wire companies sharing information about
vulnerable consumers; maybe some extra hoops for wires of a
certain amount to certain countries.
Thank you very much for the opportunity, and I look forward
to answering questions.
[The prepared statement of Mr. Sorrell follows:]
[GRAPHIC] [TIFF OMITTED]
Mr. Terry. Thank you very much. Very informative from all
of you.
My first comment/slash question, Ms. Brown and Ms.
Hillebrand, my wife is a bank teller part-time. Kids are
getting older, wanted something to do. And about 2 months ago,
and this is kind of an impetus for this hearing today, older
gentleman, mid 80s, walks into the bank, he is a customer
there, or has his accounts there, says, I need a money order
check for X thousands of dollars.
And my wife, thinking, well, this is odd that he is asking
for this, and prompts a couple of questions. Oh, you know, what
is this for? And he says, well, I am going to get this money.
If I give this X amount of money, $5,000 or whatever it was, I
am going to get all of this money.
And, of course, she knew instantly he was being scammed and
told him, you are being scammed. This isn't real. You are not
going to get this money. I feel very uncomfortable letting you
go through with this transaction.
No. And he was very, very demanding, called the boss over,
supervisor.
Supervisor instantly recognized it. Refused to give him the
check that he was asking for. And they didn't know, as Ms.
Hillebrand, you pointed out, what their rights were. They just
know they were being a good--wanted to protect this guy from
the mistake he was about to make.
So they asked, is there somebody in your family that helps
you with your money? And they concluded the conversation, well,
bring her in and we will work with the both of you on this
check. And, of course, he didn't show back up. But those are
very real out there.
And so that is just a real life story that occurred. And so
when you mention, Ms. Hillebrand, about bank tellers needing to
know what their rights are, most of the time, bank tellers have
a lot of things they have to know about banking law, but how to
work with somebody at the counter is probably not one of the
things they are really taught. So you pointed that out in both
your statements.
Now, I am going to focus my questions a little bit--Mr.
Campbell, Mr. Harwood, first question is regarding collection
of the data. You mentioned, Mr. Campbell, your IC-3, 42,000
registered complaints within that database. Mr. Harwood, I
don't know how many you all receive at the FTC in a year span.
Do you guys work together? Do you share the data and
coordinate your efforts, Mr. Campbell, Mr. Harwood? Mr.
Campbell first.
Mr. Campbell. That is right. We do share that information,
and we feed much of it into the Consumer Sentinel Network as
well, where it can be shared even additionally from there. And
I believe Mr. Harwood can comment on that as well.
Mr. Harwood. Yes. In fact, Mr. Campbell's correct. IC-3
does feed almost all of its complaints, all of its complaints
except for the murder and fraud-type things, I think, to--
murder and those kinds of things, to the FTC, and then they are
incorporated into our Consumer Sentinel System.
Last year we received about 2 million complaints from
consumers around the country. And our total database is over--I
am going to say it is over 8 million complaints that we make
available to law enforcement agencies throughout the United
States, Federal, State and local to use in developing cases.
Mr. Terry. All right. Now, Mr. Campbell, on the law
enforcement side, and Mr. Sorrell brought this up to some
extent, and you are dealing with international. How does local
law enforcement, how are they able to work with State and
Federal agencies when they have a person that has been scammed,
when there is an actual victim?
Mr. Campbell. Well, certainly with the international
aspect, as you can imagine, there are difficulties there in
pursuing that, but we do receive information from all kinds of
sources, including local law enforcement, in regard to scams
similar to the one that you posited. And what we do then is run
checks on all of that information, determine if there have been
others elsewhere, if it is a pattern, if it is tied to any
particular criminal organizations, tied to any particular
subjects that we are already focusing on, and determine if in
that sense there is a pattern involved that would initiate our
involvement.
The onesies, twosies, there are so many of them, it is
difficult for us obviously with resources, but the good thing
about the IC-3, though, is that they can compile that
information, store it, continue to run analysis. And it may
come up later that, based on information we get, it is tied to
something else that is substantial enough that we would be able
to engage, but we also do share that information with others
who might be able to take action.
Mr. Terry. Very good. General Sorrell brought up a really
good point, and that is there are money entities that are
enabling the fraud. Money Gram. General Sorrell mentioned that
58 percent of the checks going to Canada through this wire
service is fraudulent, and even higher when the amounts get
higher.
How can the FBI work to shut those down? Is there something
that Congress needs to do to disable those that are enabling
this type of fraud?
Mr. Campbell. Well, I don't have specific information as to
what we are doing with Money Gram and so forth, and I can maybe
get back to you on something like that----
Mr. Terry. All right.
Mr. Campbell [continuing]. but in regard to Congress,
certainly if there is legislation that could be contemplated,
we would be interested in working through the Department of
Justice to consider legislation that might be effective,
especially in those cross-border issues, which----
Mr. Terry. Yes.
Mr. Campbell [continuing]. do create a lot of threat
problems for the elderly.
Mr. Terry. Mr. Harwood?
Mr. Harwood. Sure. Thank you. So with regard to Money Gram
in particular, the FTC filed a law enforcement action against
Money Gram precisely for facilitating lottery and prize
promotion scams that involved Canadian operations. That was
filed a couple of years ago. We obtained a substantial order
against Money Gram, including injunctive relief and restitution
for consumers.
Since then, we have instituted a regular conference in
Chicago that involves Money Gram, Western Union and GreenDot, a
newer entry into the wire transfer, money transfer industry,
and we meet regularly to talk with them about the kinds of
complaints that we are seeing and the kinds of things they are
doing to try to deal with the problem. That conference includes
representatives from other Federal, State and local law
enforcement agencies.
Third, we have been working with all three of those
entities to develop consumer education initiatives so they can
actually stop or warn consumers before they wire money offshore
and try to discourage them.
And then finally, all the complaints that we get from
Western Union, Money Gram and Green Dot, and we get many, many
complaints from them, go into the consumer sentinel system and
we make those complaints available to Federal, State and local
law enforcement agencies.
Mr. Terry. Fantastic. My time has expired, and Ms.
Schakowsky, you are now recognized.
Ms. Schakowsky. Thank you, Mr. Chairman.
In a June 2012 report to Congress, the Consumer Financial
Protection Bureau noted that consumers are getting reverse
mortgages at younger ages, and that 70 percent of the borrowers
are opting for lump sum payments rather than an income stream
or line of credit. Unsuspecting seniors who select the lump sum
option are particularly vulnerable to fraud, given the appeal
of quick money.
The CFPB has identified property flipping, inflated
appraisals, cash-out theft, power of attorney and third-party
imposters as some of the top risks to reverse mortgage
borrowers.
As I mentioned in my opening statement, Ms. Hillebrand, I
offered an amendment that provides the director of the CFPB
with authority to issue regulations for reverse mortgage
transactions, and I was wondering what the status of the rule-
making process, recognizing that there are some funding issues
and the delayed appointment of Mr. Cordray, but how are we
doing?
Ms. Hillebrand. Thank you, Congresswoman Schakowsky, for
that question and for your longstanding interest in protecting
consumers as they consider whether or not to take reverse
mortgages.
We started with a study, which I believe was mandated by
Dodd-Frank, I think that was part of your amendment to DFA,
quite a comprehensive study. We found that even after housing
counseling, some of the basic characteristics of these loans
were not well understood. Housing counselors told us that
people didn't quite understand that it is a loan and, that you
are essentially borrowing and using up your home equity as you
go. And that was a difficult concept for people who actually
were considering taking these loans.
We did say in that study, or identified some of the
potential future activities. One is regulation. And we said
that we expect to undertake a project to improve and integrate
the Truth in Lending Act and the Real Estate Settlement
Practice Act disclosures for reverse mortgages, because it is a
very different kind of product than a forward mortgage, so they
would work better, and that as part of that project, we would
consider----
Ms. Schakowsky. Let me just say----
Ms. Hillebrand. Yes.
Ms. Schakowsky [continuing]. as someone who has been
refinancing, some of that paperwork, I think, is virtually
useless, I just want you to know. I mean, you get this huge
pile, you have got, like, an hour for the closing, and it is
flipping through. And, you know, just a point there.
Ms. Hillebrand. I appreciate that.
Ms. Schakowsky. We don't all often feel better because a
piece of paper has been added to the stack.
Ms. Hillebrand. Well, no. We want to actually make the
disclosure work for consumers, and that is a major undertaking
and something that we intend to do as--in the meantime, we do
have some good consumer education material focusing on the key
insight from the study, it is a loan, and then focusing on four
key questions people should ask themselves.
And for all of your constituents, if they are considering a
reverse mortgage, make certain that both spouses are on the
loan. If they are not, you can have a situation where the widow
or widower has to either cough up the full amount of the loan
proceeds or move out of the family home. So that is number one:
put all the borrowers on the house. And then there are some
difficult questions about what your expected life--how long you
think you will live, whether it is worth it. And if you are too
young, it also can be quite dangerous to take the reverse
mortgage, because you have a risk of outliving your money.
Ms. Schakowsky. The thing that is hard about a bunch of
these different scams is that often there is a legitimate
offering. A work-at-home program, I suppose, could be
legitimate.
So what are the kinds of things that we can do to really
help people distinguish? I mean, I think that is kind of what
you are saying, Ms. Hillebrand, but are there other examples,
or Mr. Sorrell, I mean, the kinds of things that help people
sort through an offer, some of the key things they should be
listening for that would alert them. I am just wondering if
anybody wants to add to that?
Mr. Sorrell. Well, I would go back to my suggestion that
where the Federal Government could be really helpful is with
some research-based analysis of what can work, because our view
is just straight consumer education, the fliers, the mailers,
even the peer counseling, the posters at banks near the teller
as to whether this check is actually going to be there, the
funds are going to be there 2 weeks from now when it has
finally gotten back to the sending bank, that that is not
adequate. And I think AARP would suggest that just a few weeks
after peer-to-peer counseling, the beneficial impact is
reduced.
So we really want to see the National Institute of Mental
Health and academia take a look at this to tell us at the State
level what can be effective for sustainable protection going
forward.
Ms. Schakowsky. I have got a couple of seconds. Mr.
Harwood, it looked like you want to----
Mr. Harwood. Sure. I would agree with everything that
General Sorrell said. That is part of the reason that we have
been working with this new consumer education effort to try to
talk with professionals and activities directors and others who
are at facilities that are frequented by boomers and seniors to
try to get a better sense of what kinds of messengers they will
trust, what kinds of messages will be meaningful to them, and
hopefully in that way help them better educate consumers in a
way that is going to be best received by those consumers
receiving the messages.
Ms. Schakowsky. Let me just say because it is interesting
that the gentleman who was actually protected at the bank went
away mad. You know? Anyway, thank you.
Mr. Terry. It is interesting. At this time the gentlelady
from Tennessee is recognized for your 5 minutes.
Mrs. Blackburn. I thank the chairman, I want to go to Mr.
Harwood and General Sorrell, and let's talk about some
specifics. So let me use this Jamaican lottery scheme as an
example. And I know New England has been hit particularly hard
by that.
And as these events happen, whether it is that lottery
scheme which is telephone driven----
Mr. Sorrell. Yes.
Mrs. Blackburn [continuing]. Or whether it is some of the
rogue Web sites, what I want to know from you is what you are
learning on the ground that you could transfer that information
to Mr. Harwood? And then Mr. Harwood, what could you give us as
action items where you could block some of these phone calls,
block these Web sites, block the financial networks that are
allowing some of the transactions? You always don't have a bank
teller who is going to say, you know, I think this is a scam.
Let me get some help over here.
And so let's use that as a specific and talk about the
lessons learned and then the action item that transfer that
information and the action item and we have got 3 minutes and
47 seconds to do that.
Mr. Sorrell. In 30 seconds I will say we don't have the
answers. We are trying peer-to-peer counseling. We go to AARP
functions. We go on talk shows. We continue to say if it sounds
too good to be true, it probably is. But what we have found
thus far is that even one-to-one contact, that after a matter
of weeks, the protective impact of that gets dissipated.
Mrs. Blackburn. OK, let me say then when you find the
action, what you are doing with that data and that information?
Are you putting it in the Consumer's Sentinel Network or how
you are working with Mr. Harwood? Where do you transfer your
lesson learned? How you are handling that?
Mr. Sorrell. We communicate the information that we have to
the Federal authorities.
Mrs. Blackburn. OK. Then, Mr. Harwood, what then what do
you do with that and what can you advise us would be helpful to
do?
Mr. Harwood. Thank you, Representative. There are a couple
of challenges. First of all, we get information that oftentimes
doesn't tell a complete picture. Lots of times what happens in
these scams the consumer knows something about what happened
and they know they lost some money, but they oftentimes don't
know where they sent it. Sometimes it goes to multiple places.
Sometimes it is wired to one country but picked up in another
country. Sometimes there is an intermediary. I know that
General Sorrell has seen all of these stories come up as well.
So the first things, oftentimes, is to try to take those
pieces of information that we receive from attorneys general
and others and try to turn them into a meaningful picture, and
that is where the Consumer Sentinel system comes in and other
analysts come it. You are trying to create a where is this
money being wired from, where is it being picked up at? And it
is oftentimes a challenge, frankly, because these scammers
don't want to be found. They are trying to hide behind
international borders and behind multiple steps in the process.
Nevertheless, we have had some success in that regard. In
fact, some companies have stopped agreeing to wire or process
money that goes to Jamaica. I think GreenDot, which is one of
the wire transfer companies, actually stopped allowing people
to remove money in Jamaica because of the number of scams that
are coming there. That, in part, is because of ongoing dialogue
with GreenDot about the number of scams.
Mrs. Blackburn. What about the credit card processors? And
PayPal, and some of those?
Mr. Harwood. I don't think they have taken the same sort of
action in that regard, but I would have to confirm that before
I could say for sure.
Mrs. Blackburn. OK.
Mr. Harwood. The next step is there is actually a Federal
law enforcement effort that is actually located in Jamaica
called Project JOLT that is a joint effort by criminal law
enforcers, and I think it is the Postal Inspection Service that
is leading that effort at that point, but it includes other
Federal criminal agencies. They are working with local
prosecutors in Jamaica to try to shut down some of the scammers
in those countries. They use information such as the
information from the Sentinel system to help them target the
entities they are going after.
Of course, the challenge is even if you find them you have
to know how to prosecute them and get them extradited to the
United States. That is a very expensive process and can
oftentimes be a challenge for criminal law enforcers, but that,
nevertheless, is what they try to do. So the information we
obtain is used also by Project JOLT to develop their efforts
and go forward.
Mrs. Blackburn. What about the communication companies?
What kind of information do you have to give them and programs
like FairPoint?
Mr. Harwood. So this would be, for example, we are talking
about telephone companies, mobile carriers, Internet?
Mrs. Blackburn. Yes.
Mr. Harwood. So there are a couple of different things we
have done with them. Obviously, they are aware of the problem
we are seeing here. The challenge has been a lot of these
operations now use VoIP services, so they actually disguise
where they are located. VoIP is an automatic system. It is very
hard to track them down. So as much as the phone companies like
to tackle the problem, oftentimes they can't really see where
the calls are coming from. Which, again, means they can be only
of limited service to us. But to the extent they know what is
going on they do try to work with us.
Mrs. Blackburn. Thank you. Yield back.
Mr. Terry. At this point, we recognize the son of the
Godmother of Vermont politics, Mr. Welch.
Mr. Welch. Thank you very much, Mr. Chairman.
I want to follow up on Mrs. Blackburn's questions, Mr.
Attorney General. Thanks so much for being here. The real
question here is at the point where the scam is initiated, or
at the point where the victim is coming into the bank, it is at
the moment before that actual transfer of cash, that appears to
be from everyone's testimony the very critical moment.
And there are some challenges here. For instance, Mr.
Terry's wife, what is she to do when the depositor comes in,
has a right to access the money, but she really does know that
this is going to vanish? Are there some things that we can do
to provide encouragement and protection to a person like his
wife who is going to do what we all think is the right thing?
Mr. Sorrell. Well, we had an example up at the Price
Chopper in St. Johnsbury where a woman was in trying to wire
money, a grandparents scam, and the clerk said, Mrs. Stowe, I
think this is a scam. I don't want to do this. And she said it
might well be a scam, I love my granddaughter, she needs help,
send the money. But Price Chopper didn't send it and within a
matter of hours, learned that it was a scam. So that was a
intervention. Good for Price Chopper.
I don't know what legally could be done, unless you are
looking at some restrictions of some extra hoops that a wire
transfer company would need to go through for transfers above a
certain amount to certain countries or would-be recipient
locations.
Mr. Welch. Mr. Harwood, what about that? Because again, as
a practical matter, what the Attorney General told us is
something we all knew. Once the money is out the door, it is
gone. And that victim is not going to get it back. And then you
also mentioned that a lot of victims are so embarrassed that
they got taken that they won't even report. Are there things
that we can do that would help the wire transfer company? That
would help the banks? That would help the Price Choppers? So
that when they made a very reasonable judgement that look, this
is a scam, they could take appropriate action to stop it before
it ended?
Mr. Harwood. That is a great question. There are a couple
of things. First of all, obviously we have been trying to
encourage the wire transfer companies to implement better
procedures that would make it possible to more easily track
where the money is being picked up, who is picking it up, that
sort of thing. Their current procedures--let me say their
historic procedures have been rather loose in terms of tracking
where the money is going.
Mr. Welch. So let's talk about that a little bit, because
they obviously make money each time they make a transfer. So
the victim's loss is the wire company's gain. And it shouldn't
be any motive here but, there is not a strong incentive for
them to make that extra step. What would be some of the
practical steps they could take, and that we could practically
and reasonably require them to take, to provide for the
protection of the person transferring that money?
Mr. Harwood. Well, I think there are a couple of things.
First of all--and some of them have already done this--
implement a call-back program where they are being asked to
wire a certain amount of money, before they actually make that
wire, call back the consumer.
Mr. Welch. That is it sort of what Mrs. Terry did.
Mr. Harwood. And some of them are already doing that. It
would be great to see that happening with all the companies.
Secondly more intervention by the actual tellers than we are
seeing now. In some cases they have got signs up, not all of
them have signs or warnings up, or provide the training. That
would be wonderful to see. Third, it would be good if we could
make sure that when they wire a particular country or
particular location, the more precise we can get information on
where that money is being wired, the more likely it is going to
be for us to actually target the scam there.
Lots of times right now you can wire to one place, but it
can actually be picked up somewhere else. For example, if you
wire it to Vancouver, British Columbia, your money might even
be picked up in Montreal, for example, which makes it different
to deal with that issue.
And then finally, through our ongoing sort of dialogue with
all the wire transfer companies, we have been pointing out to
them which ones seem to have the worst problems. Somebody
commented on the fact there are antitrust issues with sharing
information. We are trying to bridge that by working with them
and saying, you seem to have bigger problems with this country,
seem to have a bigger problem with this country. And we do that
by looking at the data we are getting on all of them through
our consumer----
Mr. Welch. So you from the FTC would be OK with the
allowing of sharing of information when the goal of that
sharing was to protect against victimization?
Mr. Harwood. Well, I am not an antitrust attorney, but I
would certainly think that because I think there would be
significant consumer benefits in that regard.
Mr. Welch. So you wouldn't object to us doing the right
thing here?
Mr. Harwood. No, even for competition purposes, yes.
Mr. Terry. He might not be able to speak for the Justice
Department though.
Mr. Welch. Do I still have some time?
Mr. Terry. Yes.
Mr. Welch. Well, I just want to ask the FBI, you know, Mr.
Sorrell, the Attorney General, is saying that the Montpelier
Police Department, Burlington Police Department, they don't
have all the resources. But I have noted you guys are kind of
busy yourselves with a few things going on, and wire transfers
are probably not things that you have a lot of agents to chase
down one after another. What I think might be helpful, Mr.
Chairman, is that we ask the FBI, the FTC, and maybe the
National Association of Attorneys General to give us some
concrete A, B, C what we can do that would help at that point
of transfer so that we are stopping the transfer before it is
impossible to catch up. Would that be something----
Mr. Sorrell. We would welcome that.
Mr. Harwood. We as well.
Mr. Welch. Thank you. I yield back.
Mr. Terry. Thank you, Peter. And at this point I now
recognize Mr. Lance, the vice chairman of this subcommittee.
Mr. Lance. Thank you, Mr. Chairman. To Ms. Hillebrand, you
discussed the fact that financial advisors, sometimes the
elderly, trust the wrong advisor. Could you explain briefly how
your authority differs from that of the FTC?
Ms. Hillebrand. Thank you. Let me start by describing a
little more detail our study, which is a congressionally-
mandated study on senior designations. We found a wide variety
of these designations. Some you can--there is one you can get
by taking a 100-question multiple choice test with no
education, all the way to ones that require graduate level
education and substantial professional credentials.
But the initials are quite similar and it is very hard to
tell one from the other. So we issued the report with the
analysis looking at things like what is the educational
requirement to get the designation? Is there any ongoing
checkup to see if you are still qualified by the entity that
gives the designation? Is there any oversight? A CPA license
can be taken away by the State Board of Accountants; can a
designation be taken away by the conferring agency? We found a
very wide variety and have recommended that the agencies that
do licensing think about adding a feature to their license
check sites that say we can check on this too. You asked a
slightly different question and I will try to answer it.
Mr. Lance. Are most of these designations determined by
State entities?
Ms. Hillebrand. The designations are conferred by private
entities, private bodies that give the designations. But most
of these folks also have a license of some kind and many of
them hold a State license.
Mr. Lance. And the State license would be CPA----
Ms. Hillebrand. Could be a CPA license, could be a
financial planning licenses in States that license those, it
could be an insurance agency license.
Mr. Lance. Is there a broad array across the Nation as to
these designations and whether or not they are overseen by
State capitals?
Ms. Hillebrand. Yes, the licenses are overseen by the State
licensing body, but generally, there is nobody overseeing the
designations and that is why we raised this issue to bring it
partly to the attention of those who license the individuals
who have a license to look at what they are doing with the
designation as well.
Mr. Lance. Thank you. It seems to me that scam artists are
brazenly open about their business and I am not sure that
current penalties deter them. To the FBI, do you believe that
we need more severe penalties to deter scams and fraud?
Mr. Campbell. Again, we would certainly be interested in
working through the Department with regard to studying
potential legislation that might----
Mr. Lance. The Department of Justice?
Mr. Campbell. The Department of Justice, that is right, in
regard to maybe considering stiffening those penalties. That is
correct.
Mr. Lance. And from your perspective, what is the most
egregious situation where you think penalties might--stronger
penalties might be appropriate?
Mr. Campbell. Well, that is--that is difficult to say,
because with each of these scams, they impact various victims
in different ways regarding their life savings, personal
issues, that type of thing. So I think more research would
probably have to be done in order to sort of categorize maybe
what is more egregious or has specific factors related to it
that might mean that there are aggravating factors, that type
of thing.
Mr. Lance. Thank you. To whoever on the panel is expert on
this area, I am not as familiar with reverse mortgages as I
should be. Are there several national reverse mortgage
companies? Or is this widely dispersed across the Nation?
Perhaps, Ms. Hillebrand?
Ms. Hillebrand. Yes, thank you. There is a program
federally insured and providers generally will provide the so-
called HECM mortgage. That is the more common one. Consumers do
have a choice to take it all out in a lump sum or take monthly
payments. If you take it all out in a lump sum, you are at risk
of somebody stealing it from you after you have it in your
pocket. That is it a danger that is very hard to understand
when somebody says to you would you like this dollar amount or
so much per month?
Mr. Lance. Are reverse mortgages regulated at the State
level or are they regulated here?
Ms. Hillebrand. At the Federal level.
Mr. Lance. At the Federal level. And which agency does the
regulation?
Ms. Hillebrand. There are requirements under the Truth in
Lending Act, and we have the regulatory responsibility at the
CFPB. As you know, under Dodd-Frank, there are multiple
entities that can enforce the Truth in Lending Act and we are
among those entities.
Mr. Lance. Thank you very much, and I yield back the 15
seconds I have left.
Mr. Terry. Very well. Thank you. Now we recognize the
gentleman from Missouri, Mr. Long.
Mr. Long. Thank you. And thank you all for being here
today. General, let me ask you, on my notes here from your
testimony, earlier you said that the Federal Government could
be of benefit to you by research and development, training
materials, change consumer behavior. And then you said
something about protection from, was it antitrust, or did I
write that down wrong?
Mr. Sorrell. Yes, that was the issue Congressman Welch
raised, and there are concerns that there might be some
antitrust restrictions on companies that wire funds sharing
information with each other about their customers who are
vulnerable to being scammed. And also possibly the sharing of
information as to locations to which money is being wired that
there have been complaints or reports of high percentages of--
--
Mr. Long. So that is something we could help you with on a
Federal level?
Mr. Sorrell. Very much. Yes.
Mr. Long. OK. I would like to get something in writing from
you later. In answering the question, to you, General, you
mentioned AARP could be of benefit to us or to you or
something. Could you explain that or how that would work?
Mr. Sorrell. AARP is very concerned about seniors generally
and being scammed. And there was a wonderful meeting--very
beneficial meeting at Stanford a couple of years ago that AARP
was behind trying to bring academia and enforcers together to
deal with issues about how to better protect seniors from being
scammed.
Mr. Long. Do you know what they define as a senior? How old
do you have to be to join AARP or----
Mr. Sorrell. I think it is 50.
Ms. Hillebrand. Fifty-five, I think.
Mr. Sorrell. I have been a member for so long I have
forgotten when I became eligible.
Mr. Long. Well, you might be interested to know that some
of your money is being spent to send out literature such as
this from the AARP. And it says: According to our records show
that you haven't registered for the valuable benefits of AARP
membership, even though are you are fully eligible. Please
return the above form with your payment to receive your
membership kit and new card for you and a household member.
Their membership is included at no additional charge.
It is pretty tempting. You are going to get a free
insulated travel bag if you send this in with the appropriate
dollar amount, and they even have a card in there for my
daughter because the letter is addressed to her and she is 24
years old.
Mr. Terry. I think they have lowered the age.
Mr. Long. It says on here that you have to be 50. Is this
normal? Why would they send something to a 24-year-old kid?
Mr. Sorrell. I assume that was some mistake, but I can't
speak for AARP on that
Mr. Long. I tried to contact them--my staff tried to
contact them and they said that they will call me personally on
the matter. I don't know why they can't share information with
my staff. Anyway, I qualify, but my 24-year old daughter
doesn't.
Let's see, Ms. Hillebrand, you are talking about SEC and
bad advice--not the SEC, but you are talking about bad advice
with financial brokers. Is that what you were--financial
advisors?
Ms. Hillebrand. Financial advisors, yes.
Mr. Long. How do you ascertain--there is good financial
advisors out there, there are financial advisors that have a
good reputation, and then there are some other financial
advisors out there. So how do you ascertain whether you are
getting fraudulent advice or someone is scamming or maybe they
have a really, really good reputation, but they are putting you
in mutual funds that they get a big payoff on every time they
sell you one, and they churn your account and they decide to
put you in another one?
So how do you decide if someone is getting bad financial
advice or someone is being scammed?
Ms. Hillebrand. So you raise a difficult question for
individual seniors who are investing their life savings and
need to make good choices for themselves. It is a complicated
market. There are a lot of licenses. There are a lot of these
people who have the word ``senior'' in their title, and that is
what we focused our report on, people who claim to have
specialize expertise for seniors.
Of course, individuals need to get references. They need to
ask. We know do there are some dangers signs. Any advisor or
salesperson who tells you the door is closing, act now, that
could be a moment to stop and say I want to think about this
more carefully.
We have seen some difficulties associated with the so-
called free lunch programs where people will assert that they
are senior specialists, give you a free lunch, and it is
actually a sales activity but it may be pushed as an
educational activity. That is a danger sign.
But it is a complicated and difficult choice for people.
Mr. Long. I would think it would be, because there are a
lot of financial advisors who operate businesses in different
ways, and may have had a client for years and years and years,
and I don't know where you draw the line between poor financial
advice and fraudulent financial advice, I would guess.
And real quick for Mr. Campbell, on mortgage scams, we had
a tremendous run on real estate scams. I was a real estate
broker for 30 years before I came into Congress, and our
particular area, southwest Missouri, Springfield in particular,
we had a lot of fraudulent real estate companies there that
some people have gone to prison, others may. But as far as a
mortgage scam, how does that work exactly?
Mr. Campbell. Well, it is the same type of thing where we
will receive information either through contacts we have made
within that industry or from victims themselves. And then we
look into those issues and if it turns out that there is a
pattern there, again, if there is some kind of criminal
organization behind it, a dollar loss of significant amounts,
that type of thing, that is going to trigger then potentially
our----
Mr. Long. What is a mortgage scam? Is it the mortgage
broker collecting--not the real estate broker, but the mortgage
broker collecting too much commission? I know how the real
estate scams work, because we had that prevalent in our
community, and they would run ads on the radio and signs
everywhere where you would get in for nothing and then you buy
this house and they finance it, and then they would talk you
into buying another house and another house at a bigger value
and they would give you the profit off of that one. And pretty
soon everything collapsed.
But a mortgage scam--I am past my time. Real briefly, can
you just give me one example of how one would work a mortgage
scam?
Mr. Campbell. That is all generally the same. Those are
mortgage scams. The same with the reverse mortgage scams. That
type of thing. Straw buyers, and then----
Mr. Long. But I am assuming there are legitimate reverse
mortgage companies out there; correct? Good resource mortgage
companies?
Mr. Campbell. There are, yes, that is correct.
Mr. Long. I don't know much about their business, but it
seems they have taken a pretty good hit and today and I have
not heard anyone say there are some good ones out there.
Anyway, thank you for being here.
Mr. Terry. The gentleman's time has expired. The chair
recognized the gentleman from Maryland.
Mr. Sarbanes. Thank you, Mr. Chairman. This is a really,
really important hearing, given the demographic wave that is
coming at us and how many seniors potentially are going to be
exposed to these scams. And Ms. Hillebrand in, particular, I am
gratified to hear the efforts that the new Bureau is
undertaking in this area. In that sense, the Bureau arrives
just in time given what is coming.
I have been intrigued by General Sorrell's observations
about how things that we might believe would help our seniors
in terms of education efforts, posters, even peer counseling
and so forth, really, in some instances, aren't that effective
right out of the gate or lose their effectiveness over time. It
seems to me that is a huge challenge in this and I wondered if
you could speak--and any others on the panel who would like
to--just about kind of the difference between passive outreach,
if you will, and education, versus ongoing active outreach, and
how you enlist third parties in that, how you enlist those who
have the occasion to interact with seniors on a more regular
basis to be kind of part of a comprehensive network of
resources that are helping those seniors be much more vigilant?
How potentially you enlist families to be on the alert that
their parents or their grandparents may be at risk for these
kinds of scams? Because we can delude ourselves into thinking
that we are doing enough, and in fact, that may not be
happening. So I will just throw that to you.
Ms. Hillebrand. Thank you for that important question about
how we can all be more effective in helping seniors and those
who work with them to protect themselves. We agree. It is not
``here is a brochure and good luck with that.'' We need to
actually get in at the moment when people are thinking about
these financial issues, being approached by a scammer, and that
is very hard to do. But there are some points of light.
With the Money Smart for Older Adults program, that is
designed to be given in person at senior centers and community
centers by lay volunteer or a community trainer, because as
General Sorrell pointed out, people want to be together and
talk about issues. The Financial Services Roundtable has done
some training for banks to give to their own tellers to
identify those risk spots.
And we have a project now, we are looking not only at
educating seniors, but we need to educate the caregiver
generation. We need to educate those folks who seniors may be
turning to in their communities and also in their families. And
there is one other form of person in between the senior and the
scam, and that is folks who provide convalescent care settings.
So senior housing, assisted living, nursing home staff. And we
are putting out a guide later this summer for the professionals
who work in those places to spot the first signs of elder
financial abuse. So if may be that it is a senior who has
trouble making a homeowner's payment to the homeowners
association. That may be an indication that someone is actually
tapping them for money and draining their account. We are
trying to build that layer in with people who are reaching
seniors in other ways to be aware of and to spot and to start
to cut this off before the money is lost.
Mr. Sarbanes. General, does your office have, like, an
information hotline or like something--or do those sorts of
things exist where you put out if you for getting a call, if
you are curious, or if you are worrying about a scam, you can
call this number?
Mr. Sorrell. Yes, we, in a population of about 630,000, we
have a consumer assistance program. Toll free number. We get
between 5- and 8,000 calls a year. Questions complaints and
such. We do a lot of Web-based consumer advice. We invite
seniors to sign up for consumer alerts. We go around to senior
centers and make these kinds of presentations. But it feels to
us that despite all of those efforts, as I mentioned earlier,
just in the last 10 days, we are seeing seniors in Vermont lose
thousands of dollars despite our best efforts.
Mr. Sarbanes. I am about to run out of time, but do you
think there can be more opportunities for public service
announcements on television and other places that sort of offer
seniors an opportunity to call into a hotline and so forth?
Mr. Sorrell. Well one of my suggestions for Federal
assistance is funding for more academic study as to what will
be effective. And what we have been trying is only moderately
successful.
Mr. Sarbanes. OK. Thank you.
Mr. Terry. Thank you, Mr. Sarbanes. At this time the
gentleman, Mr. Johnson, is recognized.
Mr. Johnson. Thank you, Mr. Chairman. I want to thank the
panel for being here today also. I represent the Appalachian
Ohio district which runs all along the Ohio River. We have a
very large senior population. And so the testimony and the
evidence garnered from this hearing is very important to the
people that I represent.
Ms. Brown, starting with you first, your testimony contains
a frightening statement that the financial fraud perpetrated
against elders is reaching epidemic proportions. Is this
because of a growing senior population, because of the reach of
the Internet, or something else?
Ms. Brown. I think it is a combination. The first and most
important factor is the significant growth in the senior
population and in proportion of our population that are
seniors. And when you combine that with the many different new
opportunities with different things, like the Internet and ways
to reach seniors. I think that the third factor that we have
heard about today is that there are new sets of caregivers that
may not be aware that their parents or those that they are
caring for are becoming vulnerable and are in vulnerable
positions yet.
Mr. Johnson. I have an 80-year-old mother, and I can tell
you it is a full-time job for me and my siblings to keep her
out of trouble. About every week she has got another good deal
that someone has laid out for her. Mr. Harwood, you testified
that you try to anticipate future areas of concern. How do you
read the tea leaves, and what data do you use to identify
emerging threats?
Mr. Harwood. Thank you. And that anticipation is
challenging. As I indicated though, we based on past
experience, we know some area where scams tend to evolve. For
example, where there are new programs or new initiatives,
Federal Government initiatives, scammers are opportunistic.
They see confusion that surrounds those new programs and new
initiatives and it is an opportunity for them to create
confusion and defraud consumers and seniors. So we watch for
those kinds of things emerging.
Secondly, we look at things like surveys showing the
tremendous growth among seniors with regard to Internet usage.
And we have been seeing a lot of that in the last years. That
reflects at this point younger seniors who moving on line, but
obviously there is a much greater usage of the Internet by
seniors which leads us to suspect that we will see more fraud
on the Internet that are targeted to seniors or at least
attractive to seniors.
Mr. Johnson. Sure. You know, you bring up a good point. You
testified that a Pew study shows that seniors over 65 are
rapidly going on line. More of them are. My 80-year-old mother
is one of them. I spend more time doing remote diagnostics than
I do anything else. And I am an IT professional having spent 30
years in the industry.
Are there special scams that they should be aware of or
take precautions to prevent? And before you answer that, you
know, we have talked here in the House about cybersecurity.
Given the magnitude of the threat that you folks are laying
out, do we need a more proactive, almost like identifying
hackers and intruders into our networks? Do we need some kind
of offensive operation to identify these scams so that we can
put the word out to seniors and let them know about it?
Mr. Harwood. Well, first of all, I am not a cybersecurity
expert, so I can't tell you--I don't know whether----
Mr. Johnson. The answer to the second one. So that is good.
Mr. Harwood. Fine. Good. As to the scams, yes, I think that
there are scams that are particularly likely to be attractive
to seniors. We see more and more scams that involve age-related
maladies, health issues, things like that, that are occurring
on the Internet. Arthritis-related, diabetes-related products
being marketed on the Internet and elsewhere. Some of those are
particularly conditions that are more prevalent among seniors.
I think probably some of the investment scams, things like
that may be attractive to seniors as well. The extent those
migrate to the Internet, we may see some of those as well. The
point is that various scams that used to be targeted to seniors
and more marketed to them through mail or through telephone, as
more seniors get on the Internet, you are going to see those
scams migrate to the Internet as well.
Mr. Johnson. Quickly, to what extent are any of these scams
originating outside of the United States? Do we have any cases
of cross-border issues?
Mr. Harwood. Many of them, I am sure. Particularly on the
Internet, it is easy to market across international borders and
we see a lot of scams that have significant international
connections. The FTC has filed a number of cases over the
years. But of course, the international borders can be a
challenge for law enforcement.
Mr. Johnson. I have a lot more questions and no more time,
Mr. Chairman. I yield back.
Mr. Terry. Such is life. Jan and I have one question that
we are going to ask you before we gavel this hearing and that
is, each one of you--Ms. Brown, we will start with you--30
seconds, minute, give us the one thing you want to leave us
with. The message to us. What can we do?
Ms. Brown. What you have heard today is a lot of wonderful
ideas and a lot of good positive actions with good intentions.
And what concerns us is that there seem to be scattering in so
many different directions. Each agency has its own know
responsibility and they are fulfilling it. That is why we
believe that there really needs to be a comprehensive plan
looking across the board at how we can marshal those resources
in the best possible way.
Mr. Terry. Mr. Campbell?
Mr. Campbell. Yes, sir. I think increasing the partnerships
as we discussed here today is going to be important, and
sharing information. I also want encourage the public to visit
the IC3.gov Web site to obtain information about all the scams
we are talking about today. And there is another Web site they
produce called lookstoogoodtobetrue.com, and it explains in
very plain language all of the definitions of the scams that we
have spoken about here today and information that if you
suspect you are being scammed, or someone you know, there is
good information there and please call the FBI or your local
law enforcement as well if you believe that there is a scam
occurring.
Mr. Terry. Good counsel. Mr. Harwood?
Mr. Harwood. Thank you, I am actually going to steal an
area that I suspect General Sorrell is going to make as well,
which is more research. I actually participated in the Stanford
event that he talked about, and it is clear that we can are
deficient with regard to research that would help us understand
why seniors are being defrauded or how they are being
defrauded, what kinds of messages are working with them, what
kinds of experience they have. That research would also help us
better target our consumer education efforts, and in fact, also
would probably help us target better our law enforcement
efforts to have a better sense much of what works for those
efforts.
I would strongly urge more research, more study. Both by
academics and applied research looking at what messages work
for seniors.
Mr. Terry. Thank you. Ms. Hillebrand?
Ms. Hillebrand. Thank you, Chairman Terry, and I commend
your wife on her care.
Mr. Terry. I will pass that on.
Ms. Hillebrand. Please join the CFPB in encouraging the
older Americans who you serve to speak up and speak out about
elder fraud and elder financial abuse. The more people stand up
and say this nearly happened to me and here is how is how I
spotted it, and the more they say it did happen to me, and I am
telling you so that it won't happen to you, the more we are
going to be able to spread this word. Thank you.
Mr. Terry. Good point. Thank you. General Sorrell?
Mr. Sorrell. Again my thanks for the opportunity to be
here. I just want to repeat the States need help. There is a
real Federal lull here with financial support and resources. I
look forward to working with the Congress and Federal partners
to do a better job to protect seniors in this country.
Mr. Terry. Well, I want to thank all of you for your
efforts here, your information, your testimony. It is going to
be helpful for us deciding how to best help our senior
constituents.
I do want to add that probably the main driving impetus was
not only my wife's experience at the bank, but Jan's passion on
this issue. So she has a long history of working that area and
her election to Congress just transferred where her voice is
heard.
So with that, I ask unanimous consent to have a letter from
the National Consumers League included in the record. And it
has been shared with the minority.
Ms. Schakowsky. Without objection.
Mr. Terry. Without objection, so ordered then.
[The information appears at the conclusion of the hearing.]
Mr. Terry. And again, thank you to our panel. I want to
remind the members that they have 10 days to submit additional
questions for the record, and then if there are any questions
submitted by the members, they will be sent to you, and we
respectfully request timely responses and multi-month is not
considered upon timely by most of us.
So with that note, we are now adjourned.
[Whereupon, at 11:29 a.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared statement of Hon. Fred Upton
Defrauding anyone of their hard earned savings is
despicable. While the Federal Trade Commission indicates the
overall rate of fraud against our senior population is no more
prevalent than fraud against the rest of the population, there
are reasons to be concerned about this group in particular.
Demographics are changing in this country, and quickly. The
baby boom generation is just beginning to retire and will
increasingly swell the proportion of our population enjoying
their golden years. In Michigan, out of a population of just
under 10 million people, we have 1.3 million citizens over the
age of 65, and another two million between the age of 50 and
64. This developing increase means that the number of fraud
cases against the elderly will rise for many years to come,
even without any change in the overall historical rate of
fraud.
Adding to this dynamic is the financial reward to criminals
of targeting the elderly. Most workers nearing retirement
aspire to begin those years with a nest egg that will last them
two or more decades. To do so they have accumulated far more
assets and benefits over their working career than the younger
people who are still working. And statistics indicate the
wealth gap between today's retirees and their younger
counterparts has widened over the past few decades. These facts
would suggest that the elderly will increasingly be targeted by
criminals. Just as the infamous Willie Sutton targeted banks
for his robberies, more retirees with more wealth are an
attractive group to criminals because ``that's where the money
is.''
There are additional reasons to be concerned for the
elderly. We are living much longer, healthier lives than ever
before. But the longer we live, the greater the odds of
diminishing mental acuity that can affect our decision making
and make us more susceptible to scams. And as Internet
broadband adoption expands, we are also seeing a growing
proportion of elderly going online and opening up a potential
new avenue for scam artists to target them. Though it may pose
new challenges, the good news is the Internet can also be a
great research tool for seniors to help prevent fraud.
It is our duty to make sure government resources are
allocated accordingly to help our citizens prevent these
crimes. As the saying goes, an ounce of prevention is worth a
pound of cure. So education can and should be the first line of
defense. From the federal government down to media to community
organizations, there are plenty of resources available for
consumers to stay informed about scams and learn how to protect
themselves or their loved ones. The hurdle seems to be getting
the message to everyone and alerting them to the dangers that
exist--whether it's online or over the phone.
I am pleased to see the issue is clearly in the focus of
our relevant state and federal agencies and you share our goal
to prevent this from becoming a bigger problem than it is
today. I look forward to learning more about the efforts to
prevent these crimes and hear any recommendation we should
consider further.
# # #
----------
[GRAPHIC] [TIFF OMITTED]