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Chairman Cliff
Stearns Dear Mr. Stearns and Ms. Schakowsky: I am writing about legislation that is vital to consumers in the United States, International Consumer Protection Enforcement Act of 2003. The National Consumers League (NCL) is a nonprofit organization that was founded in 1899 to protect and advance the economic and social interests of consumers and workers. In the early days of NCL’s history, there was no telemarketing or Internet fraud, but there were unscrupulous people promoting bogus investment opportunities, miracle cures, pyramid schemes, phony games of chance, and other types of fraud through newspaper ads, the mail, door-to-door, and other marketing methods of the day. Since then, new marketing channels such as telemarketing and the Internet have been developed. Not surprisingly, con artists have seized on them to widen their reach. Because these scam operators are often in one location and their victims are in others, it is very confusing for consumers to know whom to contact to ask questions or seek help. That’s why in 1992 NCL created the first nationwide toll-free hotline to offer consumers advice about telemarketing solicitations and notify law enforcement agencies quickly about fraudulent telemarketers. In 1996 the Internet fraud component was added to our system. Consumers can call 800-876-7060 to speak to a live counselor or go to www.fraud.org. The Web site has tips about the most common types of telemarketing and Internet scams, a special section on fraud against seniors, fraud statistics, and a complaint form. Consumers can report suspected telemarketing and Internet fraud by telephone or online. That information is automatically transmitted electronically to the appropriate agencies among more than 200 local, state and federal agencies in our system from the United States and Canada, alerting them to scam operators that may merit investigation and victims that need their help. It is also uploaded on a weekly basis to the Federal Trade Commission’s Consumer Sentinel database for use by law enforcement agencies. As the marketplace has become more global, so has telemarketing and Internet fraud. In 1995, only about 5 percent of the telemarketing fraud complaints we received concerned companies in other countries; by 2002 foreign companies accounted for nearly 17 percent of our telemarketing fraud complaints. In 1997, the first full year of our Internet Fraud Watch program, about 6 percent of complaints involved foreign companies; by 2002 it was nearly 15 percent. These statistics probably understate the problem, since in many cases consumers may not be sure where the fraudulent operators are located. Call forwarding, mail drops, and the growing use of electronic payment systems that negate the need to send checks or money orders to vendors make knowing where they actually are very difficult. The Internet and email can also mask the sellers’ true identities and locations. Consumers lose millions of dollars to cross-border scams every year. Businesses are negatively impacted as well. Many telemarketing and Internet frauds are targeted specifically at business victims. Financial institutions and others also suffer damages as a result of disputed credit card charges or debits for fraudulent transactions, nonpayment for services provided to fraudulent vendors, and general loss of consumer confidence. Here is an example of a typical cross-border complaint from our hotline. Michael M. from Brooklyn, New York received a telemarketing call offering him a credit card with a $1,000 line of credit for an upfront fee of $198. We don’t know his particular financial situation, but these types of scams are often targeted to people who are having credit problems. He agreed and gave his bank account number for the fee to be debited. He didn’t get a credit card. What he received was four sheets of paper listing banks that offer credit cards – information that is available free from the local library or on the Internet. The company appears to be in Barbados. We don’t know if this man realized where the company was located, but even when consumers are aware that they are dealing with vendors in other countries, that fact may not discourage them from making purchases – nor should it. We want consumers to feel confident about taking advantage of the global marketplace, whether they are U.S. consumers interested in goods or services from abroad, or consumers in other countries who want to do business with companies here. We know from our direct contact with fraud victims that most don’t understand that recourse will probably be more difficult, perhaps impossible, if the culprits are in other countries. They want and expect their government to help them. They don’t think it’s fair that fraudulent operators may be able to get away with it simply because they’re across the border. It’s not only U.S. consumers who want to shop with confidence and expect their governments to stop the bad actors in the marketplace – consumers in other countries have the same expectations. Last year, the Trans Atlantic Consumer Dialogue, a coalition of consumer organizations from the U.S. and European Union countries, adopted a resolution supporting the efforts by the Organization for Economic Cooperation and Development to craft guidelines for improving enforcement against cross-border fraud and deception. That document can be found at http://www.tacd.org/cgi-bin/db.cgi?page=view&config=admin/docs.cfg&id=179. The U.S., and the Federal Trade Commission in particular, has led the work on these forward-looking guidelines. Now the U.S. is leading again by putting words into action, asking Congress to: remove unnecessary barriers to sharing information about fraud and deception with law enforcement agencies in other countries; provide for assistance in bringing cross-border legal actions; make it easier to obtain information about suspected con artists from the private sector; and give the Federal Trade Commission more flexibility and resources to pursue con artists wherever they are. We believe that these changes are absolutely necessary to protect consumers and legitimate businesses in the marketplace of the 21rst century. We are confident that Congress and the Federal Trade Commission can agree on legislation that will give law enforcement agencies the tools they need to combat cross-border fraud and deception more effectively, with the appropriate safeguards for privacy and due process. Thank you very much for giving us the opportunity to share our views on this matter. We will be happy to provide you with any additional information you may need. Sincerely, Susan Grant, Director |