FTC Outlines Aggressive Approach to Policing Against Pandemic Predators in Testimony Before Senate Commerce Subcommittee

The Federal Trade Commission testified before a Senate subcommittee today about the aggressive steps the agency is taking to police against pandemic predators who are capitalizing on the COVID-19 crisis to defraud American consumers.

Testifying on behalf of the Commission, FTC Bureau of Consumer Protection Director Samuel Levine said the Commission has encountered disturbing trends and noted a surge in consumer complaints stemming from a broad range of deceptive COVID-related schemes. Since January 2020 and as of January 28, 2022, the FTC has received more than 292,000 reports associated with COVID-19 frauds, reflecting $674 million in fraud losses.

“The Commission will remain vigilant in protecting the public from harms that stem directly and indirectly from the COVID-19 pandemic. The FTC is committed to tackling emerging threats, adjusting our strategies wherever necessary, and working in close coordination with our law enforcement partners at the local, state, and federal level,” the testimony states.

The FTC is fighting back by taking law enforcement action to halt and deter deceptive COVID-related claims. The agency is deploying new tools thanks to the agency’s expanded authority under the COVID-19 Consumer Protection Act of 2020. In the testimony, the Commission expressed its appreciation for additional funds provided to the FTC last year in the American Rescue Plan.

The FTC has pursued cases against more than a dozen COVID-19 predators, with more investigations in the pipeline. The FTC also issued cease-and-desist demands to more than 425 companies making false or unsubstantiated COVID-19 claims, giving them 48 hours to stop their scheme or face federal charges. The agency also notified state and local authorities of scammers’ possible criminal misconduct and alerted online companies about the fraudulent actors using their platforms to break the law. As many of these scams are perpetrated by small, fly-by-night outfits, the prospect of federal litigation or criminal charges has proven highly effective at shutting them down.

The FTC is seeing a significant spike in digital scams and abuse. The pandemic has required the day-to-day activities of Americans to transition online, and the testimony notes that scammers have been quick to take advantage of these changes, resulting in record reports of financial losses. The testimony notes a soaring number of reports about business imposters, undelivered merchandise, and substantial losses stemming from online shopping. Cryptocurrency and other investment and income scam reports have also risen sharply during the pandemic, as well as reports of fraud related to medical treatments. Much of this digital deception is originating on social media. Between 2017 and 2021, there has been a 19-fold increase in the number of reports about losing money to a scam that started with a contact on social media.

The significant rise in impersonation fraud is especially alarming. For years, scammers have falsely claimed that they are calling from the IRS, the Social Security Administration, or other offices or businesses to steal data and money from hard-working Americans, according to the testimony. Consumer financial losses to business imposter scams topped $451 million in 2021 alone, and reports from consumers more than tripled between 2019 and 2021.

The testimony notes that challenges remain in protecting consumers from the wide universe of pandemic profiteers. One of the biggest challenges is the Supreme Court ruling last year in AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (Apr. 2021), which held that the FTC does not have the ability to obtain monetary relief under Section 13(b) of the FTC Act. Amidst this devastating pandemic, restoring the FTC’s ability to provide redress to wronged consumers is critical, the testimony states.

In the meantime, the agency is doing everything it can to help fraud victims. In December, the agency launched an advanced notice of proposed rulemaking to combat government and business impersonation fraud. If a rule is ultimately promulgated, it would enable the Commission to seek refunds for consumers under its Section 19 authority, in addition to civil penalties. The FTC is also targeting its limited enforcement resources towards investigating the intermediaries with the potential to proliferate problems and perpetuate the most pain for people.

The FTC is also reviving older tools to address the emerging trends that threaten consumers, the testimony states. For example, the Commission has launched an initiative to use its Penalty Offense Authority to deter unfair and deceptive practices on a market-wide basis. This past October, the Commission sent Notices of Penalty Offense to more than 1,100 businesses regarding deceptive or misleading earnings claims and fake reviews and other misleading endorsements, and to 70 for-profit colleges regarding deceptive or misleading job and earning prospects.

The agency also is analyzing consumer complaint data to identify consumer fraud trends, and proactively reaching out to consumers using social media, video streaming, and other methods to reach historically underserved communities and people in economically and geographically diverse communities.

The Commission vote to approve the testimony was 4-0.