Stemming the tide of phone scams

U.S. Sen. Susan Collins
(R-Maine)

    As the Ranking Member of the Senate Special Committee on Aging, it has been among my top priorities to shed light on and help put a stop to telephone scams, particularly those targeting our nation’s seniors.

    Working alongside the Committee’s current Chairman, Bill Nelson (D-FL), over the past two years, we have held eight hearings to examine these scams that have victimized far too many Americans.
    Our work on this topic began with our examination of the notorious “Jamaican Phone Scam,” run by sophisticated criminal gangs operating out of boiler rooms in Jamaica.
    Before the Aging Committee’s hearing, these con artists placed an estimated 30,000 phone calls every day to victims in the United States, and stole an estimated $300 million each year from tens of thousands of American seniors.
    As a result of our hearing, the Jamaican government finally reformed its laws to target these scammers, and federal prosecutors have since indicted dozens of individuals on conspiracy charges.
    Another scam we examined is the so-called “grandparent scam” whereby a criminal calls his or her victim claiming to be a grandchild who is in trouble and in need of money.
    Last year alone, the Federal Trade Commission (FTC) received reports of more than 127,000 similar “impostor scams.”
    A common theme that has emerged from our Committee’s work is the role played by prepaid debit cards. It is difficult to say exactly how much money Americans lose through scams involving prepaid debit cards, since many victims do not report their losses. The FTC, however, says that Americans reported losing nearly $43 million through prepaid debit card scams.
    Prepaid debit cards can be a convenient and accessible tool for many Americans, particularly those who do not have access to traditional bank accounts.
    But these reloadable cards, unfortunately, have also become far too attractive to con artists because they are widely available and convenient to use. More important, money transferred using them is often untraceable.
    These reloadable cards are assigned a unique PIN number that customers can use to transfer funds. In the typical scam, the con artist will pressure the victim into purchasing reloadable cards, putting money on the card, and then sharing the card’s PIN number with the scammer.
    Armed with the PIN, the scammer can transfer money to his or her own prepaid debit card account, and then access those funds from an ATM or through PayPal, for example.
    The Senate Aging Committee recently held a hearing to look more closely into the role that prepaid debit cards have played in phone scams, as well as what the companies that offer these cards are doing to reduce instances of fraud and to educate consumers about risks.
    We heard from officials of the nation’s three largest prepaid debit card companies.
    These officials described efforts their companies are making to try to reduce fraud, including requiring that customers reload their debit cards in person at participating retailers’ locations and discontinuing the PIN method for reloading prepaid cards.
    The witnesses also described efforts to educate retailers about how to identify potential fraud as well as efforts to educate consumers. Many cards now come with literature warning consumers about how to avoid fraud.
    If someone suspects fraud or theft related to their prepaid debit card, it is critical that they immediately contact the company that issued the card. There are some instances, for example, where a company can track funds once alerted that fraud has taken place and block cash withdrawals from that account.
    These are some positive steps that can protect consumers. But given the ongoing prevalence of phone scams, many of which target seniors, more must be done.
    I am encouraged that the Consumer Financial Protection Bureau is considering a proposal that would limit a consumers’ liability if their prepaid card is lost, stolen, or fraudulently used, similar to the protections provided to those individuals who have credit cards and debit cards associated with a bank account.
    In addition, Sen. Nelson and I have introduced the “Phone Scam Prevention Act of 2014,” which would, among other provisions, direct the government to develop better ways to combat Caller-ID spoofing.
    A far too common method for criminals to reach potential victims is to spoof Caller-ID so that these individuals believe they are receiving a call from someone else.
    Our bill would also extend the current law that prohibits spoofing on domestic phone calls to apply also to callers outside of the United States.
    Some phone companies now offer “whitelist services,” which enable customers to designate a list of approved phone numbers that can ring through to their phones.
    All other numbers are forwarded to a voicemail or re-routed to a different number. Our proposal would ensure that all Americans, particularly seniors, have access to such services where technically feasible.
    As we look ahead to a new Congress, I look forward to leading the Senate Aging Committee and will continue our Committee’s important work in protecting our nation’s seniors from fraud.