▶ 0:09:34Well, good morning all. Subcommittee on Oversight and Investigations will come to order. Without objection, the chair is authorized to declare a recess of the committee at any time. This hearing is entitled fraud and focus exposing financial threats to American families. The purpose of this hearing is to better understand the various types of financial fraud that exist including the meteoric rise in check fraud and senior scams.
▶ 0:10:02This hearing will highlight different types of fraud and begin to identify opportunities for federal agencies both independently and together uh and in conjunction and cooperatively uh with the private sector uh so we better use existing authorities to combat the rise in financial fraud and engage in consumer education. This hearing will be the first in a series of fraud and scam related committee work. It is that important.
▶ 0:10:28Uh this hearing uh without objection all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. Uh I now recognize myself for four minutes to give an opening statement. I would like to thank the witnesses for being here today to discuss the fraud and scams in the financial sector and the threat they pose to consumers.
▶ 0:10:52In 2024, the FTC reported receiving 2.6 6 million reports of fraud and scams with consumers losing over 12 billion, a 25% increase from only from just 2023. While that figure alone is staggering, it is likely only the tip of the iceberg given that many victims do not report their experiences. In fact, the Department of Justice estimates that only 15% of victims report fraud to law enforcement.
▶ 0:11:19Check fraud alone has more than doubled since 2021. Criminals behind fraud and scams are sophisticated. They use a wide variety of schemes. Check fraud, romance scams, bank transfer fraud, identity theft, payment scams, and more. And they target all segments of the population. Individuals of all ages are falling victim. The only way to defeat criminals and defend consumers is truly a whole of society approach. Young adults are vulnerable with so much of their personal information readily available online.
▶ 0:11:49Seniors, meanwhile, are often hit with most devastating financial losses when exploited by scammers. All ages are at risk. That is why today's hearing is not only about exposing the problem, but also about discussing how we can best strengthen consumer education, highlight best practices for both consumers and companies, promote proven systems and models, and improve how we track and stop scammers before they strike.
▶ 0:12:11I commend the Trump administration for initiating efforts to counter fraud and scams in the US, including its recent sanctions on cyber scam centers uh based in Southeast Asia. President Trump also signed an executive order to move away from using checks for government related payments. Treasury Department, the Federal Reserve, and the Securities and Exchange Commission have all recently initiated efforts to gain information pertaining to check fraud, payment fraud, and crossber fraud.
▶ 0:12:36To aid this effort, I sent a letter along with Chairman Hill uh and andy Bar yesterday to Federal Reserve Chairman Jerome Powell seeking more information as to the Fed's work on fraud, including how it is collaborating with the OC, FDIC, and other stakeholders to address check and payment fraud. Uh we also requested a briefing on the uh comments received to the Fed's June 2025 request for information as well as the Fed's plans to educate consumers moving forward.
▶ 0:13:06No single actor can stop fraud on their own. To truly protect families, we must foster collaboration across all stakeholders. That includes working across federal, state, local governments uh within the financial sector uh in including lending um uh payment companies and fraud protection companies, technology platforms and telecom companies. We're already seeing companies step up.
▶ 0:13:30Apple's recent iOS 26 update for instance expanded spam text and call screening to help consumers block fraud at the source. Uh much more needs to be done. However, conversations with all these stakeholders, including with consumers themselves, will be critical as we pursue a whole of society approach to combat fraud and scams.
▶ 0:13:53Finally, I want to highlight that my office has just recently launched a new online resource at musa.house.gov/scams where consumers can flag red flags to spot uh spot scams, useful links to prevent fraud, and guidance on what to do if they fall victim. So, this is just the beginning of the committee's work and Congress's work on fraud and on scams.
▶ 0:14:16So, I look forward to working on a bipartisan basis to find real solutions to a problem that continues to be the number one financial services issue I hear from my constituents, community banks and law enforcement. I yield back. The chair now recognized the ranking member of the subcommittee, the gentleman from Texas, Mr. Green, for four minutes for an opening statement.
▶ 0:14:39I thank the chairman, someone whom I have great respect for, and I thank the witnesses for being here as well, as well as some other persons who are here at my request to uh show support. We greatly appreciate your attendance. The title of this hearing is fraud and focus, exposing financial threats to American families.
▶ 0:15:02However, a better title for this hearing would be Fraud Enabled: How President Trump is Exposing American Families to Financial Threats with his tariff taxes and his evisceration of the Consumer Financial Protection Bureau, the CFPB.
▶ 0:15:22When President Trump campaigned on imposing steep tariffs on both our allies and adversaries, he assured the American people that the cost of these tariffs would be paid by foreign sellers, not Americans. This proarication has become one of the biggest frauds in an administration ripe with fraud.
▶ 0:15:51Instead of foreign sellers paying the price for Trump's tariffs, it is the buying US businesses in tandem with their clientels who are suffering the cost that foreign sellers won't pay. Among the US businesses suffering, small businesses have been especially vulnerable to the volatility of Trump's erratic economic policies.
▶ 0:16:20In July 2025, 67% of small businesses reported higher expenses over the period quarter prior to that time with 60% attributing higher costs to Trump's recent tariff increases. Millions of mom and pop businesses are closing or are facing the prospect of closing.
▶ 0:16:49Republicans desiring to combat fraud or financial threats to American families should focus on Trump's tariffs that are devastating American businesses, especially small businesses, as well as how Trump has systematically gutted the principal financial protection agency, the CFPB, and how the Consumer Financial Protection Bureau is being made ineffective.
▶ 0:17:18Ive the CFPB was established after the great recession to protect consumers from financial abuse including fraud. Since its creation, the CFPB has actively protected consumers by investigating and punishing financial institutions for their abuse and deceptive practices.
▶ 0:17:40Since 2011, the CFPB has returned more than $20 billion to consumers defrauded by big banks, debt collectors, and payday lenders. Sadly and shamefully, Trump's CFPB has stopped initiating new investigations into abuses in the financial industry, and has discontinued ongoing dismissed enforcement actions,
▶ 0:18:10and even finalized settlements, denying consumers agree to benefits. To add insult to consumer injuries, Republicans cut the CFPB's funding, cut it in half, crippling the AY's ability to police the payment processors big tech platforms and banks uh are using to take advantage of
▶ 0:18:40consumers. The Republican record is clear. They have defrauded and dismantled the CFPB fraud police at the expense of the American consumers and have perpetrated a tax fraud on American families. Regrettably, this isn't oversight. This is complicity coupled with aiding and abetting Trump's fraud. I yield back.
▶ 0:19:07Chairman yields back. Gentlemen yields back. Uh the chair now recognizes the chairman of the full committee, Chairman Hill, for one
▶ 0:19:18Thank you, Chairman Muer. Today's hearing is another step in the committee's efforts to better understand the various types of financial fraud so that we can better help protect American families from these financial threats. Over the past three years at one state bank trade association that I've gone to after another, Georgia, Mississippi, Arkansas, Louisiana, Texas, Ohio, among others, this has been the top topic our state attorney generals are witnessing accelerate.
▶ 0:19:45Check fraud, debit fraud, text fishing are all targeting Americans and generating unprecedented losses to both consumers and the financial system. Personally, our family was a victim of check fraud thanks to the US Post Office uh in 2022. We'll begin today by exploring a proactive set of measures that federal agencies might take and implement to counter these threats and better protect all Americans for financial fraud.
▶ 0:20:13We look forward to hearing from about emerging technologies like AI and blockchain technologies that can help achieve that protection. I thank our witnesses and I yield back. I thank Chairman Hill. We'll now move move to witness testimony. Seeing that the ranking member of the full committee is not here, u I really appreciate we all appreciate your your attendance and your what we expect to be expert testimony.
▶ 0:20:42Um uh we I'll start off by uh welcoming Mr. Paul Benda. Uh Mr. Benda is the executive vice president of risk fraud and cyber security at the American Bankers Association where he leads the ABA's initiative on fraud, cyber security, physical security, and information security and chairs the ABA fraud coordination group. Mr. Bend also serves as the chair of the international banking federation scams and fraud task force. Mr.
▶ 0:21:05Defend his career span both public and private sectors having served as the active duty as an active duty US air force officer as an official with both the department of defense and department of homeland security. Mr. Bender received a bachelor's and master's degree in mechanical engineering from from Purdue University. Welcome and thank you. Uh Mr. Ian Benedowitz. Uh Mr. Benowitz is the general manager of Lifellock at at Gen, a leading US identif identity theft protection service. Prior to joining Lifellock, Mr.
▶ 0:21:34Bendowitz was the global head of protections at eBay where he was responsible for managing and improving programs to build customers trust for transacting on eBay. Mr. Benowitz graduated Sumic Law with BA in economics from Cornell University and holds an MBA from the Kellogg School of Management. Thank you very much and welcome. Miss Kate Griffin. Miss Griffin is a director in the Aspen Institute's financial security program.
▶ 0:21:57Uh she also serves as director of national task force on fraud and scam prevention where she leads a multis- sector collaborative effort aimed at creating a national strategy to prevent scammers from stealing wealth from everyday Americans. She holds a master's from American University and a bachelor's degree from Kenyon College. So thank you very much. Uh Miss Carla Sanchez Adams, welcome. Miss Sanchez Adams is a senior attorney at the National Consumer Law Center. She also serves as a board me member for the National Association of Consumer Advocates and is a fellow with the American Bar Association.
▶ 0:22:28Prior to joining NCLC, Miss Sanchez Adams was a managing attorney with Texas Rio Grand Legal Aid. Miss Sanchez Adams graduated with a bachelor's degree from NYU and received her jurist doctor from the University of Texas. So, thank you all very much as well. So, uh, each of you will be recognized for five minutes, uh, to give an oral presentation of your, uh, testimony. Without objection, your written statements will be made part of the record. Uh, so, Mr.
▶ 0:22:56Benda, you are now recognized for five minutes for your oral remarks.
▶ 0:23:01Thank you, Mr. Chairman, Chairman Muer, Ranking Member Green, and members of the subcommittee, thank you for focusing on this critical issue today and the opportunity to testify. My name is Paul Benda and I serve as executive vice president of risk, fraud, and cyber security at the American Bankers Association. Banks have long been on the front lines of protecting consumers from fraud.
▶ 0:23:22From chip enabled cards to multiffactor authentication, from AIdriven fraud detection to real-time alerts, the banking industry has invested billions to make our financial system one of the most secure in the world. And Americans recognize that effort. Surveys show that nine and 10 customers say their bank is taking proactive steps to protect them from fraud. But criminals are innovating, too.
▶ 0:23:45They've reinvested the 300 billion stolen during the pandemic to build highly organized networks that now use deep fakes, spoofed caller IDs, stolen checks, and fake social media accounts to target Americans. This is where banks face a critical limitation. By the time a victim is ready to send a payment, they often believe they know and trust the scammer. Caller ID might display the bank's name. A text message might look identical to a legitimate fraud alert.
▶ 0:24:14A social media ad might appear to come from a trusted company. These are tools banks do not control. That is why banks cannot fight this battle alone. Other stakeholders must step up. Telecommunication companies must stop criminals from impersonating banks through spoofed phone calls and fraudulent texts. Today, a criminal overseas can make a call appear as if it's coming from a wedding number on the back of your debit card. If the phone says it's your bank, most people will believe it.
▶ 0:24:42Social media platforms must remove fake accounts and fraudulent ads more quickly. The Wall Street Journal recently documented how fake investment promotions on Instagram and Facebook have cost consumers their life savings. Banks regularly flag these scams, but takedowns are slow and inconsistent. The postal service must strengthen protections against check theft, which remains one of the fastest growing forms of fraud.
▶ 0:25:06And law enforcement needs more resources to investigate and prosecute cases because no amount of bank investment can replace the deterrence of putting criminals behind bars. We urge Congress, the administration, regulatory agencies, and others in the private sector to help close these gaps. First, the administration should create a White House Office of Fraud and Scam Prevention to coordinate federal efforts, unify consumer reporting, and drive a national strategy.
▶ 0:25:34Second, we should require telecom accountability by closing loopholes that allow spoof calls and texts, ban SIM boxes that send thousands of scam texts, and ensure caller ID can't be faked. Third, we need to hold social media account social media companies responsible by mandating quick free takedown of impersonation accounts and imposed liability if platforms knowingly allow them to remain.
▶ 0:26:01Fourth, we must support law enforcement by providing for state level financial crimes units modeled on Texas's financial crimes intelligence center, which has proven effective. Fifth, we need to improve information sharing by be creating safe harbors for banks and regulators to exchange fraud data and require the FCC to establish a searchable spam text and messaging Finally, we need to continue to combat check fraud by supporting the development of a national check verification
▶ 0:26:32system to authenticate checks at deposit. Banks are proud of the role we play in protecting consumers. We continue to invest, to innovate, and to educate. ABA has launched several national anti-fraud campaigns, including banks never ask that and practice safe checks to help people recognize scams as well as safe banking for seniors to help combat the ever growing problem of senior fraud.
▶ 0:26:59But unless every player in the fraud ecosystem accepts their responsibility, criminals will continue to victimize Americans at an unprecedented scale. Fraud is not just a banking problem. It is an ecosystem problem. And until all parts of that ecosystem are equally committed to protecting consumers, the American American public will remain at risk. Thank you. And I look forward to your questions.
▶ 0:27:31Thank you, Chairman Mer, Ranking Member Green, the members of the committee. Good morning and thank you for this opportunity to testify on this critical topic of fraud affecting American families. My name is Ian Benedoitz and I'm the general manager of Liflock.
▶ 0:27:46Uh, Lifellock is the leading identity theft protection service in the US and Lifellock is part of a larger company, Gen, a global S&P 500 company uh that has over 500 million consumers that we protect through our brands Norton, Lifellock, and Avast. Fraud today is not just growing, it is accelerating at an unprecedented rate. You know, multiple people have highlighted statistics.
▶ 0:28:15The statistics we have is that the American consumer lost $16.6 billion in reported losses last year. That's a 33% increase year-on-year. And that translates into $51 for every person in this country. At Liflock, we sent over 81 million identity theft alerts.
▶ 0:28:37And the number of social security numbers that are on the dark web that have been exposed through breaches increased from 8 million to 300 million in just one year. And these aren't just statistics. Behind these facts are people are seniors that are losing their life savings. Our young people whose financial futures are ruined before they even start their careers and families who are blindsided by fraud. And fraud, unfortunately, does not discriminate.
▶ 0:29:05Young people get victimized more frequently because they're online more often, whereas seniors experience much larger fraud when it happens or much larger losses. The average senior lost $35,000 in reported fraud. And in total, seniors lost a staggering $5 billion. And yet, despite these statistics, over twothirds of seniors say that they feel invincible, that they feel safe from the risks of fraud and scams.
▶ 0:29:36This represents a huge disconnect between perception and reality. And artificial intelligence is only increasing this gap in the hands of criminal organizations. Artificial intelligence is allowing them to industrial industrialize fraud, allowing them to make fishing emails that are perfect, voice clones that are compelling, deep fakes that can fool even the most sophisticated American
▶ 0:30:10uh and AI on the other hand is also our best defense against these uh criminal organizations. a gen. We use AI to go through millions and millions of data points, detect fraud in real time. We use it to detect deep fakes and to protect consumers to prevent scams from ever getting consu to consumers in the first place. But technology is not enough.
▶ 0:30:35We also invest in education and partnerships and sharing intelligence with law enforcement. Congress has a critical role to play in this fight. Based on our experience, we urge three primary priorities. We have to stop fraud before it happens.
▶ 0:30:54Raise awareness of the threats through national education campaigns that focus on scams, fraud, identity theft, modernize breach notifications, and invest in public private partnerships that raise raise digital literacy. Two, we have to disrupt the scam supply chain. So, the social media networks, the companies, the data brokers that trade and personal information that are fueling the rise of scams, we need to better regulate them.
▶ 0:31:22And we need to empower our law law enforcement to be able to go after international organizations across borders, give them the tools to be able to take down the infrastructure and to be able to collaborate uh across countries. And then third, we need to empower victims and support local law enforcement. Local law enforcement needs the education and the tools to be able to deal with these types of scams and fraud.
▶ 0:31:46And victims need to be able to have a centralized repository of breaches and actions that they can take to remediate and address when they are victimized. Fraud now represents a systemic threat to our digital economy and to the trust that consumers have in their digital Together, government, industry, and civil society must work together and collaborate to protect American families, restore confidence,
▶ 0:32:16and secure the digital economy for every American. Thank you, and I look forward to your Thank you very very much. Miss Griffin, you are now recognized for five minutes.
▶ 0:32:28Chairman Muer, Ranking Member Green, distinguished members of the subcommittee, thank you for inviting me. My name is Kate Griffin and I am director of the National Task Force on Fraud and Scam Prevention at the Aspen Institute Financial Security Program.
▶ 0:32:43Over the last year, hundreds of experts from more than 80 institutions, public and private, have spent thousands of hours together, to mount a coordinated defense against scams, the ability for criminals to deploy sophisticated social engineering techniques that lure victims to send their hard-earned money. As my colleagues have outlined, scams are a growing threat to to all of society.
▶ 0:33:11Every day, roughly 50,000 Americans become victims. We believe one in five Americans have been affected to date. And these people are young and old, urban and rural, rich and poor. Everyone is at potential risk. Because of this, every week, more than$2 billion dollar is flowing out of American pocketbooks and into the hands of foreign criminal enterprises.
▶ 0:33:41who use those funds to fuel other illicit crimes, including drug and human trafficking. Research suggests that this scam's industry now rivals the size of the illicit drug trade. And scam losses reported to law enforcement have more than tripled since 2019. Those reports though are only a fraction of what's really happening.
▶ 0:34:03In fact, the FTC has estimated that actual fraud related losses accounting for this under reporting exceed $158 billion dollar per year. The vectors of attack are varied which is why we will talk about this as an ecosystem or whole of society problem.
▶ 0:34:22Scammers target victims on all the core systems of American commerce and communication, telecoms, messaging, digital platforms such as social media or paid advertising, retail and financial services spanning banking, payments, fintech, crypto, and investments. Most US adults report receiving scam messages through those means daily or weekly. And those consumers are asking for your help. They don't know where to turn.
▶ 0:34:52Being tricked by a scammer to send money or provide access to a financial account is the second largest crime concern in the US, second only to identity theft. People are worried more about scams than they are about violent crime or And they rarely report when it happens to law enforcement. In fact, mo most victims, seven and 10 will report directly to their financial institution, while only a small fraction of that will report to local law enforcement or a federal agency.
▶ 0:35:24That's why preventing scams requires this whole of ecosystem response. Leaders in our task force are very sophisticated fraud fighters, but they're asking for help with scams. They've underscored the need for collaboration across all those sectors and the desire for strong leadership from the federal government in doing so. No single entity in the scams life cycle can do this alone.
▶ 0:35:48We will have a detailed set of recommendations in a forthcoming report from the task force in a few weeks which will provide a blueprint for a national strategy to prevent scams. A few highlights from that report include a call for bold government leadership, which includes naming scams as a national priority, asking congressional leadership to mount a coordinated response, and empowering leaders within government to marshall our resources towards a coordinated response.
▶ 0:36:18It will also require driving better law enforcement and intelligence outcomes by providing top officials with clear anti-scam goals and sufficient funding. We must enhance their powers to prosecute while upgrading their capabilities. The criminals are using the most sophisticated technologies and so must we. And of course, the private sector has a a role to play as well.
▶ 0:36:40Specific actions in the private in related to the private sector in the report will include things like enacting robust anti-scam policies, strengthening system defenses around the better vetting of platform users, investing in cross- sector information exchanges, and improving the effectiveness of justin time warnings and interventions. In closing, I want to tell you how inspired I've been over the last year by leaders in government and the private sector who are committed to taking serious action.
▶ 0:37:10The American public is asking all of us to take this seriously. Bipartisan majorities of US adults say the federal government is doing a bad job of handling online scam attacks. And there's lots of upside to working on this, not the least of which is returning $158 billion a year to our economy. Thank you.
▶ 0:37:33Thank you very very much. We look forward to your report. Miss Sanchez Adams, you are now recognized for five Chairman Muer, Ranking Member Green, members of the committee, thank you for the opportunity to testify on behalf of the National Consumer Law Cent's low-income clients. Payment fraud is a national crisis demanding a national holistic response from our government. Payment fraud impacts all Americans regardless of age, race, education, income, or political affiliation.
▶ 0:38:02Now, technology has enabled criminal fraudsters to use older forms of payment like bank-to bankank wire transfers and checks to steal money, and these lack sufficient protections. Newer forms of payments, such as peer-to-peer transactions and crypto transfers also enable criminals to steal and launder money in an easier form. Payment fraud can be sorted into two buckets, unauthorized and fraudulently induced.
▶ 0:38:28Unauthorized transactions occur when a criminal fraudster initiates a transaction on behalf of the victim but without their knowledge or permission. On the other hand, fraudulently induced transactions occur when the consumer or the victim themselves initiates the transaction but only as a result of a fraud scheme using deception or manipulation. Now, as you've heard, criminal fraudsters, they spoof real numbers of financial institutions via text message or phone call.
▶ 0:38:54They use deep fakes, take over accounts through malware or breaches, resort to man manipulative psychological practices, and even use violence to get victims to initiate payments. Americans are plagued by both types of fraud, and we need to address both if we're going to combat fraud and instill confidence in our banking and payment systems. But the response that fraud victims get vary greatly depending on the payment method used.
▶ 0:39:18A victim's best chance at getting their money back is if there was an unauthorized breach of their accounts because of the strong protections of the Electronic Fund Transfer Act or EFA. But EA's regulation E exempts certain wire tra trans transfers leaving victims with weak state laws while EBT cards are unprotected entirely.
▶ 0:39:38And if the transaction was fraudulently induced, which you all call a scam, then usually the victim's going to hear, "Sorry, there's nothing we can do because there are no clear protections under the law." We therefore need to update antiquated laws that offer little to no protection to victims impacted by fraud. In this day and age where the vast majority of transactions occur online or through a mobile app, it makes no sense that only some of these transactions are covered by FA and not others. We also need to update EFA to include fraudulently induced transfers.
▶ 0:40:07Following the example of the UK, which recently adopted rules reimbursing victims of authorized push payment fraud with industry recognition that making consumers safe is central to confidence in the payment systems. Protecting victims should be central to any discussion about combating fraud. We absolutely cannot push the burden of fraud entirely onto its victims.
▶ 0:40:28Consumer education is important and necessary, but it alone will not solve the problem of fraud, especially with fraud schemes and technology are ever evolving. However, there are steps that we can collectively take to keep the impacts of fraud on innocent consumers and even financial institutions to a minimum and to um incentivize more effective use of innovation to prevent fraud and make our system safe.
▶ 0:40:50I agree that telecommunication and social media companies must take action to prevent fraud in the first instance, especially since some know that they are carrying fraudulent traffic. If a criminal fraudster cannot contact a victim through fake texts, spam calls or me social media schemes, then the fraud can't occur. Payment systems and financial institutions must also bear greater responsibility in the fight against fraud. Criminal fraudsters need a way to receive those stolen funds.
▶ 0:41:16If these criminals can't get access to our payment rails or deposit holding accounts, then innocent victims won't lose money that way. As such, we need a stronger focus on the know your customer obligations of the financial institution or payment provider that allowed the fraudster or money mule to open an account and receive the fraudulent funds. Victims should be reimbursed by the banks who in turn should be reimbursed by the institution that received the fraudulent payment. If they bear liability, they will use more innovative technology to detect and stop fraud.
▶ 0:41:46This already happens on certain payment networks when there's claims of unauthorized use. Simultaneously, we must give innocent consumers the right to a swift resolution if their funds are frozen or closed by overly aggressive fraud reporting. This is not the time to be weakening consumer protection or the agencies that protect consumers. The CFPB was actively working on addressing fraud, but is now in tatters. And Congress blocked the CFPB from supervising P2P apps which would have helped fraud victims.
▶ 0:42:14And with a change in leadership, the CFPB dismissed an enforcement action invol involving fraud on zel. Meanwhile, President Trump has sparked an effort to reduce the number of checks sent through the mail to and from the government, which is incredibly important given the rash of checkashing fraud. But people will not be comfortable making or receiving electronic payments if they're if fraud is rampant. Moreover, we should not encourage the use of stable coins, crypto assets, and the crypto exchanges when they're a vector for fraud and scams. These payment forms and systems cannot be outside of our consumer protection laws.
▶ 0:42:44Thank you, and I'm happy to take any questions.
▶ 0:42:47Thank you very much for your testimony. Uh we'll now turn to member questions. The chair recognized himself for five minutes. Uh fraud and scams are not new con concepts. I'm extremely concerned by how rampant and as we all are it has become in recent years. Miss Griffin I'd like to start with you. Can you briefly explain the difference between fraud and a scam? And then elaborate when you mentioned that fraud is a national security crisis. Uh who is behind the scams?
▶ 0:43:16Who is behind the fraud? Many think it's it's loan actors. Others as you're expressing it's criminal uh networks. If you could expand please. Yes, absolutely. Um, within the financial services ecosystem, a fraud occurs uh when the customer has no knowledge or participation uh in the transaction.
▶ 0:43:37So, if you buy a coffee uh on the street here in DC and simultaneously your card is used uh to buy a computer in Texas, uh your financial institution says, "Hey, something's going on here that's not right." But you did you had no knowledge of that transaction. in a scam. Uh you have perhaps met someone online. You received a phone call from someone you believe is the FBI asking you to move funds.
▶ 0:44:05You authorize that transaction to your financial institution um and are part of uh the process. In that case, the financial institution has very different sets of information about what's happening in that transaction because you have authorized it. You ask about who's behind this.
▶ 0:44:22Um the annual threat assessment of the US intelligence community has identified these scams unauthor or authorized transactions as part of a nexus of criminal activity threatening the United States perpetuated by transnational criminal organizations and state affiliated groups that also engage in human trafficking, drug trafficking, weapons and human smuggling.
▶ 0:44:46North Korean hackers, Mexican cartels, Russian crime syndicates, and triad gangs affiliated with the CCP are among the US advers adversaries that are benefiting from these crimes. We also know that they are using human traffic victims in some places to commit those crimes. Scam compounds in Southeast Asia may have as many as 400,000 enslaved people forced to commit those scams against US and other country citizens.
▶ 0:45:18Well, thank you. It's quite compelling. M Mr. Benowitz, um what are some of the explanations for the rise in financial fraud and scams? You mentioned 33% increase, I think you said, over a two-year period, and I really appreciate you saying these are not just statistics. The these are people uh that are that are truly being seriously victimized. If you would, please.
▶ 0:45:39Yeah, thank you for the question, chairman. Uh there are three primary drivers of the increase in scams and fraud over time. Just lean into the mic a little bit.
▶ 0:45:51Oh, sorry. The um there are three primary drivers of the increase in scams and fraud over time. The increase in data breaches, the industrialization of fraud, and the rise of AI. Data breaches have tripled since 2020.
▶ 0:46:07And that means there is a plethora, this according to the ITRC and our own data, but that means there's now billions and billions of pieces of personal information that are exposed on the dark web that criminals can use to target people uh to target them with compelling messages from their banks, target them with spoofed numbers. It can that that information is very critical.
▶ 0:46:33Then you take that, you know, no longer, you know, as Miss Griffin said, it's no longer an individual in a basement somewhere. You have criminal organizations across the world that are professional, that have large staffs, at times, human traffic themselves, that are doing this and targeting victims day in and day out. And those two on their own are enough to drive the growth. But then you take AI into it. I said AI was a double-edged sword in the hands of these organizations, right?
▶ 0:47:03You know what would have taken more time and cost to take that information that's out there in the dark web and combine it with information social media and public internet would be harder. That's become easier and easier so that no longer do we have the days of the, you know, the Nigerian print scam with all of the spelling errors, but instead you've got emails that look like they're from your bank that have your account number in there that have your name.
▶ 0:47:30Thank you. Great, great, great answers. M Mr. Bender, uh, relatively quickly, um, the Office of Scam and Fraud Prevention, you brought up there's a lot of discrepancies when it's 12 billion, $16 billion of of of loss to, uh, you know, from these scammers and fraud experts. Talk about that, how important that would be to interconnect government agencies with them.
▶ 0:47:52Sure. I I think that the challenge we've got, we've heard that the numbers that Americans are experiencing scam could be hundred billion dollars. And yet you have to ask yourself the question, who's in charge of scam and fraud prevention in the US government? Is it the Treasury Department? Is it Department of Justice? Is it Department of Commerce? We have no central point to report these. And in fact, consumers are confused of where they should even report a scam or fraud. Should they report to the FBI? Should they report to the CFPB? Should they report to FTC and others?
▶ 0:48:17So having a central place where we could report this information that could be acted upon to actually take action for the consumer.
▶ 0:48:23My apologies, we have to finish this later. My my time is expired. Um, we will now turn to the gentleman from California, Mr. Licardo, for five
▶ 0:48:33Thank you, Mr. Chair, and thank you each one of you for um your testimony. I wanted to ask one question and ask for hopefully the feedback of each of you if we can get it all done in five minutes. Um, let me describe the basis of the question. Uh, we've been very active in this committee in attempting to set up rules to govern cryptocurrency. uh and that's long overdue.
▶ 0:48:57I think many in the industry would agree that uh this is an area that needs uh some settled regulation rather than regulation by litigation or other approaches have been taken in the past. Um we know that trillions of dollars are transacted and centralized exchanges and and decent decentralized uh protocols every year. Uh that number is increasing rapidly.
▶ 0:49:22Uh and with that quantity of exchange obviously to the extent that particularly it's happening off of decentralized exchanges there is increasing opportunity for fraud uh and for theft as well as money laundering and other kinds of criminal activity.
▶ 0:49:40We have recently in the House of Representatives passed a bill clarity act that governs what happens on centralized exchanges and perfectly or imperfectly has established know your customer requirements, anti-money moneyaundering requirements, other rules to establish centralized exchanges.
▶ 0:49:59But we know increasingly the activity is moving from centralized to decentralized to DeFi uh protocols and because of pseudony anonymity person on one end of the transaction doesn't actually know the identity of their the person at the other end of the transaction and if they try to get a subpoena or they call the FBI to say I was defrauded uh they can't even find out who it was doing it. So the question is what do we do about DeFi?
▶ 0:50:28uh that wasn't addressed in the bill that passed through the House. So I'm interested, Mr. Sanchez Adams, do you have any particular views?
▶ 0:50:37Yeah, as I mentioned in my testimony, I think that regardless of the market regulation and structure of the bill, you have to protect consumers. So if you update or clarify, you can, you know, the CFPB can do it through guidance or you all can do it through legislation that the FDA applies to crypto transactions, then those platforms will be held responsible and liable when consumers are defrauded, especially if you also update it to include fraudulently induced transactions.
▶ 0:51:01But if it's off a platform, what do you do then?
▶ 0:51:04I mean, you you mean if it's um like from an unhosted wallet?
▶ 0:51:08That's right.
▶ 0:51:08Right. So, I mean, you can I think that there are problems with crypto and with the technology aside from that, which I'm happy to talk about at another point in time, but I think you still hold them liable. They're the party or the entity that is receiving the fraudulent fund. And so, you know, if they're unfortunately it would be like I'm acting in cash and I'm transacting in cash, right? So, if I have an unhosted wallet that's being used to pay somebody else who has an unhosted wallet, it's like I'm giving them cash.
▶ 0:51:33And so, you know, they can't be regulated the same way as a bank could be regulated, but they're still subject to criminal um
▶ 0:51:41Thank you, Mr. Griffin.
▶ 0:51:43Thank you for the question. And uh the forthcoming report will have a number of recommendations related to this. Um one of which will include establishing param uh parody of law enforcement powers uh across money movement including the civil forfeite of digital assets. Um, so some things about treating digital assets as cash for purposes of of the civil forfeite of fungeable property. Um, clarifying US Secret Service authorities regarding those asset transactions.
▶ 0:52:12Essentially, how do we empower our law enforcement to be able to go after uh when crypto is involved in the transaction? I think the other element of this that that's come up quite a bit in the task force deliberations is is also related to the risk posed by crypto ATMs.
▶ 0:52:28um ATMs that are placed in um community uh stores in in nursing homes uh in retirement homes uh and where people are directed to put uh their hard-earned cash into those ATMs for the purposes of sending to um to criminals and uh that's an area where we think there's uh greater need for for you all to be investigating.
▶ 0:52:50Thank you, Mr. Pre. You might have the last word. Yes. Well, thank you for the question. I'll be very brief. I think from our standpoint, I go back to what I said. I think awareness is very very important. Consumers are unaware of the in the incredible risk that crypto poses and crypto poses. It is at the heart of a lot of different scams because people get excited about uh the potential returns. They don't know when they send crypto to an individual what risks that they're opening themselves up to.
▶ 0:53:18So making people more aware of the risks of crypto and how they should be much more thoughtful of when they are putting cash into crypto and where they do that is very very critical to combating this
▶ 0:53:30At the very least we should be making them aware if they're on a DeFi protocol as opposed to a centralized exchange with those kinds of%.
▶ 0:53:38Thank you very much for your testimony. Thank you. I yield.
▶ 0:53:41Gentleman yields. The gentleman uh from Arkansas, Chairman Hill, who's uh our chair of our full committee, is now recognized for five minutes.
▶ 0:53:48Thank you, Chairman. Again, thanks the panel. Great panel. Good discussion. Um and I noted in my opening statement that, you know, our family was hit with wash checks from the postal service and uh really offensive.
▶ 0:54:02I want to credit my bank for finding it and recognizing the fraud and stopping it and helping work with the FBI and the local police to put the people in jail, which I was happy to do, but there are millions of people where around the country that that's not happening uh to so this is such an important hearing. Uh Mr. Bender, I want to start with you and thanks for the ABA taking a keen interest in this. Every all the comments I've heard is 100% true. There's just not a way to get at this.
▶ 0:54:30It's it's a it's a whack-a-mole situation and we don't have enough mole whackers uh working on it. And one of the things noted was you said maybe a hundred billion dollars of losses. And one of my complaints is we can't measure or tackle things we can't see. And I've argued that the bank call report should break fraud losses out of other expense and make it its own line item. Would you support that, Mr. Bendum?
▶ 0:54:56I think it's important for us to track uh fraud and scam losses in a consolidated manner. Uh that would be one thing we'd be open to looking at
▶ 0:55:04Good. Thank you. Um also this all of the above law enforcement effort that it takes and all of you have kind of touched on that in your different um uh remarks and answer of questions. I went to Tyler, Texas to look at the Tyler Law Enforcement Center that the state of Texas has set up there to combat debit fraud. so focused on debit skimming mostly at in fuel pumps operated by cartel related gangs across Texas. Millions of dollars lost per month.
▶ 0:55:35Uh the card issuers are the eaters of those losses, not the merchants generally. Uh what should we ask merchants to do in terms of 24 hours, 7 day a week microscopic telecommunications pump uh point of sale fraud. You mentioned ATM, similar issue to prevent skimming. Who wants to tackle that question? Miss Griffin, you want to tackle that?
▶ 0:55:59Uh, I think the only thing I'll say is we have a number of um uh members in in the task force I know that have been working on this issue both related to uh EBT cards as as Miss Stanchas Adams brought up as as well as other types of of transactions. Um there are um increasing and emerging technologies they can use at the point of sale devices to to detect when a skimming device has been put there and more investment in that is
▶ 0:56:22the the technology I saw is smaller than my little fingernail. It's inserted in the skimmer both at point of sale at retail and at a gas pump and it's downloaded by Bluetooth to the criminal who just walks by the pumps on a regular retrieval basis. And this is, you know, not your grandmother's fraud like you're all making the comments. This is super sophisticated.
▶ 0:56:45Attorney General Tim Griffin in my state has set up a financial fraud task force to bring all the forces together in Arkansas to combat this. Text, phone, mail, check, the whole uh effort. So, I really commend him for that. Miss Griffin, I I wonder what your view of of how those stakeholders should try to work together on a national basis to do best practices.
▶ 0:57:13And in the in my example in Arkansas, tens of thousands of dollars missing, 1.5 million out of my post office just in my little neighborhood was the publicly reported number. We have one postal inspector for the state of Arkansas, 3.4 million people. Uh so can you comment on the role of the FBI, the US Postal Service, and other law enforcement? Thank you, Miss Griffin,
▶ 0:57:35Yes. Thank you. I um first of all um uh those agencies were all very active at our table. Lots of dedicated leaders focusing on this. And one thing that we heard quite often um is that um the collaboration around scams is a sight of the desk activity. Uh there's not a directive from the top that uh anti-scam activity is a leading priority for law enforcement.
▶ 0:57:59And one of the actions that we believe um can be facilitated by naming scams as a national priority to mount a coordinated response is to direct law enforcement to create greater resources towards those kinds of collaborations because as you rightly mentioned they will yield benefits.
▶ 0:58:13Yeah. And it's a cross congress problem. I mean, you know, we don't control the FTC on this committee, and yet the FTC and the FCC should be very involved here due to the transmission means that you've all addressed like in in telecommunicationbased scams, which is the fastest growing, the most accurate. You've all testified to that.
▶ 0:58:35So I think we've got to link the financial services industry with uh you know the transmitters transmission capabilities which is mail uh and telephone and text and internet. So I want to thank the panel. Mr. Muser, thank you for a great hearing and I yield back.
▶ 0:58:53Uh the chairman yields back. Uh the gentleman from Texas, Mr. Green, who is the ranking member of oversight and investigations, is now recognized for five minutes.
▶ 0:59:03Thank you, Mr. Chairman. Uh and again I thank the witnesses for appearing. Uh let me start with a basic premise and this premise is that consumers need all of the help they can get from whatever agencies are available to them including the consumer financial protection bureau which is currently under assault.
▶ 0:59:28Currently, an effort is a foot to remove some 1,500 of the personnel from the CFPB. This would be tantamount to moving about 90% of the staff. Consumers need all the help they can get at a time when this president is eviscerating the Consumer Financial Protection Bureau.
▶ 0:59:55Now, uh, Miss Sanchez, uh, you made a comment earlier, Sanchez Adams, about the CFPB. Um, some of what my colleagues, my friends, as witnesses are calling to our attention are things that the CFPB could be associated with, and if needed, we could expand what the CFPB can do.
▶ 1:00:18Someone said, "We need a central point of contact for consumers." Well, that sounds like a consumer financial protection bureau which is being eviscerated. This hearing is quite amazing to me.
▶ 1:00:36We want to help consumers by some standards, not mine, by eviscerating the agency that helps Miss uh Sanchez Adams, would you kindly
▶ 1:00:51Yes, I agree. Um the CFPB in January of 2025 entered a consent order against Block uh which is the owner of Cash App for fraud that was happening there. Um they weren't investigating properly unauthorized use claims under EFA. So that was one of the violations as well as some you know a lot of other uh promises about a protect uh about a system that was safe and was supposed to protect them.
▶ 1:01:15Now, under that order, they're supposed to receive a consumers and victims who were impacted by unauthorized use that should have already gotten their money back are supposed to get $120 million in redress. However, they haven't received a penny yet. I think part of that is there's a reduced workforce that is not able to do the work that it's supposed to be doing for that reason. So, I agree with you that we need to restore the strength of the CFPB.
▶ 1:01:40Yes. And you mentioned zel. Uh, explain.
▶ 1:01:44Yeah. So they had um also in in 2020 I I believe it was December of 2024 they had filed a suit against zel for simol similar infractions. So they also were not responding to the EFTA unauthorized use claims properly timely reimbursing impacted victims and also they knew before it was time to launch the product that it wasn't yet safe and didn't have all the guardrails that it may now have in place um at the time because they didn't want to lose market share.
▶ 1:02:12And so the claims and the petitioners that they launched it before it was safe um as a violation of the CFPA. Uh unfortunately, as I mentioned in my testimony that uh with the change of of uh leadership at the bureau, that uh suit was dismissed, though it was picked up by the New York uh attorney general's office.
▶ 1:02:30And are you familiar with the uh Townstone financial case?
▶ 1:02:35Okay. This is invidious discrimination against black people. Settlement was at hand. tell us what happened, please.
▶ 1:02:42Yeah, in that case, there was actually a court order um and they were ordered to pay money back and the bureau decided it did not want to um to pay that money out or to enforce that order and they wanted to vacate that order um and uh the court did not allow them to do so.
▶ 1:02:56What what signal are we sending to consumers when we complain about their the atrocities that they have to suffer and we eliminate the agency that's there to help them? What what's the signal that we're sending, please?
▶ 1:03:11That we don't care about them.
▶ 1:03:13And if we don't if we cared about consumers, would we eviscerate the Consumer Financial Protection Bureau?
▶ 1:03:19Not in my opinion.
▶ 1:03:21Uh what what could we do uh to strengthen it? In your opinion,
▶ 1:03:25we do need to restore the funding so that is able to function the way that Congress designed it to function under the DoddFrank Act. Um and we also should not eliminate the workforce that is there to do the job of protecting American consumers. This is another example of how the president creates a problem and then decides that he'll solve the problem with the solution that was already there.
▶ 1:03:50This is unbelievable that we would find ourselves now eviscerating the Consumer Financial Protection Bureau and saying that consumers need protection. I yield back.
▶ 1:04:02Gentleman yields. The gentleman from Georgia, Mr. Louderdermilk, is now recognized for five minutes.
▶ 1:04:07Thank you, Mr. Chairman, before I get on with my main line of questioning, Miss Miss uh Benda, no Mr. Benda, I'm sorry. Yeah, my apologies. Um Miss Sanchez Adams suggests that simply shifting losses from one party to what would this do in practice?
▶ 1:04:32So, I think we can see um we can see an example of that in the UK. They have a reimbursement framework that she mentioned. Uh if if a consumer is fraudulently induced of transferring a payment, they're liable to reimburse up to £85,000. Um so the hope was that this was going to greatly reduce the amount of scams and fraud out there for investment. What unfortunately has happened is that banks had already heavily invested in anti- fraud and anti-cam protections. Scam losses only went down by one and a half%.
▶ 1:04:58The challenge it would create for banks though here in the US is not only wouldn't necessarily reduce scam losses, it would put banks in the uncomfortable position of trying to tell American consumers how they can and can't spend their money. We talk about sending, you know, we don't want people to send money to someone they don't know and trust. By the time they're ready to make that payment, they believe they know and trust who they're talking to. We have countless stories where you can talk to a family member that couldn't convince someone not to send money. And now you're going to have a bank teller that's going to be responsible for making that decision.
▶ 1:05:25We don't believe that Americans want banks telling them who they can and can't send money to.
▶ 1:05:31And and while I've got you, Mr. Benda, I apologize. Um the Georgia Bankers Association brought uh something to our attention earlier this year. And as the uh the chairman of the full committee, Chairman Hill, brought up, we've also in Georgia have had a a big issue with uh checkashing, especially through the post office. Stealing of checks and uh I mean, hundreds of thousands of dollars have been uh fraudulently stolen that way.
▶ 1:06:02And they brought up a scenario where uh the fraudster, the criminal would go to a non-local bank and most likely using fraudulent identification would open a bank account and that would pass the know your customer standards. Then way that they would take these fraudulent checks and deposit those in that bank.
▶ 1:06:28But instead of the big bank putting a hold on the check, they're paying those checks and clearing them. Um, is that a problem that you have been aware of? Is this something that would would be an easy fix of requiring the banks to to hold the checks?
▶ 1:06:46So, check fraud is a is a very substantial problem that's does not appear to be going away. We have a lot of challenges right now with fake IDs that are out there. If anyone has a college age student, they know that it's relatively easy. AI is now allowing criminals to generate very realistic looking statements from a utility company, from a telephone company. And so banks have are really struggling with when the the documents being used to open an account are look completely legitimate in many cases pass through uh certain verification procedures. So open up those accounts.
▶ 1:07:14So we trade banks to do is look at the age of the account, look at the holistic nature of what is being done, what is the pattern of deposits. And so banks would like more flexibility quite frankly on being able to hold those checks. certain checks have certain timelines and when they have to release the fund such as a treasury check. So I we would be very open to having a discussion of how we could increase those hold times appropriately when fraud is suspected and that is something our members would be very interested in.
▶ 1:07:38Okay. Thank you for that. Um in your testimony you mentioned that criminals effectively took advantage of the economic devastation during co 19 especially the unprecedented government uh response to support small business and out of work Americans. How has the CO 19 pandemic had a lasting effect on
▶ 1:07:59Well, and I think Mr. Benitz mentioned that the identity theft that's out there. And so, let me give you the example. We talked about that trust issue that the scammers built. If you get a phone call that comes in, it shows the number on the call ID of your bank and they say, "Mr. Louderdermilk, is this you? Do you live at this address? Does this last for your social security number? Can I talk to you about some potential suspicious transactions on your account?" The vast majority of Americans don't realize that all that information is out there.
▶ 1:08:24don't realize their phone number can be spo that the bank phone number can be spoofed and they're going to believe they're talking to their bank and they're going to give up that information. That is the challenge that we face. We face a very sophisticated criminal adversary that's leveraging the loss of all that information and the technology available to them to steal from American Has the uh pandemic actually helped create new criminal networks? I believe.
▶ 1:08:53So what we've seen is the unemployment insurance fraud created that market for that the personally identifiable information, but it also created um a belief that this white collar crime isn't getting enforced. So check fraud vastly increased after 2020. Identity theft increased after 2020. These white collar financial crimes have vastly gone up and unfortunately enforcement due to lack of resources simply hasn't kept up.
▶ 1:09:17Okay, I see my time's expired and I yield back.
▶ 1:09:20General yields back. The gentleoman from California, Miss Waters, who is also the ranking member of the full committee, is now recognized for five minutes.
▶ 1:09:30Much um let me just start by saying Donald Trump is the most profound pro- fraud president in history. Um, he dismantled the CFPB, rolled back protections, and dropped lawsuits against big banks and crypto scammers, making it easier to um, basically scam retirees, students, and working Americans.
▶ 1:10:00He's 7.77 billion richer and continues profiting off the presidency at the expense of constituents. Under his watch, fraud targeting American consumers has soared. From meme coin pump and dump schemes to insider training linked to his own tariff announcement.
▶ 1:10:22Miss Sanchez Adams earlier this year, Trump's CFPB, since he took it over, dropped a lawsuit that the agency previously filed against Zel, Bank of America, JP Morgan Chase, and Wells Fargo, where they found hundreds of thousands of consumers lost nearly$1 billion dollars through various payment fraud schemes.
▶ 1:10:48With reinforcement cases like this being dropped by the Trump administration, how will these harm consumers get their money That's a great question. Thank you for that question. Unfortunately, right now they're they're relying on their state regulators to pursue that enforcement. So, as I mentioned earlier, the New York AG filed suit against Zel for the same um actions, but that's only protecting New Yorkers and the rest of the country also needs protection. You don't want to hear from your constituents.
▶ 1:11:17Why aren't you doing anything? New York's doing something, but we're not doing anything. So, that would be one answer is that we need more protection by the CFPB, more enforcement instead of drop suits.
▶ 1:11:30Well, let me just say that this hearing is a sham. Committee Republicans are defunding the very agencies designed to protect consumers and oversee the financial system. Just two months ago, Republicans voted to eliminate half of the CFPB's budget. You heard all that discussion this morning, all while rejecting every attempt by Democrats to reign in Trump's crypto fraud.
▶ 1:11:57Instead of protecting consumers, committee Republicans have chosen to enable scams and defend Trump's fraud first agenda. What can we expect further from the CFPB that is now been reduced to practically nothing uh with all of the layoffs and firings etc etc. What can we expect them to do? How much more harm can they re on the American people?
▶ 1:12:27Thank you for that question. you know, unfortunately, uh, taking steps to to deregulate the industries that pose a threat and harm consumers is not the right step to take. And I hope that that is not what continues. I hope that they don't um, bend to the pressures of industry to to let, you know, let them do what they want and continue to harm consumers.
▶ 1:12:49I hope that they do continue to enforce laws and I hope that they continue to do supervision like they're supposed to do um instead of weakening their the you know their efforts to protect consumers.
▶ 1:13:00Would you agree uh that the way that they have defined this hearing fraud in focus exposing financial threats to American families is misleading. I hope that we are taking steps to protect families against fraud and not just paying lip service.
▶ 1:13:25And so uh having a hearing like this where uh the opposite side of the aisle is talking about fraud in focus again exposing financial threats to American families.
▶ 1:13:40Do you think that uh based on some of the comments that I have made about the consumer financial protection bureau and others, I was one of the ones sitting on the uh conference committee of DoddFrank reform when we actually got some protection from consumers with the CFPB? Do you think that I have at all u somehow defining correctly what has happened to the CFPB?
▶ 1:14:12No, I think it's accurate that um they are not doing the job that they were ordered by Congress to do. They're not currently protecting consumers against
▶ 1:14:22Is there anything that you think they can say uh to deny anything that I have said? No, I just hope that that Congress restores their funding and they hire their employees back so that they can get back to doing their job.
▶ 1:14:35Thank you very much. I yel back. Gentle lady yields back. The gentleman from Tennessee, Mr. Ogles, is now recognized for five minutes.
▶ 1:14:41Thank you, Mr. Chairman, and thank you to the witnesses for being here. Mr. Benda. Uh, the banking industry has reported that fraudulent ads purchased through Google and Meta are being used to impersonate legitimate financial institutions, tricking families into handing over sensitive credentials and wiring away their life savings, otherwise known as mall advertising or mal advertising. When banks flag these ads, what specific obstacles do you face in forcing big tech to remove them quickly?
▶ 1:15:11And are these platforms effectively profiting while dragging their feet on takedowns?
▶ 1:15:16Thank you for the question. Uh so I think that what we are seeing is significant levels of profiting from these ads. The the best source we have is a Wall Street Journal article that said Meta earns 160 billion from ads. They estimated 70% of those ads were there illicit or poor goods or fraudulent ads. Uh it can take 8 to 32 strikes to take down an ad. And so you can imagine someone reporting something 25 times isn't sufficient. It has to be 30. So I would say not all social media companies are the same. Uh Google is an example I think of a company that is is improving.
▶ 1:15:47They have a priority flagger program that they partner with financial institutions to report things. Uh during the pilot they took down ads with um they took down around 97% of the ads that were reported uh within a very quick time frame. We think that type of activity needs to be done across all social media platforms whether voluntarily or mandated. But we also think when user sponsored content, which the Google priority platform doesn't account for, uh, needs to have a way to be examined when they're portraying themselves as a financial services company and luring people into scams.
▶ 1:16:17And just to clarify, you said meta 160 billion, roughly 70% was fraudulent.
▶ 1:16:22That is what the Wall Street Journal reported. Sir,
▶ 1:16:24Miss Griffin, the GAO has found that responsibility for countering scams is spread across 13 federal agencies with no real coordinated strategy. Given that advertising on Google and Meta is now a common vector for fraud, should national anti-fraud strategy explicitly include requirements for these platforms to vet and verify financial advertisers before an ever an ad ever goes live?
▶ 1:16:49Thank you for the question. One of the things that was clear in the uh conversations we had among the task force members which included the companies we're talking about today is that there are very different business incentives um and legal and regulatory requirements across these different sectors.
▶ 1:17:06Um, we believe that there is a a an important step to take that outlines the private sector expectations or responsibilities that that companies have for scam prevention and combine that with good Samaritan legal safe harbors when firms act in good faith to prevent scams. Um, doing so I think will go a long way towards um creating a better playing field for all of these different sectors at the table.
▶ 1:17:33Mr. Bednoitz. Your company specializes in monitoring and protecting consumers against identity theft. From your vantage point, how often do victims first encounter fraud by clicking or fraudulent search and/or social media promotion? And given the sophistication of AI generated scams, do you believe that Google and Meta so-called consumer education efforts are keeping pace with the real threat? Are they leaving Americans to fend for themselves?
▶ 1:17:57Yeah, thank you for the question and it's a very good one. You know, I'm looking at data here from our own protection. We see that 63% of scam related threats were observed on Facebook, 22% on YouTube. Uh, and criminals are using AI generated personas and deep fakes to make these scams appear legitimate like what we're talking about here. And there's also another vector of threat from the social media companies by them encouraging people. It's in their best interest for people to have their information publicly.
▶ 1:18:26And people don't realize that they hide privacy uh controls. And the more information that's out there, the easier that criminals can take advantage of that and use that with AI to put together sophisticated profiles that allows them to target people in the most personalized ways possible.
▶ 1:18:43Well, you know, I want to caution, you know, when you're a hammer, i.e. the federal government, everything looks like a nail. And so, you know, last thing I want is more government. Uh which is why I supported gutting the CFPB. In fact, in a hearing, I said to be or not to be. And I said the one agency that deserves to die the most painful be death is in fact the CFPB because the regulatory restraints they were putting on small banks. But that being said, when you look at this issue, the crisis at hand, especially the seniors, but in general the scams and the loss of funds, Mr. Bendo, what can we do?
▶ 1:19:13And we have 28 seconds. What can we do to fix this?
▶ 1:19:17I think one of the things that's critical is to have a takedown process. We recognize these ads are up there when they're when someone is being impersonated. Say your local banker and it's scamming people into um crypto schemes that needs to be taken down. Needs to be taken down quickly at a minimum. You'll get the last word.
▶ 1:19:38I agree with what Mr. Benda is saying. There needs to be vetting of the advertisers on the platform and then also pressure to make privacy controls more transparent to the consumer.
▶ 1:19:50Thank you, Mr. Chairman. Thank you to the witnesses. Have a great day. Gentleman yields back. The gentleman from Louisiana, Mr. Fields, is now recognized for five minutes.
▶ 1:20:00Thank you, Mr. Chairman, and thank you, acting rank ranking member. And let me thank all the guests who are here today as well. uh in in Louisiana, we've faced uh we've been faced with uh a different type of fraud. Uh we have had uh and and it and it's not just the elderly. It hits all ages where um a person or group of people will send a text message.
▶ 1:20:25The most recent was a text message reportedly from the DMV uh saying you have to you know pay a fine a ticket that uh happens whenever a go or you will lose your driving uh uh privileges and they give them a certain time. I have the email here.
▶ 1:20:50Actually, they sent it by text, but the but it's from an email and the attorney general um obviously went to work to uh try to find out the u you know the the origin of this uh bad uh email. But there were just good people, you know, young, old, uh, all races of life, all walks of life, and and and and many of them were responded.
▶ 1:21:17What can we do to figure out where the emails come from? Do we have a system in place to do that? And that's for all of you because uh it it's it's hitting our state hard and uh and it's just paining to hear constituents call and say, "Should I pay this ticket? I don't remember it, but should I pay it?" And then you say, "It's a scam." You know, uh what could we do?
▶ 1:21:47I'm happy to take that question because I've gotten the same text message over and over again. Um, so part of it is as as we put in our paper, um, in our written testimony, we have recommendations that telecommunication companies should do to prevent those types of text messages from hitting consumers. Um, they should do the same thing that banks do of knowing your customer. They should do the exact same thing. um as I mentioned, they know when they're trafficking um you know, fraudulent activity.
▶ 1:22:14They just don't have the incentives to stop that, which is why we think the FCC and Congress should act to require um higher and stiffer penalties. I know that's outside of this committee. Um and I think we should not wait for them to act. This committee can also act and part of that is my recommendation that consumers are also made whole um and that they are reimbured for fraudulently induced payments. Um, we need to have everybody acting to protect consumers.
▶ 1:22:43I'd like to add to that. Thank you for the question. Um, and certainly that particular text message is one we're all familiar with. Um, we spent a lot of time in our task force really talking about the interface between the private sector and law enforcement and their ability uh to share information with one another about things like this. um that um would create better information for law enforcement to act and better information across the private sector.
▶ 1:23:10So that for example, if someone acting on that text message directed their financial institution to send a payment, financial institution might have information that helps to disrupt or stop that payment. Um and um there are not clear or easy protocols right now for law enforcement and and the private sector to be sharing that data. Um it's a critical element that we'll be talking about more in the forthcoming report. Often in fact those things are done manually.
▶ 1:23:39We heard tales of stacks and staff stacks of PDF files with hundreds of pages of raw data. um and knowing that uh what we know about the ways that we have technologically to be able to share that data. It's an issue that I think uh we can make some real progress on um to be able to strengthen everyone's ability to act.
▶ 1:24:00Thank you.
▶ 1:24:01Thank you for the question. I would say there are two two ways that we can address this. I look at this from the consumer angle. Uh one is awareness and I come back to this a lot. If people have vigilance, we have to tell people that they can no longer trust communications coming from SMS, email or phone. Anything that comes, they need to go and verify that. They need to stop, breathe, verify.
▶ 1:24:26The other thing that I would say is there are solutions in the private sector that can help that can scan people's uh emails, texts and block their phone calls so that these things they get awaren they get warnings or they get blocked before it ever reaches them.
▶ 1:24:42And there are interfaces that have AI to be able to battle AI that they can take these communications put them in that are trained on millions and millions of scam emails to say, "Hey, is this a scam or not?" So, they also need that level of protection. In a world where the scammers have AI, we need consumers to have AI to defend them as
▶ 1:25:05Um, I'm out of time, but I would love to hear your response. I think I'll yield back the vows.
▶ 1:25:12Gentleman yields back. Uh, the gentleman from Florida, Mr. Herodopoulos, is now recognized for five minutes.
▶ 1:25:19Thank you, Mr. Chairman. I first want to express my gratitude to our sheriff back at home, Sheriff Wayne Ivy. He has been very aggressive in getting out the information. As I think everyone in the room knows, this is all about prevention because the odds of catching these characters are very, very low. And it's great to see law enforcement leaders like my sheriff, Sheriff Ivy, getting out there using social media for the positive and making sure that people recognize these scams as each of you are talking about so that we don't even uh have these problems to deal with in the first place. As people are aware, I think they're making smarter decisions.
▶ 1:25:49I actually talked to one of my friends today talking about a financial issue. He said, "Can you please give me a call? I want to make sure it's you asking me this question." I think that's a lot of the things that that we're going through in this in this real life world. So, I really applaud the locals uh getting into that. Uh Miss Griffin, I'd like to ask you the first question. Um I'd like to focus on your work with the National Task Force on Fraud and Scam Prevention, which I understand is a working group with law enforcement.
▶ 1:26:13How do federal, state, and local groups work together so we don't have these different silos, but they actually work in concert so we're not wasting resources and and getting this broad message across.
▶ 1:26:25Absolutely. Thank you very much for the question. Um, and I just have nothing but praise um uh for the dedication and passion of law enforcement agents working on this issue across local, state, and federal agencies. Um we heard multiple instances of local task forces where um that sort of multiplicity of of agencies were working together in a local community um both to try to deconlict cases and to try to raise awareness in those communities.
▶ 1:26:52Um, but I can't stress enough how often we also heard that this was a side of the desk activity, that this was happening in off hours um through the passion and dedication of those agents and not because uh anti-cam efforts were a dedicated priority of the agencies in question. Um, we also heard that there's a greater need for more training of of local law enforcement agents on how to work with scam victims.
▶ 1:27:18Um, and so that when a victim does come forward to local law enforcement, which is rare, um, they are treating that victim um, uh, in a way that a shows compassion, but b uh, is able to elicit the information that we need in order to go after those
▶ 1:27:35Well, thank you. And I'll build in the question, and I know recently I spoke with my other sheriff down in county, Sheriff Flowers. almost daily he has people coming in saying, "I I I thought this person was uh this person versus that person and and tens of thousands of dollars. This is not a small scam. This is a serious number, at least in the communities that we're living in." And so, um, how how do those local sheriffs share information, Miss Griffin, across the jurisdictions so that uh, one can quickly get the scam out there?
▶ 1:28:05I I know whenever I get the oddball text, I'll often go to one of my search engines and say, "Is this number real? Is this real? And and it's and it's hard to say. How do we make sure that once we see a a small activity, maybe others can uh chime in on this as well that we quickly get the information so we stop that scam and it tracks of people are are are alert enough to say is this real or not?
▶ 1:28:28Yeah. No, it's a great question and there are multiple resources available for consumers, but the fact that there are multiple resources available for consumers then makes it also sort of a noisy environment. and where do consumers turn to is is um a real question I think that we need to solve for. Um there's also um not always easy ways um for law enforcement to know what to do in that scenario.
▶ 1:28:51We talked earlier today about how the criminals who are perpetrating these crimes are often um uh representatives of of foreign criminal enterprises and so the jurisdiction of local law enforcement is quite limited in that case. And so their ability to then um lies effectively with federal agents who can take action um is something that we need to create um more strategic and streamlined pathways for them to do so.
▶ 1:29:16Well, thanks M. Griffin. I'll just close with this, Mr. Chairman. I really applaud my local sheriff, Sheriff Ivy and Sheriff Flowers. They're really aggressive getting out there in their local community and and I'm glad that we're raising this awareness. That's probably the biggest weapon we have. As you mentioned, Miss Griffin, so many of these criminal syndicates are not within the borders of the United States, and the likelihood of recovering these dollars is very, very slim given the realities of these crimes. I think I know some folks have talked about the CFPB getting involved in this issue. You know, this is a front-end issue. This is not a backend issue.
▶ 1:29:44The likelihood of us kind of coming through with some government agency to recover these are probably pretty slim. But I I hope that we can use the coordinated efforts uh for the future so that when one scam happens we can uh use the power of the internet in positive ways so that people realize if you see this number beware. Uh these are just the challenges of the day. It's frustrating. We have so many great innovations coming with social media but these are clearly one of the attractions from it. So with that Mr. Chairman thank you for highlighting this issue.
▶ 1:30:10It's a huge issue unfortunately in our district and the fact that you're bringing this to people's attention probably save a lot of folks a lot of money. Thank you. Gentleman's remarks are appreciated. The gentleman yields. The gentleoman from Georgia, Miss Williams, is now recognized for five minutes.
▶ 1:30:25Thank you, Mr. Chairman, and thank you to all of our witnesses today for your testimony and being here. I appreciate my Republican colleagues for focusing on this hearing and exposing financial threats and potential solutions to fight off fraudsters in this space. But y'all, I do need to point out that we had an independent watchdog that helped to protect consumers and deliver dollars back to constituents, and it was the Consumer Financial Protection Bureau.
▶ 1:30:51But my Republican colleagues decided in the billionaire bailout bill to reduce funding for the CFPB, leaving opportunities for fraudsters to flourish. And since acting director VA's takeover of the CFPB, ongoing cases to hold financial institutions accountable for deceptive practices have been dropped. Many of the rules that were either proposed or implemented by former director Chopra have been dropped as well. All of which were aimed at helping consumers find relief.
▶ 1:31:20And the most baffling is midepptember, y'all. And we still have no clue when the acting director is going to testify in front of the full committee. Perhaps I missed the memo, but what we're focused on today is or my focus today is on the consumer. The billionaire bailout budget opened the door for scammers, a poison CFBP, and pivoting from the previous administration's rulemakings that put consumers over schemers. And y'all, the schemers are real.
▶ 1:31:51I just heard this week an a news report down in Columbus, Georgia, where the local sheriff's office working with the FBI was at point of sale transactions at Target, Walmart, gas stations pulling the spiffers from the machines because people's cards were being cloned and purchases being made all over the country. And then of course, we're all too familiar, like my colleague from Louisiana stated, those text messages where even my 10-year-old son Carter is like, "Mommy, I don't drive a car.
▶ 1:32:21What do they mean they're going to take my driver's license if I don't pay?" And so, this is rampant across the board. But because of these reductions at the CFPB and all of the changes, I'm going to use this time to remind the American people how this administration is p prioritizing scammers and fraudsters and hurting our Miss Carles Sanchez Adams.
▶ 1:32:44Last December, the CFPP announced it at the time that they were distributing 1.8 8 billion with the B billion dollars to 4.3 million consumers, including $13 million delivered to Georgia for consumers that were harmed by a group of predatory credit repair companies. That's real money. This is the largest ever distribution from the bureau's victim relief fund in history. And I applaud the bureau for acting against these scams.
▶ 1:33:10But I think we know that there is still widespread financial scams like this that are still ripping off American consumers. Miss Sanchez Adams, have you heard of this type of financial scheme? And is this the type of scam impacting customers that you work with?
▶ 1:33:25Yeah, so that was loud. Um, credit repair organizations, um, you know, quote unquote, uh, do charge consumers to help them fix their credit. And often they actually charge and collect that money before actually doing anything to help address some of the credit issues. Or they make false promises that they can do something that they can't actually do. It is indeed a big problem and I agree with that. I also just want to take this moment to respond to something that we said that like fraud and scams is a front-end issue and not a back-end issue.
▶ 1:33:55I take issue with that because fraud encompasses both the scams and also unauthorized use. And I hear so many cases where consumers are being impacted by unauthorized use, meaning someone takes over their account, someone initiates a transaction without them knowing about it, and yet their banks aren't making them whole, even though under the law they're supposed to. And not just banks, but P2P apps, which was what the Zela lawsuit and the Cash App lawsuit were about. And that's supervision.
▶ 1:34:22That is the bureau stepping in and saying, "Hey, you guys aren't complying with the law. You're supposed to be protecting consumers." So, I just wanted to clear that up.
▶ 1:34:29Thank you for that. And building upon that and the conversation around the pred predatory practices around cleaning up your credit reports, do you think there's an opportunity for Congress to crack down on these scams and better protect consumers who are trying to get their financial lives back on track and just trying to live in this economy?
▶ 1:34:48So, Miss Sanchez, I asked because as someone who spent years paying off my student loans, they are done, y'all. I owe zero student loans. My husband, that's another story. Chairman Muser, we're still working on his. that I spent years paying off my student loans. I understand how important it is to understand debt and building credit worthiness and is still an important issue to fight off predatory actors in the credit repair space. I remember during my first term in Congress when we were in the majority then chairwoman waters would hold hearings and testimony from the CEOs of the largest banks.
▶ 1:35:18We haven't had that in a while. So I hope that is coming. And I see that I am coming up on time. So Mr. Chairman, I want to leave this last question on the record to get a written response. What do you say to consumers who the banking industry has failed and who have relied on the CFPB as the final course of action when all else has failed them? I would love to get that on the record in writing. Thank you
▶ 1:35:39and I yield back.
▶ 1:35:40Okay. The gentle lady yields. The gentleman from North Carolina, Mr. Moore is now recognized for five minutes.
▶ 1:35:46Thank you, Mr. Chairman. You know, financial fraud is touching every corner of our society and and no demographic is immune. This isn't a Republican issue, a Democratic issue. Uh this is an issue that that impacts uh everyone, you know, from sophisticated AIdriven scams to checking uh you name it. Uh criminals are stealing billions from seniors, veterans, and working families, really anybody.
▶ 1:36:08Um these crimes I I know of stories where these crimes have drained retirement accounts, wiped out savings, and and really if not put in check in some ways, erode our financial system. So, Miss Griffin, what I would just ask you is from your experience, who would you say who is most at risk of fraud today? Seniors, young people, small business, and then are you seeing any particular types of scams being targeted at any of these groups?
▶ 1:36:33Yeah. No, it's such an important question because really interestingly, in the survey data that we've been analyzing, there are no discernable demographic differences among the victims. It's perhaps one of the only social problems we have in America with that characteristic. Young and old, uh, urban and rural, uh, different geographies, different races, different incomes, everyone is at equal risk of being impacted by this issue.
▶ 1:37:01Um, and, uh, I I would say the only other discernable uh, difference is that, uh, older Americans lose more money. Um, and I think that's largely a result of them having had more time in their lives to accumulate more money to You know, u the scope of this of this problem is really staggering.
▶ 1:37:22In 2024 alone, the FTC reported that 2.6 million consumers reported being victims of fraud with a combined loss of a staggering 122.5 billion. Uh and as our witnesses have testified before, we expect the true monetary impact of fraud to be to be much higher because of non-reporting, etc. But uh Mr.
▶ 1:37:43Brenda, community banks and credit unions I know are devoting enormous resources in fighting fraud, but the threat is larger than any single industry can possibly tackle on its own. Can you describe the scale of fraud that your members are
▶ 1:37:58Uh, thank you for the question. It's really hard to describe because as you said, we don't have accurate numbers. We've got numbers that are all over the place. The one thing we can look at is the trend lines. So, both the FBI claimed a 33% increase in fraud from 23 to 24. FTC showed a 25% increase from 23 to 24. So fraud is going up 25 to 30% every year in terms of what we're seeing from our members perspective.
▶ 1:38:20Uh we spend an inordinate amount of time on check fraud and we've seen the SARS being reported on check fraud have tripled frankly in the past four or five years and that number is not going down and then we continue to see the rise of scams um trying to convince consumers to send money out and that is simply going to continue to increase.
▶ 1:38:37Right. Well, let me ask you this. How have the banking regulators been engaged in helping financial institutions fight scams and fraud? And as a secondary, have there been any regulatory or inter agency fragmentation that's made it harder to respond?
▶ 1:38:53The regulator when the regulators haven't I'll focus on the scam issue. The regulators haven't really focused on the scam issue because it is I I think it is more focused on the front end thing which is a a consumer being induced to commit some type of act. So what we would like to see them focus on is ways that we can better share information. We really want to focus on the preventing the fraud from happening in the first place.
▶ 1:39:14And that requires sharing information they received from sicious activity reports, sharing information from law enforcement, and allowing banks and other financial institutions to share information about bad accounts being used in real time. So those accounts can't be used to commit with respect to uh this I mean what would you say that the scams are just I mean this is probably a rhetorical question they're becoming more sophisticated though these scams are
▶ 1:39:40they are they are they're using the data that they've stolen they're using AI to um fabricate documents they're using AI to deep fake voices and they're using AI to commit fraud at scale it's no longer a simple thing to to spot a fishing email it's very challenging
▶ 1:39:55you mentioned AI that brings me to uh Mr. Bedwitz, I'll ask you a question. We know AI is a double-edged sword. Criminals are using, of course, to create more convincing scams, but my understanding is companies are also deploying it to detect fraud. How effective is AI being used in protecting consumers today? And uh what gaps still
▶ 1:40:15Yeah, thank you for the question. AI is definitely a double-edged sword and we utilize it in our tools to scan millions of data points to detect fraud in real time to detect deep fakes, prevent scams from ever reaching consumers via their email, phone or text. And we're not alone. The private sector is innovating very heavily with AI uh to combat these uh these scams and these fraudsters.
▶ 1:40:39uh and you know the gaps that I keep coming back to is just awareness on the side of consumers to be able to adopt these types of protections and to also be aware to breathe and stop to know that they need to check that they shouldn't just respond to any email phone or text that they can't they have to be vigilant they unfortunately can't trust their communications today
▶ 1:41:03right and I know I'm out of time Mr. Chairman, I just will point out for now the criminals can actually use artificial intelligence to mimic a loved one's voice. Uh they they can I mean someone gets a call and they think they're actually getting a call from family member or whatnot saying that they need this or need that. So so it is scary how how it is out there and and so appreciate the effort that the industry is making on this. With that, Mr. Chairman, I yield back.
▶ 1:41:28The gentleman yields back. The gentleoman from Michigan, Miss Talib is now recognized for five minutes. Thank you so much, chairman. You know, we're talking about all of this and all I keep thinking about is how paralyzed the CFPB is right now. I mean, this is where the 911 for consumer fraud is. I mean, romance fraud is up. I have this huge fraud right now. You got to check this out, chairman, where they say, "Oh, you didn't respond to the jury response.
▶ 1:41:56Did you hear about this one to jury duty and your warrants out for your arrest?" And they get these calls. I had one constituent lose $11,000 on that one. They're getting so sophisticated because you're right, they even have a website with.org like so not butorg like so it looks real. It almost looks exactly like and the number that they call them from is the same county number.
▶ 1:42:21All of that to say is CFPB was doing an incredible job and it's being paralyzed right now. Why? Because it goes after banks that cover up the scams. Let's be honest. Let's be frank here. Everybody keeps thinking about that, but think about it. They I I don't know why they don't want to like help and aid in regards to this. I mean, to see them in March, you know, CFPB under the current administration dropped a case against digital payment uh app, what's that?
▶ 1:42:50uh uh a joint venture between Wells Fargo, Chase, uh Bank of America delivering a de facto pardon to the company for failing to protect its you know users from fraud. We're almost giving them like hey well that's not our fault. We can't oh well I mean that doesn't make any there should be a sense of responsibility on the consumer to be protected if these big banks are you know again uh having their consumers you know use their service. It doesn't make any sense to me.
▶ 1:43:20You know, one of the things, and this is to all the witnesses, if banks fail to fulfill their obligations under the electronic funds transfer act, some protections in there requiring them to investigate consu customer complaints of fraud. If those banks will, you know, willfully ignore hundreds of millions of dollars in consumer losses, would you agree that that that the that, you know, at that moment they're not going to be held accountable and they're not going to even actually proceed unless we force them to? I feel like people think they're just going to do the right thing. And I'm like, no.
▶ 1:43:49CFP made them do it. That's so what I continue to see. I don't care if it's the loan services for the student loans. I don't care if it was folks targeting the veterans. And some of this stuff never gets headlines. It never gets in the headlines. So, I would love to hear from all of you. I mean, you saw this case get dropped and be honest. I think my be honest, do you think them dropping that case exposed a lot of our consumers right now? So, I'll jump in real quick.
▶ 1:44:16Um, so the EFA, one of the brilliant things about that statute is that it actually has a private enforcement.
▶ 1:44:22You're talking about for for my residents, electronic funds transfer act. I just want them to know when they see that, they don't know that there's protections in there. They just think it's something to do with transfer of
▶ 1:44:32So, it does have private enforcement with really strong um remedies if it's violated, including punitive damages and tribal damages. However, not everybody can afford a lawyer. That's right. And one of the brilliant things about the CFPB is it acted on behalf of all of you Oh, the elder law clinic can't take the case. You I'm serious, chairman, they can't take the case. They can't do any. I send them to CFPB and sometimes CFPB just calls or sends the letter and inquiry, gets it fixed like that. Yeah,
▶ 1:45:02I've seen it happen.
▶ 1:45:03And I also just want to, you know, um respond to something that one of the witnesses talked about, which is about private entities that are able to help protect consumers. Now, that is all well and good and I love that, but there are low-income consumers who can't afford those services and that's the importance of government agencies.
▶ 1:45:20I mean, what do you all think other than I mean, you know, Miss Carla here, what do you all think about them dropping the case? You think that was a great idea? We're talking about $870 million in losses to the public. And this is one of 22 enforcement actions, by the way, per Don't be afraid. Was this a good action on behalf of CFPB to drop that case?
▶ 1:45:43I'm sorry, Congresswoman. I'm not familiar with the case. I can't speak to
▶ 1:45:46Okay. How about you, Ian? So, it's okay. They're just not going to enforce the Electronic Funds Transfer Act, but go ahead, Ian.
▶ 1:45:53I I appreciate the question. I'm also unfamiliar with the case.
▶ 1:45:56Kate, you're familiar. You know, the CFPB just dropped the $870 million case against these folks. I mean, Zel is participating with these banks and they're letting it happen and pretty much they're like, "Sorry, you lost that money. We can't do anything about it."
▶ 1:46:10Thank you for the question. One of the things that we talked about a lot in in the task force that that we um have been organizing is the ability for in this example um of the text messages for the banks to get information from the telecommunications companies about that interaction so that they know whether the that case is fraudulent. they just want to do. I don't understand why they don't want to help.
▶ 1:46:32Well, I think uh the the issue we'll come out with in this report is is how we can um help all of those institutions to better share information so that they can take more preventative action.
▶ 1:46:42Yeah. Thank you. I yield.
▶ 1:46:45Gentle lady yields. Uh the gentleman from Oklahoma, Mr. Lucas, is now recognized for 5 minutes.
▶ 1:46:50Thank you, Mr. Chairman, and thank you to our witnesses for being here today. And of course, it goes almost without saying, this hearing could not be more relevant to our world today. One of the most pressing topics I hear from credit providers in my district is the growing prevalence of fraud and financial threats to our families and According to CFTC, in my home state of Oklahoma, over $75 million was lost last year in fraud attacks.
▶ 1:47:16But we know these crimes are severely under reportported and the actual numbers most likely dramatically higher. Uh so let's focus again on the core stuff here. All of our federal agencies must prioritize the effective prevention tools and work together to find and punish bad actors. So Mr. Betanowitz, how has your company had success? Let's talk about some success here in fighting bad actors and what are the lessons the federal agencies could learn from private sector experiences?
▶ 1:47:48Yeah, absolutely.
▶ 1:47:49You've been in the trenches. Tell us about it. Yeah, thank you for the question. Look, we protect over 500 million consumers globally from these types of threats and you know, we do it through a variety of technology solutions that the private sector offers. And I want to say a few things to address the uh the comment earlier. Just because it's private sector doesn't mean that it has to be something that people can afford.
▶ 1:48:11You know, there are partnerships from peers in the industry between banks and those uh credit bureaus that offer free solutions for people uh to be able to protect themselves. There's the identity theft resource center that helps people when they have problems in addition to the paid solutions that are out there. But the success is really based on having comprehensive protection of your devices through security, having identity theft protection, scam protection is coming out.
▶ 1:48:41And then there's uh restoration and remediation. And some of these providers including us provide support every step of the way when someone falls victim as well as insurance to help uh reimburse them for those losses that they have. So there are solutions out there.
▶ 1:48:57Uh and we have many stories of people, you know, one story comes to mind of an elder gentleman who as we talk about these Bitcoin ATMs, he was tricked into uh that money, $9,000 had come into his account into giving $9,000 into one of those ATMs, but because he was covered by our insurance, we were able to reimburse him for that loss.
▶ 1:49:19Mr. Binda, could you comment on this as Absolutely, Congressman. So, I think what we're seeing is banks are making some success at trying to combat these scams and fraud. Uh, sharing information where they can, but I think the focus really needs to be here on the prevention side of things. I think we need better sharing from the telecoms in terms of the text messages that are being out there. I think we need better enforcement from the FCC uh to shut down those telecoms that are sending those bad text messages.
▶ 1:49:47But I think there's got to just be a better information sharing across the ecosystem. You can share across financial institutions without fear of liability, but social media, telecoms, and others can't necessarily share in that same level of information. And we know that banks file 6,000 SARS a day, substitution activity reports a day focused on fraud, but that information never comes back to financial institutions in a manner they can use to prevent that fraud from occurring.
▶ 1:50:10Continuing with that, uh, Mr. Endo, we've heard a lot about those gaps in the data collection from the federal agencies and the financial fraud. Can you talk about the need for and expand more on this cross agency collaboration and a whole of government approach? I mean why are the information silos ineffective and you've touched on that just in a moment. Would you expand on
▶ 1:50:31Thank you. Uh I think that's the critical need. You know the question you have to ask yourself is we hear many times when say a small bank gets their local area gets blanketed with these fake fraud alerts. You hear about this. They send these thousands of messages out and then they they overwhelm one of our small banks got 600 calls a day. We know crimes are being committed at that exact moment. There is no 911. There is nowhere to call to say how do I stop these text measures. How do I stop this crime from occurring? We need to have a centralized strategy.
▶ 1:50:59Other countries like Australia has developed a national anti-scam center has a national strategy in place. They've seen a reduction in scam losses of 25%. We need that type of centralized approach to build capabilities. In the few seconds I have left, Mr. Griffin, how can we make sure the federal government and its private industry partners stay competitive against bad actors? How do we adapt to emerging threats? This is moving quickly every moment, it sounds like.
▶ 1:51:24Yes, thank you for the question. I just want to underscore uh what Paul is talking about here in terms of the importance and the urgency of a coordinated national strategy uh that leverages the best of what America has to offer. The innovation um the ability to coordinate um are all um paramount uh and we need to um create um better um uh clarity of expectations of the private sector for their role um in helping to prevent scams.
▶ 1:51:54Thank you very much. yield back, Mr.
▶ 1:51:56Uh, the gentleman yields back. The gentleman from Illinois, Mr. Foster, is now recognized for five minutes.
▶ 1:52:02Uh, thank you, Mr. Chairman, and to our witnesses. You know, I probably stayed up later than I should have last night reading Mr. Bend's excellent testimony. Um and and the thing that struck me over and over reading that is that identity fraud was at the core of every single one of the frauds. The long list of frauds, whether it's the the the text message that starts a long romance scam or whatever it is, the the point to stop this is at the beginning.
▶ 1:52:28And the tool at hand is to provide people with a means of proving they are who they say they are in an online environment. And because of inaction by the federal government, states are doing this. They're standing up what's called the the mobile ID, the the digital driver's license.
▶ 1:52:45This is simply um connecting your real ID compliant driver's license issued to the state, which is a pretty unique um you know identity that cannot be um you know, it's very difficult to get many fraudulent copies of of the real ID. We've done a pretty good job federally on that. But then what you do is you you associate that with your cell phone. take advantage of the fact that a modern cell phone is like a security dongle. It can use it can it has a unique secret ID in there.
▶ 1:53:13It's a unique device in the world and when it gets associated with a real ID um that allows you to prove you are who you say you are in a legally traceable um method online and certainly for every every time you open a bank account that has to be an option to people. Uh because if people even talk about the checking fraud that we're talking about, they say, "Okay, you transfer that to a fraudulently open bank account." Well, guess what? If you're in other countries, just pick your country, say Korea.
▶ 1:53:40You want to open a bank account, you get out your cell phone, and you prove you are who you say you are, and you can open the account like that because you're you're that has been compared against a list of bad actors. You are a single legally traceable person with responsibility for that account. And it does not happen in countries that have done this. And you know, the US has fallen behind on this. Countries around the world understand that you need to be able to prove you are who you say you are.
▶ 1:54:06We can do everything that we want with trying to identify patterns of fraud and and all of the deep fake impersonations, but the bad guys are getting sophisticated too fast for that. The other side of the coin that they'll never be able to beat is when you have a cryptographic assurance of being able to prove you are who you say you are. And the the tool at hand is the mobile ID that's being rolled out by many digital driver's license rolled out by many states. And and this is this is the real answer to this.
▶ 1:54:34And I think that we have to use this for federal government purposes. You know, we've gotten, you know, very close to for federal government purposes to having motion in both the House and the Senate, never in the same session. But the time has passed for that. I think that if industry had access to a simple efficient way of for people to prove they are who they say they are, there would be huge adoption immediately and a dramatic drop in fraud.
▶ 1:54:58Uh so is does anyone you know that whole little spiel I just gave, is there any any details you think need to be corrected on that or do you all agree that that's
▶ 1:55:07Congressman? If I could jump in there, I'd like to thank you for your leadership in this in this uh mobile identity space. You've done a great job of pushing that issue forward. So I want to personally thank you for that. Uh we partnered with the better identity coalition. We recognize the value of mobile digital driver's license. We partner with them to send a letter to the FDI asking them to make sure that their examiners are aware that we can use those. We think it's a critical need to have a reservoir of truth to be able to go back to those DMVs. Not every state participates in the DMV validation piece.
▶ 1:55:35Having mobile driver's license, digitally digital authentication, we think is critical and we are happy to partner with you going forward on that effort to do anything we can to spur adoption of that. Yeah, it it'll be um just a tremendous simplification. One of the big things we're struggling with during COVID, it was costing like $400 to on board uh an unbanked person for a bank. And that was a huge barrier to getting COVID relief to people that need it the most. It did not happen in countries where you say, "Okay, smile at it.
▶ 1:56:04do your biometric login, have that cell phone prove you are who you say you are, and then um and authenticate to a bank account, and boom, there is your COVID relief check. And it was it's just it was heartbreaking to see the delays there and the amount of fraud. Hundreds of billions of dollars of taxpayer money stolen by fraudsters because we do not have a decent uh way to prove you are who you say you are.
▶ 1:56:28Anyway, so I I I I sense there's some motion, some bipartisan motion to get this to happen because the level of fraud is just out of control.
▶ 1:56:36And I I just want to say until a legislation like that is passed, that's why we need to enforce Bank Secrecy Act regulations and do supervision to ensure that fraudulent accounts aren't being opened and money isn't being laundered that way.
▶ 1:56:49Yeah. and and I echo everything that was said by my colleagues about the tragedy of what's been done to the CFPB and and the anti-fraud uh mission of the CFPB is a small part of what the damage that was done there. So, I just want to thank you all and look forward to actually building some momentum on this. Yield
▶ 1:57:09Gentleman yields back and I recognize myself for five minutes to ask questions. Appreciate you all being here on a really important topic. I can't tell you how many constituents I talked to that have been victims of financial scams, problems, uh, in particular pig butchering where people are integrating romantic relationships online, purported romantic relationships online, uh, and then delving into a financial side. Later today, I'm holding a hearing in particular as it relates to artificial intelligence and AI.
▶ 1:57:39There's a lot of positive things that could be done by AI. There's also a lot of challenges. I just want to touch on how some of the challenges uh affect this area about financial uh challenges. Uh Mr. Bedn if I can ask you uh in particular how AI how bad actors are utilizing AI in this way and then I want to get into questions following that about the ways that we can utilize technology or AI itself uh to prevent those.
▶ 1:58:05Sure. Sure. There's there's been a couple themes here today and I'll just reiterate some of those. I think it's the ability to create very realistic and legitimate looking fishing emails, fishing texts. Um, we're worried about agentic AI that's going to be able to act on its own, can resol access personally identifiable information, can deep fake voices to make it sound like someone else, and then interact with either banks or other companies who are trying to fraud them. And I think that the scams part of thing is really the the tragic piece in that we're now seeing romance scams being committed because they can change their visage.
▶ 1:58:35They can change their voice. And so it could be someone from overseas of a completely different race and pretend to be someone else and interact and try and build that romance scan, build that trust over time so that someone loses their life savings.
▶ 1:58:45And how how are financial services firms navigating these new choppy waters?
▶ 1:58:51Well, I think there's a lot of challenges that we have uh in terms of the fishing. We've got one thing in place. Uh there's a thing called bankank where you can actually register your bank's um internet domain and it can't be it's less resistant to fishing simply because no one else you have to be a financial services to put your website on there. Uh we've got activities anti-ishing um advertising campaigns such banks never asked that that's out there trying to inform consumers.
▶ 1:59:16So I think a lot of it is really on consumer education to try to people aware of So the consumer education, what the companies are doing, should our regulators be be reviewing whether or not companies are utilizing some of these anti-fraud protection tools?
▶ 1:59:28Uh we would love to partner with regulators on a consumer educ educ education campaign.
▶ 1:59:34Let let me let me build on some of the AI with you, Mr. Bednowitz, if I can. Um Mr. Bedna just referenced um AI being used to duplicate voice, to duplicate images. I think that's one of the things that's uniquely challenging. You can think of fraud against uh calling maybe a a grandma or a grandpa uh imitating the voice uh of a grandson or granddaughter saying that they need assistance. Taking that um grandparent fraud to the next step.
▶ 2:00:01It's uniquely challenging especially if that sure sounds like uh your grandson or granddaughter who needs quick help and of course it's a criminal on the other end saying send $100 to this location. How should we be thinking about that or navigating against that?
▶ 2:00:14So there are two ways. There's a low tech way which is uh teaching people to be vigilant and just using safe words. So across families if you have a safe word which is a unique nonsensical word that is no one is writing down then if someone is actually having a a threat then they can use that safe word and you know that's actually that person on the other end or not.
▶ 2:00:37on the more high-tech solutions my company others in the private sector are building using AI like you talked about to help defend against that type of AI to detect deep fakes uh to detect scams and fraud whether it's coming through video through voice through email uh so that is absolutely a front in the battle that we are tackling AI is also though in the background uh what Mr. Benda didn't talk about.
▶ 2:01:02It's less flashy, but AI allows criminals to take information that's out there in the dark web, that's out there in social media sites, data brokers, and create profiles of you to either steal your identity or to target you with very personalized scams
▶ 2:01:16and and to do it in an incredible with with incredible volume in a way that was not possible uh previously. Come to you to close us out, Miss Miss Griffin. um h how do you think we should be navigating the the downside risk of the AI?
▶ 2:01:31Um thank you very much for the question and one of the first things that comes to mind to me is to make sure that our law enforcement is able to use those same tools. when we think about the kinds of data that are available both in terms of what the private sector has uh due to consumers reporting to them as well as the kind of data Paul mentioned the SARS database um the ability for our law enforcement to deploy AI as well to query those databases and construct cases and go after criminals at scale is a critical element
▶ 2:01:59I I think what you're saying to bring us home is there's downside risk of AI for sure but there's also massive upside potential to address these frauds and making sure that we don't throw the baby out with the bath water uh is going to be incredibly essential as we dive into AI. We'll be having a hearing looking at that later today. Appreciate you being here. Uh I yield back and now recognize the gentleman from Ohio, Mr. Davidson, who's the chair of the subcommittee on national security uh who is now recognized for five minutes.
▶ 2:02:26Uh thank you chairman. I appreciate this and really appreciate the work of the committee staff, Chairman Muer and others to get focus on fraud. As chairman for national security and elicit finance, we opened the year up talking about scam centers and consumer fraud. Uh we had a great panel of witnesses and I think once again we have a great panel of witnesses, albeit different witnesses. So thank you for your work to protect people uh from these kinds of scams.
▶ 2:02:51Um it's clear that financial fraud remains one of the most pressing threats to economic security for American families and there's certainly a lot to cover today. I want to focus my time on elder fraud. These are some of the most evil contrived schemes that take advantage of our seniors and uh that you know they've accumulated money. They're just trying to live out their years and these wicked elder schemes uh have turned into a global enterprise at this point. It's not like a local crime generally.
▶ 2:03:21So uh the good news is fighting elder fraud is an issue that does unite Democrats and Republicans should should unite all Americans. Uh it's time to cut uh the party line push back and make laws to protect our seniors more effective. One example here is the Guard Act. It's a bipartisan legislation put forth by my colleagues Congressman Nun got and Fitzgerald.
▶ 2:03:45Uh while the FDI, FBI, FTC, and Fen are tracking the elder abuse fraud schemes, the missing piece here is amping up coordination between federal, state, and local law enforcement. A lot of times when I talk to my prosecutors, they can detect the fraud, but they have a hard time getting the resources. We're working with Fen to try to get more of this. So, uh, Mr. Benda, scam targeting seniors are on the rise.
▶ 2:04:09According to the FBI, um, from 23 to 24, there was a 46% increase in complaints and a 43% increase in revenue losses. How has scams targeting seniors evolved over the
▶ 2:04:23Uh, thank you for the question, Congressman. So I I think they've evolved fairly significantly in terms of we talked about the use of AI and targeting these uh the elderly folks. You know, one of the things that was really interesting was the use of Bitcoin ATMs to cash out on these scams. Uh we mentioned uh mentioned earlier DC originally has just brought suit against Athena, which is a Bitcoin operator that operated for 5 months here in the district. It turns out that they analyzed the transactions at that Bitcoin ATM. 93% of the transactions at the ATM were fraudulent. 93%.
▶ 2:04:54The average age of the victim 71. The average loss $8,000. So the question is this is as a 71y old really going to buy Bitcoin at a ATM inside a convenience store. They're not. And so it's really the challenge is they're targeting these elderly folks and they're trying to they're convince them whether threaten or cajul them and they're cashing out through these Bitcoin ATMs.
▶ 2:05:14Yeah, thank you for that. And I think you know a couple things there that you highlight. Yeah, the techniques are used. You know, Bitcoin ATMs didn't exist a long time ago. AI wasn't around. But the other thing is these data centers that are making all this possible are on the back end. So as a member of the foreign affairs committee, we're seeing you know even nation state level um you know structuring of data centers to be able to create income for low you know poor countries.
▶ 2:05:42They make some of their a significant portion of their GDP off of helping scam seniors. So this is becoming way beyond the scope of what state state and local law enforcement can do. You highlight one of the ways that they can do it and certainly Bitcoin ATM has been used for fraudulent activity, but I'd also highlight that blockchain tracing tools uh have made it so it's easier to follow the money in some cases. So um you know, let me turn to um Mr. Bednowitz.
▶ 2:06:12How might consumer education, specifically efforts geared towards seniors, help decrease barriers in reporting?
▶ 2:06:19Yeah, this is a great question. Thank you for that question. Our data shows that despite consumer uh elderly consumers reporting in total $5 billion of fraud, a staggering amount. 67% of them think that they are invulnerable, that they're safe from scams and fraud. So there's a huge gap in expectations and reality. So it's very important to partner with organizations to raise that level of awareness. We have partnership with the AP to help.
▶ 2:06:47But any way that we can reach out to these seniors and let them know that they are vulnerable because seniors think, hey, it it happens to seniors in general, but it doesn't happen to me. I'm smarter than everyone else. And that's the problem that leads that overconfidence leads them to be able to fall victim more easily. Yeah, I was particularly impressed with uh the AARP witness earlier in the year and highlighting the nonprofit center that they were working with in Pittsburgh.
▶ 2:07:12And I think the complement to that might be a customer oriented uh function for FenSen that works not only with with uh citizens and consumers, but with our state and local law enforcement. We'll see if we can do that. I think it's a bipartisan answer. The Guard Act is a good start, but I appreciate your time today and I yield The gentleman yields back. Uh we now uh will have excuse me the uh gentleman from Iowa, Mr.
▶ 2:07:40Nun, who's now recognized for five minutes.
▶ 2:07:44Well, thank you very much, Mr. Chair, and I want to thank the witnesses for being here. You have all echoed what all of our seniors, what too many Americans already know. This country and the individuals in it are losing billions of dollars each year to sophisticated scams. In 2024, there were reported 2.6 million fraud cases in the United States. It resulted in 12.5 billion being scammed from individuals. Many of those dollars going overseas. These aren't just national statistics.
▶ 2:08:15They're real everyday Americans. Their families, friends, communities, veterans, seniors, not just in my district, but across the In Iowa, my home state, last year, the attorney general reported receiving more than 13,000 fraud cases. And this is a small farm state by comparison to some, and it resulted in a loss of $42 billion.
▶ 2:08:37My office just worked with a 68-year-old veteran who lost $100,000 to someone he thought he was helping, only to be scammed out of his military This is why I'm grateful to be working with this committee on a bill that we've introduced called the Guard Act.
▶ 2:08:55It provides state and local law enforcement better tools to track fraud as well as the bill we're leading in a bipartisan way, the Traps Act, to really stop fraudulent payment schemes targeting seniors at a national level, working both locally and strategically to be able to address these issues. I'm also proud to be co-chairing a new formed caucus called Stop Scams.
▶ 2:09:20This is a bipartisan effort on best practices that we should be sharing and it's one of the reasons I'm so grateful this committee is speaking about our scam attacks today. So, Mr. Binda, I'd like to begin with you. As you know, banks are on the front line. Too often, fraud occurs there and coordination with regulators and law enforcement happens after the damage has already been done.
▶ 2:09:43Wouldn't a coordinated task force like what is created under the traps act help to address and disseminate best practices before these events occur?
▶ 2:09:51Thank you for the question, Congressman, and thank you for your leadership and thank you for establishing the stop scams caucus. Uh we think more effort, more focus on this can only help. So we think the traps act is a is a good effort to try and coordinate the activities across the federal government. We we applaud your efforts in that space and we hope that you'll be able to gather information and come up with a consolidated plan moving forward. M. Griffin, I'd also like to ask for your input on this. Look, the task force has called for a national fraud prevention strategy, specifically with the traps act.
▶ 2:10:20Would this help address a nationwide strategy to oppose the type of scams that we're seeing?
▶ 2:10:27Yes. Uh, thank you for the question and thank you for your leadership uh with your uh fellow co-chairs in creating the stop scams caucus. Um, your question and the efforts of the c uh of the caucus really represent what is needed here. Uh we've talked about this as a whole of society or a whole of ecosystem approach. There are a lot of jobs to be done. Um there are jobs to be done by this committee um by other uh committees here in this building.
▶ 2:10:51Uh and um the efforts of things like the traps act that really recognize that and name um for leadership within um the executive branch of government as well um to create a national strategy are critically important at this moment.
▶ 2:11:06I think we all want to go one step further here. It can't just be the role of the federal government trying to solve this. As you know, this is not just a whole of government approach. This needs to be a whole of nation approach and that includes our guys on the front line. Whether it's a mainstream bank or whether it's the county sheriff. One of the things we're trying to do is put more resources in the hands of our frontline defenders. We're leading a effort called the Guards Act. The Guards Act looks at empowering local law enforcement to give muscle to the strategy that the Traps Act would come up with. Local law enforcement, as we all know, they're at the front lines.
▶ 2:11:37They hear the call. They talk to the senior citizen. They heard from our veteran. And often they feel powerless in their ability to help. And by the time the federal government shows up, as we noted, it is too little too late. The Guards Act provides local law enforcement with tools to act while the Trap Act would establish a federal coordinating hub. Would you say the two bills together create both a top-down and a holistic approach and a strategy that right now is not available to too many? Yes, thank you very much for that.
▶ 2:12:07And and I I'll say that um what we've heard from victims are both stories of times when local law enforcement has been enormously helpful um and times when local law enforcement has not known what to do and they've turned away in shame. And so the ability to create more resources so that local law enforcement has training um and the incentives uh to be working with victims and elevating this issue is critically important. Thank you for that leadership. Representative, if I may. Um, I appreciate the traps act.
▶ 2:12:35The one thing that I ask is that it be expanded to not just cover electronic payments, but all types of payments.
▶ 2:12:41That's very good. I appreciate that feedback. Together, I think we need to be able to come up with a strategy first of all to be able to implement and help our folks at the local level. With that, I yield back my time.
▶ 2:12:51Gentleman yields. The chair thanks the gentleman for his remarks. Uh, before we adjourn, I ask unanimous consent to enter two documents into the record. One letter from the consumer bankers association discussing the need for crossindustry collaboration and the other from the bank policy institute discussing how banks, government and telecoms need to work together to solve this issue. Uh without objection so ordered. Uh I would like to uh thank our witnesses for their testimony today.
▶ 2:13:19I do want to apologize uh for the earlier remark made by the ranking member that characterized this hearing as as a sham. uh this is furthest thing from a sham. We're all here collectively to try to work together to correct the escalating fraud that has occurred over the last three to four years.
▶ 2:13:38And and and I'm sure that the results of our work will be preventing such fraud uh being um uh being caused and and forced upon thousands and thousands of um innocent Americans. So that is our goal and uh I look forward to working with you all on it over the next uh several months and and years or whatever it takes. Um without objection, all members will have five legislative days within which to submit additional written questions for the witnesses to the chair.
▶ 2:14:08The questions will be forwarded to the witnesses for their response. I ask our witness to please respond no later than October 23rd, 2025. This hearing is adjourned.