COVID Scams Are Surging, But Congress Isn’t Giving The Government Power To Repay Victims

“These are hucksters, these are fraudsters, who are selling people snake oil,” the FTC told Congress.

WASHINGTON — In Illinois, fake COVID testing sites are popping up to take advantage of surging demand. In Florida, criminals are dressing up as medical professionals and walking up to people in line at COVID testing facilities. In Missouri, scammers are calling retirees and telling them to input their social security numbers to “validate” their “COVID-19 vaccine verification.”

All across the country, a parallel pandemic of fraud has risen with COVID and the ensuing shortages of tests and personal protective equipment. At the same time, the Federal Trade Commission has lost its most powerful tool to crack down on scammers and force them to return money to victims. The FTC is pleading with Congress to restore this tool.

So far, Congress has barely noticed.

“It’s crazy to me that two years into this pandemic consumers still can’t go on an e-commerce platform and have confidence that the mask they buy is authentic,” FTC Bureau of Consumer Protection Director Samuel Levine told a Senate Committee on Tuesday.

Levine said that scams ranging from identity theft to the proliferation of substandard, falsely advertised masks have exploded since 2020. He blamed this in part on big tech platforms like Amazon and Facebook Marketplace failing to crack down on deceptively marketed products. But he also said the FTC is hamstrung, and will be until Congress takes action.

For almost four decades the FTC had used its power to seek injunctions, under section 13(b) of the FTC Act, to force scam artists to compensate those they defrauded. In the last five years of its use, the FTC recovered $11.2 billion.

But last year the Supreme Court struck down this power. The court ruled unanimously that monetary repayments to victims were outside the sphere of injunctive relief. The ruling noted that if the FTC wants this power it should ask Congress to give it to them.

Since the ruling, the FTC has repeatedly asked Congress to change the law and restore its Section 13(b) powers. The FTC does have other enforcement mechanisms to extract monetary relief, but the agency said those can take years to wind through the courts and are nowhere near as effective.

It’s not so much that Congress is opposed to giving the FTC back its old powers, it’s that the issue is completely under the radar. BuzzFeed News asked several senators from both parties where they stand on the issue. Almost all said they weren’t familiar with the details.

Democratic Sen. Richard Blumenthal, chair of the Consumer Protection subcommittee, has proposed a bill to restore Section 13(b) powers. So far it has not progressed towards a floor vote.

“I have a bill, which I’m going to push. I think there’s certainly bipartisan agreement that we need to do more against those scams,” Blumenthal told BuzzFeed News Wednesday.

But he said he didn’t know if any Republicans currently support his bill. At least 10 would be needed to pass it through the Senate.

There are signs of Republican resistance to empowering the FTC. GOP Sen. Mike Lee pushed back against FTC officials Tuesday at a Consumer Protection subcommittee hearing, calling their previous use of Section 13(b) powers illegal, and warning that honest businesses could be targeted. Lee said it would be “legislative malpractice” to give the FTC back these powers without significant restrictions.

“It’s also essential that consumers continue to have access to goods and services provided by legitimate businesses,” Lee said.

Levine responded that the FTC would not have complete freedom to compel fines on its own, but would have to convince a federal judge. “Frankly, Senator, these are not close calls. These are hucksters, these are fraudsters, who are selling people snake oil,” he said.

Lee responded that the FTC has “overwhelming power” and “it’s not an even playing field” for businesses defending themselves in court. Lee did not respond to questions from BuzzFeed News about what protections for business he wants included in the law. Sen. Marsha Blackburn, the ranking Republican on the Consumer Protection subcommittee, also refused requests for comment.

During the hearing, both parties criticized the FTC for doing too little to crack down on scams and price gouging during the pandemic. The agency has only brought forward a handful of cases under the COVID-19 Consumer Protection Act Congress passed last year.

Samuel Levine said that earlier in the pandemic the agency focused on sending cease-and-desist notices when it saw fraudulent products being advertised to consumers. He said the FTC frequently got those ads down within 48 hours, preventing further time.

But Levine said the priority is now shifting towards leveling criminal penalties to send a message to scammers.

“We’re now at the point where we don’t only want to get these claims taken down. We want to make sure scammers out there know they’re going to pay a heavy price, not only pay back what they stole but pay a penalty to the government as punishment,” he said.

He also said that the FTC will continue to be restricted in its response as long as it lacks its former Section 13(b) powers.

There are no signs that will happen anytime soon, despite sky-high reports of COVID-related fraud. When it was put to Sen. Blumenthal that his bill does not seem to be a live issue in Congress, he did not disagree but said “things have a way of changing around here.”