Page 1       TOP OF DOC

74–384 PS











 Page 2       PREV PAGE       TOP OF DOC




JULY 12, 2001

Printed for the use of the

Committee on Transportation and Infrastructure


DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-Chair
HOWARD COBLE, North Carolina
JOHN J. DUNCAN, Jr., Tennessee
STEPHEN HORN, California
 Page 3       PREV PAGE       TOP OF DOC
JOHN L. MICA, Florida
SUE W. KELLY, New York
JOHN R. THUNE, South Dakota
RICHARD W. POMBO, California
JIM DeMINT, South Carolina
ROBIN HAYES, North Carolina
ROB SIMMONS, Connecticut
HENRY E. BROWN, Jr., South Carolina
 Page 4       PREV PAGE       TOP OF DOC
SAM GRAVES, Missouri
MARK R. KENNEDY, Minnesota
BILL SHUSTER, Pennsylvania

NICK J. RAHALL II, West Virginia
ROBERT A. BORSKI, Pennsylvania
BOB CLEMENT, Tennessee
ELEANOR HOLMES NORTON, District of Columbia
BOB FILNER, California
FRANK MASCARA, Pennsylvania
 Page 5       PREV PAGE       TOP OF DOC
GENE TAYLOR, Mississippi
BILL PASCRELL, Jr., New Jersey
JAMES P. McGOVERN, Massachusetts
TIM HOLDEN, Pennsylvania
BRIAN BAIRD, Washington
MICHAEL M. HONDA, California
RICK LARSEN, Washington



 Page 6       PREV PAGE       TOP OF DOC

Subcommittee on Highways and Transit

THOMAS E. PETRI, Wisconsin, Chairman

HOWARD COBLE, North Carolina
JOHN J. DUNCAN, Jr., Tennessee
JOHN L. MICA, Florida
SUE W. KELLY, New York
JOHN R. THUNE, South Dakota
RICHARD W. POMBO, California
JIM DeMINT, South Carolina
ROBIN HAYES, North Carolina
ROB SIMMONS, Connecticut
HENRY E. BROWN, Jr., South Carolina
 Page 7       PREV PAGE       TOP OF DOC
SAM GRAVES, Missouri
BILL SHUSTER, Pennsylvania
  (ex officio)

ROBERT A. BORSKI, Pennsylvania
NICK J. RAHALL II, West Virginia
BOB FILNER, California
FRANK MASCARA, Pennsylvania
BILL PASCRELL, Jr., New Jersey
TIM HOLDEN, Pennsylvania
 Page 8       PREV PAGE       TOP OF DOC
MICHAEL M. HONDA, California
RICK LARSEN, Washington
BOB CLEMENT, Tennessee
JAMES P.McGOVERN, Massachusetts
BRIAN BAIRD, Washington
  (ex officio)



    Cirillo, Julie Anna, Acting Deputy Administrator, and Chief Safety Officer, Federal Motor Carrier Safety Administration, U.S. Department of Transportation
    Harrington, Eileen, Associate Director for Marketing Practices, Bureau of Consumer Protection, U.S. Federal Trade Commission

 Page 9       PREV PAGE       TOP OF DOC
    Harrison, Joseph M., President, American Moving and Storage Association

    Hecker, Jayetta Z., Director, Physical Infrastructure Team, U.S. General Accounting Office

    Lynch, Timothy P., President and CEO, Motor Freight Carriers Association
    Weinberg, Wendy J., Executive Director, National Association of Consumer Agency Administrators
    Weisman, Hillary, Assistant Attorney General, Bureau of Consumer Frauds and Protection, New York State Attorney General's Office, on behalf of the National Association of Attorneys General


    Costello, Hon. Jerry F., of Illinois
    Mascara, Hon. Frank, of Pennsylvania
    Oberstar, Hon. James L., of Minnesota

    Rahall, Hon. Nick J., II, of West Virginia


    Cirillo, Julie Anna
    Harrington, Eileen

 Page 10       PREV PAGE       TOP OF DOC
    Harrison, Joseph M

    Hecker, Jayetta Z

    Lynch, Timothy P
    Weinberg, Wendy J
    Weisman, Hillary


    Cirillo, Julie Anna, Acting Deputy Administrator, and Chief Safety Officer, Federal Motor Carrier Safety Administration, U.S. Department of Transportation, responses to questions
    Harrington, Eileen, Associate Director for Marketing Practices, Bureau of Consumer Protection, U.S. Federal Trade Commission, chart, TSR Sweeps

    Harrison, Joseph M., President, American Moving and Storage Association, responses to questions

    Hecker, Jayetta Z., Director, Physical Infrastructure Team, U.S. General Accounting Office, report, ''Federal Actions are Needed to Improve Oversight of the Household Goods Moving Industry'', March 2001

    Lynch, Timothy P., President and CEO, Motor Freight Carriers Association, responses to questions
 Page 11       PREV PAGE       TOP OF DOC
    Weinberg, Wendy J., Executive Director, National Association of Consumer Agency Administrators, responses to questions
    Weisman, Hillary, Assistant Attorney General, Bureau of Consumer Frauds and Protection, New York State Attorney General's Office, on behalf of the National Association of Attorneys General, responses to questions


    American Moving and Storage Association, letters, July 24, 2001 and July 25, 2001
    Barnes and Thornburg, statements and exhibits of Robert A. Davidson, Vice President, Marketing and Pricing, ABF Freight System, Inc., and Martin Larson, Vice President of E-Commerce, and Chief Information Officer, Consolidated Freightways Corporation

    Kamburowski, Michael, letter, July 17, 2001

    Maddox, Judy A., letters and attachments

    Nieporent, Richard J., Ph.D., letter and attachments, submitted by Rep. Roscoe G. Bartlett, a Representative in Congress from Maryland

    Petersen, James P., letter, July 11, 2001
    Sperling and Slater, Angie A. Chen, letter and attachments

 Page 12       PREV PAGE       TOP OF DOC

Thursday, July 12, 2001
House of Representatives, Committee on Transportation and Infrastructure, Subcommittee on Highways and Transit, Washington, D.C.

    The subcommittee met, pursuant to call, at 10:03 a.m. in room 2167, Rayburn House Office Building, Hon. Thomas Petri [Chairman of the subcommittee] presiding.

    Mr. PETRI. The subcommittee will come to order.
    I understand, by the way, just for your information, there may be several votes, probably around 10:30, after the one-minutes, on the House Floor. We can expect, I believe, on this day to be interrupted several times during this hearing because things seem to be in a bit of a state of flux.
    This subcommittee is meeting today to receive testimony on Federal oversight of the movement of household goods. Oversight responsibility of the traditional household goods moving industry with regard to consumer protection matters initially resided with the Interstate Commerce Commission. In 1995, Congress decided to sunset that Commission and transferred household goods oversight responsibility to the Department of Transportation.
    Initially, the department delegated the responsibility to the Federal Highway Administration. In 1998, due to a number of complaints, the subcommittee held a hearing to review Federal Highway's efforts in this area. At the hearing the subcommittee listened to a litany of heart-wrenching stories ranging from goods being held hostage, goods being lost and constituents being victimized by unscrupulous household goods carriers.
    All in all, Federal Highway's oversight efforts came up far short. Yet, after reviewing the testimony and considering the initiatives the agency was undertaking to improve oversight, we refrained from pursuing a legislative solution at that time.
 Page 13       PREV PAGE       TOP OF DOC
    However, here we are in 2001, three years later, and we find that things apparently have not improved. In fact, oversight efforts of the household goods moving industry, which were transferred in 1999 to the newly created Federal Motor Carrier Safety Administration, seem to have grown, if anything, worse.
    We are hearing the same complaints that we heard back in 1998. We are receiving correspondence from across our country telling of egregious actions taken by some household goods carriers. As recently as this past month, I received letters bringing to my attention stories of citizens victimized by carriers.
    In one such case, the victim is going so far as to seek recourse under the Racketeer Influence and Corruption Organization Act, better known as RICO.
    While I am confident that the majority of moving companies are honorable and trustworthy, clearly there is a problem with that minority of the industry that is not, and something does need to be done.
    Therefore, today's hearings will focus on solutions, ways to improve the oversight of the movement of household goods and to ensure that consumers are adequately protected.
    We are particularly interested in hearing from the General Accounting Office about its report released last March assessing the effectiveness of the department's oversight program.
    I want to hear from the department on its efforts to improve its oversight record and address the issues raised in the GAO report. I also hope to learn whether the FTC telemarketing program is an applicable model for the household goods moving industry.
    We will also explore the question of whether it is time and if it is appropriate to consider allowing States a greater role in enforcement of Federal authority and the right to bring State enforcement actions.
 Page 14       PREV PAGE       TOP OF DOC
    In addition, today's hearing will also provide an opportunity for discussion for the movements of household goods by general freight carriers, a topic recently in the news. General freight carriers engaging in the movement of household goods do not fall under the traditional household goods Federal regulatory scheme.
    This relatively new service, generally referred to as ''You Pack,'' has raised some questions with regard to application of the consumer protection regulations to this service. Recently, the Federal Motor Carrier Safety Administration reaffirmed its position on oversight of this practice. I would like to hear their thoughts.
    With that, I now recognize my colleague, the Ranking Member of the subcommittee, Representative Bob Borski from Pennsylvania.
    Mr. BORSKI. Thank you very much, Mr. Chairman, and thank you for calling these oversight hearings on the household goods moving industry.
    Section 209 of the Motor Carrier Safety Improvement Act of 1999 directed the General Accounting Office to conduct a study of the effectiveness of the Department of Transportation's enforcement of household goods consumer protection rules under Title 49 of the United States Code.
    Section 209 also required an examination of other potential methods of enforcing the rules, including allowing States to enforce the Federal rules.
    The GAO report submitted to Congress in March of this year is highly critical of the department's oversight and enforcement of the household goods moving industry. It makes a series of recommendations to the department to help it better oversee the industry. These include completing mandated studies, enhancing data collection and analysis, assessing whether enforcement is adequate and determining whether legislative changes are needed to supplement the department's efforts.
    I am please the GAO representatives are with us today to elaborate on their report and comment on the department's activities since the report was issued.
 Page 15       PREV PAGE       TOP OF DOC
    I am also pleased that FMCSA Deputy Administrator Julie Cirillo is with us to respond to the report.
    Based on the report, it is clear that the department has a lot of work to do to strengthen its efforts on behalf of the consumers. I trust the department will work with us and with the GAO in that endeavor.
    The department must enhance its efforts with respect to consumer complaints and carrier compliance reviews and take strong enforcement action where it is needed.
    Systematic data collection, analysis and enforcement are fundamental to effective oversight. Strong measures will be needed to strengthen these essential functions.
    Clearly, FMCSA's top priority is truck safety. The agency must not be asked to meet its consumer protection responsibilities by diverting resources from safety-related activities. However, anything prevented the FHWA then and anything prevents FMCSA now from requesting additional resources to meet its consumer protection obligations.
    Our questions are: Does the department need additional resources or not? If so, why weren't additional resources requested in the past? Why did the program fall into neglect when the department gained jurisdiction in 1996? Why has so little been done to strengthen the program since the subcommittee hearings in 1998?
    I look forward, Mr. Chairman, to our witnesses' answers to these and other regulated questions, particularly in light of proposals to give more authority to State and local governments to enforce Federal rules.
    I hope these hearings will bear fruit, Mr. Chairman, and I hope the department takes a strong leadership position in bringing about the necessary changes. Whatever approach the subcommittee takes, whether we legislate in this area or not, I believe we must get our Federal house in order.
    I look forward to working with you to that end, Mr. Chairman, and hope the administration cooperates in that effort.
 Page 16       PREV PAGE       TOP OF DOC
    Mr. PETRI. Thank you.
    Statements by the Chairman of the full committee, Don Young of Alaska and the Ranking Member of the full committee, Representative Oberstar of Minnesota, will be made a part of the record.

    Are there any other members who wish to make opening statements at this time?
    [No response.]
    Mr. PETRI. If not, we will proceed to the first panel. That is comprised of JayEtta Hecker who is the Director, Physical Infrastructure Team of the U.S. General Accounting Office; Julie Cirillo, the Acting Administrator of the Federal Motor Carrier Safety Administration of our Federal Department of Transportation; and Eileen Harrington, Associate Director for Marketing Practices of the U.S. Federal Trade Commission.
    I welcome you all. We appreciate the effort that has been made to prepare your statements. As you know, we invite you to summarize them in about five minutes and then respond to questions.
    We will begin with Ms. Hecker.

    Ms. HECKER. I am pleased to be here today to speak on GAO's work on the oversight and consumer protection for the household goods moving industry.
 Page 17       PREV PAGE       TOP OF DOC
    My remarks will be based on a March report that we issued to you as well as updated information on initiatives by the Federal Motor Carrier Safety Administration in this area.
    Basically, I will talk about three things today. The first is the findings of our report and what has happened with the types and levels of consumer complaints.
    Second is the status of DOT's commitment to increase its oversight and enforcement activities, made just a few months ago.
    Then, finally, regarding the main agenda that you have here today, other measures DOT or the Congress could take to increase protection for consumers.
    I will start with a brief highlight of all three and then move quickly to the third area, given your interest in it.
    The bottom line of our review is that the department's implementation of its household goods responsibilities has been limited at best. It is easier to characterize it as woefully inadequate and unresponsive to the responsibilities assigned by the Congress.
    In light of that lack of initiative, lack of leadership and lack of presence in the area, complaints against household goods carriers have multiplied in recent years, really leaving a vacuum, in a sense, for inviting unscrupulous operators to prey on consumers. Our report has a wealth of details on this lack of progress or even initiative in many of those areas.
    The second thing was what is DOT or the Motor Carrier Safety Agency has been doing since we issued our report in March of this year. In our report DOT indicated a number of commitments, had a plan, had milestones for each of those plan's actions. It really appeared to be a commitment to move forward.
    Unfortunately, I have to report that the department has fallen behind on nearly all of the commitments that it made just three months ago. It continues to evidence a lack of commitment by the department to implement its assigned responsibilities under the legislation.
 Page 18       PREV PAGE       TOP OF DOC
    That brings me to the third issue. Again, I could go into either of the other two issues in detail, but I think your focus is on the third point. Let me go there. I believe that there are actions that both the department and the Congress can take to improve oversight and consumer protection without detracting from the department's efforts and priorities on improving truck safety.
    Before I turn to that point, though, let me say that the issues and concerns about abuses, not by all the industry, but by unscrupulous operators, have been around since before deregulation. In fact, I was looking last night at the statistics while the consumer protection function was at the ICC.
    Before the deregulation initiatives in 1980, there were over 25,000 complaints received at the ICC about household goods operators. That was the highest level of complaint of any matter that was brought before the ICC at the time.
    Then the deregulation initiatives basically allowed competition to more protect consumers, more flexibility by carriers, more commitments for committed dates of delivery, the ability to use binding estimates. These initiatives actually led to a dramatic decline in the number of complaints. So, competition played a very positive role in that early period and brought complaints down to about 5,000.
    Unfortunately, as we outline in our report, we don't really even have current data. The DOT does not retain any centralized data that has any real notion of the number of complaints they receive or are received by others.
    However, our limited data indicates that there are many indications that the number of complaints continues to be high and that the recourse for consumers continues to be limited.
    Let me focus then in that third area and your focus of concern here on what can really be done to shake this loose and get some real attention and oversight and protection for consumers in this area.
 Page 19       PREV PAGE       TOP OF DOC
    I think it splits up into two issues, actions by the department and actions by the Congress. Clearly, there is a need for follow-through and a commitment for follow-through by the department on its initiatives to demonstrate to the Congress and the public that it is protecting consumers.
    We have not seen that yet. Their response always continues to be, ''The effort will be consistent within the resources.''
    There are five full-time equivalent people dedicated to this activity at the department and the regulations which were drafted and mandated and issued in proposed form in 1998 are still not on the top of the agenda, are still not a priority and are not scheduled to be released.
    So, the first thing is really a commitment to that action list and meeting the deadlines that it sets in its plan. The second thing is they really need some performance indicators. They need real strategies to address those indicators and then follow through on how effective those strategies have been and what really works.
    In this regard there is actually a specific mandate in the legislation assigning the responsibilities to DOT to evaluate how well arbitration was working. The legislation on household goods recognized that there was a role, an important role for arbitration. The types of losses that consumers often incur are relatively small enough so that arbitration can, presumably, potentially be a useful vehicle.
    The department was mandated to do a study of how well arbitration was working as the recourse for consumers who have concerns. The study was required to be completed several years ago and it is not even started yet. So, again, that is another piece of evidence of the importance or having a plan, following up on it and getting some indicators of what is working and what is not working and what else needs to be done.
    Another thing that the department could do that you alluded to is ask for the additional resources if it needs them. We have never seen an analysis of whether one additional person or two or five or whatever is needed. But whatever is needed, if it in fact would seriously detract from the 99 percent of the resources that are already dedicated to safety, then the department should make it clear that additional resources are needed to implement their household goods consumer protection responsibilities under the Act.
 Page 20       PREV PAGE       TOP OF DOC
    Now, that being said, while the authority for departmental action seems to be there and the potential for action is there, the other agenda item you had is actions that the Congress might take. What could the Congress do? There are several things. One is having this kind of oversight. Focusing attention, I think, makes it clear that the Congress is committed to a strong and effective Federal presence in this area.
    The second thing that perhaps could be useful, another form of oversight is a specific reference to the household goods function oversight and the expectation of effective oversight in the authorizing legislation. That is another way to reiterate the message to the agency of the commitment and the intent by this committee and the Congress to effective implementation of DOT's responsibilities under the law.
    The third is the area that you have alluded to is expanding the State's role in regulating the household goods moving industry and providing increased opportunities for recourse by consumers. There are several different ways to do this and several different options that could be considered.
    The first, I think, and the least intrusive is to authorize States to enforce Federal statutes and regulations so it is not undoing the Federal scheme. It is just saying let the States take action to enforce both those statutes and regulations. One of our key points about that option is that you cannot say, ''Oh, well, DOT is not going to do anything; let us give it to the States.''
    That strategy cannot work without effective leadership and action by the Federal agency. Obviously, the point is to have them enforcing Federal regulations which are now years out of date. As you will hear from the FTC, Federal leadership is required if there is going to be State enforcement of Federal statutes to provide a coordination role. That doesn't seem to be in DOT's plans and the capacity of the current level of staffing within the department.
    So that first thing is the delegation of the authority to enforce Federal statutes. Now another whole set of options exist and that is to enact legislation which would alter the Carmack Amendment.
 Page 21       PREV PAGE       TOP OF DOC
    I think you know that in 1906 the Congress enacted a scheme that defined carrier liability for loss or damage of goods and specified how it had to be covered by the initial carrier. Early on there was debate about obligations of one carrier that picks up goods and another that ends up delivering them. It put the obligation firmly on the initiating carrier and that the terms of this coverage be in the bill of lading. So, there is lots of debate about what it covers. But it was the intent to have a level of national preemption to avoid conflicting State interpretations.
    There are several ways to change the Carmack. One is to give the States the ability to enforce their own consumer protection laws. That would more narrowly define what is seen as the current preemption by Carmack. The other is to expand private rights of action to permit consumers to make claims for violation of State consumer protection laws.
    I would be happy to answer any questions. That concludes the summary of the remarks. I look forward to trying to help you sort out what can be done here.

    Mr. PETRI. Thank you.
    Ms. Cirillo?

    Ms. CIRILLO. Thank you, Mr. Chairman and members of the subcommittee. I appreciate the opportunity to appear before you today on behalf of the Federal Motor Carrier Safety Administration.
    A couple of years ago, I moved back from San Francisco to Washington, D.C. Fortunately, my interstate move went smoothly. I believe most household goods moves go smoothly. Consumers are well served by registered, legitimate, safe and efficient household goods carriers.
    Since my arrival in Motor Carriers, I have been deeply concerned about the number and severity of some of the complaints I receive about household goods carriers. Two things became very clear to me early on. Many people engage a carrier without exercising good prudence. If the deal seems too good to be true, it probably is.
 Page 22       PREV PAGE       TOP OF DOC
    There are unscrupulous carriers preying on the elderly and the uninformed. These are the very carriers we target. But I want to make clear that no matter how many enforcement actions we take against bad carriers; our actions bring no financial or monetary relief for the individual consumer.
    It is really important for people to understand that our role in the household goods moving industry is to regulate the industry, to enforce those regulations, but not to provide direct help to the consumer.
    The Interstate Commerce Commission formerly had responsibility for the household goods moving industry. When the ICC was terminated in 1996, Congress transferred some of the ICC's household good regulation duties and very little staff to the Department of Transportation.
    Congress explicitly directed that the ICC dispute resolution functions were to be discontinued. The legislation encouraged consumers to take household goods disputes directly to the courts and specifically directed the department not to attempt to resolve household goods disagreements between consumers and carriers.
    Carriers are required to establish neutral arbitration processes to resolve loss and damage issues. Consistent with this direction, FHWA before and FMCSA now generally do not become involved in attempting to settle these types of disputes. Instead, we target investigations on carriers that exhibit patterns of noncompliance with Federal household goods regulations.
    As the GAO witness has just testified, there is much work to be done to improve consumer protection in interstate moves, and a dialogue among the States, industry and consumer groups and the Federal Government may provide useful potential solutions.
    We are especially interested in exploring a wide range of options to partner with States to increase the level of oversight. I have read FTC's testimony and find their model of shared Federal-State enforcement of Federal regulations very promising.
 Page 23       PREV PAGE       TOP OF DOC
    I look forward to exploring this topic. In addition, I agree with the GAO testimony that it is time to re-examine the effect of the Carmack Amendment, a 1906 amendment to the Interstate Commerce Act that details carrier liability for loss of damage arising from interstate shipments.
    Unfortunately, over the years the courts have interpreted this amendment as preempting basically all State requirements. This court history has had a chilling effect on States' efforts to enforce their own consumer protection laws.
    Since 1998, when the Department of Transportation last testified on household goods movements, Motor Carriers has investigated 32 consumer complaints against household goods carriers. Thirty resulted in enforcement actions, including two revocations of authority, one civil injunction, 12 claims, notices for fine ranging from $5,000 to $45,000 and seven warning letters. Four company officials have been jailed and three cases are open for possible criminal prosecution. One company has gone out of business.
    FMCSA targets its enforcement actions against the most unscrupulous carriers and is making some progress in assisting consumers. However, I must be candid in stating that as we have organized our new agency, we have focused our resources on the safety issues detailed in our enabling legislation, the Motor Carrier Safety Assistance Act of 1999. Our agency is fully committed to its safety mission. This is where our highest priority remains.
    This is not to say we have not made some progress. Until August 2000, FMCSA addressed household goods complaints through a task force of employees who handled a broad range of safety and regulatory matters.
    Today, we have five full time employees who are focused solely on household goods movement. As we streamline our registration processes, we hope to reassign as much as ten percent of our insurance and licensing staff to household goods enforcement.
    We have also expanded the scope of our 24-hour, toll-free hotline to receive consumer complaints. Soon we will establish a national consumer complaints database that will help identify the worst carriers.
 Page 24       PREV PAGE       TOP OF DOC
    One option we are considering is to use this database to inform the public about carriers on which we receive a high volume of serious complaints.
    Currently, FMCSA uses several criteria to target investigations. We determine whether the carrier has adequate insurance to protect the public. We also look at hostage shipment allegations and prior compliance and enforcement history of the carrier.
    In addition to enforcement, we are trying to help consumers learn more about household goods transactions, so they can make the best choices in selecting and negotiating with the moving company.
    If consumers are armed with knowledge about their rights and typical business practices, they are less likely to be victims of unscrupulous companies.
    The FMCSA activities I have mentioned are not enough alone to deter unscrupulous movers from defrauding large numbers of consumers. We are looking for opportunities to work with Congress, States, consumer agencies and others to better protect the public.
    I would be pleased to answer any questions that you may have.

    Mr. PETRI. Thank you.
    I think we will proceed to hear the opening statement of Ms. Harrington and then recess for votes on the Floor. So, Members are welcome to listen to the testimony or proceed to vote on the Floor.
    Ms. Harrington?

    Ms. HARRINGTON. Thank you, Chairman Petri and Members. I am Eileen Harrington from the Federal Trade Commission's Bureau of Consumer Protection.
    The commission thanks the committee for the opportunity to describe its joint Federal-State enforcement framework that was established by the Telemarketing and Consumer Fraud and Abuse Prevention Act or the Telemarketing Act.
 Page 25       PREV PAGE       TOP OF DOC
    The Telemarketing Act was signed into law in 1994. Its purpose was to bolster the FTC's ability to combat telemarketing fraud, which had been a very high enforcement priority for both the commission and the States' Attorneys General for quite some time.
    In the years leading up to the passage of the legislation, the FTC had challenged scores of fraudulent telemarketing schemes in Federal courts throughout the United States. Section 5 of the FTC Act authorizes the commission to take action against unfair or deceptive acts or practices affecting commerce.
    The commission's enforcement program against fraudulent telemarketing is one of many broad enforcement initiatives undertaken by the agency.
    The Telemarketing Act strengthened the commission's ability to combat telemarketing fraud and brought some resources from the States and the Department of Justice into play. The Act directed the commission to issue a rule and also specified that certain acts or practices should be addressed by the rule and finally authorized the commission to consider imposing record-keeping requirements through this rule.
    But the aspect of the act of greatest interest to the subcommittee is that it authorized the States' Attorneys General and other appropriate State officials and private persons to bring civil actions in Federal district courts to enforce compliance with the FTC's rule.
    The FTC adopted its rule in 1995. It became effective on the last day of that year. It requires telemarketers to disclose specific information to consumers. It prohibits misrepresentations about cost, quantity and other material aspects of the goods and services that they offer. It places time limitations on telemarketing calls to consumers. It contains other specific prohibitions on certain abusive acts and practices.
    Through these very specific requirements the commission attempted, and I think somewhat successfully drew a bright line between the kinds of practices that legitimate telemarketing companies engage in and those which are engaged in by these fraudulent and unscrupulous telemarketer.
 Page 26       PREV PAGE       TOP OF DOC
    But more importantly, I think, to your concerns, the Act had the effect of placing many more cops on the telemarketing fraud beat. It did this by empowering the Attorneys General of the States to bring civil actions on behalf of their residents in appropriate Federal district courts and to obtain nationwide injunctive relief to stop these schemes.
    Also, State enforcement authorities are given the authority to obtain redress for their own citizens in these actions brought in Federal court. Now, the Act promotes coordination between the States and the commission by requiring that the States, where possible, provide prior notice to the FTC before initiating an action in Federal court and it gives the FTC authority to intervene in such actions in the event that there is a Federal interest or a Federal issue.
    The likelihood of inconsistent decisions from State court to State court or Federal court to Federal court is limited by this scheme because the States, when they are in Federal court, are enforcing the specific provisions of a Federal rule.
    Now, one of the most important outgrowths of this scheme is the data collection and information sharing mechanism that we have set in place in this and other consumer fraud areas.
    The FTC has established Consumer Sentinel, which is a Web-based complaint database for all kinds of consumer fraud. It grew out of an earlier initiative undertaken by the States' Attorneys General and the FTC to create a common pool of telemarketing fraud complaints.
    Over the years, we have expanded that database to now include over 300,000 consumer complaints about all kinds of consumer fraud and those complaints are made available immediately desktop to law enforcement throughout the United States, Canada, Australia, the United Kingdom because, you know, fraud is increasingly a global problem.
    So, creating a mechanism for sharing complaints was the first part of our implementation strategy.
 Page 27       PREV PAGE       TOP OF DOC
    The second part was to take some leadership in coordinating enforcement. To that end, the Federal Trade Commission, working with the States Attorneys General has undertaken a series of 21 separate enforcement sweeps to use the telemarketing sales rule, to stop various kinds of fraudulent telemarketing activities.
    The FTC has brought 126 law enforcement actions on its own as part of these sweeps and the States have brought hundreds more enforcement actions, in fact, a total of 330 enforcement actions by our State partners. That is the kind of leverage and leadership that we think the telemarketing scheme has provided us with an opportunity to perform.
    We think that the model from the telemarketing experience really does provide some useful example for you as you deal with this other difficult consumer problem. We would note on every available occasion that the Federal Trade Commission Act exempts common carriers from the commission's jurisdiction.
    This is an area in which we really have no experience or expertise, but in other areas of important consumer protection, we do and were complimented that you would ask the commission to come and share its experience with you.

    Mr. PETRI. Thank you.
    There is a vote on the House Floor. I understand there will be another vote immediately following that to adjourn. So, we will come back as quickly as we can. I anticipate that the subcommittee will resume at about ten minutes before the hour. We will recess until approximately then.
    Mr. PETRI. We will resume. We will begin questioning of the first panel with questions from Mr. Borski.
    Mr. BORSKI. Thank you, Mr. Chairman.
 Page 28       PREV PAGE       TOP OF DOC
    Ms. Hecker, let me start with you, if I may. According to your report, the department has received only a fraction of the resources the ICC devoted to oversight and enforcement of the household goods moving industry.
    Could you be more specific about the resources expended by the ICC and the resources expended by the department?
    Ms. HECKER. I would be pleased to share what information we have available. We have actually tried to identify the magnitude of resources at the ICC and find there are not sufficient records to really document it.
    We have heard that it was potentially up to double the amount at the department right now, but we couldn't confirm that with any specific records. Part of the reason was that it was done at the regional district offices and on a part- time basis. So, it is very hard to develop an actual estimate.
    But it certainly was a focus of a lot of the collection of consumer complaints, the processing of those complaints, and some action as well.
    Mr. BORSKI. Ms. Cirillo, could you respond to that?
    Ms. CIRILLO. Well, Congressman, we also have the same difficulty in getting a specific number, but fortunately we do have in FMCSA some folks who worked for the ICC as it transitioned over to Federal Highway. They estimate that the equivalent of 50 full time people in the field did household goods enforcement activities.
    As Ms. Hecker has indicated, it was essentially a field activity that was run by the ICC regions or divisions or whatever their field structure was called.
    Mr. BORSKI. What about now?
    Mr. BORSKI. Yes.
    Ms. CIRILLO. We have five full-time people; three in the field and two in headquarters. We have a plan to hire one additional person in headquarters.
 Page 29       PREV PAGE       TOP OF DOC
    Mr. BORSKI. So, we went from 50 to what?
    Ms. CIRILLO. Well, actually we went from 50 to zero to hire one additional person in headquarters.
    Mr. BORSKI. So, we went from 50 to five?
    Ms. CIRILLO. Well, actually we went from 50 to zero, as it transitioned. We have just assigned, as of probably August of 2000, the five full-time people. Prior to that, FHWA was dealing with the issue with a task force. They had put together a group of people, some who had an ICC background and some who did not. This task force functioned essentially as a collateral duty. They did household goods issues along with other safety issues.
    Mr. BORSKI. Is this going to be enough, in your view? Are five or six people in the field going to be enough to do the job?
    Ms. CIRILLO. Well, I think, Congressman, it really depends on how you define the job. If someone suggested that we investigate every complaint that we receive or even those complaints that we could substantiate were real complaints, well, obviously, it is not enough.
    But for the consumer aspect of it, I think our biggest problem with the consumer aspect of it is the history of the Carmack Amendment, which prohibits the States from prosecuting some of these consumer complaints.
    So, it really depends on how one defines where you want to go and how that mixture of Federal and State enforcement comes together.
    Very similar, on the safety side, motor carriers used to do all of the roadside inspections and we had 150 people doing roadside inspections. Now, we have several thousand, but they are State people who are doing the roadside inspections and we do the compliance reviews.
    Mr. BORSKI. So, is that a good model for what we should do, in your view?
 Page 30       PREV PAGE       TOP OF DOC
    Ms. CIRILLO. I think it is something certainly worth looking into. I think that the States usually have the responsibilities for consumer protection. This is a big area of consumer protection.
    If we could construct some measure where the States and the Federal oversight could work together, so that we can bring to the fore Federal oversight, the enforcement that we do against carriers, and allow the States the ability to pursue the consumer protection issues, as it relates to either Federal law or to their own law, then they are not preempted from pursuing their own issues. I think the FTC model certainly sounds like something worth investigating.
    Mr. BORSKI. OK. Ms. Hecker, let me get back to you on this question because I know the moving and storage association is going to testify. From their testimony they are obviously concerned. They believe that allowing States to enforce the Federal statutes, that is, ''The State enforcement would result in a firestorm of inconsistent, varying interpretations of Federal law that presents the potential for injunction relief threatening the continued operation of legitimate movers.''
    Do they have a legitimate concern?
    Ms. HECKER. The model that you have heard from Ms. Harrington shows there is the potential to have State enforcement of Federal law and regulation with leadership and guidance from the Federal Government to promote consistency and coordination. So, I don't think negative effects are the necessary result and I don't believe that should preclude consideration of how to construct an exemption or a revision of the current practice that does provide more direct remedies through State action or private action.
    Mr. BORSKI. OK. Ms. Hecker, let me stay with you, if I can. In the ICC Termination Act, Congress directed the department not to become involved in mediation efforts between carriers and household goods shippers. Could you tell us how much the department cut back in other areas like bringing enforcement cases and conducting compliance reviews of carriers and in performing data collection and analysis?
 Page 31       PREV PAGE       TOP OF DOC
    Ms. HECKER. The focus of our review identified a whole range of areas where the department had assigned responsibilities, not only the area that you mentioned in terms of collecting and analyzing nationwide information, which is not the same as responding to individual complaints, but understanding the nature of the problems in the industry. That was not done. The regulations were not finalized. It didn't even know how many compliance reviews of household goods carriers it had conducted. It did little to educate consumers.
    The booklet that is required to be given to consumers still doesn't even have the reference to the right office in the department to call.
    Outreach is perhaps one of the key concerns with other consumer groups and State groups. It was very poor during the last few years. In fact, when we talked with 24 State agencies, over half of them didn't even know which Federal agency was involved or had any jurisdiction in the matter whatsoever.
    So, this movement toward a State role, as I said before, requires a strong leadership role and a presence at the Federal level.
    Mr. PETRI. Thank you.
    Mr. Isakson, do you have any questions?
    Mr. ISAKSON. Thank you, Mr. Chairman.
    Ms. Cirillo, you are with the DOT oversight that now is over this?
    Ms. CIRILLO. Yes, I am.
    Mr. ISAKSON. I apologize to all of you for coming in very late.
    In my private life for 32 years I sold houses. So, I just have a couple of questions. It says in here there are about 4,000 complaints a year, is that correct, that get to you?
    Ms. CIRILLO. Approximately, right. The number is increasing. Last year it was about 4,000 complaints.
 Page 32       PREV PAGE       TOP OF DOC
    Mr. ISAKSON. It is my recollection from something else I read preparing for the hearing that there are about 1.4 million moves a year in America.
    Ms. CIRILLO. Yes.
    Mr. ISAKSON. So, the percentage, although zero is the ideal number, is not a huge percentage of the number of moves. But my question is, based on historical perspective, when you do get complaints, generally, they are pretty egregious situations or they used to be. Is that still the case?
    Ms. CIRILLO. We get a range of complaints. What we do is, when we collect the information and we look at it, we actually try to investigate really egregious complaints. We get a whole range of complaints, from ''I'm waiting here for my goods and the mover has told me he is going to charge me five times what he told me originally. He is charging me for twice as much weight, et cetera,'' all the way to, ''They broke the shade on my aunt's lamp and I want to get the money back.''
    So, it is a real range and we try to look at, for investigation, the most egregious complaints.
    Mr. ISAKSON. In that case, if I might, in a hypothetical, not naming anybody, egregious case, when you find out that in fact somebody was charging five times or had misrepresented the weight, what do you do?     Ms. CIRILLO. We would conduct an investigation and substantiate what happened. Then we would fine the carrier. We would find the carrier in violation of the Federal regulations of the things that they have to do, for example, providing a written estimate, or having a process to resolve issues.
    So, we would go through the list of criteria they have to meet and if they didn't meet those criteria, we would fine them.
    Mr. ISAKSON. Is there a formula for the fine?
    Ms. CIRILLO. Yes, there are criteria for the fine. The fines are set in terms of how much you get fined for each violation.
 Page 33       PREV PAGE       TOP OF DOC
    Mr. ISAKSON. My last question is: Without naming anyone, do you watch for patterns where the level of complaints is much higher against one than another in the industry and is that in fact the case? Are the complaints weighted toward a couple of folks?
    Ms. CIRILLO. We do watch for patterns, but not in a systematic basis because up until recently, we have not had a plan to systematically collect data and do an analysis in terms of prioritizing who we are getting the most complaints against.
    Most of the complaints are received by our State offices. Since they are handling a discrete number of complaints, they usually can pretty quickly focus in on a carrier or carriers about which they are getting many complaints. Those are the carriers that we would investigate.
    Mr. ISAKSON. My last question is: Are the majority or at least the highest number of complaints regarding money more than breakage or handling or do you have an idea?
    Ms. CIRILLO. Yes, the most egregious complaints are about money.
    Mr. ISAKSON. Thank you.
    Thank you, Mr. Chairman.
    Mr. PETRI. Thank you.
    Mr. Rahall, any questions?
    Mr. RAHALL. Not at this time, thank you, Mr. Chairman.
    Mr. PETRI. Mr. Clement?
    Mr. CLEMENT. Yes, Mr. Chairman.
    Ms. Hecker, according to your testimony, if Congress decides to expand the State's role, it should be done in conjunction with, not in lieu of, more effective Federal efforts.
 Page 34       PREV PAGE       TOP OF DOC
    First, would it be advisable for Congress to expand the State's role in regulating the household goods industry, and second, to what extent do you believe the States are prepared to assume a larger role?
    Ms. HECKER. We have not reached the point where we have a specific recommendation about expanding the State role. We do conclude that it has substantial promise for increasing opportunities for consumers to seek redress. It also has the potential to leverage, as Ms. Harrington noted, the very limited resources at the Federal level.
    The issue of the State capacity is an important one because capacity does vary. But our sense is that it may be variation with the level of the problem in the State.
    For example, there is real commitment and movement and focus and concern about this issue in Florida and New York, which are some of the States where the most significant number of problems have been experienced. Those States are very concerned and I think you will hear that they are effectively precluded under current interpretations of the preemption reach of Carmack from taking any action.
    Mr. CLEMENT. Thank you.
    Ms. Cirillo, I would like to ask you, how is the FMCSA and you might describe exactly what that is hotline working? When a complaint is received over the hotline, for example, a complaint involving a hostage goods situation, what steps are taken to address the complaint and does the department investigate all complaints?
    Ms. CIRILLO. Well, I can answer your last question first. The department does not investigate all complaints. We only investigate those companies about which we receive more than one series of complaints about egregious behavior.
    We do get calls about hostage goods situations, and we sometimes receive those calls as the goods are being held hostage. The customer is on the phone with us and the moving van is outside refusing to unload their goods unless they pay an additional amount of money.
 Page 35       PREV PAGE       TOP OF DOC
    We try to do several things in that situation. One is to try to help the customer get through that particular situation, really by our ability to talk to and cajole and deal with some of the issues in a non-enforcement way, in trying to resolve the particular issue.
    That particular process is really a function of the folks who are working this area and above and beyond our official duties. When we get a series of complaints about hostage goods or any other serious complaint, we send an investigator to the company.
    That investigator investigates that company in terms of their compliance with all of the household goods regulations, plus at the same time, we generally do a safety investigation while we are there. So, we kind of get a ''two-fer.''
    Every time we go to do a investigation, we find violations that not only relate to the complaint, the reason we went, hostage goods, but we will find other violations, for example, operating without authority, some issues associated with weight, some issues associated with providing estimates.
    So, we try to categorize those carriers which are egregious and we go after those carriers. But we don't do that categorization and that assessment in a systematic fashion. It is not at the same level that we do the safety evaluations, where we systematically collect data, we calculate a score, and then identify the at-risk carriers.
    We do have plans to develop a database for household goods carriers. The database is structured, but it is not populated. So, as we move forward with that, I would expect that we would operate that particular type of activity the same way we operate the safety.
    We would identify those carriers that are poor actors and target those for investigation. But under our current structure and with the folks that we have doing that, my guess is that the number of investigations that we would undertake would be pretty much at the same level that we have now.
    Mr. CLEMENT. Thank you, Ms. Cirillo.
 Page 36       PREV PAGE       TOP OF DOC
    Ms. Harrington, the Federal Trade Commission seems to be involved in a lot of different consumer protection issues covering a lot of different industries. Obviously, there are some jurisdictional issues to consider, but have you ever thought about regulating the household goods moving industry?
    Ms. HARRINGTON. It is a question that has certainly come up over the years several times, particularly when the ICC was winding down and going out of business. So, yes, there has been thought given to it.
    We repeatedly have come to the conclusion that it would not be a good idea for this task to be given to the FTC. The FMCSA and the Department of Transportation really are the part of the Federal Government that have the experience and deep knowledge on this industry and the experience in bring enforcement in this area.
    The agency is already out there doing safety checks and perhaps could do something more in the consumer protection audit area when they are doing that as the bank examination authorities do when they go out to do bank exams.
    The FMCSA and the department have this apparatus of 52 or so field offices and four service centers that really put it out there on the ground in a better position than the FTC, which is a very small agency. It has about 1,000 employees to do both anti-trust and consumer protection work.
    So, for those reasons we have pretty consistently concluded that this is a task that we are not very well suited to do and that the department of Transportation really is.
    Mr. CLEMENT. Thank you.
    Thank you, Mr. Chairman.
    Mr. PETRI. Thank you.
    Ms. Hecker, did you have a comment that you wanted to make?
    Ms. HECKER. Yes. Thank you, sir. I wanted to say that there is a fundamental limitation of the DOT role in terms of this investigation that Ms Cirillo describes. Even if there was rigorous consistent investigation of the nature that she described, at the end of it the action that can be taken is largely penalties to the carrier, not redress for damages for the consumer for either breach of contract or fraud or negligence.
 Page 37       PREV PAGE       TOP OF DOC
    So, the current scheme really is not providing opportunities for redress and that is certainly not, even after the best of the investigations and an active role by DOT, getting actions to protect consumers for fraudulent behavior.
    Mr. PETRI. Mr. Otter.
    Mr. OTTER. Thank you, Mr. Chairman.
    Ms. Hecker, you said in your testimony that in 1980 there was 25,000 complaints and now there are 4,000, roughly. Is that right?
    Ms. HECKER. Yes.
    Mr. OTTER. Wasn't that your testimony?
    Ms. HECKER. The data is incomplete about how comparable it is. There was a lot of understanding and clarity that the place to complain before 1980 was the ICC. That was before the deregulation trying to introduce the competition and flexibility by movers.
    It was a very rigid price and route regulation that was extremely inefficient.
    Mr. OTTER. But the point is when a person was injured, either by breach of contract of damaged goods, in 1980 there was 25,000 instances where those were brought to light. Today, you are saying if they are not injured they just don't complain to anybody?
    Ms. HECKER. Well, there is very little help for consumers to know that Ms. Cirillo's agency is the place to go. The DOT website doesn't help you get there. The Motor Carrier Agency's own front Web page doesn't really have a consumer complaint indicator that says, ''We are the place to go.''
    You can't search and find out that that is the place to go. So, you really have to look at Better Business Bureau. You have to look at other kinds of Web sites.
    Mr. OTTER. Does the Better Business Bureau know where to go? They are professionals.
 Page 38       PREV PAGE       TOP OF DOC
    Ms. HECKER. The Better Business Bureau doesn't refer complaints to the department because of the department's role and effectiveness to intervene for a consumer is really so limited. They basically have limited tools to tell the consumer about what they can do.
    The current option is to go to Federal court using the Carmack amendment. For most complaints that is unwieldy and excessively costly. So, I think they try to do it more like on an arbitration basis.
    Mr. OTTER. So, when we had the ICC, which was a full- time complaint bureau and regulatory bureau for such industries as the household moving industries, we had 25,000 complaints. Then when we let the private sector take over and sort of encourage themselves and clean up themselves to a certain extent, they dropped by 75 to 80 percent.
    Now, we are saying, gee, what we ought to do is go have another Federal agency get back into the business so maybe we can drive those complaints back to 25,000.
    Ms. HECKER. Well, sir, I actually think a point that you are honing in on, the important of competition, is absolutely central in this. I think the public policy revisions made in the early 1980's to so many sectors in this economy and in transportation was the best way to protect consumers was competition.
    So, we are not talking about a new economic regulatory program. We are talking about the barriers on interstate commerce that require a continued Federal role in a very narrow way.
    Certainly five or ten or even fifteen people are not the recreation of the ICC. The issue is that there really is not a lot of recourse right now. The numbers of complaints appear to be down from the levels seen at ICC, but we don't have the same kind of national pooling of the data from the Better Business Bureau, from the State Attorneys General and others. So, they are not of the same volume, but a lot of those complaints were really about the unwieldiness of regulation and the inflexibility that consumers and carriers had.
 Page 39       PREV PAGE       TOP OF DOC
    Mr. OTTER. Well, trust me, it has been my experience that even 15 or 20 can create an entire agency and can create more regulations than we ever thought possible. So, I would encourage us, and I just received information from my Attorney General in Idaho who indicated to me that this is not a big problem in Idaho. But where they have had problems you, in fact, hit the nail on the head, they can handle the problem.
    You, in fact, hit the nail on the head. The problem is the Federal regulations that they can't use on a State level. So, perhaps we could cure the problem by simply saying, ''States, go ahead and work your magic right there on the local level. You have a local problem. Have a local solution.''
    Ms. HECKER. There is certainly promise there for increasing redress and access by consumers for some relief.
    Mr. OTTER. Thank you.
    Ms. Cirillo, what percentage of the Federal Motor Carrier Safety Administration's budget goes to take away from safety on the highway and administration the local household complaints department?
    Ms. CIRILLO. It is about one percent.
    Mr. OTTER. One percent? What would that be?
    Ms. CIRILLO. In terms of our budget?
    Mr. OTTER. Right.
    Ms. CIRILLO. About $1 million, which includes five full-time people, conducting field investigations and other activities connected with household goods oversight.
    Mr. OTTER. About $1 million. Thank you.
    Thank you, Mr. Chairman.
    Mr. PETRI. Thank you, Mr. Otter.
 Page 40       PREV PAGE       TOP OF DOC
    Mr. Mascara.
    Mr. MASCARA. Thank you, Mr. Chairman.
    I am generally a 10th Amendment person. I believe in State's rights. At the same time, I understand the difficulty in applying uniformity to laws and regulations.
    I have a question at the end. But by way of more or less a statement, is anybody shocked or surprised that some in the industry have run amuck and continue to wreak havoc on the unsuspecting public who want their goods transported in a timely fashion and safely?
    To give you a historical perspective, there was a rush back in 1995, which most of us supported, to balance the budget but at the same time eliminated the ICC in 1996 and the subsequent transfer of responsibility to the Department of Transportation.
    It is my understanding that the funding for oversight did not follow the transfer of responsibilities and that the DOT has not budgeted any significant amount of funds to carry out the former responsibilities of the ICC.
    Before anybody places blame, as a Member of Congress, we need to acknowledge that we as the legislative body need to accept some responsibility for the problems that we are facing today. We have a responsibility to protect the public just as the State does.
    I don't think we can go forward in seeking a solution until we accept that responsibility. Thank God we didn't go forward with the elimination of the Education Department and the Energy Department.
    I hate to use that ''I told you so,'' but this a lot of what we were talking about at the time when we eliminated the ICC.
    Isn't this problem caused by the lack of funding? If I were a member of DOT, I would reject responsibility without the funding. Did any of that funding follow the responsibilities to DOT? How much funding did you get to carry out the oversight responsibility?
    Ms. CIRILLO. I didn't know I had the option of rejecting the responsibility, but I will take that back to the Secretary and let him know.
 Page 41       PREV PAGE       TOP OF DOC
    When the ICC was terminated and pieces of the remaining functions were transferred to the Federal Highway Administration, it was not just household goods oversight that was transferred. There was the licensing and insurance function. So, there was a larger group of activities that were transferred.
    Most of those activities, however, are self-supporting. The dollars for the people who do licensing and insurance come from the fees that we charge carriers.
    So, household goods, which was an oversight function, came essentially with the responsibilities that had been in place for years and years with very few people. As time went on, we had even fewer people because they were older people from the ICC who retired and were not replaced. There was no funding specifically for that.
    So, any funding that we have put to household goods we have eked out of the budgets that we have had over the years.
    One of the issues that is prevalent here though, and I have to reiterate Ms. Hecker's comment, is that even if we had all the funding that I could possibly ask for and the process would allow me to have, the function that we have does not give any redress to the consumer who is harmed. The consumer's goods are held hostage and they complain to us. We investigate that carrier.
    The end result is we find that carrier. That consumer has no recourse through us. Unfortunately, because of the court's interpretation of the Carmack amendment, there is a good likelihood that the State in which that consumer resides, that that Attorney General is going to be reluctant to pursue it because the courts have interpreted the Carmack amendment as preempting the State's ability to pursue their legislation in the courts.
    We are really kind of in a Catch–22 as it relates to the consumer. It seems to me that if we did nothing else, we should look at the Carmack Amendment and some revision of that to allow the States to at least perform their consumer protection function because our process offers no direct redress to the consumer.
 Page 42       PREV PAGE       TOP OF DOC
    Mr. MASCARA. It sounds like a cop-out to me on the part of the State. But perhaps there is a need to work more closely with the States, to suspend the license of the carrier or something to make sure that the consumer is protected.
    Ms. CIRILLO. I don't think the States have copped out. I think the court history on this has really stymied efforts. I mean every time a State has gone to court, the courts have decided that the Carmack Amendment preempts them. From 1906 on, there is a history of this. So, they are reluctant to spend their limited resources essentially going after something that historically has not gone their way.
    Mr. MASCARA. My time has run out, but just a final question: Then it is not about money. It is not about funding. It is not about lack of personnel. It is about the problem associated with the legal ramifications between the Federal Government and the State government?
    Ms. CIRILLO. I think it is all of those things.
    Mr. MASCARA. Thank you.
    Thank you, Mr. Chairman.
    Mr. PETRI. Thank you.
    Mr. Thune, do you have any questions?
    Mr. THUNE. Thank you, Mr. Chairman.
    I have just one question. Forgive me if this has been asked. I apologize for missing some of the earlier testimony. But I am curious to know about just information keeping and data and so forth. One of the things that we run into in a lot of other areas in dealing with some of the airline issues, too, and the passenger complaints is how they are catalogued and the database that is maintained and do consumers have access to those complaints for purposes of making decisions?
    My understanding is that there is some effort underway to come up with sort of a national database. Could you just elaborate a little bit on that?
 Page 43       PREV PAGE       TOP OF DOC
    Ms. CIRILLO. We have a plan to develop a consumer complaint database. Right now what we do is we keep registers, log registers in each of our field offices, and we keep a register in headquarters from the Consumer Complaint Hotline.
    We have a plan to develop a database. Actually, the database is in its final stages of development, but it is not populated. We have not put any of the existing data into the database.
    So, nationally, as the GAO has testified, we have no mechanism for doing any type of national analysis as to who are the bad actors and who aren't and what type of complaints have been filed against Company ABC, so a consumer who is interested in contracting with this company can find out how many complaints have been filed against them.
    Right now we have no automated mechanism for doing that.
    Mr. THUNE. If you develop one, how would that information be disseminated to consumers?
    Ms. CIRILLO. Well, I would assume we would do it very similarly to what we do on the safety side. We actually have an Internet access to our safety database. So, if you are interested in shipping some goods, you can query the database, the public can query the database about a particular company, and it will give you all of the safety information that we have on that company including their safety rating. So, I would assume it would be something similar to that.
    Mr. THUNE. Thank you. I yield back the balance of my time, Mr. Chairman.
    Mr. PETRI. Thank you.
    I know Mr. Borski has asked for a second round. No? We are fine.
    Let me just ask the panel a few questions. There has been a lot of discussion of the Carmack Amendment. This is something that is built in to the fabric of the trucking industry in the United States now. It applies to a lot of things beyond household movement.
 Page 44       PREV PAGE       TOP OF DOC
    But as I understand it, it traditionally was supposed to be restricted basically to damaged goods in transit and for some reason courts have broadened it so that when goods are being held hostage where they have some of these moving disputes, they claim there is a preemption there.
    So, is there some opportunity for us to not upset the whole transportation world, but focus on clarifying Carmack so that people would know that in the moving goods cases that are beyond this narrow scope of Carmack there could be recourse?
    Do you have any comment on that or does anyone? Does that seem like a profitable way to go in that area?
    Ms. CIRILLO. That would certainly be something that the Department would encourage and support, to clear the table so that the things that we do and the things that the States are allowed to do can come together and not only help us regulate and monitor the industry, but help consumers have some redress through the State processes.
    Mr. PETRI. One question, also, of Mr. Hecker. That is, does GAO have any advice or position on which way we should go if we want to get the greater State involvement? Should we try to get the States to enforce a Federal scheme or get out of the way and let them come up with their own enforcement in this area or rules of whatever?
    It is interstate movement of goods, so there is some policy in favor of trying to have a Federal coordination, but State enforcement rather than just get out of the business so to speak.
    Ms. HECKER. Precisely. I think one of the interesting things to hone in on is the issue of uniformity as an argument for preemption. I think one of the key things here is preemption is most justified where it is impossible for a firm or an entity to comply with both State and Federal laws. So, that is one of the things you want to clarify here.
    The second is where the State law or State action might impede the accomplishment of the purposes here. So, those are two tests of the reach of the preemption vis-a-vis the challenge of maintaining uniformity. Where those are not necessary, there is a lot more opportunity.
 Page 45       PREV PAGE       TOP OF DOC
    But we don't have a position. The least intrusive approach is providing authority to States to enforce the current Federal regulations and statutes. That just puts more cops on the beat. That does not provide the consumer redress that we have been talking about.
    It is the State enforcement of State consumer protection laws parallel to the experience that we heard from Ms. Harrington that really alters the access by consumers. But I think there is a justified concern and I think it should be examined carefully. You will hear from the moving industry and the trucking industry and the railroad industry about finding the right balance as. you open up the reach of State enforcement authorities to this interstate traffic.
    Mr. PETRI. Ms. Cirillo, the legislation that we passed several years ago called for some new updated rules and regulations in this area and nothing evidently has happened. Is there an explanation or can we find another deadline or what?
    Ms. CIRILLO. Actually, we were engaged in drafting rules. To be candid, the rules really tried to clarify some things that are inconsistent with regulations and with the ICC Termination Act.
    In our efforts to implement the provisions of the Motor Carrier Safety Assistance Act of 1999 which had many new rules and deadlines, we have put that rule on household goods movements essentially on the back burner. It is drafted. It is in review. But with the press of other activities that we have had, in terms of regulations with specific deadlines that deal with the safety issue, it has been delayed.
    Mr. PETRI. Do you have any forecasts as to when the delay might end and we might see action?
    Ms. CIRILLO. Where is my counsel? Actually, the gentleman sitting behind me is the gentleman who has that review. He tells me that it will be probably by the end of the year that we will move it out of the agency.
 Page 46       PREV PAGE       TOP OF DOC
    Mr. PETRI. Under the current schedule the plan would be to have it by the end of the year?
    Ms. CIRILLO. That is correct.
    Mr. PETRI. Well, as you can tell with this hearing, we will be reviewing the whole area and hopefully there will be some opportunities to get action for the public. Congressional action takes longer than executive action sometimes, but perhaps not in this case.
    Do you have any comments on the testimony we are going to be hearing a little later? I referred to it in my opening remarks. That is the You Pack Service, and whether there is some action that we ought to be taking in that area since it is a new or at least considerably expanded approach to moving household goods.
    Ms. CIRILLO. As you mentioned, we have recently issued a decision about that particular type of service, You Pack. It is essentially a situation where a consumer hires a truck and a truck driver, the consumer packs their own goods and loads them onto the truck and they can be carried with other goods. Then, when they get to their destination, the consumer unloads their own goods from the truck.
    So, the responsibility of the motor carrier is simply to provide the truck and to drive. Our recent decision basically said that that activity on the part of the motor carrier was not the same as household goods movers who essentially come in and pack your goods and load them on the truck and move them to the destination.
    Mr. PETRI. Have you had any complaints of consumers in that area?
    Ms. CIRILLO. No. Well, not that I know of. I shouldn't be so blithe to say no, but we will check and we will get back to you, Congressman. None have come to my attention. But I don't know for sure. We will check to see if we have any complaints.
 Page 47       PREV PAGE       TOP OF DOC
    The following was received from Ms. Cirillo:

    [We have not received any complaints.]

    Mr. PETRI. Ms. Harrington, could you expand a little bit or give us the benefit of your thinking based on the experience of your agency on things that the Department of Transportation might do in terms of contracting out with some person in the private sector, some other way to kind of beef up what they are doing?
    Ms. HARRINGTON. Well, one of the services that we perform at the Federal Trade Commission is done through our Consumer Response Center, which is the central complaint handling unit at the FTC. Some years ago the Congress increased the FTC's appropriation fairly modestly to set up a toll-free number and staff up our Consumer Response Center.
    Consumers can complain to the FTC by calling the toll- free number. They can visit our website where there is an online complaint form. They can send us letters. They can send us faxes. All of those complaints, as I mentioned, go into this database.
    We also have lots of other contributors to the database. We have over 100 Better Business Bureaus who contribute their fraud complaints to our Consumer Sentinel Database. We have other law enforcement at the State and Federal level and other private interests who contribute data.
    There are two things I think it makes sense to do when you are in the complaint handling and database creation business. One is to try to contract out as much of the initial complaint receiving work as can be done. We have used performance contracts to hire, for example, a company that operates part of our call center.
    What we know is that when we are doing a good job on enforcement and consumer education, we actually experience an increase in complaints because then people know where to go when they have problems. So, our contractor is required to have a capacity that covers a range of complaints from a low number to a high number.
 Page 48       PREV PAGE       TOP OF DOC
    So, we don't have to pay to have a bunch of people sitting around waiting for phone calls that don't came. But when they start coming, the contract requires the contractor to increase staffing. So that is one area, complaint handling.
    A second is perhaps in the data collection area. When we set out to create the central Web-based complaint database, we took a look at what was already available in the way of data management software and found that there is very good off-the- shelf stuff.
    So, you don't have to re-invent the wheel if you are looking to set up a fully searchable database to handle consumer complaints. You need to have technicians, IT people who can tweak it for you, but there is good material and there are lots. We do our database management in-house at the FTC. That can also be contracted out.
    The reason we do it in-house is that this is a fraud complaint database that is used for law enforcement. It is used by the FTC. It is used by the FBI. It is used by local police departments. There is an urgency and sensitivity to that data that we think is best handled in-house. But there are very many competent data management companies in the private sector that, I am sure, would be interested in bidding on this kind of thing.
    Ms. HECKER. I just wanted to add, we have talked a lot about increasing access to the courts and remedies to the courts. But I think another thing that really is critical here and provides promise and opportunity is the arbitration process.
    As I said earlier, many of these cases are small enough that it will never be cost-effective or very rarely be, far less frequently be cost effective to have the issue taken to court. Therefore, for 30 years there has been a recognition that the arbitration process was key.
    When the role was transferred to the department they were mandated to do a study of how effectively the arbitration process was working. I would think if you are going to hold them accountable for the issuance of rules, another one that would have merit in making sure you are going to see that evaluation of how well arbitration works to be independent, balanced, and provide real opportunities for redress.
 Page 49       PREV PAGE       TOP OF DOC
    Mr. PETRI. Thank you. We will be interested in working with you at the FTC. As we pursue this subject, possibly you will have some ideas and can help with your experience.
    We appreciate all of your testimony. Thank you very much for coming today.

    Mr. PETRI. The second panel consists of Wendy J. Weinberg, the Executive Director of the National Association of Consumer Agency Administrators; Hillary Weisman, who is the Assistant Attorney General, Bureau of Consumer Frauds and Protection of the New York State Attorney General's Office, appearing on behalf of the National Association of Attorneys General.
    I think, given the fact that a vote has also now started on the Floor, we may as well recess, vote and then come back.
    So, we will probably resume about ten minutes after the hour instead of hearing the testimony now.
    Mr. PETRI. The subcommittee will resume with the second panel. We will begin with Ms. Weinberg, the Executive Director of the National Association of Consumer Agency Administrators.
    Ms. WEINBERG. Thank you for the opportunity to address this committee. My name is Wendy Weinberg and I am the Executive Director of NACAA, the National Association of Consumer Agency Administrators. NACAA is a nonprofit association who members are State, local and Federal Government consumer protection agencies.
 Page 50       PREV PAGE       TOP OF DOC
    Why are we tolerating fraud in interstate moving? Why are we preserving a niche for movers under the Carmack Amendment that has long since outlived any usefulness that it may have had and now acts to insulate rogue movers from prosecution for fraudulent acts?
    Research indicates that moving is the second most stressful event in a person's lifetime. Death is the first. Why are we not protecting people at this time of incredible vulnerability? Why are we saying that this is one of the only areas with documented abuse where people are just left on their own?
    We have set up a system in which there is virtually no Federal oversight over interstate moves. The States have been preempted from action and individuals don't stand a chance in trying to protect themselves.
    The problems in this area are well documented. In hearings three years ago NACAA and other organizations, as well as individual consumers described the nightmare that interstate moves have become for many households. Consumers are drawn into contracts with low-ball estimates that vanish once the consumer's goods are on the truck.
    In too many cases, the movers then demand triple the original estimate in cash or they threaten to disappear with the family's worldly possessions. There are endless stories of movers inflating the price of a move with unnecessary packing materials deceptively increasing the weight of a shipment, losing irreplaceable personal items and irreparably damaging a consumer's valued possessions.
    We know that the number of complaints in this area has risen dramatically since the ICC Termination Act of 1995. According to the GAO report, from 1996 to 1999 complaints to the DOT rose 107 percent. Complaints to the BBB rose 72 percent. Requests for arbitration to the moving industry association rose 750 percent.
    Add to this picture the fact that very few, fewer than two percent of those that experience a major fraud report that problem to a State AG or Federal agency and you realize there is a growing crisis brewing beneath our radar screens.
 Page 51       PREV PAGE       TOP OF DOC
    Yet, the exemptions persist for this industry and only two others: airlines and railroads. This insulation cannot be justified because movers are engaged in commerce across State lines. The number of businesses engaged in interstate commerce is overwhelming. All of these other interstate enterprises are subject to Federal as well as State consumer protection laws.
    Telemarketers have been brought into line. Sweepstakes promoters have been prosecuted. Sellers of travel packages and all types of merchandise are told that fraud will not be tolerated. What is different about movers?
    The answer cannot be a lack of resources. The States are ready to step in. NACAA suggests that two different enforcement models would be helpful in stemming the abuses that have clouded this industry.
    The first is to allow the States to enforce Federal law. There is much precedent for this type of joint cooperation that I spelled out in my written comments. The most active model is under the Federal Telemarketing Sales Rule. Under this scheme, the Federal Trade Commission and the States have jointly and individually attacked the problems in telemarketing.
    As Jodie Bernstein, the FTC's former Director of Consumer Protection has stated, and as Eileen Harrington stated this morning, the TSR effectively put 50-plus cops on the beat. Why not let these cops loose on interstate movers?
    NACAA would further urge, however, a strengthening of the Federal law, which currently has insufficient provisions to combat fraud and deceptive practices.
    The second model is to allow the States to go after rogue interstate movers under their own consumer protection statutes, the unfair and deceptive acts and practices. This will not, as some may argue, subject movers to a crazy quilt of laws. These laws are fairly uniform both in their content and in how they have been interpreted.
    We are not talking about arcane legalities. We are talking about fraud. If a mover provides an estimate for $2,000 and then asks for $6,000 in cash once a consumer's possessions are on the truck, that is fraud, whether the act occurs in Florida or in New York.
 Page 52       PREV PAGE       TOP OF DOC
    Of course, State action in the interstate context will be most effective if there is a strong Federal body to help aggregate complaints and coordinate enforcement. However, this body must be one that recognizes and prioritizes the fight against the rising fraud in this arena.
    Finally, I would urge this committee to take action now. Consumers are being harmed every day and this harm cannot be undone. If you lose your only picture of your grandmother or a special chair that your grandfather made, nothing can replace those items.
    Retirement nest eggs that are shattered by con artists cannot be recreated. It is not just a question of losing time trying to retrieve those possessions or lost money illegally coerced from the pockets of consumers. People's lives are permanently marked.
    We cannot afford to wait and there is no excuse not to take action now. I urge you to allow the States to step in to help consumers. They are ready and able to fill the enforcement void. None of us should ever have to take a call from a consumer which ends with ''I am sorry, but there is really nothing either you or I can do.''
    Thank you.

    Mr. PETRI. Thank you.
    Hillary Weisman, Assistant Attorney General, Bureau of Consumer Fraud and Protection, New York State Attorney General's Office, testifying on behalf of the National Association of Attorneys General.
    Ms. Weisman?

    Ms. WEISMAN. Thank you, Mr. Chairman. I would like to thank the committee for inviting State law enforcement's viewpoint on consumer issues in the interstate moving industry. My name is Hillary Weisman and I am appearing for New York State Attorney General Eliot Spitzer.
 Page 53       PREV PAGE       TOP OF DOC
    My comments reflect Attorney General Spitzer's perspective, but are also representative of the views of many of his colleagues around the country. In our society, interstate moves have become more and more commonplace and unfortunately more and more problematic.
    While the majority of movers are conscientious and ethical, there are too many who are eager to take advantage of consumers. In recent years State Attorneys General and consumer protection agencies have seen a dramatic rise in consumer complaints about problem movers.
    The interstate aspect of the moving industry is regulated under the Transportation Act. As you know, enforcement of the Federal Licensing and Consumer protection Regulations is vested in the FMCSA. Since that time there has been very little systematic national oversight of this industry.
    In 1998, the Federal Highway Administration published proposed amendments to its regulations governing interstate movers and many Attorneys General submitted comments at that time.
    Among other observations, the comments noted that if consumer protection regulations are not vigorously enforced, their usefulness is limited. Those comments are at least as accurate today as they were three years ago.
    Currently, the FMCSA does not enforce even the existing statutory and regulatory standards for interstate movers. In the absence of Federal enforcement, an increasing number of consumers across the Nation have become targets of fraudulent movers.
    Under the best of circumstances, a long distance interstate relocation can be complex, expensive and stressful. When problems arise with the mover, the process can become a nightmare.
    Almost by definition, consumers who hire moving companies for interstate moves are highly vulnerable. They have consigned all their belongings, including necessities, to a generally unfamiliar business.
 Page 54       PREV PAGE       TOP OF DOC
    Examples of the most common problems in interstate moves we have heard today are, for example, misleading, low-ball cost estimates, gross over-charges for unnecessary packing materials and services, intentional delays that inflate fees on hourly-rated moves, use of multiple corporate entities of shell companies to frustrate consumers and law enforcement agencies, loss, theft, or damaged property.
    Perhaps the most vexing consumer abuses occur when consumer's goods are held hostage. In the typical case, the unscrupulous interstate mover illegally inflates the charges for the move by several times the estimate. If the consumer objects to this gouging, the mover refuses to unload the truck and holds the consumer's belongings until full payment is made, usually in cash.
    By threatening to keep the consumer's goods and even adding storage charges, a scan artist can coerce payment of virtually any amount of money. Although such fraudulent tactics are clearly prohibited by Federal regulations, few consumers are able to protect themselves. Usually the police do not intervene. They think it is a civil matter. State agencies lack effective jurisdiction if the move is interstate. The FMCSA lacks the resources to resolve such individual disputes.
    The exploitation of consumers by rogue movers undermines the legitimate movers who cannot match deceptive low-ball bids that consumers are offered and the entire industry as a result is stigmatized by a relatively small group of fraudulent movers who inflict harm disproportionate to their numbers.
    The scope of these problems is national and their solution cannot be achieved by State and local governments alone. Consumers often reside far from the fraudulent business location and State law enforcement finds it difficult to effectuate remedies when goods are being held hostage in another State.
    Effective protection of the millions of Americans who move each year cannot be accomplished without cooperation and assistance at the Federal level. We urge that the FMCSA vigorously enforce compliance with its economic as well as its safety regulations.
 Page 55       PREV PAGE       TOP OF DOC
    We recommend that the agency investigate movers who generate frequent complaints and in appropriate cases suspend or revoke movers' licenses. Where problem movers are found to be shipping goods without FMCSA authority, that activity should be enjoined.
    Without a minimum level of regulatory oversight, statutory provisions enacted by Congress are basically meaningless and all these conclusions, of course, are bolstered by the GAO report we heard about this morning.
    We also believe that a coordinated State-Federal approach to enforcement would maximize both the FMCSA's efficiency and cost effectiveness and that of the Attorneys General. There are statutes that provide models for how this can work. We have heard about the Telemarketing Act, also the Federal Fair Credit Reporting Act, and the Homeowner Equity Protection Act, which all give Federal agencies and Attorneys General concurrent enforcement powers.
    We urge that Congress enact similar provisions authorizing State prosecutors and Attorneys General to enforce the penalty provisions of the Transportation Act as they concern interstate movers. States could be empowered to seek existing Federal penalties for violations of household mover consumer protection rules and to put a half to unlicensed fraudulent interstate moves.
    We further recommend that such legislation provide for nationwide injunctions and asset freezes without the need for States to post a bond.
    Finally, to remove any question concerning State authority, we ask Congress to declare explicitly that States retain the power to enforce State deceptive business statutes against interstate movers.
    I would like once again to thank the subcommittee for providing this forum and this opportunity to testify before you. The Attorneys General urge that the FMCSA's existing rules for the industry be strengthened.
    Moreover, we urge that the FMCSA vigorously enforce those rules and we also as the subcommittee to consider legislation that would permit State Attorneys General to enforce the FMCSA's consumer protection rules in Federal and State courts as well as our own State laws to help address the very serious problems that consumers face in this area.
 Page 56       PREV PAGE       TOP OF DOC
    Thank you.

    Mr. PETRI. Thank you.
    Now, we will turn to questions. Mr.Rahall?
    Mr. RAHALL. Thank you, Mr. Chairman.
    Ms. Weinberg, you mentioned some concern about organized crime in the household goods moving industry. Could you give us any further details?
    Ms. WEINBERG. I have talked to several of my members who have told me both in Florida and New York that there are allegations that organized crime has taken advantage of the lack of oversight to become engaged in household goods moves. I know that there is currently an investigation ongoing with the FBI against a mover in Florida.
    Mr. RAHALL. Is that investigation public knowledge?
    Ms. WEINBERG. No. I am not in a position where I can give you details on the record. But I am sure that I could put you in touch with somebody who would be able to talk to you further off the record about this situation in Florida.
    Mr. RAHALL. Is it somebody with the FBI to which you refer?
    Ms. WEINBERG. I could get you a name of somebody in the FBI.
    Mr. RAHALL. They are going to talk to somebody about such an investigation?
    Ms. WEINBERG. I don't know what they will say. All I know is that they are involved.
    Mr. RAHALL. All right. I assume you have read the department's lengthy pamphlet, ''Your Rights and Responsibilities When You Move.''
    Ms. WEINBERG. I have seen it, yes.
    Mr. RAHALL. It is supposed to be furnished to all prospective shippers. It takes a Philadelphia lawyer to understand the thing. I just wondered if you have read enough of it to give any thoughts on it. You say you have seen it. Have you read it?
 Page 57       PREV PAGE       TOP OF DOC
    Ms. WEINBERG. I have seen it. I have read it. I do agree with you that if it was in plain English and if it were shorter it would be of much more use to consumers. I think in order for information like that to be useful it needs to be accessible. It is very difficult to get through that document.
    Mr. RAHALL. Are the States prepared to assume a more active role in enforcing the Federal regulations?
    Ms. WEINBERG. Absolutely. They are looking for both enforcement of the Federal regulations, hopefully strengthened Federal regulations, and they are also looking for the ability to enforce their own fraud acts, their unfair and deceptive acts and practices statutes.
    Mr. RAHALL. So, you say that for all 50 States?
    Ms. WEINBERG. I say that for the NACAA members which is not all 50 States. We have 165 members at the State, local and Federal level. Certainly, I know the States that are most affected by this on the eastern corridor and the western corridor, that they are looking for stronger enforcement abilities.
    Mr. RAHALL. How many States do regulate household goods carriers?
    Ms. WEINBERG. I don't know.
    Mr. RAHALL. Ms. Weisman, do you have a comment on that?
    Ms. WEISMAN. I really don't know. I think it is around 30 or 35 out of the 50 that regulate interstate movers.
    Mr. RAHALL. Concerns have been expressed by the American Moving and Storage Association that State enforcement of the Federal regulations would lead to inconsistencies of interpretations. Do either of you have a reaction to that? Ms. Weinberg?
    Ms. WEINBERG. State enforcement of the Federal regulations?
 Page 58       PREV PAGE       TOP OF DOC
    Mr. RAHALL. Right.
    Ms. WEINBERG. I don't really see where their argument lies. I mean if we are talking about enforcing Federal laws and if we are talking about a coordinated effort with a Federal agency and the States, I think that you would have consistency.
    It is just a question of having more cops on the beat. You would have more manpower to do the enforcement.
    Mr. RAHALL. You don't see where there could be possible misinterpretations of what should be enforced and what should not be enforced?
    Ms. WEINBERG. There maybe different emphasis put on different provisions in different States, but the regulations, if they require that an estimate be in writing, that is pretty clear. It has to be in writing. If it says that you have to unload the goods for 110 percent offer made on the binding estimate, that is fairly clear.
    If you have violations of those rules, I don't see that there is really grounds for much concern. Particularly, I think that the legitimate movers should not be concerned. They shouldn't have any problems with these regulations at all.
    The State agencies and the local agencies are not interested in going after legitimate movers or interrupting their businesses. It is the rogue movers, the small percentage of movers who are causing a problem who we need to go after.
    Mr. RAHALL. OK. Thank you. I know they are coming up on the next panel, so perhaps we will have their response to that.
    Thank you.
    Thank you, Mr. Chairman.
    Mr. PETRI. Mr. Duncan.
    Mr. DUNCAN. Ms. Weisman, we have a report showing there is about a million and a half moves each year nationwide. How many moves did you have last year in New York?
 Page 59       PREV PAGE       TOP OF DOC
    Ms. WEISMAN. I really don't know. I can get you that information. I am sure there were a lot. I mean New York is a very populous State.
    Mr. DUNCAN. How many complaints did you have?
    Ms. WEISMAN. That I also don't know.
    Mr. DUNCAN. You don't know that either?
    Ms. WEISMAN. It is unquestionably a small percentage of the total. There is no argument about that.
    Mr. DUNCAN. I tell you, I would assume that this is a problem that varies widely from State to State. In some State you probably get very few complaints and then in some States you may have more fraudulent operators.
    Ms. WEISMAN. I think that is right.
    Mr. DUNCAN. I will tell you, I have no connection even remotely with any moving company. I knew nothing about this before I came here, but I see this, 4,000 complaints last year to the Department of Transportation, I figured out that is about 2/10ths or 3/10ths of one percent. It seems to me that almost any business that I can think of is going to get more complaints than that. I mean that is 99.8 percent apparently are doing all right. I am sure people wish that these things cost less, these moves.
    I saw in the report that there were 4,000 complaints to the Department of Transportation and 4,900 complaints to the Better Business Bureau. But I assume that some of those complaints were duplicates. Do we have any information at all? I assume that there were people who were unhappy who didn't know who to complaint to. So, there are other people who had problems.
    Do you have any laws in the State of New York now prohibiting any of this? Surely you have some State laws.
    Ms. WEISMAN. We have extremely strong State laws against all kinds of business fraud which cover movers. The problem is movers who are going interstate, from State to State. It is arguable.
 Page 60       PREV PAGE       TOP OF DOC
    Because of the Carmack amendment we have to stay hands off of that area.
    Mr. RAHALL. Well, anything is arguable, but I don't think they would have a very good argument. We have an example of a Brooklyn moving company that perpetrated a fraud on a family in Brooklyn, apparently. It seems to me that surely there are State laws that would cover something like that and they couldn't get out of it.
    Ms. WEISMAN. Oh, absolutely. The problem is when the family from Brooklyn is moving to Newark, New Jersey. It is when the move is from one State to the other that our jurisdiction is questionable.
    I would not concede that we have done, but it is certainly very problematic. One of the things we are asking Congress to do is to clarify that in fact you did intend to preempt us from prosecuting those movers.
    Mr. RAHALL. I agree with that. I will tell you, I don't see anything wrong with having a law against this situation that they described in this report where a company, after they get somebody's goods on their truck, suddenly increases the rates by 400 percent. I mean that is fine with me.
    But I don't think that we should go overboard on this since we are getting such a low percentage of complaints that we cause a lot of trouble and paperwork and drive up the costs for all these good companies that are out there.
    Ms. WEINBERG. Except that I do not believe that it would in fact drive up the costs for any legitimate company. If they are already abiding by the law, it is not as though they have extra forms to fill out or extra paperwork or extra duties. They conduct their business the way they always have, which is lawfully.
    It is the unlawful movers who would suffer if our enforcement capacity is increased.
    Mr. RAHALL. Any time you increase Federal regulation over an industry, you are driving up costs. Anybody with any common sense knows that.
 Page 61       PREV PAGE       TOP OF DOC
    But at any rate, thank you very much, Mr. Chairman.
    Mr. PETRI. Thank you.
    Mr. Hayes, do you have any questions?
    Mr. Otter?
    Mr. OTTER. Thank you, Mr. Chairman.
    I don't want to belittle the fact and following up on what my good friend, Mr. Duncan, his pursuit. Being only 4,000 out of one million, but to that family, that could be 80 percent of their assets. That is their bed that they want to sleep in and their refrigerator that they want to keep their beer cold in.
    I think it is important. I don't want to belittle that because to that particular family, that is very important. But I am also aware that the industry itself, wouldn't you agree, Ms. Weisman, has started to do or has done in the past few years a pretty good job of trying to police themselves?
    Yes, there are indeed some unscrupulous operators that are sneaking in under the carpet. For anybody who looks for a good deal, a deal probably too good to be true, which it really is, would you agree that the industry has taken some-within the industry-policing action to try to move the unscrupulous out?
    Ms. WEISMAN. I believe that that is their intention. In fact, they tend to be very supportive when we are conducting enforcement actions because, as I have said, it hurts the entire industry. When you read newspapers articles about extortion by movers, you think that applies to the whole industry and of course, it does not.
    Unfortunately, I don't think that legitimate movers can do the job themselves. I think they need enforcement action from both the States and the Federal Government.
    Mr. OTTER. Well, the enforcement that I always look for with government, I mean the government is always supposed to be the referee. If you have two willing partners that at least initiated the contract, then the government should be the referee and say, ''Now, wait a minute. This is not what was promised and you didn't deliver what was promised.''
 Page 62       PREV PAGE       TOP OF DOC
    Where I have great concern is, I agree with my friend, Mr. Duncan, where I have great concern is then after the fact when the government comes in and interprets the contract for themselves rather than what the two parties agreed to.
    I think perhaps a position where the government maybe becomes the holder of the check while the furniture is delivered, and the government becomes the holder of the check as the referee and says, ''OK, as soon as we get this whole thing all squared away, you have to deliver the furniture no matter what, whether the payment is made or not. But the payment is going to be made to the Attorneys General's office consumer protection.''
    You hold onto the check until the investigation proves who was right and who was wrong. Who did not live up to their side of the contract? I can see the government playing that referee role.
    But unfortunately, that is not what we have heard here this morning. That is what I don't hear here.
    Do either one of you have an agriculture that protects the unscrupulous consumer against the legitimate household service mover? Who is collecting those complaints?
    For instance, ''You broke my piano.''
    ''Well, actually, ma'am, your piano was broke when it was loaded.''
    Who handles those complaints?
    Ms. WEISMAN. I don't know how it works in other States. In New York there is a Department of Transportation that deals with complaints back and forth between movers and shippers. In all cases they listen to both sides of the argument. There are hearing procedures where the movers can explain what it was they did and didn't do and why and the shippers can also testify accordingly.
    So, there is due process that exists within the administrative system, at least in the State of New York.
 Page 63       PREV PAGE       TOP OF DOC
    Mr. OTTER. Well, I would hope there would be in the other 49 States as well.
    Ms. WEINBERG. Well, I would just say that government consumer protection agencies are not automatically pro- consumer. They look at a complaint that comes in and will find against the consumer if the consumer is in the wrong. They don't take the consumer's side automatically. They are looking to investigate the complaint. Many times they send the consumer packing.
    I just wanted to also respond to your earlier question about industry self-regulation and say that one of the obvious problems with that is that the rogue movers, the criminals, are not going to join a voluntary industry association. The industry cannot go beyond their own membership.
    They are not going to bring enforcement actions. They are not going to bring sanctions against a rogue mover who is not even part of their group.
    Mr. OTTER. I certainly understand that. Then I begin to believe that that is where the role of government comes in as the referee. I really think this whole idea of holding hostage 85 to 90 percent of somebody's assets, not only that, their gatherings for all their life, when you voluntarily surrendered them believing that a good and legitimate service was going to be provided.
    But let me ask you both a question again. Do you have statistics that show how many unscrupulous consumers perpetrated a fraud against legitimate operators?
    Ms. WEINBERG. Within the household goods context?
    Mr. OTTER. Yes.
    Ms. WEINBERG. No.
    Mr. PETRI. Thank you, Mr. Otter.
 Page 64       PREV PAGE       TOP OF DOC
    I am wondering if either of you could expand a little bit on the testimony that we have had today about the alleged preemptive effect of the Carmack amendment in the household goods area.
    Can you explain how that works or are there cases out there that you could cite or help us to understand why an amendment that effects all trucking activity has been interpreted to preempt States from dealing with moving fraud?
    Ms. WEINBERG. There has been a line of cases and I can provide citations to the committee at a later point. I know that Rini was one of the primary cases where it was held that all State claims would be preempted and they cannot be brought on behalf of an individual and the State couldn't bring them on their own behalf.
    Agencies have seen this line of cases. There has been consistently bad case law. Either they have been directly preempted by a decision within their jurisdiction or they have been afraid of creating bad case law within their jurisdiction and therefore are afraid to take any action.
    Mr. PETRI. We will be exploring that with you and trying to figure out how we can constructively clarify the thing without creating any other uncertainties or confusion because of the Carmack provision which has been on the books now for nearly 100 years. It has worked by and large quite well for most of the industry and we want to be sure that we don't disturb what is working well while trying to fix another problem in the home moving area.
    In your testimony you referred to three or four areas where there is a joint enforcement model, including the telemarketing sales rule which we heard about from the Federal Trade Commission, the Fair Credit Reporting Act, The Telephone Consumer Protection Act, the Children's Online Consumer Protection Act.
    Could any of you right now or later evaluate what works if there are some features of those joint efforts that are particularly desirable or some areas where they have not worked very well so if we looked to those as models, we could pick the best rather than something that is not so good for the household goods moving area?
 Page 65       PREV PAGE       TOP OF DOC
    Ms. WEINBERG. I think that one element which is helpful is if the States have the authority to proceed in State court. They also need to be able to get damages and attorney's fees. Those are two elements that are missing from the telemarketing sales rule, which would make action easier for the States if we were considering a new rule in this context.
    Ms. WEISMAN. Obviously the cooperation with the Federal agency is key in a circumstance like this. It has worked extremely well with the FTC. But the FTC is very well set up. It is database is very elaborate and so on. So, that is part of what has contributed to its success in that area.
    The FMCSA obviously has a long way to go to reach the point of being able to be that kind of partner in this. But I think the FTC is a great model in this for that kind of relationship.
    Mr. PETRI. Now, there was also testimony about a lot of companies and other organizations do have consumer complaint programs and that idea of contracting out to a private operation that can ramp up or ramp down has a lot of merit, rather than trying to deal with the more inflexible government operating systems.
    Do States do that in the consumer protection area or is this something that is a Federal Trade Commission innovation that is still being looked at?
    Ms. WEISMAN. We don't, and I don't know of any other State that does. You know, it is all in-house. We have created the system for complaint collection and retention in- house. I don't know if any other States have contracted that out or not.
    Ms. WEINBERG. I don't know of any States that have, either, but I would just point out that if they are going to be soliciting complaints from consumers, they have to advertise their hotline and they have to put educational materials out.
    As stated previously, if you go to their website right now, there is nothing that indicates that there is any consumer services available. There is nothing that indicates that there is a hotline. There is nothing that even indicates that they regulate or have any oversight over household goods movers.
 Page 66       PREV PAGE       TOP OF DOC
    Mr. PETRI. Finally, we are going to be hearing from the American Moving and Storage Association, which is the leading trade association in this whole area. Have either of you made any effort to work with them at all or other industry associations on trying to improve consumer awareness in this area?
    Ms. WEINBERG. Yes. I had some discussions with Mr. Harrison a few years ago and actually invited him to NACAA's annual conference to discuss this very issue. We were unable to progress beyond our initial discussions.
    Ms. WEISMAN. I believe that representatives from my office have spoken in New York State with industry leaders. In fact, I believe there is someone who spoke at one of their conventions several years ago.
    Again, we want to maintain a relationship that makes it clear that this is, as we have pointed out repeatedly, a very tiny percentage of the movers and that in fact it serves the interests of all legitimate movers to have a strong both Federal and State enforcement framework because it can only harm legitimate movers when there are fraudulent activities going on.
    Ms. WEINBERG. I would just add that NACAA is certainly interested in working with the Moving and Storage Association. I think that there are lots of ways that we could further our joint interests in this area.
    Mr. PETRI. Are there any other questions?
    If not, we thank you both. We are sorry that the hearing has interfered with the lunch hour, but that is business in Washington. Thank you very much for your willingness to testify here today.
    The final panel consists of Mr. Joseph M. Harrison who is the President of the American Moving and Storage Association, and Timothy P. Lynch, President and CEO of the Motor Freight Carriers Association.
 Page 67       PREV PAGE       TOP OF DOC
    We welcome you both to our proceedings here today. We will turn to Mr. Harrison for the first statement.
    Mr. HARRISON. Thank you, Mr. Chairman.
    I am Joe Harrison, President of the American Moving and Storage Association, headquartered in Alexandria, Virginia. AMSA is the national association of the moving and storage industry, representing 3,500 movers worldwide; 2,000 of which are interstate motor carriers regulated by the DOT Federal Motor Carrier Safety Administration and the Surface Transportation Board.
    My complete statement to the subcommittee provides a detailed explanation of my industry's position on the issues raised by Chairman Petri related to the current State of Federal regulation.
    In addition, my statement describes many important steps AMSA has taken to improve the public's understanding of the moving process and what they should expect when dealing with legitimate movers.
    While I urge the subcommittee to pay particular attention to our efforts detailed in my statement, I will not use my limited time this morning or this afternoon to further explain our numerous consumer education efforts.
    Since the main focus of this hearing is the GAO report on DOT's consumer protection activities, I will touch on certain details that are not covered in our report. I am able to do this because my association has become the principal recipient of consumer moving complaints since the ICC was abolished.
    We are fully aware of the many schemes employed by unregulated or unscrupulous movers who take advantage of the moving public. We are also keenly aware of the limited effort DOT has expended to assist the public.
 Page 68       PREV PAGE       TOP OF DOC
    At several points in my complete statement I suggest that if the motor carrier administration is focused on highway safety issues and is unable to devote sufficient resources to administering its consumer-oriented responsibilities as charged by Congress, DOT should request funds for this specific purpose and Congress should appropriate those funds.
    In this connection I call attention to the activities of DOT's Office of Aviation Consumer Protection as a prime example of a Federal operation that deals with non-safety related consumer issues while the FAA simultaneously concerns itself with airline safety issues.
    The Motor Carrier Administration would be well advised to review the operations of that office as a possible model on its part.
    As Chairman Petri has noted, the absence of a significant Federal presence on the enforcement front has prompted certain interests to push for State involvement in the regulation of the interstate moving industry. AMSA would strongly oppose such a proposal.
    Of course, we are well aware of Congress's delegation of concurrent authority to the States' Attorneys General as an adjunct to the FTC's authority in dealing with fraudulent telemarketers. My complete statement deals with this scenario at some length and I believe forcefully makes the point that a world of difference exists between the operations conducted by fraudulent telemarketers and the operations conducted by unscrupulous movers.
    Just as importantly, I describe situations involving regulated reputable movers that may improperly prompt the State Attorney General to take action against the mover. As an industry we are accustomed to the fact that a very limited number of consumers become unrelenting in their demands for satisfaction of their moving complaints.
    Unfortunately, there is a tendency on the part of certain State Attorneys General to assume that such complaints, if they are raised often enough, require action on their part. Put simply, the moving industry cannot afford to be saddled with compounded regulations in the form of 50 different State jurisdictions delving into their day-to-day operations.
 Page 69       PREV PAGE       TOP OF DOC
    Oversight of the interstate moving industry has always been and should be the responsibility of the Federal agency Congress has charged with that responsibility. DOT should not be allowed to slide out of its role as a regulator by passing the buck to the States.
    My complete statement also explains how ineffectively the States, as a whole, are regulating the activities of unscrupulous movers that operate in their intrastate and local commerce.
    I suggest that a productive course for the States to follow would be to review their effectiveness in dealing with unscrupulous on the local and intrastate levels and take appropriate steps to curb their operations.
    To the extent that these operations may also be engaged in interstate commerce, State actions to stop their intrastate and other operations impairs their ability to prey on all consumers, whatever the scope of their moving requirements.
    It has also been suggested that movers should be required to assume expanded liability for damages that are unrelated to actual loss and damage of the goods they transport. It is presumed that the threat of consequential damages of every description is perceived as a possible deterrent to less than completely satisfactory moving service.
    Naturally, the moving industry, and I believe the entire regulated trucking and railroad industries as well, would strenuously object to any change in the national uniformity of freight and loss and damage relief provided by the Carmack Amendment to the Interstate Commerce Act.
    I am convinced that the difficulties carriers would confront in evaluating their potential liabilities under an expanded liability scheme would force even the best operators to seriously question the wisdom of continuing their interstate service.
    Having dealt with DOT for many years, I am convinced that it harbors an ingrained unwillingness to enforce the former ICC consumer protection regulations or take anything more than minimal steps to regulate the moving industry.
 Page 70       PREV PAGE       TOP OF DOC
    This position was recently confirmed when DOT refused to initiate a proceeding to explore the practices of licensed and unlicensed brokers who arrange for the transportation of household goods, many of whom use the Internet as their trap to capture unwitting consumers.
    My complete statement includes descriptions of actual cases in which consumers have become the victims of these operators. Almost one year ago AMSA alerted DOT to these practices and urged them to institute a proceeding to establish needed guidelines.
    Last month DOT denied that request without an explanation.
    These unregulated activities are being conducted with no interference from DOT. To me this does not reflect an inability to regulate. It reflects an unwillingness to regulate.
    I conclude with the same admonition I expressed during the subcommittee's 1998 oversight hearing. My industry transports roughly 1.3 million interstate shipments a year, the vast majority of which are handled without incident. To the extent unlawful operations are being conducted, DOT should increase its activities to target those operators with the force of its entire arsenal of statutes and regulations.
    The regulated reputable industry should not be saddled with additional regulation, particularly in the form of regulation by the States to correct what I believe is an entirely manageable Federal agency problem.
    That concludes my statement. I will be glad to take any questions at the appropriate time.

    Mr. PETRI. Thank you.
    Mr. Lynch?

 Page 71       PREV PAGE       TOP OF DOC
    Mr. LYNCH. Thank you, Mr. Chairman. I thank you and the members of the subcommittee for giving me this opportunity to present testimony today.
    I would like to make a brief oral statement summarizing our key points and then, I would like to be permitted to submit more detailed written comments from the ABF Freight System and Consolidated Freightways.
    Mr. PETRI. Your full statement and those of the other witnesses will be made a part of the record.
    Mr. LYNCH. Thank you.
    The Motor Freight Carriers Association is a national trade association representing the economic interests of unionized general freight motor carriers. All of our member companies operate under the terms and conditions of the Teamsters Union, National Master Freight Agreement.
    With their skilled and experienced Teamster work force, these companies have earned a well-deserved reputation for providing safe highway transportation that is among the best in the trucking industry. That safety record is the result of a top to bottom commitment to safety.
    Our drivers bring to the job several strengths. Experience. Our drivers average between 25 and 30 years driving experience, mostly with the same company. Safe driving records. Over one-fourth of MFCA member company drivers have accumulated over one million miles driving accident-free.
    Finally, a knowledge of safety rules. Our drivers have a virtual 100 percent compliance rate with the Federal hours of service regulations.
    I am here today to present testimony on behalf of two member companies, as I mentioned earlier, ABF Freight System and Consolidated Freightways, who have developed consumer household relocation programs, generally referred to as ''Customer Pack, Carrier Haul Services.''
 Page 72       PREV PAGE       TOP OF DOC
    Recently these services have come under attack through efforts to classify the companies as household goods carriers and the attendant regulations that go with that classify.
    I would like to present our argument as to why we believe that general freight carriers like ABF and CF who limit their consumer service to simply driving the truck, should not be classified as household goods carriers.
    Consumers contemplating moving their household goods items traditionally have had only two options: Hiring a professional household goods mover who takes on the full responsibility of packing, loading, transporting, unloading and unpacking the goods, or renting a truck and providing all those services themselves.
    It is to that second category of consumer that ABF and CF, through their You Pack and CF Moves You Programs have offered a third alternative.
    Under these customer-pack and carrier-haul services, the consumer now has a new, low-cost option: The benefit of customer control over packing and loading, without actually driving the truck. That is, these services substitute a trained, experienced professional Teamster truck driver to actually drive the truck, nothing more.
    The consumer continues to do his or her own packing, loading, unloading and unpacking and the ABF or CF Teamster driver never handles the household goods, or in the parlance of regulatory jargon, provides specialized service. He or she merely drives the truck.
    Now, I suspect that at some point there may be members of this subcommittee who have contemplated renting a truck or trailer in order to move some or all of their household goods items.
    If you are like me, it sounded like a great idea until that moment when you sat up in the cab of the truck, checked the rearview mirror and realized you were about to operate a piece of equipment that is very large and very unwieldy, certainly much bigger than the family car.
 Page 73       PREV PAGE       TOP OF DOC
    It is to these consumers, not the individuals who want a full services, household goods mover, that programs like You Pack and CF Moves You are attractive. It is aimed at the consumer who wants the low cost option of personally handling their household goods but does not want to take on the risk of actually driving the truck.
    In short, these programs provide the following benefits: Maintaining consumer control over their packing and loading; providing a low-cost option for household goods transportation and substituting an experienced, trained, professional Teamster truck driver for an inexperienced amateur drive.
    To treat these companies providing these services as household goods carriers would jeopardize these benefits for no public gain. The question of whether to regulate these companies as household goods carriers has now been reviewed and rejected by two Federal agencies: The Surface Transportation Board and the Federal Motor Carrier Safety Administration.
    These decisions merely follow the precedent established in earlier years by the Interstate Commerce Commission which never required motor carriers to hold household goods authority in order to participate in relocations unless they performed specialized packing and loading services.
    Additionally, there has been no evidence presented then or now about the need for greater regulation to stop consumer abuse. Quite the contrary, consumers freely choose consumer pack, carrier haul services because of the monetary savings.
    On both the ABF and CF Web sites, consumers receive full disclosure of the liability limitations and their options to purchase higher levels of loss and damage protection.
    Finally, highway safety is improved because a professional truck drive, not your next-door neighbor, is driving the vehicle, a drive who is experienced, knowledgeable, and safe.
    I would therefore respectfully request that the subcommittee reject any efforts to impose a regulatory scheme that flies in the face of this consumer choice and highway safety.
 Page 74       PREV PAGE       TOP OF DOC
    Thank you for giving me the opportunity to testify. I would be happy to answer any questions.

    Mr. PETRI. Thank you both.
    Mr. Rahall.
    Mr. RAHALL. Thank you, Mr. Chairman.
    I thank both you gentlemen, Joe and Tim, for your testimony and your candor, especially you, Joe, in your statement.
    You say that 22 percent of interstate shipments transported by your members result in a claim for loss of damage. That seems sort of high. I am just wondering why that is so and what percent of those claims are resolved in the shipper's favor.
    Mr. HARRISON. Well, it may seem high. There are some particular carriers that have a lower percentage than that, but that is the average. We are talking about a difficult complicated service. If you have ever tried to move a piece of furniture in your own house from the upstairs to the downstairs and you are very careful, you are not a professional mover, but you try to get that chair from the upstairs to the downstairs without a nick, it is tricky.
    It is an inherent kind of thing relative to the service when you are moving a person's entire household of a five- bedroom colonial home, you take it all out of the house from various levels into a truck and then drive it a couple of thousand miles and take it out of the truck or perhaps put it in storage and ultimately put it all back in the person's new residence, you are bound to have some loss or damage.
    It is just part of the cost of doing business, unfortunately, of the moving industry. I don't think, because of the nature of the service, that 20 or 22 percent is necessarily high. Now, that is the amount of claims that occur. Now, it is a matter of the customer going to the carrier to get that resolved.
 Page 75       PREV PAGE       TOP OF DOC
    At least in my membership, and we represent every reputable mover in the United States, most, I would say the majority of those claims are handled properly. The person is paid and they are satisfied.
    When there is some dissatisfaction or disagreement between the carrier and the customer, many times they go to arbitration. Our association has an arbitration procedure that all our members utilize. Many of those larger cases, if there is a problem with, perhaps the disagreement between two appraisers on a particular loss or damage, then they may go to arbitration to get it resolved.
    But for the most part, most of those claims that represent that 22 percent are handled according to DOD regulations and to the satisfaction of most consumers.
    Mr. RAHALL. So, your percentage of shipper favorable rulings or favorable actions is pretty high then?
    Mr. HARRISON. Yes.
    Mr. RAHALL. What percent of your moves result in consumer inconvenience or delay claims and what percent of those are resolved in favor of the shipper?
    Mr. HARRISON. Because we don't track statistically other categories of claims, whether they be delay claims or estimating problems, I don't have a number, to tell you the truth.
    I do know that because you can't get a real handle on the nature of those particular kinds of complaints, but they do exist. But I don't have a particular percentage. That, again, is part of the service.
    I mean if you happen to be stuck on the Beltway here for example I was fortunate enough to be at the beach, but when the tar truck spilled its stuff on the Woodrow Wilson Bridge and you happened to be on the Beltway that day and saw some of my moving vans sitting there waiting to get across that bridge, the folks on the other side of that bridge in Virginia looking for their household goods did not get their goods on time.
 Page 76       PREV PAGE       TOP OF DOC
    Now, that was not the fault of the mover. Cliff Harvisson isn't here to talk about the tanker that spilled the asphalt, but nonetheless, certain types of claims, whether they be delay or loss or damage are simply part of the process. But we do have them. They do occur.
    The ones that are probably the most prominent are those that occur during our busy moving season when everyone wants to move on June 30 or over the 4th of July holiday.
    Because of the increased demand, traffic congestion or perhaps a breakdown in the engine of the truck, you know, these things do occur. But we try our best to make sure that we stay in contact with our customer and tell them the circumstances and try to resolve it as fast as we can.
    Are there unscrupulous movers that take their time and don't communicate with the customer at all and perhaps don't show up for weeks or show up at all? Yes. Those are the folks that I think DOT should go after.
    Mr. RAHALL. Mr. Chairman, may I have a couple of extra minutes?
    Mr. PETRI. Of course.
    Mr. RAHALL. Thank you. I just wanted to ask Tim, in your testimony you said that the customer-packed carrier-haul service provides a new, low-cost option for consumers when they move. You said this, in effect, would be jeopardized if these companies were classified as household goods carriers.
    Could you elaborate a bit on this? First, perhaps, before that even, mention what are the consequences of being classified as customer-pack carrier-haul? What additional costs are involved?
    Mr. LYNCH. Well, let me give you just one example. The original petition that was filed at the STB for this was filed by the rate bureau for the household goods industry, not the association. Now, they are very close, but the rate bureau was the one that filed it.
 Page 77       PREV PAGE       TOP OF DOC
    As you know, having been on the committee and subcommittee for quite some time, there have been numerous efforts over the years to deregulate the rate bureau process and the issue of rate bureau activity is, to say the least, controversial. These carriers have absolutely no interest whatsoever, in being part of a rate bureau process for collective rate making, standard setting, et cetera, et cetera, all of the things that go along with that.
    The principal reason why they have no interest in that is because the service that they are providing is limited to simply driving a truck. All of the other elements of what would traditionally go into a household goods move, the packing, the loading, and the moving of the furniture within the house, all the things that Joe mentioned earlier, none of those activities are handled by these carriers. They simply put the trailer in front of the house. They give the consumer two days to pack the truck. The consumer does that himself, and puts the plywood behind where they load.
    The driver then comes back and picks up the truck and takes the truck down the road and that is it.
    Mr. RAHALL. The driver never touches the goods?
    Mr. LYNCH. The driver never touches the freight.
    Mr. RAHALL. Thank you, Mr. Chairman.
    Mr. HAYES. Thank you, Mr. Chairman.
    Briefly, from both of you, what is the liability of a household mover and what is the liability of the common carrier? What is the difference here for the sake of this discussion?
    Mr. HARRISON. Well, we are both, whether you are a household carrier or a freight carrier, you are subject to a variety of liability regimes or schemes. With a professional household goods carrier we are subject to released rates orders of the Surface Transportation Board.
 Page 78       PREV PAGE       TOP OF DOC
    Essentially, we are required to provide the consumer, especially the COD consumer, with several protections. The first would be a depreciated protection where at certain thresholds, usually starting at $1.25 times the weight of the shipment that moves up the scale, a declaration of the value of those goods and so depending on the weight of the shipment, you might have a total liability on the part of the carrier of anywhere from $10,000 to $20,000.
    If it is under a depreciated value scheme, if you damage the goods and, say, it is only one couch out of the whole shipment, then you would depreciate the value of that sofa. If it was five years old, you would depreciate it accordingly. You would pay the consumer based on the depreciated value of that sofa.
    If you destroyed the entire shipment, you would then pay the consumer whatever the $1.25 or higher number times the weight would be, which would be about $20,000.
    Mr. HAYES. You are telling me just a little bit more than I want to know, especially since my time is limited.
    Now, Mr. Lynch, under this agreement, is your driver always a Teamster driver? I see that mentioned every place on the last page.
    Mr. LYNCH. Yes.
    Mr. HAYES. What is your liability once it goes into the truck?
    Mr. LYNCH. I was going to say on your first question that there is probably five to ten attorneys sitting behind me that are waiting to hear how I answer this question. But under the law and under Carmack and there was an interesting discussion earlier about what Carmack is or is not.
    Frankly, if it is OK with the Chairman, I would like to submit a paper explaining what it is and what it is not. I think Joe may even join me in that effort.
    Under Carmack, we are liable for the full value of the commodity that we are transporting. However, the law also allows us to limit that liability. Now, we have to let the consumer or the shipper know that. There is no distinction in that, at least as far as we are concerned, and the service we provide between a household goods shipper and a regular shipper.
 Page 79       PREV PAGE       TOP OF DOC
    We can limit that liability, but we have to let them know that we have done that. Clearly, and it is not small print, fine print or anything else, when you go on to the website of these two companies, it is very clearly stated right up front that there is a limitation on the liability.
    If you as the consumer feel that your goods are worth more than what the sort of average is filling up that space, you have the option to purchase additional coverage. It is clearly spelled out that you can purchase additional liability insurance to cover what you consider to be the higher value of your goods.
    Mr. HAYES. Now, if there is a claim and you carried it, do you arbitrate that claim? How do you settle that claim?
    Mr. LYNCH Joe has a more elaborate scheme, I think. Do you want to explain that?
    Mr. HAYES. Excuse me. I want Mr. Lynch to answer first based on the pack and haul.
    Mr. LYNCH. It is between the carrier and the customer.
    Mr. HAYES. And you do arbitrate it?
    Mr. LYNCH. Yes, that would be one option ultimately.
    Mr. HAYES. That is one option that you could follow. Between the two of you, are the regulations that now exist fairly applied to the two types of carrier or do we need some changes there?
    Mr. HARRISON. Well, let me answer it first and I am sure Mr. Lynch will have a different answer. Currently, there is a vast difference in the regulatory review. First of all, we are subject to a whole host of consumer protection regulations that are enforced minimally by the DOT, both the Federal Safety Administration as well as the Surface Transportation Board.
 Page 80       PREV PAGE       TOP OF DOC
    To my knowledge, there aren't any consumer protection regulations that Mr. Lynch's carriers have to abide by because they concede or at least they are of the opinion that they are not transporting household goods pursuant to the kinds of consumer protections that my members are subjected to.
    Mr. HAYES. Mr. Lynch, one more question: Is full value protection for the goods carried available? Again, based on your last answer, you need to buy additional insurance if it is above a certain amount; is that correct?
    Mr. LYNCH. Yes, and that is very carefully spelled out to the consumer, both on the website and then when they actually fill out and say that they want to have this service performed. They have to check and say, ''I understand I have limited liability.'' Then they have to check another box that says, ''No, I don't want to do that and yes, I want to purchase additional liability coverage.''
    Mr. HARRISON. I might say that in addition to the full value provisions that I talked about that full value protection is available to all of our customers and most of them take advantage of it.
    I would say for the record, and let Mr. Lynch respond, that in the ABF and CF scheme of you pack, we haul, there is no full value protection offered. There are higher thresholds of liability that are offered if the consumer chooses to use them. But they are certainly not anywhere near full value and are limited to no more than probably about $15,000.
    Mr. HAYES. Mr. Chairman, am I correct in thinking that you have to be in elected office to use the term ''scheme'' up here?
    Mr. PETRI. Mr. Otter?
    Mr. OTTER. No, thank you, Mr. Chairman.
    Mr. PETRI. In that case, as you know, there is a vote on the Floor. We want to thank you both very much for your testimony. We may submit a question or two for a written response.
 Page 81       PREV PAGE       TOP OF DOC
    With that, the hearing is concluded.
    [Whereupon, at 1:09 p.m. the subcommittee adjourned, to reconvene at the call of the Chair.]