Senate Takes Aim at Scammers Taking Money From COVID-19 Victims

July 22, 2020 by Tom Ramstack
Sen. Richard Blumenthal (Photo via Senator's Twitter Account)

WASHINGTON — Scammers who cheat desperate consumers out of money during the coronavirus pandemic prompted calls for federal legislation to crack down on them during a Senate hearing Tuesday.

The proposals would set new standards for data privacy, penalize price-gougers and toughen penalties for retailers who promise products they cannot deliver.

“We need to stop the snake oil salesmen,” said Sen. Richard Blumenthal, D-Conn., during a hearing of the Senate Commerce, Science and Transportation Committee.

The Federal Trade Commission reported about 136,000 cases of fraud related to coronavirus by this week. They included robocalls for low-cost health insurance, fake COVID-19 medical tests, false cures and online ads for masks and other personal protective equipment that never is delivered.

The Federal Trade Commission estimated Americans have lost $90 million to the scams.

Some of the most vulnerable are elderly persons, according to expert witnesses at the Senate hearing. About 80% of the coronavirus victims who have died were elderly.

Their desperation to protect themselves also made them most likely to seek preventive supplements or cures online, according to consumer advocates.

“False cures not only take people’s money, they can kill,” Blumenthal said.

One of the preventive supplements advertised online has been colloidal silver. Medical experts say colloidal silver can cause kidney damage, bluish coloration to people’s skin and potentially death.

The Federal Trade Commission has sent 255 warning letters to vendors accused of using deceit to get money from consumers seeking disease protection. The next step could be Justice Department or state attorney general prosecution.

However, few federal or state laws directly address the unique fraud opportunities created by the pandemic, Blumenthal and other senators said.

“Right now, there really is no federal price-gouging law,” Blumenthal said.

Sen. Jerry Moran, R-Kan., said, “These types of attacks continue to evolve while posing threats to Americans.”

He mentioned the example of a Twitter message blasted to thousands of people last week. The scammers who sent the message said they would send donors twice the amount of their donations for coronavirus relief. In other words, for every $1,000 donors sent to a bitcoin address they listed in the message, they would send the donors $2,000.

Before federal authorities stopped them, the scammers received about $121,000 in donations from roughly 400 donors.

Moran asked what could be done to stop similar examples of what he called “social engineering.”

Stu Sjouwerman, chief executive officer of the cybersecurity firm KnowBe4, Inc., recommended national standards for data privacy and cybersecurity. Much of the security effort now is divided among various state laws.

“At the moment it’s a patchwork and, as we can see, it isn’t working,” Sjouwerman said.

Another proposal discussed during the hearing would be a federal law based on a recently enacted Kansas law against price-gouging. Price-gouging complaints shot up after the Centers for Disease Control declared an emergency in January as the coronavirus threat grew.

Some retailers quickly raised prices on spray disinfectants, medical masks and air filters two or more times over their normal cost.

The Kansas Legislature responded by enacting a law that created a presumption of price-gouging if retailers sold goods important during an emergency for more than 25% over their pre-emergency cost. The law also authorized the state attorney general to prosecute the retailers.

“It has allowed us to get voluntary compliance almost universally among legitimate actors,” said Derek Schmidt, Kansas attorney general.

Previously, Kansas used a law similar to federal standards that forbade “unconscionable” pricing. However, the vagueness of the law made it difficult to enforce.

“It is really clunky to do that,” Schmidt said.

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