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Defending the American Consumer in the Department of Justice

August 08, 2017

Thomas Jefferson wrote, “The most sacred of the duties of government [is] to do equal and impartial justice to all its citizens.” Since it was founded in 1870, the Department of Justice’s mission has been to: “enforce the law and defend the interests of the United States according the law; to provide federal leadership in preventing and controlling crime; to seek just punishment for those guilty of unlawful behavior; and to ensure fair and impartial administration of justice for all Americans.” [1]

In the Civil Division of the Department is a small office known as the Consumer Protection Branch (CPB), or previously the Office of Consumer Litigation. Its duty is to protect the health, safety, and economic security of the American consumer.[2] Moreover, the Consumer Protection Branch fills a crucial role in bridging the gap between American businesses and consumers. While large corporations have the ability to protect their legal interests, Americans suffer a collective action problem in which no one particular group shields citizens from fraud. The CPB solves this issue; its cases stem from federal consumer protection laws, establishing precedents that apply to every American. Common cases handled by the branch include: Pharmaceuticals and Medical Devices, Odometer Fraud, Tobacco Products, Consumer Product Safety, Deceptive Trade Practices and Telemarketing Fraud, and Civil Defensive Litigation.

By cooperating with various government agencies such as the Food and Drug Administration (FDA), the Federal Trade Commission (FTC), the Consumer Product Safety Commission (CPSC), etc., the Consumer Protection Branch is an unique example in the Department of Justice. While it technically belongs to the Civil Division, the CPB also investigates and prosecutes criminal violations of the law.

Top consumer complaints by state and by category.Source: Federal Trade CommissionTop consumer complaints by state and by category.
Source: Federal Trade Commission Credit: Consumer Sentinel Network Data Book

In the twenty-first century, protecting the American consumer has become increasingly difficult. In 2017, the Federal Trade Commission reported that “imposter scam complaints surpassed identity theft for the first time as the second most common category of consumer complaints.”[3] Imposter scams commonly feature the impersonation of a federal agent in the IRS or the U.S. Immigration and Customs Enforcement. Using this unlawfully acquired identity, the fraudster is able to illegally solicit money from Americans. Of the fraud complaints, the FTC reported that 77% of victims were initially contacted by phone. This imposter scam, commonly known as telemarketing fraud, is one of the most common types of cases brought by the Consumer Protection Branch. With millions of calls and fraudulent schemes each year, the CPB has a tremendous task in litigating these cases. 

With today’s technology, fraud can transpire across borders. According to a report published by the Communications Fraud Control Association, it is estimated that global fraud loss to citizens and businesses amounted to about $38.1 billion in 2015.[4] Various cases litigated by the Consumer Protection Branch demonstrate the countless telemarketers who operate from outside the United States using American phone numbers to target unsuspecting victims. 

Moreover, according to a 2014 study by LexisNexis, the global financial system of the twenty-first century facilitates fraudulent transactions. As demonstrated in the image below, the majority of mCommerce (mobile commerce) conducted on mobile devices and eCommerce (electronic commerce) fraud occurs through credit cards.[5] However, as governments improve strategies in combatting credit card fraud, criminal schemes now venture into “alternative payment methods” such as money orders or pre-paid cards. 

Fraudulent transaction levels based on merchant type and payment method.Source: CreditCard.comFraudulent transaction levels based on merchant type and payment method.
Source: CreditCard.com Credit: 2014 LexisNexis True Cost of Fraud mCommerce

In addition, through money orders and pre-paid cards, transferring money to other countries and to fraudulent services becomes immediate, irreversible, and untraceable. For example, earlier this year, a financial services company, which specializes in money orders, Western Union and the Department of Justice and the FTC reached a settlement of $586 million.[6] According to the federal government, Western Union received more than 550,000 complaints from 2004-2015 regarding money transfers for various fraud schemes. In a FTC report describing the case, the government proved that “Western Union failed to take action against Western Union agents involved in or facilitating fraud-related transactions.”[7] Western Union is just one of many mediums in which fraudsters are able to illegally solicit millions of dollars from American citizens and from people around the world. 

Current discourse around the defense of the American consumer centers around the newly created Consumer Financial Protection Bureau, a close but separate associate office of the CPB. Created in the wake of the 2008 financial crisis, the CFPB “writes and enforces rules to ensure that markets for consumer financial services are fair and open… and protects from unfair, deceptive or abusive acts or practices by financial institutions.”[8] However, in recent news there is discussion surrounding the constitutionality of the CFPB.[9] On one side of the argument, supporters claim that the CFPB is crucial in protecting American consumers from financial deception. On the other, dissenters claim that the CFPB violates the Constitution because it is ran by a single director that the president cannot remove at will according to the Consumer Financial Protection Act of 2010. 

As of March 17th, the Department of Justice publicly announced that it will not support the Consumer Financial Protection Bureau. According to a recent amicus brief, the Justice Department states that “there is a great risk that an ‘independent’ agency headed by a single person will engage in extreme departures from the President’s executive policy.” (Ibid) Moreover, President Trump’s 2018 budget request to Congress features a section entitled “Restructure the Consumer Financial Protection Bureau,” in which the majority of the funding for the CFPB will diminish over time, essentially dissolving it.[10] In the coming months, the future of the CFPB will be decided.

In short, defending the American consumer is a pertinent issue addressed by the Department of Justice’s Consumer Protection Branch in coordination with other federal agencies. The technology of the twenty-first century creates a monumental hardship in this governmental duty. This is evidenced by the outrageous amount of international fraud, specifically the recently settled Western Union case. Finally, the government’s role in defending Americans is still evolving and dynamic, as seen in the discussion around the Consumer Financial Protection Bureau. 

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References

  [1] “About the Department.” Department of Justice. https://www.justice.gov/about.

  [2] “About the Division.” Consumer Protection Branch, Department of Justice. https://www.justice.gov/civil/consumer-protection-branch.

  [3] “FTC Releases Annual Summary of Consumer Complaints.” Federal Trade Commission. March 3, 2017. https://www.ftc.gov/news-events/press-releases/2017/03/ftc-releases-annual-summary-consumer-complaints. 

  [4] “2015 Global Fraud Loss Survey.” Communications Fraud Control Association. October 6, 2015. http://cfca.org/fraudlosssurvey/2015.pdf 

  [5] “2014 LexisNexis True Cost of Fraud mCommerce: Merchants Struggle To Contain Rising Mobile Fraud Costs.” LexisNexis. January 2015. http://lexisnexis.com/risk/downloads/whitepaper/true-cost-fraud-mobile-2014.pdf.

  [6] Small, Bridget. “Western Union settlement: $586 million in refunds.” Consumer Information, Federal Trade Commission. January 19, 2017. https://www.consumer.ftc.gov/blog/western-union-settlement-586-million-refunds.

  [7] “Western Union Admits Anti-Money Laundering Violations and Settles Consumer Fraud Charges, Forfeits $586 Million in Settlement with FTC and Justice Department.” Federal Trade Commission. January 19, 2017. https://www.ftc.gov/news-events/press-releases/2017/01/western-union-admits-anti-money-laundering-violations-settles. 

  [8] “About the Bureau.” Consumer Financial Protection Bureau. https://www.consumerfinance.gov/about-us/the-bureau/. 

  [9] Marte, Jonnelle. “Trump administration calls the structure of the Consumer Financial Protection Bureau unconstitutional in filing.” The Washington Post. March 17, 2017. https://www.washingtonpost.com/news/get-there/wp/2017/03/17/in-court-filing-trump-administration-calls-the-structure-of-the-cfpb-unconstitutional/?utm_term=.9eca7bae1abb. 

  [10] Leonhardt, Megan. “Buried in Trump’s Budget: A New Attempt to Kill a Powerful Consumer Watchdog.” Money. May 23, 2017. http://time.com/money/4790486/trump-budget-2018-cuts-cfpb-consumers/.

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RESOURCE SPOTLIGHT:

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