The Federal Trade Commission announced that it is launching a rulemaking aimed at combating government and business impersonation fraud, which the FTC said is "a pernicious and prevalent problem that has grown worse during the pandemic." This is the first rulemaking that the FTC has initiated under its streamlined rulemaking procedures.
The FTC said that impersonators can take many forms, posing as, for example, a lottery official, a government official, or a representative from a well-known business or charity. The FTC said that they may use misleading domain names or “spoofed” contact information to appear legitimate in order fish for information they can use to commit identity theft or seek monetary payments.
In announcing the action, Samuel Levine, Director of the FTC's Bureau of Consumer Protection, said, “It is reprehensible that scammers are preying on people during this pandemic by pretending to be someone they can trust. The sharp spike in impersonation scams has cost our country billions and undermined response and relief efforts. The FTC is prepared to use every tool in our toolbox to deter government and business impersonation fraud, penalize wrongdoers, and return money to those harmed."
In its Advance Notice of Proposed Rulemaking, the FTC said that impersonation scams are a leading source of consumer fraud reported to the Commission, and they generally involve scammers pretending to be a trusted source who convinces their targets to send money or disclose personal information. The FTC explained that while it has brought many cases targeting impersonation scams, its current remedial authority -- particularly its ability to obtain monetary relief -- is limited. As a result, the FTC believes that "a rule addressing certain types of unfair or deceptive acts or practices involving impersonation, including affiliation and endorsement, of government and businesses could help reduce the level of fraud in this area and serve as an additional deterrent for bad actors in the future because such a trade regulation rule would subject first-time violators to civil penalties." The FTC also said the rule would allow the Commission to obtain redress for consumers who lost money to impersonation scams.
In the ANPR, the FTC is seeking public comment on whether and how it should use its authority to address impersonation scams. In particular, the FTC proposes to address the following types of practies:
- Impersonation of a government official or agency by a person or organization without authority to act on behalf of that government;
- Impersonation of a business or its agents by a person or organization without authority to act on behalf of that business; and
- Entities that may provide the means and instrumentalities for these impersonators to operate.
The FTC's request for comment seeks public comment on any issues of concern related to the proposed rulemaking, as well as a specific questions listed in the ANPR. The questions include, for example:
- How widespread is the impersonation of government and business entities, and what types of communication and technology are used to facilitate this?
- How should a rule define "impersonation"? What claims, images, or symbols are likely to give rise to the net impression of government or business impersonation?
- Are there individuals or entities that provide the means and instrumentalities for impersonators to conduct such practices?
If, after receiving public comments in response to the ANPR, the FTC decides to proceed with proposing a trade regulation rule, the next step would be for the FTC to issue a Notice of Proposed Rulemaking.
In a statement, FTC Chair Lina M. Khan, said, "I urge my colleagues to support this ANPR and broader efforts to use our full authority to protect Americans from government and business impersonation scams " In her own remarks, Commissioner Christine S. Wilson accused the FTC of hosting "Rule-a-Palooza" at the FTC, saying, "Even when decisionmakers are motivated by the best intentions, the costs of rulemaking -- particularly in the long run -- tend to outweigh its benefits."
"The FTC is prepared to use every tool in our toolbox to deter government and business impersonation fraud, penalize wrongdoers, and return money to those harmed" -- Samuel Levine, Director, FTC Bureau of Consumer Protection