Because I consider it an obligation to listen to the voices of these thousands of men and women, and to report their thoughts to those who should hear them, I appreciate the opportunity given me here today to present the urgent call for help that these consumers have asked me to put before you. In addition, many responsible businessmen, local law enforcement officials, welfare workers, and others concerned with maintaining decent and honest competition and consumer good will, have written me to urge me to present their viewpoints too.

As you know, Mr. Chairman, I have been troubled for a long time by the miserable racket involving phony home improvements and repairs. I know from my records that this has been a growing menace for years, and is consistently listed near or at the top of the Better Business Bureau's ten most unwanted frauds. But it continues to grow, people continue to be defrauded and hurt.

In studying this strange phenomenon which no one seems able to stop, I have found that it divides into several distinct sections-all of them related to a basic situation which could be dealt with under the proposals we are discussing at this hearing. First, there is the weird problem of the itinerant or “gypsy” repairman who travels with the seasons up and down the country, from state to state, not missing rural areas, suburban, or city sections. Second, is the local dealer, sometimes well-known, sometimes unknown, who may stay within the law but finds ways to make cheating profitable. Third, is the use by either an itinerant or local dealer of actual-materials carrying a famous brand and with an implied "guarantee" because of this famous brand, or the fraudulent claim that such a famous brand material is used, when it is not.

To document each of these areas, I can give some brief details from case histories well known to all local Better Business Bureaus, the National BBB, and many a law enforcement group around the country. Take, for instance, the itinerant gang called the "Terrible Williamsons". Back in 1965 the National Better Business Bureau reported it had followed and reported on this crew for years. Acually they have been skilled con-men for some sixty years. There are uncounted members of the clan who travel throughout the country successfully bilking trusting people everywhere. They tour rural areas painting barns at fancy prices, with "paint" which washes off with the first rain. They flim-flam farmers and homeowners with fake lightning rods, home repairs, driveway surfacing, etc.

From time to time one or several members of the gang are arrested, fined and sent on their way. The president of the National Better Business Bureau, Kenneth Willson, says, "The Terrible Williamsons flourish, decade after decade, largely because when apprehended they usually are held in low bail, which they jump, or they are ordered out of town. They easily take such punishment in stride."

And still they go on. Here, for instance, is a brief letter I have recently received from a woman in Pennsylvania. She says: "About ten years ago we were 'taken' on a roof job by the Williamsons. I never forgot, and last year the coming generation of Williamsons infested this area again. They came back to our house and I got their license numbers, etc. Everywhere I turned for help to stop them I ran into a brick wall. No one would do anything about them so they just went on operating their racket as they saw fit. I called police stations in every town, the Better Business Bureau, and to no avail. This is why the Williamsons can come in and know that no one will probably lift a finger to stop them."

The Holland Furnace racket has been a similarly prolonged fraud. This and other furnace "gyps" are a particularly mean racket because it rests on frightening old people especially women-who are alone and without family or friends to advise them. The Pittsburgh Better Business Bureau reported a case in which a 90-year-old woman had been persuaded to buy over $15,000 worth of furnaces and repairs during the past five years for a house that could not be sold for more than $10,000. This is a lush field for those who prey on the elderly, because, except for a few areas, this home repair business is unregulated by either Federal or local governments.

The old, the ignorant, and the isolated families are also the target of the inexcusable local dealers or companies who manage to use contracts to fool their victims into disastrous financial deals. An Ohio resident wrote me about two men who called at a relative's home and talked the grandmother, in whose name the house was, into signing a contract to have the basement wall fixed, as it was leaking a little. They told her if it wasn't fixed right away, the whole wall might cave in. They came in, stayed about five hours in the basement

and around the house and gave her a bill for $2800. She has since died, but her son is still paying that off at $50 a month-it will take him years to do it. And the original "leak" was a minor matter.

A Michigan man wrote me last month, "Just because I live in a remote part of the U.S., it doesn't mean I shouldn't have as much protection as those who live in cities. Or does it? The little people like me feel like it's worthless to ask for help but it's people like me who would certainly appreciate it."

The use of famous brand names in bringing pressure to bear on homeowners is a serious problem. From information I have collected over the years, I am forced to recognize that sometimes a big corporation making a material used in home repairs or improvements, sells his products to contractors or subdealers knowing perfectly well that the use made of them will be fraudulent. On the other hand, some manufacturers know their products' names will be misused to sell people a repair job, and try to stop it. DuPont, for instance, has been concerned about this and tried to stop it. Their "Tedlar" surfacing for siding is often sold with irresponsible claims by local dealers. DuPont's "Teflon" also has become the tool of fraudulent or mistaken sidewalk and driveway repairmen, and DuPont has constantly battled to keep the misuse from continuing.

But the fact is that not enough of the big companies do accept any responsibility for the way their products and names are misused to defraud consumers. In this context it is interesting to note that in New York last month a N.Y. Supreme Court Justice held that "Any reputable business firm is under an obligation to allow its name to be used only where it takes active steps to prevent the misuse of its name for the purposes of fraud and deceit." The manufacturers of products for home repairs and improvements could have done a good deal to prevent the gigantic growth of the current racket, if they had taken positive action when alerted to the problem years ago.

The question consumers are asking me, and I have been asking the Federal Trade Commission, various State Attorneys-general, and others, is simply— What can be done to stop this racket fastest and most efficiently?

Can the states or local police handle it? I see that the Attorney-General of California not long ago stated that the California consumer market is "taken" annually for $7,000,000 worth of fraudulent and illegal aluminum siding sales schemes. If you extrapolate that to a national figure, the problem becomes gigantic. Moreover, no matter how much an Attorney-General's office may want to help the many who have been defrauded in this racket, the inevitable response is that they cannot "represent an individual."

Involved in the problem is the whole matter of how the loans for many of these improvement or repair deals are financed. The record of what banks in this country are doing that actually helps the swindler by financing questionable notes, without investigation or checking, is a serious charge against bank policy. But who can, under present law or ruling, require correction of this situation?

Mr. Chairman, what is needed is enactment of the three bills we are considering. I know the work and the approach of the Federal Trade Commission well, after more than 25 years of cooperation with them. They-and consumers, and decent businessmen-need the FTC power to issue an injunction to halt a deception without waiting until the end of long litigation. They need the ruling that the FTC is to police unfair or deceptive acts "affecting" interstate commerce. And above all, they need the funds to get to work fast and intensively on this problem.

I recognize this will need teamwork on the part of all of us. It will need state and local law enforcement agencies; it will need the voluntary regulation assistance of the Better Business Bureaus; and the broad and hard-hitting educational campaign to give consumers alert awareness of the facts.

But the Federal Trade Commission can spearhead this campaign best, and I urge the quick passage of these laws to give it the tools needed. Thank you for letting consumers speak through my voice.

The CHAIRMAN. We thank you very much. I have to go over to the floor. You pick out the letters that you think would be pertinent to this, and they will be available for us in our consideration of the bill. Thank you all so much.

(Whereupon, at 12:30 p.m., the committee was adjourned.)

UNFAIR PRACTICES IN THE HOME IMPROVEMENT INDUSTRY AND AMENDMENTS TO THE FTC ACT

THURSDAY, MARCH 28, 1968

U.S. SENATE,

COMMITTEE ON COMMERCE,

Washington, D.C.

The commiteee met at 10 a.m. in room 5110, New Senate Office Building, the Honorable Vance Hartke presiding.

Present: Senator Vance Hartke.

Senator HARTKE. The hearing will come to order.

We will continue the hearings today on Senate Joint Resolution 130, S. 3065, and S. 3066.

Is Mr. Miskell here?

Francis A. Miskell, Commissioner, Office of Consumer Credit, Austin, Tex.

STATEMENT OF FRANCIS A. MISKELL, COMMISSIONER, OFFICE OF CONSUMER CREDIT, AUSTIN, TEX.

Mr. MISKELL. Gentlemen, my name is Francis A. Miskell. I serve as consumer credit commissioner of the State of Texas. I appear before you today in support of S. 3065, S. 3066, and Senate Joint Resolution 130. These proposals to strengthen the power of the Federal Trade Commission in regard to unfair or deceptive interstate trade practices and to investigate home improvement frauds would effectively complement activities of the State of Texas and many other States in the field of consumer protection.

In Texas, the office of consumer credit commissioner, in cooperation and conjunction of the attorney general, various district and county attorneys, Better Business Bureaus, and programs and projects of the War on Poverty, has been engaged for several months in a comprehensive investigation of home improvement abuses. In the course of this project, which is still in progress, the office of consumer credit commissioner has investigated 168 home improvement companies and financial institutions in Texas and other States. Over 15,000 separate home improvement transactions have been examined in minute detail. This investigation has uncovered large-scale and clear-cut patterns of fraud, deceit, and deception on the part of a small segment of the home improvement industry in Texas. To date, 58 felony indictments, 12 misdemeanor complaints, 44 cease and desist orders, and 34 injunetions have been filed against home improvement contractors and financial institutions. In addition, civil suits to recover several million dollars in illegal charges have been filed or are in the process of being filed, and the end of such actions is not in sight.

Home improvement frauds constitute the most vicious, most virulent area of consumer abuse today. This stems from the fact that these abuses are found primarily among the poor, the uneducated, the unsophisticated, the elderly-the segments of our society least able to protect themselves and least liable to recover from the substantial financial injury imposed upon them as a result of such transactions. The economic loss from such abuses is estimated at from $20 to $30 million a year in Texas alone. Dollars and cents though is not a meaningful measure of the injury that flows from such abuses. In many, if not most, cases, the home of the victim constitutes the only tangible asset of a lifetime of labor. Yet once trapped, the victim is confronted by the constant specter of foreclosure for failure to meet contractual obligations entered into as a result of fraud, deceit, and deception.

This social and economic impact is amply substantiated by a random sample survey of 400 fraudulent home improvement transactions conducted by the Office of Consumer Credit Commissioner during our home improvement investigation.

The information accumulated during this survey confirmed the fact that unethical home improvement operators prey on older and poorer people in a community. Table I indicates that 59.1 percent of all transactions surveyed involved persons over 45 years of age; 8.2 percent involved persons 65 years of age or older.

Equally important, however, is the size of transactions by each age group. The largest percentage of those persons sampled-23.8 percent-had expended $2,500 or more for home improvements. A further breakdown shows that 15.2 percent of those over 45 years old expended in excess of $2,500 for home improvements, while no one in the 18-24 age group had expended that much.

TABLE 1.-HOME IMPROVEMENT EXPENDITURES BY AGE GROUP