Comment from Sedgwick

We appreciate the opportunity to provide input on fraud occurring within product recalls. Sedgwick delivers outsourced recall execution and logistical support across a broad range of industries, giving us unique visibility into emerging fraud risks as well as effective mitigation strategies. Recall fraud is occurring at both the individual consumer level and at more organized, systematic levels, with increasing sophistication. Individual Level Fraud: Common forms include: •Submission of altered or fabricated images (e.g., photoshopped cut power cords, edited serial numbers, or “picture of a picture” submissions). •Repeated use of the same image or slightly altered versions across multiple registrations. •Claims submitted by individuals who never possessed the recalled product •Return kits containing junk items or non-affected products instead of the recalled item. These behaviors generally exploit recall programs that rely on self-attestation and photo-based proof of possession. Organized and Systematic Fraud: More concerning patterns suggest coordinated abuse, including: •Automated bots flooding recall registration sites, sometimes attempting hundreds to thousands of submissions. •Social media and dark web activity, including distribution of step-by-step guides on how to exploit recall processes. Bad actors actively monitor regulatory announcements from agencies to identify recall opportunities early and scale fraudulent activity quickly. Impacts of Recall Fraud: Compliance and Operational Costs- Firms report significant added costs associated with fraud detection and mitigation, including: •Manual claim review and investigation. •Deployment of additional resources to identify fraudulent trends. •Increased customer service volume driven by delays, denials, and appeals. •Returns processing costs when non recalled or junk items are sent back. •Legal and compliance resources to support investigations and responses. Illustrative impact observed: Through the deployment of various new technology used on several events we have been able to start to quantify suspected fraud during recalls. Programs have identified walkaway rates of suspected fraud from 10%-30%, “picture of a picture” misuse warnings, large scale duplicate device submissions, geo-based discrepancy warnings, and more. One example shows 20,000 suspected fraudulent claims, representing a potential multimillion dollar financial exposure. Historically these claims may have been paid and also included in correction rate data. Some firms note that fraud can inflate regulatory reporting numbers (e.g., participation or units “remedied”), potentially misrepresenting true consumer engagement. Fraudsters are filing complaints with the CPSC, BBB, state Attorneys General, and other entities to pressure companies into paying questionable claims. In some cases, the manipulation of submitted photos is clearly evident, yet the claim is still pursued. Responding to these escalations can place a significant burden on internal resources, requiring time and coordination across customer service, legal, and compliance teams. Fraud Mitigation Measures: Effective mitigation requires addressing the entire recall lifecycle, not just registration. Technology and Controls: Advanced photo and image verification, including duplicate image detection, identification of altered or reused images, anomaly detection such as monitoring hundreds of claims from a single address, geo tracking, and velocity checks. Include email and address validation to detect synthetic or repeated identities. Balancing convenience with security, including bot detection and prevention on recall registration sites, requiring physical returns where feasible, especially for high-risk programs, incorporation of tamper resistant product features. Watch for early spikes in registration volume, identifying suspicious patterns early in the recall process. Human oversight: Training teams to recognize anomalies and emerging fraud signals, monitoring social media and dark web channels for organized fraud activity. Potential Commission Actions: 1.Issue guidance on recall fraud risks 2.Creation of Industry Advisory Committee, including information sharing and best practices