Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC amends Telemarketing Sales Rule, (Nov 19, 2015)

By Greg Hammond, J.D.

The FTC approved final amendments to its Telemarketing Sales Rule (TSR) yesterday, prohibiting four types of payment methods purportedly used by con artists and scammers, including remotely created checks, remotely created payment orders, cash reload mechanisms, and cash-to-cash money transfers.

“The record demonstrates that the telemarketing use of each of these payment methods has resulted in rampant abuse that has caused substantial harm to consumers,” Chairwoman Ramirez and Commissioners Brill and McSweeny wrote in a statement, agreeing that the ban “is both necessary and appropriate.”

Commissioner Maureen K. Ohlhausen issued a separate statement, dissenting in part with the Commission’s decision. According to Ohlhausen, it is not clear that the injury to consumers “likely outweighs the countervailing benefits to consumers and competition of permitting novel payments methods.”

Instead, Ohlhausen gives much weight to comments filed by the Federal Reserve Bank of Atlanta (FRBA), which purportedly raised serious objections to the amendments. “[T]he FRBA’s analysis of the prohibition of novel payments in telemarketing indicates that any reduction in consumer harm from telemarketing fraud is outweighed by the likely benefits to consumers and competition of avoiding a fragmented law of payments, not limiting the use of novel payments prematurely, and allowing financial regulators working with industry to develop better consumer protections,” Ohlhausen wrote. She also stated that a better course for consumers and competition would be to accept the FRBA’s request that the Commission work with sister agencies to strengthen anti-fraud and consumer protection measures.

Chairwoman Ramirez and Commissioners Brill and McSweeny, however, cited three reasons that the ban is necessary and appropriate: (1) years of public efforts to control the widespread abuse of remote created checks and remotely created payment orders in telemarketing have failed to protect consumers, and there is no evidence that the situation will change in the foreseeable future; (2) the new, bright line rules will provide “much needed clarity” in a landscape that currently consists of a patchwork of state and federal rules; and (3) there is virtually no evidence of legitimate telemarketing uses of the four payment methods at issue.

The Final Rule Amendments, including clarifications to the “Do Not Call” provisions, will primarily become effective 60 days after being published in the Federal Register, which is expected to occur shortly. The changes to the TSR that prohibit the four types of payment methods, however, will become effective 180 days from the date of publication.

News: ConsumerProtection FederalTradeCommissionNews