Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC Proposes Telemarketing Sales Rule Amendments Banning Certain Payment Methods and Advance Fee Recovery Services, (May 22, 2013)
By Tobias J. Gillett, J.D., LL.M.
The FTC is seeking public comments on proposed amendments to its Telemarketing Sales Rule (TSR) that would restrict telemarketers’ use of certain payment methods that the FTC regards as particularly prevalent in fraudulent transactions and would increase the scope of the TSR’s ban on advance fee recovery services for telemarketing fraud to cover recovery services for losses suffered in any prior transaction.
The proposed amendments would prohibit telemarketers from accepting remotely created checks, remotely created payment orders, cash-to-cash money transfers, and cash reload mechanisms as payment in in-bound or out-bound telemarketing transactions. According to the FTC, unlike traditional payment methods, these “methods are cleared via check clearing and money transfer networks that provide little or no systematic monitoring to detect or deter fraud,” and “are governed principally by state laws and remittance transfer regulations that do not provide consumers with adequate recourse when unauthorized transactions or telemarketing fraud occurs.”
The FTC believes that its current requirement of “express verifiable authorization” prior to using one of those methods, introduced with 2003 amendments to the TSR, “has not adequately protected consumers against fraud.” Moreover, in 2003 many consumers did not have access to credit cards, and the FTC believed prohibiting the alternative forms of payment could cause hardship to certain consumers. However, the market has changed since 2003, and consumers now have access to a wide array of noncash payment options, according to the FTC.
Another proposed amendment to the TSR would expand its current ban on providing recovery services for losses sustained in fraudulent telemarketing transactions in exchange for an advance fee to cover losses sustained in any transaction. The TSR currently bars requesting or receiving payment for telemarketing recovery services “until seven (7) business days after such money or other item is delivered to that person.” The FTC limited the ban to telemarketing transactions when it was enacted in 1995 to respond to concerns of commenters and due to the FTC’s lack of experience with recovery services. However, the FTC notes that now “telemarketers selling recovery services are just as likely to obtain lists of victims of online scams as they are to obtain lists of victims of telemarketing fraud.”
Additional proposed amendments would:
Expressly state that a seller or telemarketer bears the burden of demonstrating that the seller has an existing business relationship with a customer whose number is listed on the Do Not Call Registry, or has obtained an express written agreement from such a customer, as required by section 310.4(b)(1)(iii)(B)(i);
Clarify that any recording made to memorialize a customer’s or donor’s express verifiable authorization pursuant to section 310.3(a)(3)(ii) must include an accurate description, clearly and conspicuously stated, of the goods or services or charitable contribution for which payment authorization is sought;
Clarify that the exemption for calls to businesses in section 310.6(b)(7) extends only to calls inducing a sale or contribution from the business, and not to calls inducing sales or contributions from individuals employed by the business;
Modify the prohibition against sellers sharing the cost of registry fees to emphasize that the prohibition is absolute;
Illustrate the types of impermissible burdens on consumers that violate section 310.4(b)(1)(ii) by denying or interfering with their right to be placed on a seller’s or telemarketer’s entity-specific do-not-call list; and
Specify that a seller’s or telemarketer’s failure to obtain the information needed to place a consumer on a seller’s entity-specific do-not-call list pursuant to section 310.4(b)(1)(ii) will disqualify it from relying on the safe harbor for isolated or inadvertent violations in section 310.4(b)(3).
The TSR requires telemarketers to make certain disclosures, and prohibits misrepresentations and abusive business practices during telemarketing calls. Previous TSR amendments created the National Do Not Call Registry, restricted telemarketing calls that deliver prerecorded messages, and targeted deceptive and abusive telemarketing of debt relief services.
Comments on the proposed amendments must be received by July 29, 2013. Interested parties may file a comment by writing “Telemarketing Sales Rule, 16 CFR Part 310, Project No. R411001,” on the comment and filing the comment online here. Comments may also be delivered to the following address: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex B), 600 Pennsylvania Avenue, NW, Washington, DC 20580.
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