Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: TSR ban on payment methods will begin to take effect next June, (Dec 14, 2015)

By Greg Hammond, J.D.

The FTC’s final amendments to its Telemarketing Sales Rule (TSR) were published today in the Federal Register. The amendments, including clarifications to the “Do Not Call” provisions, will primarily become effective February 12, 2016. However, changes to the TSR that prohibit 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—will become effective June 13, 2016 (80 Federal Register 77520, December 14, 2015).

The majority of the FTC members contend that the restrictions on payment methods were necessary because “the telemarketing use of each of these payment methods has resulted in rampant abuse that has caused substantial harm to consumers.” According to a statement of the FTC, supported by Chairwoman Ramirez and Commissioners Brill and McSweeny, “the use of these four payment methods in telemarketing transactions constitutes an abusive practice.”

Commissioner Ohlhausen, however, disagreed. In her own statement, dissenting in part, she noted that 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.

Nevertheless, Chairwoman Ramirez and Commissioners Brill and McSweeny 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.

News: ConsumerProtection FederalTradeCommissionNews