Law enforcement, education, technology, crowd-sourcing. The FTC fights the battle against illegal telemarketing on every possible front – and here’s the latest development. After considering public comments, the FTC just amended the Telemarketing Sales Rule (TSR) to protect consumers by prying four tools out of the hands of fraudsters.
The rule change prohibits telemarketers from using certain payment methods that legitimate telemarketing businesses don’t use, but con artists have been known to exploit: remotely created checks, remotely created payment orders, cash-to-cash transfers, and cash reload mechanisms. (Consult the Federal Register Notice for detailed definitions.)
What’s the concern with those payment methods in the context of telemarketing? Remotely created checks, for example, allow telemarketers and sellers to dip directly into consumers’ bank accounts with checks those businesses create. That makes it easier for unscrupulous operators to help themselves without the account holder’s permission and harder to undo the transaction once it’s gone through. Cash-to-cash transfers – where a consumer pays cash at one location that another person picks up somewhere else – offer scammers an easy and anonymous way to take the money and run. That’s also the concern with cash reload mechanisms that allow scammers to add money to prepaid debit cards and then scram.
The payment methods prohibited in the revised TSR are all slightly different, but they have a few things in common: 1) they aren’t subject to federal laws that protect consumers when paying by credit or debit card; and 2) they’re difficult to reverse, which is why scammers like them.
Let’s be clear. The Rule will have no effect on the routine ways people use newer payment technologies – for example, when consumers pay a bill by authorizing an online payment from their bank account. Rather, the amended TSR is carefully crafted to target the ways scammers exploit novel payment methods that reputable telemarketing companies don’t use.
The amended TSR includes some additional revisions. There’s a new provision that expands the TSR’s ban on charging advance fees for recovery services to cover losses both in prior telemarketing and non-telemarketing transactions. And although not a new requirement, there’s a clarification that a description of the goods or services purchased must be included in the tape recording of a consumer’s express verifiable authorization to be charged.
In addition, the amended TSR tweaks Do Not Call provisions to provide more protection for consumers. Read the Rule for details, but here are some notable points:
- If a consumer’s number is on the DNC Registry, the revised Rule expressly states that sellers or telemarketers have to demonstrate they have an existing business relationship with the person or have the person’s express written agreement to get calls.
- The amended TSR illustrates the kind of burdens that would illegally interfere with a consumer’s right to be placed a seller’s or telemarketer’s entity-specific do not call list.
- The Rule now specifies that if a seller or telemarketer doesn’t get the information needed to place a consumer’s number on their entity-specific do not call list, the business is disqualified from the safe harbor for isolated or accidental violations.
- The revised TSR emphasizes that sellers can’t “go halfsies.” In other words, it’s illegal for multiple entities to split the cost of accessing the DNC Registry.
To keep your operations TSR-compliant, consult the Statement of Basis and Purpose accompanying the Federal Register Notice. The Do Not Call-related changes and the two additional revisions will take effect 60 days after the amended Rule runs in the Federal Register. The payment prohibitions become effective 180 days after Federal Register publication.
(This post was updated on November 18, 2015, to describe the clarification regarding the required description of goods and services in the tape recording of consumers' express verifiable consent.)