FTC proposes new telemarketing restrictions

Online purchasesThe Federal Trade Commission (FTC) introduced the Telemarketing Sales Rule (TSR) in 1995 to establish the standards by which it would enforce the Telemarketing and Consumer Fraud and Abuse Prevention Act.

The TSR requires telemarketers to make certain key disclosures and prohibits misrepresentations during telemarketing calls, and also bars a number of sales practices deemed abusive by the FTC.  The TSR has been amended several times since its establishment; a few of the more recent amendments prohibit telemarketing calls that deliver prerecorded messages and restrict the marketing of debt settlement services.

The FTC recently proposed new amendments to the TSR that would prohibit the use of certain payment methods, expand the scope of the advance fee ban on “recovery services,” and clarify the language of existing TSR requirements.  Here is a brief summary of the proposed amendments:

Limits on Payment Methods. The proposed amendments prohibit telemarketers from accepting or requesting payments through any one of the following four payment methods:  (1) remotely created checks;  (2) remotely created payment orders; (3) money transfers; and (4) cash reload mechanisms as payment. The FTC indicated that these novel payment methods are largely unmonitored and provide consumers with fewer protections against fraud as compared to credit card and ACH transactions.

Advance Fee Ban Expansion for “Recovery Services.”  Telemarketers selling “Recovery services” promise to recover money for consumers who have  been victimized by telemarketing fraud. The TSR currently prohibits any telemarketer or seller from charging a fee for recovery services until seven business days after the lost funds have been recovered.  The proposed amendments to the TSR would expand the scope of the of the advance fee prohibition to include recovery of losses in any previous transaction, and not only telemarketing.

Enforcement Policy Amendments. The proposed amendments also would clarify the language of certain existing TSR requirements to reflect Commission enforcement policy. These amendments would:

(1) Specify that the recording of a consumer’s express verifiable authorization must include a description of the goods or services being purchased;

2) Require telemarketers to bear the burden of demonstrating that the seller has an existing business relationship with, or has obtained an express written agreement from, any consumer whose number is listed on the National DNC Registry;

3) Clarify that the business-to-business exemption on telemarketing calls extends only to calls to induce a sale to or contribution from a business entity, and not to calls to induce sales to or contributions from individuals employed by the business;

4)  States that the current prohibition against sellers sharing the cost of DNC Registry fees is absolute; and

5)  Set forth examples of the types of impermissible burdens that deny or interfere with a consumer’s right to be placed on a seller’s or telemarketer’s entity-specific do-not-call list..

The public comment period for the proposed amendments closes on July 29, 2013. A copy of the notice of proposed rulemaking is available at: http://www.ftc.gov/os/2013/05/130521telemarketingsalesrulefrn.pdf.

Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.

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