If you regularly follow this blog, you are aware that the Federal Trade Commission (FTC) has been cracking down on telemarketers and service providers who have allegedly violated the Telemarketing Sales Rule (TSR), sometimes securing multi-million dollar judgments against the defendants. This morning, the FTC issued proposed changes to the TSR, which may significantly impact the telemarketing industry.
Telemarketing Sales Rule Generally
The TSR requires certain disclosures and prohibits misrepresentations during telemarketing calls. It also bars abusive practices, including charging up-front fees for certain services such as credit repair, recovery services, and loan or credit offers presented as guaranteed or having a high likelihood of success. Previous TSR amendments created the National Do Not Call Registry, curtailed telemarketing calls that deliver prerecorded messages and combatted deceptive and abusive telemarketing of debt relief services and payment processors.
Proposed Telemarketing Rules
The newly proposed telemarketing rules are aimed at preventing telemarketers from utilizing several preferred methods of payment, including remotely created checks, remotely created payment orders, cash-to-cash money transfers and cash reload mechanisms. Despite the convenience and low transaction costs associated with these payment methods, the FTC believes that telemarketers often rely on the aforementioned payment methods to defraud consumers. According to the FTC, the payment methods addressed by the proposed amendments are largely unmonitored and provide consumers with fewer means of redress for fraudulent practices. If the proposed TSR rules are enacted, telemarketers will be prohibited from accepting these types of payment methods.
In addition, the proposed amendments will expand the scope of the advance fee ban on “recovery” services. The recovery services referred to in the proposed rules refer to services in which a telemarketer calls a consumer offering to help recover losses suffered through fraud. According to the FTC’s website, such telemarketers offering recovery services are themselves often engaged in deceptive practices. While the current TSR prohibits advance fees for recovery services regarding previous telemarketing transactions, the proposed rules would expand the limitation to any transaction engaged in by consumers.
How to Protect Your Telemarketing Business
The progression of the proposed changes to the TSR should be carefully monitored by those engaged in telemarketing. Public comments to the proposed amendments are being accepted until July 29, 2013. The FTC is obligated to take all comments into consideration before enacting any proposed regulations. Should the proposed amendments pass, those that fail to comply may find themselves facing regulatory action from the FTC, as well as consumer class action litigation.
If you are interested in learning more about this topic or need to review your telemarketing practices, please e-mail us at info@kleinmoynihan.com , or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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