FTC Seeks To Ban Certain Telemarketing Payment Methods

4 Jun

bullhornThe Federal Trade Commission (FTC) is seeking public comment on proposed amendments to the Telemarketing Sales Rule (TSR).  Along with changes that seek to clarify and improve various provisions of the TSR, the FTC wants to bar sellers and telemarketers from accepting the following payment methods in inbound or outbound telemarketing transactions: 

(1)  remotely created checks, which are unsigned checks not created by the paying bank;

(2)  remotely created payment orders, which are payment orders created by a payee that are not signed by the accountholder;

(3)  cash-to-cash money transfers, which are person to person electronic money transfers sent by money transfer providers; and

(4)  cash reload mechanisms, which are purchsed by consumers with cash, the monetary value of which  gets loaded onto a prepaid card that is authorized by a code.

In its May 21, 2013 press release, the FTC stated that unscrupulous telemarketers rely on these payment methods because they are largely unmonitored and provide consumers with fewer protections against fraud.  For example, allowing telemarketers to dip directly into a consumer’s bank account through the use of an unsigned check (also known as a “telecheck”) or “payment order” that has been remotely created makes it easy for unscrupulous telemarketers to later debit the consumer’s bank accounts without authorization.  “Cash-to-cash” money transfers and “cash reload” mechanisms allow scammers to get money quickly and anonymously from consumers.

The TSR, which was promulgated by the FTC in 1995 requires certain disclosures, bars abusive practices and prohibits misrepresentations during telemarketing calls.  The FTC will be accepting public comments on the proposed amendments until July 29, 2013.  A complete copy of the FTC Notice of Proposed Rulemaking can be found here.

Heather Maldegen-Long

Attorney

heamal@jaffelaw.com

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