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State Attorneys General Make Recommendations for Changes to Telemarketing Sales Rule

December 05, 2014
By Tracey E. Schelmetic - Telemarketing Software Contributor

When it comes to pursuing cases of telemarketing or contact center fraud, the duty often falls to state attorneys general, who are often the keepers of state telemarketing laws as well as federal legislation such as the Telemarketing Sales Rule (TSR). In late November, 38 state attorneys general (AGs) contacted the Federal Trade Commission (FTC (News - Alert)) and recommended updates to the Telemarketing Sales Rule. The goal, said the AGs, is to provide states with more tools to protect consumers against unfair telemarketing practices.

“Telemarketing and its abuses, which occur when consumers are engaged in phone calls with businesses in the privacy of their homes, as well as on their personal cellular telephones, have long been areas of keen interest to our offices,” wrote the AGs in the letter. “Indeed, the consumer protection offices of the State Attorneys General are often at the “front line” in fielding consumer complaints, taking up investigations, and pursuing legal actions against those who prey on victims through telemarketing and negative option scams.”

“Negative option scams” are those that trick a customer into providing billing information that continues without the customer’s approval. The customer is required to “opt out,” to cancel the relationship, and often finds it difficult if not impossible to do so. In 15 U.S. states, unsolicited goods are deemed to be gifts with no obligation to pay for or return them, but the other 35 states continue to permit the practice.

Fraud complaints for scams by telephone are on the rise in the U.S., and state attorneys generals are usually the clearinghouse for these complaints, along with the FTC. In 2011, there were 184,965 complaints registered for telephone scams. That number increased to 208,271 in 2012 and 226,428 in 2013. Negative option marketing is responsible for the lion’s share of these complaints, according to the AGs, who are urging the FTC to alter the TSR (News - Alert) to better protect customers.

The AGs are also urging the FTC to address so-called “novel payment methods” that scammers are beginning to take advantage of precisely because they are so unregulated. These methods are common in the “Nigerian scam” that asks victims to provide wire transfer information.

“At the same time, the use of novel payment mechanisms, such as remotely created checks or payment orders, wire transfers, and cash reload mechanisms, is also of concern to the State Attorneys General,” read the letter.

Finally, the AGs are urging the FTC to outright ban the practice of so-called “preacquired account telemarketing,” something the agency stopped short of in its last amendment to the TSR in 2003. The practice of sharing customer billing information with third parties is already prohibited for online retailers, but the AGs want the TSR to go a step further and ban the practice across the board.

“The Commission also declined [in 2003] to adopt the recommendation of the National Association of Attorneys General (‘NAAG’) urging a total prohibition on the use of preacquired account information in transactions involving ‘free-to-pay’ conversions.”

A full copy of the letter, which includes recommendations for new record keeping practices for telemarketers, may be found here

Edited by Rory J. Thompson