The Federal Trade Commission has had a busy month. Among other things, the FTC issued a final rule incorporating amendments to the Telemarketing Sales Rule (“TSR”). Most amendments are effective February 12, 2016.
As background, the TSR defines and prohibits deceptive and abusive telemarketing practices. It applies to telemarketing, defined as “a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate telephone call.” Among other things, the TSR prohibits telemarketers from contacting consumers whose numbers are on the National Do Not Call Registry (“DNC Registry”), with limited exceptions. Importantly (and unlike state and Federal Communications Commission rules), the TSR does not cover calls that are strictly informational or for debt collection.
On December 14, 2015, the FTC released its final rule, adopting amendments to the TSR. If you engage in telemarketing activities, here’s what you need to know:
No Remotely Created Payments Allowed
Telemarketers may not accept remotely created payment orders in outbound and inbound telemarketing transactions. Practically, this prohibits the acceptance of any payment that is (1) remotely created by the payee and (2) deposited into the check clearing system. This includes checks that are not signed by the payor, but are instead generated by the payee using the consumer’s personal and financial account information. This particular amendment is effective June 13, 2016.
No Cash-to-Cash Money Transfers or Cash Reload Payments Allowed
The Rule prohibits the use of cash-to-cash money transfers and cash reload mechanisms in outbound and inbound telemarketing transactions. This prohibits, for example, the use of a consumer’s cash reload pin to transfer funds onto the telemarketer’s general use prepaid card or digital wallet. For both this prohibition and the prohibition on remotely created payments, the FTC emphasized that “legitimate telemarketers and sellers do not rely” on such forms of payment. This amendment is also effective June 13, 2016.
Expansion of the Ban on Collection of Advanced Fees to Non-Telemarketing Transactions
Telemarketers may not collect “advanced fees for services promising to recover losses incurred by consumers in a previous” telemarketing or non-telemarketing transaction. The FTC stated that expansion of the ban was necessary, noting that prosecutors in United States v. Business Recovery Services, LLC, Civ. No. 11-00390-JAT (D. Ariz. Sept. 13, 2013) could only charge defendants with TSR violations based on losses resulting from telemarketing scams, not online scams. Opining that there is “no logical reason” to differentiate between the two, the expansion prohibits telemarketers from collecting advanced fees for recovery services to victims of online scams.
Enhanced Requirements for Oral Authorization of Charges
The TSR allows the use of an audio recording to memorialize a consumer’s express verifiable oral authorization of a charge for a telemarketing transaction. The amendments require that the recording include “an accurate description, clearly and conspicuously stated, of the goods or services or charitable contribution for which payment authorization is sought.” Companies that use this method still must comply with state restrictions on call recording.
Clarification of Business-to-Business Exemption
The TSR’s business-to-business exemption applies to most sellers and telemarketers that are soliciting the purchase of goods or services or a charitable contribution by the business itself, not by the individual employees of the business. Accordingly, telemarketers may not solicit individuals at their places of business to circumvent the DNC Registry rules.
Telemarketer Bears Burden of Proof to Establish Exception to Do-Not-Call Rules
Telemarketers may call numbers on the DNC Registry in limited circumstances without violating the TSR. For example, the TSR does not prevent telemarketer from calling numbers on the DNC Registry where the telemarketer has obtained express written authorization from the call recipient or where the telemarketer has an active established business relationship with the call recipient and the recipient has not opted out. Though the burden of proving the availability of such carve outs had previously rested with the telemarketer, the TSR amendments clarify this point more clearly.
The TSR Enumerates Examples of Burdens That Impermissibly Interfere with a Consumer’s Right to be Placed on an Entity-Specific Do-Not-Call List
These examples are: (1) harassing any person who makes such a request; (2) hanging up on that person; (3) failing to honor the request; (4) requiring the person to listen to sales pitch before accepting the request; (5) assessing a charge or fee for honoring the request; (6) requiring a person to call a different number to submit the request; or (7) requiring the person to identify the seller making the call or on whose behalf the call is made.
Finally, the amendments clarify that sellers may not share the cost of fees to access the DNC Registry.
As most of these amendments go into effect on February 12, 2016, companies engaging in sales over the telephone should review their policies and procedures for compliance. Failure to do so may lead to enforcement actions or civil litigation.