To help protect consumers from telemarketing fraud and educate the public about the differences between legitimate and fraudulent telemarketing practices, in 1995 the Federal Trade Commission (FTC) issued the Telemarketing Sales Rule (TSR). The TSR essentially spells out who and when telemarketers can call and certain things they must say. The rule has been amended several times. And now it's been amended again. Here are the details, including some important background information to help you comply with the FTC's latest requirements.
How Does the TSR Currently Restrict Telemarketers?
The TSR contains several provisions to combat telemarketing fraud. Specifically, the rule:
- Requires disclosures of specific material information, such as details about cost, quantity, offer restrictions and refund policies,
- Prohibits misrepresentations to induce consumers to buy goods or services or make donations,
- Limits when telemarketers may call consumers,
- Requires transmission of Caller ID information,
- Prohibits abandoned outbound calls (subject to a safe harbor),
- Bans unauthorized billing,
- Sets payment restrictions for the sale of certain goods and services, and
- Requires that specific business records be kept for two years.
Telemarketing activities may also be regulated by state laws. The FTC and Federal Communications Commission have collaborated with local governments to create a unified national system enabling "one-stop" service for consumers and businesses seeking to comply with the requirements.
Important note: Compliance is serious business. Any business that violates the TSR is subject to civil penalties of up to $16,000 per violation. In addition, violators may be subject to nationwide injunctions that prohibit certain conduct. They also may be required to pay redress to injured consumers.
Are Your Promotional Campaigns Covered by the TSR?
If your telephone marketing campaigns involve any calls across state lines, you may be subject to the TSR's provisions. These campaigns may include outbound telemarketing calls your sales reps make or calls you receive in response to advertisements.
The TSR defines telemarketing as, "A plan, program, or campaign . . . to induce the purchase of goods or services or a charitable contribution" involving more than one interstate telephone call. The TSR also covers calls made from outside the United States if they're made to consumers in the United States.
Some types of businesses aren't covered by the TSR — even though they often engage in telemarketing activities — because they're not regulated by the FTC. Specific exempt entities include:
- Banks, federal credit unions, and federal savings and loans,
- Common carriers, such as long-distance telephone companies and airlines, and
- Not-for-profit organizations.
Some types of calls also aren't covered by the TSR, regardless of whether the entity making or receiving the call is covered. Examples generally include unsolicited calls from consumers or calls placed by consumers in response to a catalog or direct mail campaign. But upselling — when a telemarketer tries to sell additional goods or services during a single phone call, after an initial transaction — are typically covered by the TSR, even if the initial transaction is exempt.
What Changes Has the FTC Recently Made?
In 2013, the FTC proposed a new set of amendments to the TSR. After a public comment period, the agency has approved final amendments that ban four types of payment methods:
1. Remotely created checks,
2. Remotely created payment orders,
3. Cash reload mechanisms, and
4. Cash-to-cash money transfers.
These methods are favored by fraudsters because they aren't subject to federal laws that protect consumers who use credit or debit cards. In addition, these transactions may be difficult to reverse. For example, once a fraudster anonymously picks up cash from a cash-to-cash money transfer, it's usually irretrievable.
"Con artists like payments that are tough to trace and hard for people to reverse," said Jessica Rich, Director of the FTC's Bureau of Consumer Protection. "The FTC's new telemarketing rules ban payment methods that scammers like, but honest telemarketers don't use."
Some people mistakenly believe that the TSR amendment restricts newer technology-based payment methods, such as authorized online payments from a consumer's bank account or the use of digital checks created with smartphones. That's untrue. The FTC took care to draft its amendments to specifically target the ways scammers exploit novel payment methods that reputable telemarketing companies don't use.
In addition to banning these fraud-prone payment methods, the amended TSR expands the existing restrictions on charging advance fees for recovery services to cover losses both in prior telemarketing and non-telemarketing transactions. Often these advanced fees are associated with deceptive telemarketing practices. And the amended rule clarifies that you must include a description of the goods or services purchased when you tape-record a consumer's "express verifiable authorization" of the charges.
The amendments also make it harder to contact consumers on the National DNC Registry. Here's a summary of the major changes:
- If a consumer's number is on the DNC Registry, the revised rule expressly states that sellers or telemarketers have to demonstrate they have an existing business relationship with the person or have the person's express written agreement to get calls.
- The amended TSR illustrates the kind of burdens that would illegally interfere with a consumer's right to be placed on a seller's or telemarketer's entity-specific do not call list. Examples of impermissible burdens include harassing consumers who make such a request, hanging up on them, requiring the consumer to listen to a sales pitch before accepting the request or requiring the consumer to call a different number to submit the request.
- The revised rule specifies that if a seller or telemarketer doesn't get the information needed to place a consumer's number on their entity-specific do not call list, the business is disqualified from the safe harbor for isolated or accidental violations.
- The amended TSR emphasizes that it's illegal for multiple entities to split the cost of accessing the National DNC Registry.
To keep your sales and marketing operations TSR-compliant, you may need to review your current policies and procedures, as well as conduct additional training for your employees. Consult with your professional advisers for more detailed information on the TSR. The latest round of changes will generally go into effect 60 days after the amended rule is published in the Federal Register. However, the payment method prohibitions become effective 120 days later.
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