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FTC Amends Telemarketing Sales Rule
Practical Law Legal Update w-000-9147 (Approx. 5 pages)
FTC Amends Telemarketing Sales Rule
by Practical Law Commercial Transactions
| Law stated as of 19 Nov 2015 • USA (National/Federal) |
The Federal Trade Commission (FTC) has released a final rule to amend portions of the Telemarketing Sales Rule (TSR). Among other things, these amendments prohibit certain types of payment methods and clarify provisions of the TSR.
On November 18, 2015, the Federal Trade Commission (FTC) released a new final rule amending the Telemarketing Sales Rule (TSR). The TSR defines and prohibits deceptive and abusive telemarketing practices.
The amendments contain new rules to strengthen the TSR's anti-fraud provisions. Most importantly, this final rule prohibits telemarketers and sellers from using the following payment methods:
- Remotely created checks. A remotely created check is a check that the payee (typically a merchant, seller, or telemarketer) creates using the consumer's personal and financial account information. Instead of the payor's actual signature, a remotely created check generally has a statement indicating that the payor authorized the check, such as "Authorized by Account Holder" or "Signature Not Required."
- Remotely created payment orders. A remotely created payment order is an electronic version of a remotely created check.
- Cash reload mechanisms. A cash reload mechanism acts as a virtual deposit slip for consumers to load funds onto a general-purpose reloadable debit (GPR) card without a bank intermediary. The consumer pays cash plus a small fee to a retailer that sells the cash reload mechanism. In exchange, the consumer receives a unique access or PIN authorization code, which the consumer can use over the phone or internet to:
- transfer the funds onto any existing GPR card within the same prepaid network;
- apply the funds to a digital wallet with a payment intermediary;
- or pay a utility or other bill owed to an approved partner of the cash reload mechanism provider.
- Cash-to-cash money transfers. A cash-to-cash money transfer is a specific type of money transfer in which a consumer brings cash or currency to a money transfer provider that then transfers the value to another person who can pick up the cash in person.
These payment methods are problematic because, unlike conventional payment methods, they are not:
- Subject to federal laws that provide consumers with specific rights and remedies.
- As closely regulated.
- Generally processed or cleared electronically through networks that are centrally and systematically monitored for fraud, such as the NACHA - Electronic Payments Association.
For more information on federal laws governing electronic payment methods, see Practice Note, E-Commerce Payment Mechanisms.
This final rule also updates several provisions related to the National Do Not Call (DNC) Registry. The amendments:
- Expressly state that when contacting a person on the DNC Registry, a seller or telemarketer bears the burden of demonstrating that the seller either has:
- an existing business relationship with the called party; or
- obtained an express written agreement from the called party.
- Illustrate the types of impermissible burdens that deny or interfere with a consumer's right to be placed on a seller's or telemarketer's entity-specific do-not-call list.
- Specify that a seller's or telemarketer's failure to obtain the necessary information to honor a consumer's request to be placed on a seller's entity-specific do-not-call list disqualifies it from relying on the safe harbor for isolated or inadvertent violations.
- Emphasize that the prohibition against sellers sharing the cost of DNC Registry fees, which are non-transferrable, is absolute.
The DNC related changes are effective 60 days after this final rule is published in the Federal Register. The payment prohibitions become effective 180 days after publication in the Federal Register.
Update
On December 14, 2015, the FTC adopted the final rule, publishing the previously detailed amendments in the Code of Federal Regulations. The DNC related changes are effective on February 12, 2016. The payment prohibitions become effective on June 13, 2016.
For more information on the TSR, see Practice Notes, Direct Marketing: Telemarketing Sales Rule and Sales Promotions, Contests and Sweepstakes: Telemarketing Sales Rule.