State AGs Urge FTC to Strengthen Telemarketing Sales Rule

26 November 2014 Publication

Legal News Alert: Consumer Financial Services

This week, 38 state Attorneys General (AGs) submitted comments to update the Telemarketing Sales Rule (TSR). In a letter to the Federal Trade Commission (FTC), the AGs called for a number of new requirements as part of the FTC’s rule review. The letter is led by Florida Attorney General Pam Bondi and Pennsylvania Attorney General Kathleen Kane. (Note a letter of 36 state AGs constitutes an official position of the National Attorneys General Association).

State AGs have authority to pursue unfair and deceptive acts and practices under state laws, and additional enforcement power under certain federal laws and regulations. Specifically, AGs have authority to remedy violations of the Telemarketing Sales Rule. The TSR applies limitations on telemarketing activities, including the Do Not Call registry, requires certain disclosures from telemarketers, and provides guidelines for allowable sales calls and payment transactions.

The state AGs offer comments in four categories: 1) prohibitions on the use of preacquired account information; 2) negative option marketing restrictions on consumer-to-vendor calls; 3) telemarketer / seller requirements to maintain call records; and 4) regulation of money transfers.

First, the comment letter notes that for online sellers the use of preacquired account information for marketing is already prohibited under the Restore Online Shoppers’ Confidence Act, in response to online retailers sharing customer billing information with third party sellers. The AGs call on the FTC to adopt a similar prohibition to telemarketing, indeed a total ban on the use of preacquired account information. The letter notes that the three major credit cards currently restrict merchants from sharing consumer account information with third parties.

Second, AGs have long targeted negative option marketing which they deem to be the sale of products or services based on a consumer’s acceptance through his or her silence or ambivalence, failure to cancel the agreement, or lack of rejection of products or services. The AGs argue the TSR should require the following: disclosures made separately from other terms in the product offer; a distinct consumer acceptance of that offer; and a confirmation sent to the consumer. The AGs also seek this regulation to be applied to inbound consumer-to-vendor calls when a consumer is responding to an advertisement or direct mail marketing.

Third, the AGs request a mandatory recordkeeping rule on telemarketers and sellers, including the creation of call records, to aid in their enforcement efforts.

Fourth, the AGs seek a ban on certain payment methods, such as cash-to-cash money transfers, often used in telemarketing fraud — the comment letter even references the ubiquitous “Nigerian scam.” The AGs support TSR amendments to require money transfer companies to perform due diligence into whether a transfer results from a prohibited solicitation.

The state Attorneys General comment letter can be found here.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:

Joseph W. Jacquot
Jacksonville, Florida

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