FTC Amends Telemarketing Sales Rule To Ban Various Payment Methods
The Federal Trade Commission has approved new telemarketing rules designed, in part, to prevent fraud in the financial marketplace via the prohibition of a handful of “suspect” payment methods: remotely created checks, remotely created payment orders, cash-to-cash transfers, and cash reload mechanisms.
Specifically, the amendments to the Telemarketing Sales Rule have been implemented to stop telemarketers from directly accessing consumer bank accounts by using certain kinds of checks and “payment orders” that have been “remotely created” by the telemarketer or seller. The FTC believes that these payment methods are utilized by corrupt telemarketers to unlawfully debit bank accounts and make it more difficult for consumers to undo the transactions.
The amendments to the TSR will also prohibit telemarketers from receiving payments through traditional “cash-to-cash” money transfers or accepting as payment “cash reload” mechanisms utilized to add funds to existing prepaid cards. Accordingly to the FTC, the foregoing payment methods utilized within the telemarketing context constitute an “abusive practice” in that they cause, or are likely to cause, substantial injury to consumers that is neither reasonably avoidable by consumers, nor outweighed by countervailing benefits to consumers or competition.
Note that the payment method ban only applies to telemarketing transactions involving a plan, program, or campaign to induce the purchase of goods or services subject to the TSR.
The new rule also:
· Expands the advance-fee ban on recovery services to include losses both in prior telemarketing and non-telemarketing transactions;
· Clarifies that any recording made to memorialize a customer’s express verifiable authorization to be charged must include an accurate description of the goods or services;
· Updates provisions related to the National Do-Not-Call Registry by, among other things: (i) requiring a seller/telemarketer to demonstrate that it has an existing business relationship with, or has received an express written agreement from, a consumer it calls if the consumer’s number is on the DNC Registry; (ii) clarifying that the telemarketing exemption for calls to businesses covers only calls inducing a sale or contribution from the business, and not calls inducing sales or contributions from individuals employed by the business; (iii) setting-forth various types of burdens that interfere with a consumer’s right to be placed on a seller’s/telemarketer’s entity-specific DNC list (e.g., harassing consumers, requiring consumers to listen to a sales pitch, assessing a charge for honoring the request, etc.); (iv) stating that if a seller/telemarketer does not obtain the information needed to place a consumer’s number on its entity-specific DNC list, the seller/telemarketer is ineligible from the safe harbor; and (v) emphasizing that multiple entities are prohibited from sharing DNC Registry access costs.
Consult with a telemarketing lawyer to discuss the Statement of Basis and Purpose accompanying the Federal Register Notice.
The new TSR-related changes will take effect 60 days after the amended Rule runs in the Federal Register. The payment prohibitions become effective 180 days after Federal Register publication.
FCC Grants Limited Waiver of Caller Identification Requirements
In February 2014, National Grid USA, Inc. requested a limited waiver of section 47 C.F.R. § 64.1200(b)(1) of the Federal Communication Commission’s rules that would enable it to meet the TCPA caller identification requirements by providing a public-facing fictitious business name that had been registered with the relevant State Corporation Commission (or comparable regulatory authority) when placing pre-recorded voice calls, rather than providing its legal corporate name. National Grid is a public company traded on the London Stock Exchange.
Pursuant to Section 64.1200(b)(1) of the FCC's rules and the related orders implementing the TCPA, when a prerecorded call is placed, the caller is required to “state clearly the identity of the business, individual, or other entity that is responsible for initiating the call. If a business is responsible for initiating the call, the name under which the entity is registered to conduct business with the State Corporation Commission (or comparable regulatory authority) must be stated.”
The FCC has interpreted this requirement in numerous orders, stating that the “legal name of the business" or the “official business name” is required to comply with Section 64.1200(b)(1).
The Commission has also spoken to the issue of whether a company's “d/b/a” name is sufficient in a prerecorded call. The Commission stated: "We also decline to reconsider the requirement for businesses to use their legal name to identify themselves when they use prerecorded messages. We believe that the use of “d/b/as” (“doing business as”) alone in many instances may make it difficult to identify the company calling. However, as we stated in the 2003 TCPA Order, the rule does not prohibit the use of “d/b/a” information, provided that the legal name of the business is also provided.”
Accordingly to National Grid, the FCC had not, however, ruled on whether a registered d/b/a name – a d/b/a name registered with the State Corporation Commission or comparable regulatory authority – satisfies the requirements of Section 64.1200(b)(1) of the FCC's rules. Alternatively, National Grid sought a waiver providing it a limited exemption from 47 C.F.R. § 64.1200 (b)(1).
As part of its Petition for Expedited Declaratory Ruling and/or Waiver, National Grid argued that:
· All of its services are provided under the National Grid name;
· Regardless of the technical legal corporate name of the company involved, customers identify their services as coming from National Grid;
· Transitioning all services to the actual corporate name would be enormously impracticable;
· In each state in which it conducts business, National Grid has registered the “National Grid” name as a d/b/a name at the relevant State Corporation Commission (or comparable regulatory authority) [a customer receiving a call from National Grid can access the relevant Secretary of State’s publicly-available website, input the name “National Grid,” and they will be able to retrieve the relevant corporate records and contact information];
· A registered d/b/a name satisfies the spirit of the rule, which is to ensure that callers are able to identify the calling party;
· A d/b/a name that is registered with the appropriate regulatory authority will allow called parties the same ability to search for and identify the caller as they would be able to do with a search for a “legal” or “official business” name;
· In National Grid's specific situation, customers will be able to identify the caller more easily if the caller is identified by its registered d/b/a name; and
· The Commission’s Rules allows the FCC to waive its rules “for good cause shown” and customers will be alarmed if they receive a call from a company name they do not recognize.
On November 16, 2015, the Federal Communications Commission issued a limited waiver to National Grid to let them use a registered DBA when leaving prerecorded messages.
In doing so, the FCC concluded that National Grid demonstrated the existence of good cause to waive the requirement to provide the name under which the entity is registered to conduct business with the State Corporation Commission and allow it to use the name “National Grid” when making artificial or prerecorded voice message calls.
The Commission stated that, in this instance, the relief granted does not undermine the policy objectives of the rule because consumers will continue to have the ability to search for the identity and contact information of the calling party via the appropriate state or local databases for registered DBA names. The Commission also concluded that National Grid’s request for waiver to use only its registered DBA name rather than the legal or official name in prerecorded messages serves the public interest because the company demonstrated that its customers are familiar with its registered DBA name because all customer services are provided in that name.
Although the Commission has previously rejected requests to allow the use of a DBA name in lieu of an official or legal name to satisfy the requirements of section 64.1200(b)(1) due to concerns regarding the adequacy of such names in identifying the calling party, the Commission concluded that the totality of special circumstances presented alleviated these concerns.
This waiver does not extend to other businesses. Such business would have to seek their own, independent relief. Adequate identification information is always necessary so that consumer can assess the purpose of the call, ensure compliance with telemarketing regulations and make DNC requests.
This article should be of interest to any company or individual engaging in lead generation and telemarketing, including corporate counsel. Please contact the author if you are interested in discussing the design and implementation of preventative compliance controls, or if you are the subject of a telemarketing-related investigation or enforcement action.
Information conveyed in this article does not purport to cover every issue associated with telemarketing requirements. Rather, it is intended to provide guidance concerning practices that may increase the likelihood that telemarketing activities comply with applicable laws, rules, regulations and guidelines. This article is provided for informational purposes only and does not constitute, nor should it be relied upon, as legal advice. No person should act or rely on any information in this article without seeking the advice of an attorney.