Telemarketing

Telemarketing is ubiquitous. It causes frustration to landline holders and cell phone owners alike. Although many telemarketing calls are for legitimate business purposes, scammers have latched on to robocall technology to bilk consumers. Telemarketing fraud includes:

• selling inferior merchandise;
• misrepresenting goods;
• failing to deliver goods; and
• billing for fraudulent charges.

Several federal laws and regulatory rulings deal with telemarketing fraud. Federal law provides tools for law enforcement to reduce telemarketing abuses and for consumers to obtain redress for fraud. States can enforce federal law. Federal law includes the 1994 Telemarketing and Consumer Fraud and Abuse Prevention Act and the Telemarketing Sales Rule (TSR). The Federal Trade Commission (FTC) amended the TSR to prohibit the use of novel payment mechanisms that make it harder for older consumers to protect themselves, including remotely created checks, payment orders, money transfers, and cash reload mechanisms. It also expanded its prohibition of recovery services so that it applied to losses in any prior transaction, not just those done via telemarketing. They may seek remedies against telemarketing fraud nationwide under the TSR. Yet, the law does not address all types of telemarketing fraud, including courier pickups and online fraud.

As communication methods have evolved, both legitimate businesses and scammers may seek to reach consumers through new means to get their attention. These include the use of voicemails, text messages, and messaging platforms such as WhatsApp and Facebook Messenger. Some of these forms of communication may not be subject to existing protections against telemarketing abuses. Because of the serious gaps in consumer protection, states can play an invaluable role in preventing, deterring, and prosecuting telemarketing fraud. Reducing telemarketing fraud requires strong enforcement at all levels of government.

Courts have generally supported efforts to address fraudulent telemarketing. The U.S. Supreme Court has ruled that states can bring fraud actions against telemarketers that make false or misleading representations about how charitable donations will be used. The court also previously ruled that high fundraising costs alone do not necessarily indicate fraud. However, it rejected claims that prosecutions based on misrepresentations violate the First Amendment.

The federal government and some states operate do-not-call registries. Consumers register their phone numbers to reduce unwanted telemarketing calls. Those who register may still receive calls from political organizations, charities, and companies conducting surveys. The federal database alone has more than 229 million phone numbers registered.

Most states have adopted the national do-not-call registries for state purposes, adding their registered numbers to the national registry. The national registry does not preempt the state registry laws. They may include additional consumer protections, such as exempting other organizations and including stronger enforcement provisions.

Under the national registry rules, telemarketers must screen (or scrub) their call lists against the FTC’s registry every 31 days or face fines of up to $11,000 for each call to a registered number. Compliance remains a challenge. In 2017, the Federal Trade Commission received over 7 million complaints about violations of the federal do-not-call registry. More enforcement tools are needed.

The Telephone Consumer Protection Act (TCPA) of 1991 restricts telemarketing. The Federal Communications Commission strengthened the core protections of this law in the following ways:

• Text messages are now considered “calls” subject to the TCPA.
• Callers are now liable for making robocalls to reassigned wireless numbers if the new phone users have not consented to receive them.
• Callers must now obtain consent for robocalls even if they are not “presently” dialing random or sequential phone numbers. This means that consent must come from the party any robocaller contacts, not just the intended party.