Telemarketing 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. Because of the serious gaps in consumer protection, states can play an invaluable role in preventing, deterring, and prosecuting telemarketing fraud. Reducing the pervasiveness of 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. Yet it rejected claims by telemarketers and charities 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 additional 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.
Policymakers and the private sector should enact meaningful rules and standards that will provide government oversight and consumer protection against nuisance telemarketing calls and telemarketing fraud.
Policymakers should ensure that telemarketing practices incorporate consumer protections. Telemarketers should:
- immediately identify themselves and the true purpose of the communication;
- explain key terms, conditions, and costs (including refund and cancellation policies);
- communicate in plain language; and
- provide the name and location of the company being represented.
Prize promoters must state that no purchase is necessary to win and explain how to enter a contest without making a purchase.
All courier pickups associated with telemarketing sales should be banned unless the goods are delivered with the opportunity to inspect them before any payment is collected.
Telemarketers should not be allowed to use a consumer’s financial account information without the consumer’s prior written authorization.
Telemarketers should be prohibited from blocking caller ID.
Payment processors should be held liable for unauthorized transactions
Federal and state regulators should vigorously enforce do not call registries (DNCRs).
Consumers who place their name on a federal or state DNCR should be protected from wireless phone charges triggered by telemarketing calls.
Registration and bonding
All telemarketing businesses and their agents that operate in the state must be registered. If a state allows any exemptions to the registration requirement, the entity must still be subject to the state’s telemarketing and consumer fraud laws.
All telemarketers must be bonded, so that they can compensate consumers in the event they engage in fraud.
Enforcement of antifraud measures
Policymakers should strengthen enforcement of anti-fraud measures. The Federal Trade Commission should strengthen the Telemarketing Sales Rule. Agency rulemaking and enforcement efforts should address problems that remain in the telemarketing industry. They should address issues such as online fraud, unauthorized access to consumer bank accounts, disclosures regarding premiums and prize promotions, repeat calling of telemarketing fraud victims, and the contacting of consumers who have placed themselves on a DNCR.
The Department of Justice also should vigorously enforce laws designed to combat telemarketing fraud.
Civil and criminal penalties should be imposed for violations of telemarketing laws. This includes prison terms for those who knowingly and willfully deceive consumers. These penalties should be assessed based on the degree of fraud committed, regardless of the actual dollar amount lost.
Appropriate investigation and enforcement tools should be available to regulators, including one-party consent for electronic monitoring, to combat telemarketing fraud.