On June 27, the Federal Trade Commission issued an alert regarding new amendments to the Telemarketing Sales Rule (“TSR”) that are now in effect. The new amendments prohibit telemarketers from using three types of commonly abused payment methods: cash-to-cash money transfers (such as MoneyGram), PIN numbers from cash reload cards (such as Vanilla Reload, Reloadit, or MoneyPak), and remotely created payment orders and checks (such as unsigned checks used to withdraw money directly from consumers’ bank accounts). The newly-banned payment methods are seen as exploitative of consumers and are believed to be typically used by scam artists.
The FTC simultaneously issued new guidance to consumers alerting them to the illegality of telemarketers requesting payments via the above methods. “If a telemarketer asks you to use one of these payment methods,” the FTC guidance states, “he’s breaking the law … . [S]ay ‘No’ and hang up.”
The TSR amendments were initially approved in November 2015. In its press release announcing the approval, the FTC quoted Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, as saying that “[c]on artists like payments that are tough to trace and hard for people to reverse[.] The FTC’s new telemarketing rules ban payment methods that scammers like, but honest telemarketers don’t use.” Invoking Section 5 of the FTC Act to ban such “unfair” practices or acts, the FTC asserted that the newly effective TSR amendments will help curb abusive telemarketing practices. Interestingly, technological innovations in payment methods like consumer-created digital checks generated from consumers’ smart phones are not prohibited under the new amendments.