By: Linda L. Goodman
38 state Attorneys Generals (“AGs”) demanded updates to 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, both of whom have won elected office on their commitment to pursue unfair and deceptive acts and practices under state, Federal laws, and regulations. As AGs have authority to bring actions against online and offline marketers for violations of the Telemarketing Sales Rule, this demand is significant.
The AGs demands can be placed into one of four categories: 1) prohibitions on the use of pre-acquired 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 letter justifies further changes to the TSR by informing the FTC that online sellers may not use pre-acquired account information for marketing as it is prohibited under the Restore Online Shoppers’ Confidence Act. This Act was passed several years ago in response to online retailers sharing customer billing information with third party sellers. The AGs demand the FTC to adopt a similar prohibition to telemarketing but extend it further – demanding a total ban on the use of pre-acquired account information. The letter notes that the three major credit card companies currently restrict merchants from sharing consumer account information with third parties.
Second, the AGs targeted negative option marketing. They describe this marketing as one where the sale of products or services is based on a consumer’s silence or ambivalence, not on a consumer’s affirmative acceptance. The AGs argue the TSR should require the following: (1) disclosures made separately from other terms in the product offer; (2) a distinct consumer acceptance of any secondary offer [to avoid bundling]; and (3) a confirmation communication sent to the consumer with the right to subsequently reject the offer. The AGs demand that 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 demand mandatory recordkeeping for all telemarketers and sellers, including the creation of call records, to aid in their enforcement efforts.
Fourth, the AGs seek a ban on various payment methods including cash-to-cash money transfers. The AGs demand a TSR amendment to require money transfer companies to perform due diligence into whether a transfer results from a prohibited solicitation. In other words, they are demanding a private organization act as an AG in fact.
The state Attorneys General comment letter can be found here: http://www.naag.org/assets/files/pdf/signons/Final FTC Telemarketing Sales Rule Comment.pdf
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This article is a publication of The Goodman Law Firm and is intended to provide information on recent legal developments. This article does not create an attorney-client relationship, nor should it be construed as legal advice or an opinion on specific situations. This may constitute “Attorney Advertising” under the Rules of Professional Conduct and under the law of other jurisdictions.
Linda L. Goodman is the founder of The Goodman Law Firm, concentrating its practice in internet business and law. Her firm’s clients include Advertisers, Affiliates, Affiliate Networks, and ISP’s.
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