Several distinct practices occur in fraudulent telemarketing operations. The TSR takes specific aim at these practices.
Disclosing or Receiving Unencrypted Account Numbers for Consideration
Along with the provisions on express verifiable authorization and unauthorized billing, another provision is designed to ensure that consumers are not charged without their consent. Basically, the Rule makes it illegal to disclose or receive unencrypted account numbers for consideration, unless the disclosure or receipt is to process a payment for a transaction the consumer has consented to after receiving all necessary disclosures and other protections the Rule provides. Other than processing a transaction to which the consumer has consented, there is no legitimate purpose for disclosing or receiving a consumer’s unencrypted account number. Because of the likelihood that people illicitly trading in unencrypted account numbers will misuse the information by placing unauthorized charges against consumers’ accounts, this practice is deemed abusive and is prohibited under the Rule.
The term “unencrypted” means not only complete, visible account numbers, whether provided in lists or singly, but also encrypted information with a key to decrypt. “Consideration” can take a variety of forms, all of which are aimed at compensating the provider of the account number information. Forms of consideration include cash or other forms of payment for the list up front or after the sale, and payment of a percentage of each “sale” made using the account numbers, among others.
Payment Restrictions on Sales of Credit Repair Services
Credit repair services promise consumers with a bad credit history that they can remove negative information from, or otherwise improve, a consumer’s credit history, credit record, or credit rating, regardless of whether the information is accurate.
The Rule prohibits sellers and telemarketers from requesting or receiving payment for credit repair services before two events occur:
One, the time frame during which the seller has promised services will be provided must have expired. Sellers can represent the time frame for the delivery of the services either orally or in writing, including in the contract for the
services. If there’s a discrepancy between the various representations by the credit repair seller, the longest time frame represented determines when payment may be requested or received.
Two, the seller must provide the consumer with evidence that the improvement promised in the consumer’s credit record has been achieved. The evidence must be a consumer report from a consumer reporting agency, issued more than six months after the results were achieved. Nothing in the TSR affects the requirement in the Fair Credit Reporting Act that a consumer report may be obtained only for a specific permissible purpose.
| This prohibition is directed at the deceptive marketing and sale of bogus credit repair services; it is not directed at the nondeceptive telemarketing of secured credit cards or legitimate credit monitoring services. No one can permanently remove or “erase” negative entries on a consumer’s credit report if the information is accurate and current. Deceptive credit repair services may be able to cause negative credit information to disappear from a consumer’s credit report temporarily by flooding a credit bureau with letters disputing the accuracy of the negative entries. But once the credit bureau verifies with creditors that the negative items are accurate, they will reappear on a consumer’s credit report and stay there for up to seven years and, in the case of a bankruptcy, for 10 years. If an item is inaccurate, incomplete, or more than seven or 10 years old, consumers can remove or correct the information themselves at no charge if they follow the dispute procedures in the Fair Credit Reporting Act. Consumers do not need the services of a third party to correct an inaccurate or out-of-date credit report. No one can do anything to “repair” a bad credit report that is accurate and up to date. |
Payment Restrictions on Sales of Recovery Services
So-called “recovery services” target consumers who have already been victimized by telemarketing fraud. In these operations, a deceptive telemarketer calls a consumer who has lost money or failed to receive a promised prize in a previous scam. The recovery room telemarketer falsely promises to recover the lost money or the promised prize, in exchange for a fee paid in advance. But even after the fee is paid, the services promised are not provided. Typically, the consumer never hears from the telemarketer again.
The Rule prohibits any recovery service from asking for or accepting payment for any goods or services purporting to help a consumer recover funds paid in a previous telemarketing transaction—or to recover anything of value promised to a consumer in a previous telemarketing transaction—until seven business days after the funds or other items recovered are delivered to the consumer.
The Rule’s restriction on when recovery rooms can ask for and accept payment does not apply to services provided by licensed attorneys. In addition, the Rule takes aim only at recovery services that promise the return of money or other items of value paid for or promised to the consumer in a previous telemarketing transaction. It does not apply to attempts to recover money or items lost outside of telemarketing.
This prohibition does not cover debt collection services. In fact, debt collection services are not covered by the Rule in general, because they are not “conducted to induce the purchase of goods or services”— a prerequisite for Rule coverage as dictated by the Rule’s definition of “telemarketing.” Debt collectors must comply with the FTC’s Fair Debt Collection Practices Act.
Payment Restrictions on Sales of Advance-Fee Loans
In advance-fee loan schemes, a telemarketer, in exchange for a fee paid in advance, promises to get a loan or a credit card for a consumer or represents a high likelihood of success in getting or arranging a loan or other extension of credit for a consumer, regardless of the consumer’s credit history or credit record. After the consumer pays the fee, he or she typically doesn’t receive the promised loan or other extension of credit. Advance-fee loans generally are marketed to consumers who have bad credit histories or difficulty getting credit for other reasons. The Rule prohibits sellers and telemarketers who guarantee or represent a high likelihood of success in obtaining or arranging a loan or other extension of credit from asking for or accepting payment until a consumer gets the extension of credit promised.
This prohibition on advance fees for loans or other extensions of credit applies only if sellers and telemarketers guarantee or represent a high likelihood of success in obtaining or arranging for a loan or other extension of credit. Legitimate creditors may offer various extensions of credit through telemarketing and may require an application fee or appraisal fee in advance. There must be no guarantee or representation of a high likelihood that the consumer will obtain the extension of credit. This prohibition in the Rule does not apply to firm, “pre-approved” offers of credit by creditors who properly use a “pre-screened” list in accordance with the FTC staff commentary on the Fair Credit Reporting Act (FCRA).
|
