Amended Telemarketing Sales Rule Prohibits Certain Payment Methods

Telemarketers may need to reevaluate the forms of payment they accept in light of the recent amendments to the Telemarketing Sales Rule (“TSR”).  Effective June 13, 2016, the TSR will prohibit remotely created payment orders, remotely created checks, cash-to-cash money transfers, and cash reload mechanisms in all inbound and outbound telemarketing transactions.

The Federal Trade Commission (“FTC”) found that remotely created payment orders and remotely created checks are particularly susceptible to fraud as the payment forms do not require a consumer’s signature (whether an electronic or “wet” signature).  The FTC also found cash-to-cash money transfers (i.e. MoneyGram, Western Union, and RIA) and cash reload mechanisms to be less secure forms of payment. 

A cash reload mechanism is any device or security measure that allows a person to convert cash into an electronic form that can be used to add funds to a general-use prepaid card.  However, a general-use prepaid card itself is not a cash reload mechanism.  Common providers of cash reload mechanisms include MoneyPaks, Vanilla Reloads, and Reloadit.

The TSR’s amendments will also require telemarketers to obtain a consumer’s recorded verification that includes “an accurate description, clearly and conspicuously stated of the goods, services or charitable contribution for which payment authorization is sought.” 

The FTC further clarified that the business-to-business exemption for sales calls to businesses only applies to the business itself and not to personal purchases made by employees of the business.  These two amendments take effect February 12, 2016.

Please contact us if you have questions as to use of specific payment methods.