FTC Proposes Ban on Prepaid, Remittance Payments to Telemarketers; Seeks Industry Comment (May 28, 2013)
The FTC has proposed barring telemarketers from accepting payments via wired funds, remotely created checks and payment orders, and authorization codes for prepaid cards. In a proposed change to its Telemarketing Sales Rule issued last week, the FTC said such payment methods “offer fraudulent telemarketers the most accessible and anonymous method of extracting money from consumers.” The agency is seeking input from industry participants on the proposed change, with comments due July 29.
A remotely created check, also known as a demand draft, is printed by a merchant who has received authorization from a customer. The check, which contains the customer’s checking account number, but not his or her signature, is then imaged and can be deposited by the payee. Prepaid authorization codes are created when a prepaid cardholder pays cash at a merchant and is given a code corresponding to that amount of money. The code can then be used to reload a prepaid card or an online account with a payment intermediary.
In its proposal, the FTC cited several surveys indicating a high risk of fraud in telemarketing transactions using such payment methods, which the agency said are preferred by scammers because they are easier than getting a check from a consumer, and offer more anonymity to the payee. Such payment methods also are subject to less regulation than traditional payment cards and Automated Clearing House electronic transactions, the FTC said.
“The Commission’s experience in combating telemarketing fraud operators that use these transfers to pocket consumers’ money, and pursuing the third parties that assist and facilitate them, suggests that the use of these transfers in telemarketing is an unfair practice, and that prohibiting them would serve the public interest,” the FTC said in its notice.
Comments on the proposed rulemaking can be made on the FTC’s Website, or sent by mail to FTC, Office of the Secretary, Room H-113 (Annex B), 600 Pennsylvania Ave., N.W., Washington, D.C 20580.