The Rule prohibits a seller or telemarketer from engaging in certain conduct that is classified as abusive, including threats, intimidation, or the use of profane or obscene language, and requesting or receiving payment for credit repair services, recovery services, or advance-fee loans, before the promised goods or services are delivered. Each of these prohibitions is explained below.
All sellers and telemarketers are prohibited, in a telemarketing transaction, from using threats, intimidation, and profane or obscene language. This prohibition covers all types of threats, including threats of bodily injury and financial ruin, and threats to ruin credit. It also prohibits intimidation, including acts which put undue pressure on a consumer, or which call into question a person's intelligence, honesty, reliability, or concern for family. Repeated calls to an individual who has declined to accept an offer may also be an act of intimidation.
Credit repair services promise consumers with a bad credit history that the services can remove derogatory information from, or otherwise improve, the consumers' credit history, credit record, or credit rating, regardless of whether that information is accurate.
The Rule prohibits any seller or telemarketer from requesting or receiving payment for any credit repair services before two events occur. First, the time frame within which the seller has represented that the promised services will be provided must have expired. Sellers can make representations about the time frame for the delivery of the services either orally or in writing, including in the contract for the services. If any discrepancy exists between the various representations by the credit repair seller, the longest time frame represented will determine when payment may be requested or received.
The second event that must occur before payment can be requested or received for credit repair services is that the seller must provide the consumer with evidence that the promised improvement in the consumer's credit record has been achieved. The evidence must be in the form of a consumer report from a consumer reporting agency, issued more than six months after the results were achieved. Nothing in this Rule affects the requirement in the Fair Credit Reporting Act that a consumer report may only be obtained for a specified permissible purpose.
| The abusive practice against which this prohibition in the Rule is directed is the deceptive marketing and sale of bogus credit repair services; it is not directed at the nondeceptive telemarketing of secured credit cards, or to 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. However, once the credit bureau verifies with creditors that the negative items are accurate, they will reappear on a consumer's credit report and remain there for as long as seven years and, in the case of a bankruptcy, for ten years. If an item is inaccurate, incomplete, or more than seven or ten years old, a consumer on his or her own can remove or correct the information at no charge if he or she follows the dispute procedures set forth in the Fair Credit Reporting Act. Consumers do not need the services of any third parties to correct an inaccurate or out-of-date credit report. And nothing can be done by anyone to change a bad credit report that is accurate and up to date. |
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 who has failed to receive a promised prize, in a previous scam. The recovery room telemarketer falsely promises to recover the lost money, or obtain the promised prize, in exchange for a fee paid in advance. After the fee is paid, the promised services are never provided. Typically the consumer never hears from the telemarketer again.
The Rule prohibits any recovery service from requesting or receiving payment for any goods or services purporting to assist a consumer to recover funds paid by the consumer 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 recovered funds or other item is delivered to the consumer.
The Rule's restriction on when recovery rooms can seek 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.
Debt collection services are not covered by this prohibition in the Rule. In fact, debt collection services are not covered by the Rule as a whole 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" (explained on page 6). Debt collectors must comply, however, with the FTC's Fair Debt Collection Practices Act.
In advance-fee loan schemes, a telemarketer, in exchange for a fee, paid in advance, promises to obtain a loan for a consumer or represents a high likelihood of success in obtaining or arranging a loan or other extension of credit for a consumer, regardless of that consumer's credit history or credit record. As with recovery room schemes, after the consumer pays the fee, he or she typically never receives the promised loan or other extension of credit. Advance-fee loans are generally marketed to consumers with bad credit histories or who have difficulty obtaining credit for other reasons. In the past, advance-fee loans have required payment up front. The Rule now prohibits a seller or telemarketer that guarantees or represents a high likelihood of success in obtaining or arranging a loan or other extension of credit from requesting or receiving payment until a consumer obtains the promised extension of credit.
This prohibition on advance fees for loans or other extensions of credit applies only if the seller or telemarketer guarantees or represents 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, provided the creditor does not guarantee or represent a high likelihood that the consumer will obtain the extension of credit. This prohibition in the Rule also does not apply to firm, "preapproved" offers of credit by a creditor who properly uses a "prescreened" list in accordance with the FTC staff commentary on the Fair Credit Reporting Act (FCRA).
The Rule prohibits telemarketers from:
The Rule also prohibits sellers from directing telemarketers to make such calls.
A telemarketer may not call a consumer who previously has requested to receive no more calls from, or on behalf of, a particular seller whose goods or services are being offered. Similarly, a seller that has been requested by a consumer not to call again may not cause a telemarketer to call that consumer. Sellers and telemarketers are responsible for keeping "do not call lists" of those consumers who have requested not to receive calls placed by, or on behalf of, a particular seller. Calling a consumer who has requested not to be called is a Rule violation and a telemarketer or seller that engages in the practice of making such calls risks a $10,000 civil penalty per violation. A seller or telemarketer will not be liable for a civil penalty for calling a consumer who has requested no more calls, however, if:
| What happens if a consumer
is called after he or she has requested not to be called?
If a consumer is called who has requested not to be
called by or on behalf of a particular seller, the seller
and telemarketer may be liable for a Rule violation. If
an enforcement investigation finds that neither the
seller nor the telemarketer had written "do not
call" procedures in place, both would be liable for
the Rule violation. If the investigation reveals that the
seller had written "do not call" procedures but
the telemarketer ignored the procedures, the telemarketer
would be liable for the Rule violation. The seller may
also be liable if the investigation finds that the seller
did not implement its written procedures. Ultimately a
seller is responsible for keeping a current "do not
call" list, whether it is through a telemarketing
service it hires or through its own efforts. What does "error" mean? If a seller or telemarketer has and implements written "do not call" procedures, it will not be liable for a Rule violation if a subsequent call is the result of error, but it may be subject to an enforcement investigation. The investigation would focus on the effectiveness of the procedures in place, how they are implemented, and if all personnel are trained in the "do not call" procedures. If there is a high incidence of "errors," it may be determined that the procedures are inadequate to comply with the Rule's "do not call " requirements and thus there is a Rule violation. On the other hand, if there is a low incidence of "errors," there may not be a Rule violation. The determination of whether an excusable "error" occurs will be based on the facts of each individual case. A safe rule of thumb to ensure that adequate "do not call" procedures are implemented would be to periodically test for quality control and effectiveness. To which "seller" does a "do not call" request apply? Distinct corporate divisions of a single corporation are considered separate sellers for purposes of the Rule. Factors used to determine if corporate divisions will be treated as separate sellers include:
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