FTC Revises Proposed Telemarketing Rules : Commerce: Agency says legitimate businesses will benefit, but consumer advocacy groups say protections will be weaker.
The Federal Trade Commission on Wednesday revised its proposed telemarketing rules in response to complaints that the earlier draft was too tough on legitimate businesses.
Some consumer groups immediately criticized the revisions as weakening proposed protections that vulnerable consumers need.
The purpose of the rules is to help reduce telemarketing abuses and fraudulent activity that cost consumers an estimated $40 billion a year. About a third of the victims are elderly.
The FTC, in its revised proposal, substitutes a list of about 20 banned activities with a general prohibition against misrepresentations. The commission also substantially reduced the number of disclosures a telemarketer would have to make.
In addition, the agency proposed expanding transactions exempt from the rules to include those initiated by consumers in response to most radio or TV pitches. That revision was sought by infomercial companies and home shopping shows.
The commission said the proposed changes would untie the hands of legitimate business yet be effective against fraudulent operators.
“In several ways, the revised proposal is stronger than the original one as it applies to fraudulent telemarketers,” FTC Chairman Robert Pitofsky said.
But some consumer groups disagreed.
“We have grave concerns about the changes,” said Lee Norrgard of the American Assn. of Retired Persons in Washington. The new draft “does not provide consumers a clear line to determine what is legal and illegal activity,” he said.
The key revisions say that:
* Telemarketers are banned from making threats or using intimidating language and from using obscene or profane language. This replaces a proposed ban on calling a consumer more than once in a three-month period.
* Telemarketers are required to make specific disclosures “promptly and clearly.” These would include the identity of the seller and the nature of the goods or services being sold. The earlier draft required that such disclosures be made at the beginning of the call.
* Telemarketers are prohibited from making any false or misleading statement to induce payment. This replaces a ban on telemarketers’ using courier services to pick up payments from consumers. It also replaces a provision that telemarketers must have written authorization before they can take funds from a consumer’s bank account.
However, the revised rules still state that companies selling credit-repair services, loans or other financial services must provide them before collecting fees.
The FTC is taking public comment on the revised draft through June 30. The agency is required to promulgate the rules by Aug. 16.
Rule violations could result in fines of up to $10,000 each.
