Consumers, who lose an estimated $40 billion annually in telemarketing scams, will be able to spot and fight telemarketing fraud more effectively thanks to new rules that go into effect next month.
Yet even the new rules and the biggest crackdown on telemarketing fraud in U.S. history--a project dubbed "Senior Sentinel" announced Thursday that's already nabbed about 400 con artists who prey on the elderly--are insufficient to protect consumers if consumers don't take steps to protect themselves, regulators say.
"The first line of defense is healthy, robust skepticism on the part of consumers," says Allen Hiles, assistant director of the division of marketing practices at the Federal Trade Commission in Washington, D.C. "It is much better not to get scammed at all than to get scammed and try to get your money back later. By the time law enforcement gets involved, the money is long gone."
The new law that goes into effect at midnight Dec. 31 will establish a set of rules for all telemarketing contact. It requires all telemarketers to do several things.
Specifically, telemarketers must promptly identify who they are, say who they represent and state the nature of the call. In other words, if the purpose of the call is to solicit funds for charity--or to sell a product--the salesperson or fund-raiser must state that clearly in the first few moments of the conversation.
The law bars any sales calls from being made after 9 p.m. or before 8 a.m. And, if the consumer asks not to be called by that organization again, the telemarketer is in violation of the law if they call back.
The law also allows state attorneys general to enforce its provisions nationwide. So telemarketers cannot escape prosecution by fleeing across state lines, as they could in the past.
These rules are enforced through civil penalties that amount to $10,000 per violation, Hiles said. "This is civil law enforcement, but it has a big set of teeth," he says.
It's worth noting that senior citizens appear to be particularly susceptible to telemarketing scams, but no one is immune.
Roughly $40 billion is lost to this type of fraud each year, only about $5 billion to $10 billion of that is from senior citizens. In fact, some con artists are so skilled that they can take even the most educated consumers, Hiles notes. Nonetheless, there are several red flags that can warn consumers they may be dealing with a con artist--or at least an abusive telemarketer. And, thanks to a new telemarketing fraud hotline and the rules established under the new law, it's easier than ever to spot and report suspected abuses.
What do you look for and how should you handle a telemarketing call in today's environment?
Them: Expect disclosure. All telemarketers must quickly give their name, their organization and the nature of their call. If they don't do that, starting Jan. 1, they will be in violation of the law.
You: Keep a record. If you frequently get calls from telemarketers, you should seriously consider keeping a note pad by the phone. When the telemarketer reveals his name, organization and the nature of the call, write it down.
Them: Expect courtesy. If the telemarketer telephones after 9 p.m. or before 8 a.m.--or if they call a second time, after you have told them you're not interested and don't want them to call back--they are violating the law.
You: Impose discipline. Federal regulators will not sit in your kitchen and enforce the law. You must enforce the rules yourself, by telling the telemarketer that it's too late to call or that you don't want him or her to call back. If they violate the law, your privacy or simply annoy you, hang up.
Them: Allow time. Expect telemarketers to give you adequate time to make a decision or payment. A red flag of fraud is when the telemarketer expects you to pay for a product before you receive it.
You: Procrastinate. Never give a telemarketer your bank account information or your credit card information without hanging up and spending some time thinking about what they need payment for. Refuse to make a deal in one phone call.
While you're thinking, give a call to the National Fraud Information Hotline--1-800-876-7060--and talk to somebody about the offer. These people deal with telemarketing cons all day. They can give you a good indication about whether the person who has called you is legitimate or a criminal.