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posted 8 years ago
When endeavoring to engage in a
sale with a consumer over the telephone, it is important that sellers and telemarketers
comply with traditional state and federal contracting laws. Equally, if not more, important is that
sellers and telemarketers comply with applicable state and federal
telemarketing sales rules. This Practice
Guide addresses compliance issues associated with the federal Telemarketing
Sales Rule (the “TSR”), as promulgated by the Federal Trade Commission (“FTC”).
Material Information
The TSR requires sellers and
telemarketers, both on outbound and inbound calls, to provide certain “material
information” before consumers order/pay for the applicable goods or services
that are the subject of the telemarketing calls. Material information is information that a
consumer needs in order to make an informed decision about whether to purchase
the applicable seller’s or telemarketer’s goods or services. Failure to provide this material information
before the consumer pays for the goods or services is a deceptive telemarketing
practice that violates the TSR and subjects the seller or telemarketer to civil
penalties of up to $16,000 for each violation.
When to Disclose
When making outbound calls,
sellers and telemarketers must promptly disclose certain types of information
in their presentation. This required
information must be provided prior to asking for any credit card or payment
information from the consumer.
In addition, where the seller or
telemarketer has “pre-acquired account information,” it must provide the
required disclosures before the consumer provides his or her express informed
consent to purchase the applicable product or service. Pre-acquired account information is any
information that enables the seller/telemarketer to charge a consumer’s account
without obtaining the account information directly from the consumer during the
telemarketing call.
General Disclosures
The TSR specifies several broad
categories of information that sellers and telemarketers must provide to
consumers before obtaining their consent to purchase products or services
during a given telemarketing call including, but not limited to, the following:
·
The TSR requires the disclosure of the total
cost to purchase the offered goods or services.
This includes disclosing, where applicable, the total number of
installment payments and the amount of each such payment, among other things.
·
The TSR requires that sellers and telemarketers
disclose all “material restrictions, limitations or conditions” to purchase the
goods or services that are offered to the consumer. A material restriction, limitation or
condition is one that, if known to the consumer, would likely affect the
decision to purchase.
·
If there is a policy of honoring requests for
refunds or cancelations, this must be disclosed fully if sellers/telemarketers
make a statement about this policy during their sales presentations. If the sales presentation includes a
statement about such policy, it must also include a clear and conspicuous
disclosure of the terms and conditions of the policy that are likely to affect
a consumer’s decision on whether to purchase.
·
A seller or telemarketer that offers a prize
promotion must provide consumers with several items of information before the
consumer pays for any associated goods or services that are offered in
connection with the promotion, including:
(1) the odds of winning the prize(s); (2) that no purchase is necessary
and that any purchase or payment will not increase the odds of winning; (3) how
to enter the promotion without paying any money or making a purchase; and (4)
any material costs or conditions to receive or redeem any prize(s).
Negative Option Features
Under the TSR, any seller or
telemarketer whose offer of a purchase or service involves a negative option
feature (for example, a free-to-pay conversion or free-trial offer) must truthfully,
clearly and conspicuously disclose three pieces of information:
(1) The
fact that the consumer’s account will be charged unless he or she takes
affirmative action (such as cancelling) to avoid the charge;
(2) The
date(s) on which the charges(s) will be submitted for payment; and
(3) The
specific steps the customer must take to avoid the charge(s).
Outbound Sales Calls
A number of disclosures must be
promptly made in all outbound sales calls, including:
·
The identity of the seller (i.e., its corporate
name or registered d/b/a);
·
That the purpose of the call is to sell goods or
services;
·
The nature of the goods or services offered; and
·
In the case of a prize promotion, that no
purchase or payment is necessary to participate and that a purchase or payment will
not increase the odds of winning.
Other Disclosure Requirements
The foregoing contains just some of the TSR disclosure requirements
that sellers and telemarketers must comply with when engaging in sales calls in
the United States. In addition, operators
in this space should also observe applicable state-specific telemarketing sales
regulations when telemarketing in certain jurisdictions.
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