FTC Bans Telemarketers from Accepting Cash Reload Mechanisms (Dec. 8, 2015)
The FTC has banned telemarketers from accepting four types of payments—among them are cash reload mechanisms. The ban is supposed to help shield consumers from fraudulent telemarketers by prohibiting four types of payment methods “favored by con artists and scammers,” according to a statement by the commission, which recently approved amendments to its Telemarketing Sales Rule (TSR).
Fraudsters using telemarketing cons, which have become more prevalent, according to the TSR, instruct consumers to pay with cash reload mechanisms that can then be used to transfer funds to the scammer’s prepaid card or an account with a payment intermediary, such as a digital wallet.
“It’s unclear how the FTC expects the rule to actually work to prevent fraud,” Eli A. Rosenberg, associate at Baird Holm LLP and a Pay Gov contributing editor tells Paybefore. “The rule prevents the legitimate use of these products, but does nothing to prevent their illegitimate use.”
Prohibiting a real telemarketer from receiving payments through all of these products will not prevent a con artist from using one of the products, he explains. “The new requirements also will likely be confusing to consumers, who will now be told that legitimate methods of payment for other parts of their life, such as paying bills, cannot be used to pay a telemarketer.”
The lone dissenter of the measure approved by the commission 3 to 1 was Commissioner Maureen Ohlhausen, who said the FTC’s amendments don’t adhere to the commission’s “unfairness analysis” of balancing consumer injury against the benefits to consumers or competition. “Although the record shows there is consumer injury from the use of … [certain] payment methods in telemarketing fraud, it is not clear that this injury likely outweighs the countervailing benefits to consumers and competition of permitting novel payments methods,” she said in a statement.
Other forms of payment deemed unacceptable by the FTC include: remotely created checks (RCCs), which in place of a check’s normal signature bear a statement indicating that the account holder has authorized the check; remotely created payment orders, which are electronic versions of RCCs; and money transfers, in which consumers purchasing a money transfer pay cash to a money transfer provider, such as MoneyGram and Western Union, and transfers the value to another person who can pick up cash in person.