Clinton, Leahy Talk Tough on Phone FraudTelemarketers are supporting the content but bristling at the tone of President Clinton's weekly radio address in which he singled out deceptive telemarketers as the greatest threat to older Americans.
Saying that Americans lose $40 billion a year in telephone fraud, Clinton called for legislation authorizing the Justice Department to cut off the phone service of telemarketers when federal agents find evidence that they are engaging in fraudulent business practices or are preparing to do so. He said he would introduce legislation to Congress this month that would authorize the action, among other measures aimed at protecting senior citizens, as part of his 21st Century Crime Bill.
"The greatest threat many older Americans face is not a criminal armed with a gun, but a telemarketer armed with a deceptive rap," Clinton said in his speech. "Last year we toughened penalties for telemarketing fraud, but we should stop scam artists before they have a chance to harm America's seniors."
Although the industry supports legislation that seeks to reduce fraud committed using the telephone, it also is concerned that such strongly worded rhetoric from politicians can further damage the fragile reputation of legitimate telemarketing, which is under seemingly endless attack.
"You want to wince whenever they use the word 'telemarketer' and they mean 'fraud perpetrator,'" said Chet Dalzell, a spokesman for the Direct Marketing Association, New York. "Unfortunately, I don't get to write their speeches."
Mike Sandifer, legislative affairs consultant to the American Teleservices Association, described Clinton's language as "a little strong" and also questioned his use of the term "telemarketer."
"There's nothing that gets our ire up more than someone who uses the telephone to deceive people, but they are not telemarketers," he said.
Clinton's announcement followed by a few weeks a bill introduced by Sen. Patrick Leahy (D-VT), calling for the Federal Trade Commission to maintain a central database of telemarketing fraud reports and seeking stricter penalties for people convicted of fraud against senior citizens. Leahy, whose bill provided the model for Clinton's proposal, also called for legislation enabling phone companies to block or disconnect phones being used for telemarketing fraud.
The efforts of both Clinton and Leahy are aimed at protecting seniors by adding more teeth to the Telemarketing Fraud Prevention Act, which Clinton signed into law last year. That measure tacked three years onto the sentences of people convicted of using the telephone in perpetrating fraud.
"It is important for government and consumer groups to focus their attention on this so that we can get rid of those people who are portraying themselves as telemarketers," said Sandifer. "This would be a deterrent to those people - it's the perpetrator that causes the problems for everyone."
Sandifer and other observers said it was still too early in the process to determine what the ramifications of the legislative activity might be or how much support the bills might receive in Congress.
However, if the proposals begin to pick up momentum, telemarketers will be watching closely and could seek to influence the wording of any new laws.
"We could end up helping them define good, legitimate business practices and fraud, as well as point fingers to try to find the individuals who are committing fraud," said Tyler Prochnow, an attorney with Lathrop & Gage, Kansas City, MO, and counsel to the ATA.
Although several states have proposed forcing phone companies to cut off the service of people engaged in telephone fraud, there has been little activity at the federal level, Prochnow said.
"This probably takes it further that we have in the last six years or so," he said. He added that one area of concern for telemarketers might be the criteria that is used to determine at what point phone service can be blocked. Both Clinton and Leahy are calling for the disconnection of service before anyone has actually been convicted of a crime - they must only be planning to commit fraud.
Leahy's Seniors Safety Act was co-sponsored by Sens. Thomas Daschle (D-SD), Edward Kennedy (D-MA) and Robert Torricelli (D-NJ). It requires the FTC to create a central repository for complaints about telephone fraud and the Attorney General to maintain a database of companies convicted of telephone fraud. The act also calls for expanding the scope of telemarketing fraud to include all "wire communications using a telephone service" rather than simply messages conveyed via telephone calls, thus including the possibility of fraud via e-mail. The bill also mandates that phone companies not lease their lines to people who have been convicted of fraud against the elderly.
Richard Barton, senior vice president of Congressional relations at the Direct Marketing Association, said honest telemarketers had nothing to fear from the bill, however.
"This doesn't look like it really affects in any serious way the operations of any legitimate telemarketers," he said. "We don't see anything objectionable as it stands right now."
Both Barton and Sandifer of the ATA said the industry generally endorses such legislation, although the ATA has not yet taken a stance on the Leahy bill.
"In the past, the ATA has been very supportive of increasing federal sentencing guidelines for fraud in general and for the protection of senior citizens," Sandifer said.
Both Clinton's proposal and Leahy's bill also include numerous other protections for senior citizens, including tougher penalties for nursing home fraud and abuse, measures to prevent health care fraud, safeguards to protect pension funds and other proposals.