Pre-Acquired Info Faces ScrutinyOver the past couple of years, the legal focus of the telemarketing industry has been fairly limited in scope. State-run do-not-call lists, registration and bonding and disclosure measures have dominated the legislative landscape.
However, it is fitting that there are two new legislative areas that will occupy the minds of legislators and regulators from coast to coast and in Washington this year -- the use of predictive dialers and abandonment rates.
The other new focus for industry relates to something government is calling "pre-acquired account information." This describes the situation where the telemarketer already has the consumer's credit card or checking account information in the its possession, before initiating contact with the consumer.
Regardless of whether the telemarketer has obtained this information from the consumer's bank or from other companies that are doing business with the consumer, government regulators have identified the misuse of this information as a prime target for legislative and regulatory action in 2002.
While most of the consumer groups that track telemarketing fraud have found it impossible to distinguish how many victims of fraud gave the company their account information versus how many of those companies already had it, the rhetoric surrounding the fraudulent use of pre-acquired account information has sparked more than just a passing interest for government.
It should be noted that regulators, legislators, consumer groups and industry do agree on one important fact: There is nothing wrong with conducting transactions using pre-acquired account information. If done properly, everyone acknowledges that access to such information allows for a more efficient purchase/sales process in that consumers and companies are not burdened with the additional time necessary to record such information.
It is equally acknowledged, however, that having access to such information certainly makes it easier for fraudulent vendors to make credit card charges or withdrawals from a consumer's bank account even if the consumer never agreed to pay. With that background and concern, many states and the FTC already have or are expected to move aggressively in formulating a regulatory scheme to combat fraud.
In 2001, Idaho passed measures regulating the use of pre-acquired account information. Again, the state did not act to prohibit transactions using such information, but moved to prevent the unauthorized use of account numbers.
In Idaho, it must now be disclosed to the consumer, clearly and conspicuously, that the telemarketer has the consumer's account number, that the telemarketer is going to charge the consumer's account number and the specific amount that will be charged to the specific account number.
In addition, the telemarketer also must disclose a name, address and telephone number of the entity that will be charging the account. Once that information is disclosed, the telemarketer must obtain a written or a verbal authorization from the consumer to charge the account.
The statute does contain certain exemptions, including an exemption for many types of inbound calls. It is important to review the statute to determine whether your use of pre-acquired account information may be exempt.
The Federal Trade Commision, through its new chairman Timothy Muris, has signaled that regulating the use of pre-acquired account information will be one of the key points the FTC proposes to amend the existing Telemarketing Sales Rule.
Based on Muris' public statements, writings on the FTC's Web site and meetings that industry trade groups have held with the chairman, it is clear the FTC will propose new regulations similar to the Idaho statute.
What appears to be at the top of the list for the FTC will be ensuring that the consumer is made aware that the company has their account information and that a specific authorization is obtained for each charge to the consumer's account. It is anticipated that this proposed rule might be released as early as the end of January.
After the rule is published, there will likely be a 60-day public comment period for the industry to present its position on the proposal. It could be very important for the industry to review these proposed measures and have its voice heard to ensure that a legitimate form of marketing is not regulated out of existence, simply because it also presented an opportunity for thieves to prey on the American public.