Caveat Vendor

FTC Proposes Ban on Telemarketers’ Use of Novel Payment Instruments

May 29, 2013

By Paul Hastings Professional

Last week, the FTC issued a Notice of Proposed Rulemaking (“NPR”) to amend the Telemarketing Sales Rule to ban sellers and telemarketers from using certain payment instruments as payment for telemarketing transactions. Payment instruments covered by the NPR include remotely-created checks and payment orders, cash-to-cash money transfers, and cash reload mechanisms.
Why the proposed ban?  Isn’t “novel” good?  Well, apparently not always.  Here, the agency claims concern that those instruments, unlike credit and debit cards, lack statutory protections for consumers in the event of unauthorized use.

The NPR follows recent enforcement actions by the FTC in connection with consumer financial transactions and represents yet another example of the increasingly activist  approach the agency is taking toward providers of consumer financial products and services. While it remains to be seen how aggressively the FTC will pursue this area, it is clear that, in combination with the Consumer Financial Protection Bureau, nonbank financial services firms are being subject to a more comprehensive and rigorous set of standards than in the past.

For additional information regarding the NPR, including recommended steps nonbank financial firms should consider taking, see the full article here.

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