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Scams Are Target of FTC Rules : Consumers: Tele- marketers will be restricted in how and when they can make calls.

August 17, 1995|From Bloomberg Business News

WASHINGTON — Taking aim at con games thought to cost American consumers about $40 billion a year, the Federal Trade Commission on Wednesday unveiled a package of rules to fight telemarketing scams.

The sweeping regulations, required by Congress in a law passed last year, establish a range of required disclosures for sales and prize-promotion pitches, regulate when and how telemarketers can place calls, and restrict fraudulent billing schemes.

"This rule makes it illegal for fraudulent telemarketers to steal consumers' money. It exposes the worst problems we've seen in their boiler-room schemes and provides solutions," said Jodie Bernstein, director of the FTC's consumer protection bureau. "These rules are really going to put these people out of business."

The rules, which take effect Jan. 1, also establish a nationwide set of standards and permit any of the 50 state attorneys general to file suits in federal court to shut down fraudulent schemes wherever they operate.

Currently, local law enforcement authorities have no power to keep con artists from simply relocating to another state and beginning anew.

"This new rule puts 51 cops on the beat--the FTC and all 50 state attorneys general," Bernstein said. "Any one of us can get an injunctive order that applies nationwide."

"I think it's the most powerful tool we've ever had," said Wisconsin Atty. Gen. Jim Doyle.

Regarding several controversial proposals, the final version backs off from the stricter provisions of in earlier drafts and that had drawn industry criticism.

One fight was over requirements that telemarketers identify themselves and disclose the fact that they're making a sales call. After initially requiring those disclosures to be made immediately, the FTC's final rule says they must be made promptly, without defining what that means.

While acknowledging that state attorneys general had pressed for more specific language, Doyle said he was comfortable with the notion of prosecuting violations of the vaguer standard. "Prompt means prompt," he said.

The final rule also eliminates specific limits, included in earlier drafts, on how often a telemarketer could call the same customer. Instead, the rules make it illegal to call back a consumer who specifically asks to be left alone. That change, Bernstein said, was made because some legitimate companies argued that it would hamper customer service, and the FTC decided it shouldn't bar calls unless a consumer finds them annoying.

The regulations specifically target two growing types of fraud: misleading prize promotions and scams that promise to help people repair credit records or recover money lost to previous con artists.

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