Consumer Concerns for Older Americans

Protecting Older Americans From Telemarketing Scams:

A Quick Guide for Advocates

Telemarketing and 900-number scams have grown rapidly in recent years, spurred by new technology such as automatic dialing systems and 900 numbers. The scams cover a broad range of telemarketing solicitations, including business opportunities and investments, credit card protection plans, credit repair, charitable solicitations, employment opportunities, advance fee loans, and work-at-home schemes. Refinements in data collection, the proliferation of sharing or selling of customer billing information and the development of novel payment methods have exposed consumers, including older Americans, to a host of telemarketing abuses.

Americans lose an estimated $40 billion each year due to the fraudulent sales of goods and services over the telephone.  The elderly are frequently targeted.  Studies have shown that fraudulent telemarketers direct anywhere from 56% to nearly 80% of their calls at older consumers.  It is often difficult to recover money lost to a telemarketing scam. Advocates can help clients by alerting them to the types of scams that telemarketers commonly use and give advice on how clients can avoid becoming victims.

Common telemarketing scams: 

• Sweepstakes and Prize offers: Schemes in which consumers are lured by false offers of cash or other prizes.
• Travel packages: Vacation packages that are advertised as "free" or "low cost".  These packages end up costing an exorbitant amount because of hidden costs, or the seller may not ever provide the promised trip.
• Investment Schemes and Work-At-Home Scams: These schemes promise that consumers will "get rich quick" or "make $1000/week from home."  They advertise high income with little or no risk, but end up delivering nothing.
• Charity Fundraising Scams: Phony charities that ask for money over the phone, often pressuring consumers for an immediate donation.  Phony charities may try to confuse consumers by using names that sound like well-known charitable organizations or even law enforcement agencies.
• 900 Numbers or Pay-per-call Services (also known as "pay-per-call" or "information access" services): These scams entice consumers to pay to make calls in order to receive information, such as how to save money on groceries or how to receive free credit cards.  They then charge consumers exorbitant prices for calling these numbers.
• Recovery Scams: Telemarketers prey on people who have already been victimized by other telemarketers.  For a hefty fee, the recovery room scam will promise to get a consumer’s money back, or get them the prize or investment they didn’t receive from the first scammer.
• Advance Fee Loan Scams: Fraudulent loan brokers and other individuals misrepresent the availability of credit and credit terms, often stating that they guarantee consumers will get a loan or other type of credit - but the consumer must pay before they apply.
• Credit Card Protection Scams: Telemarketers misrepresent that they are affiliated with a credit card company and offer plans to limit a consumer’s liability for lost or stolen credit cards. This is done even though federal law limits such liability to no more than $50.00.

Common Telemarketing “Lines”

Fraudulent telemarketers often use common “lines” or statements that consumers should be informed about. The following language is often associated with fraudulent telemarketing practices:

• You must act "now"--or the offer won't be good.
• You've won a "free" gift, vacation, or prize--but you have to pay for "postage and handling" or other charges.
• In order to pay for goods or services, you must send money, give a credit card or bank account number, or have a check picked up by courier.
• You don't need to check out the company with anyone.
• You don't need any written information about the company.
• You can't afford to miss this "high-profit, no-risk" offer.
  

Legal Framework to Address Telemarketing Fraud1

Telemarketing is covered by several different, sometimes overlapping federal and state statutes and regulations. Each of the following should be considered when evaluating complaints of telemarketing fraud against older Americans:

The Telephone Consumer Protection Act (TCPA) is administered by the Federal Communications Commission.2 The TCPA offers a private cause of action in state court for any violation. It focuses mostly on abusive methods of contacting the consumer, such as unsolicited faxes and prerecorded messages, but also restricts telephone solicitations at inconvenient hours.

The Telemarketing and Consumer Fraud and Abuse Prevention Act is administered by the Federal Trade Commission (FTC).3 It offers a private cause of action but only where the plaintiff's damages exceed $50,000. This Act and the corresponding rules (Telemarketing Sales Rule4) focus on the content of telemarketing calls, forbidding various forms of deception and abuse. It overlaps with the Telephone Consumer Protection Act in its prohibition of calls at inconvenient hours.

The FTC's Mail or Telephone Merchandise Rule requires prompt delivery of merchandise.5 It does not create a private cause of action but in most states will be enforceable through the state Unfair and Deceptive Acts and Practices (UDAP) statute. In addition, state telemarketing statutes typically overlap to at least some extent with the FTC rule and usually offer a private cause of action.6

Practical Steps to Prevent or Remedy Telemarketing Fraud

Advocates should advise clients to register with the Federal Trade Commission’s “Do-Not-Call” registry and any similar registry that may exist in your state. Beginning July, 2003, consumers may register with the FTC’s registry online at DONOTCALL.GOV or by phone by calling 1-888-382-1222m TTY 1-866-290-4236 from the telephone number they wish to register. Registration with the FTC’s do-not-call registry is free. If registration is done online consumers must provide an email address for confirmation. Once they have registered, their telephone number will remain on the registry for five years, until it is disconnected, or until they delete it from the registry. After five years they can renew their registration.  Many states also maintain a “do-not-call” list. Consumers can contact their state attorney general or state consumer protection program to learn if their state has such a list and how it may protect them.
Consumers may also contact the Direct Marketing Association, which represents many businesses that engage in telemarketing and other forms of direct sales.  Consumers can request the DMA to remove their name from lists that its members use. While many fraudulent telemarketers will not respect such a request, this will stop any telemarketing calls from DMA member telemarketers.

Contact the DMA at: 

DMA Telephone Preference Service P.O. Box 9014 Farmingdale NY 11735 (212) 768-7277

Fraud hotline

Another simple step that consumers can take if they suspect telemarketing fraud is to telephone the National Fraud Information Center at 1-800-876-7060 or go to www.fraud.org. The Center was established by a coalition of groups battling telephone fraud and operates from the National Consumers League. Reports can also be made on-line or by mail.7 The line is open 9:30 a.m. to 5:30 p.m. eastern standard time and operators may be able to give guidance as to whether a telemarketing call appears fraudulent. If so, the center will file a complaint for the consumer with the FBI, the FTC, and the local police. The FTC maintains a database called Consumer Sentinel. It is housed on a restricted-access secure web site that provides national, international, federal and local law enforcement agencies immediate access to Internet cons, telemarketing scams, and other consumer fraud-related complaints. The database contains fraud complaints made to the FTC and to the National Fraud Information Center and other federal, state, and local law enforcement agencies and private organizations. The public web site, www.consumer.gov/sentinel, contains consumer tips and information about fraud trends.

Reporting telemarketing fraud to law enforcement authorities through the hotline may be particularly useful for consumers who, having paid by check or cash, cannot withhold payment of a credit card bill. Reporting telemarketing fraud to the hotline is also important so that law enforcement authorities have information about the location and tactics of fraudulent telemarketers.

Withholding payment on credit card bill for fraudulent telemarketing sale

If the consumer used a credit card, federal law allows the consumer to refuse to pay for goods not delivered or delivered not as represented.i The credit card issuer is subject to all claims (except tort claims) and defenses arising out of the sale, up to the amount of credit still owing for the sale. The only preconditions to this right are that the consumer first made a good faith effort to resolve the matter with the telemarketer, the amount at stake must exceed $50, and the transaction must have occurred in the same state (or within 100 miles) of the cardholder's current address. Consumers should take the position that the telephone transaction occurred in the consumer's home state, since that is where the telemarketer initiated the sale. The consumer should not pay the disputed charge before invoking this right, however, as payment waives the right to assert the claims about the telemarketer's deceptive or fraudulent conduct against the card issuer.ii

Where the amount at stake is less than $50, or the other requirements for withholding payment have not been met, the consumer has the option of notifying the card issuer under the Fair Credit Billing Act (FCBA) of a billing error.iii The Federal Reserve Board (FRB) has stated that the failure to provide purchased goods or services is a billing error.iv The credit card issuer must then initiate an investigation and reverse the charge if warranted.

Stopping future client victimization

Telemarketing fraud operators know that some of the best prospects for future sales are past victims, particularly the elderly. These individuals are known to be vulnerable to fraud and are therefore likely to be solicited again. For example, recovery room schemes offer (for a fee) to facilitate the delivery to the consumer of all those free prizes and gifts that were never delivered. These operators often have all the trappings of a public agency or non-profit organization. One recovery room, for example, called itself "Senior Citizens Against Telemarketing" and allegedly claimed a special relationship with the FTC and state attorneys general that helped it get money back for victims of telemarketing fraud. To deter this recovery room fraud, some FTC orders prohibit the defendants from selling or transferring their customer lists.

Reporting Telemarketing Fraud

You should always report telemarketing fraud.  One organization that can help is the National Fraud Information Center.  Call the Center at 1-800-876-7060 or go to www.fraud.org.  The line is open 9:30 am to 5:30 pm (Eastern Time). Operators are available to give you guidance as to whether a telemarketing call appears fraudulent.  If so, the Center can help you file complaints with government agencies such as the Federal Trade Commission (FTC), FBI, local consumer protection program, and your state attorney general.  You can also file a complaint with these agencies directly. 

Reporting the fraud may not get you the money back, but it will help prevent the scam artist from hurting others.  In some cases, a government agency may take action against a company and even get some refunds.  If you report the fraud, you help make sure your name is on the list of victims to get refunds. 

Advice for Older Consumers to Prevent Future Fraud 

• Register telephone numbers with federal and state “do-not-call” registries.
• Never let a telemarketer pressure them to make an immediate decision.
• Never give credit card, checking account or social security number to an unknown caller.
• Before buying something over the phone, get all information in writing, including any refund policies.
• Never pay for something just because the telemarketer offers a "free gift." Scam artists will try to get consumers to buy something by them feel guilty that about receiving a free gift. 
• Check out a telemarketer’s record with the local Better Business Bureau, local consumer protection program, or state attorney general.
• Avoid wiring money or sending cash, money orders or personal checks. If you use these payment methods rather than a credit card, you may lose valuable rights to dispute fraudulent charges.
  

Additional Resources 

• National Consumer Law Center, Unfair and Deceptive Acts Manual (5th ed. 2001 and Supp.), [includes FTC Rules applicable to Telemarketing and a list of state telemarketing fraud statutes]. For more information, see www.nclc.org of call NCLC Publications at (617) 542-9595.
• American Association of Retired Persons, 601 E St., N.W. Washington, DC  20049, www.aarp.org
• Federal Trade Commission, 600 Pennsylvania Ave., N.W. Washington, DC  20580 www.ftc.gov
• National Association of Attorneys General, 750 First Street, N.E. Suite 1100 Washington, DC  20002 www.naag.org
  Advocates for elders seeking more information can call the National Consumer Law Center at (617) 542-8010 or visit our website at www.consumerlaw.org. 

July 2003 

This brochure was supported, in part, by a grant, number 90-AP-2640, from the Administration on Aging, Department of Health and Human Services, Washington, D.C.  20201.  Grantees undertaking projects under government sponsorship are encouraged to express freely their findings and conclusions.  Points of views or opinions do not, therefore, necessarily represent official Administration on Aging policy.

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1 See generally National Consumer Law Center, Unfair and Deceptive Acts and Practices (5th ed. 2001 and Supp.).
2 47 U.S.C. §227.
3 15 U.S.C. §§6101-6108.
4 16 C.F.R. Part 310, as amended by 68 Fed. Reg. 4480 (Jan. 29, 2003).
5 16 C.F.R. §435.
6 See generally National Consumer Law Center, Unfair and Deceptive Acts and Practices §5.9.2 (5th ed. 2001 and Supp.).
7 The web address for on-line reports is www.fraud.org. The mailing address is National Fraud Information Center, P.O. Box 65868, Washington, D.C. 20035.
i See 15 U.S.C. § 1666i; Reg. Z, § 226.12(c). See also National Consumer Law Center, Truth in Lending § 5.16 (4th ed. 1999 and Supp.); § 6.6.6, infra.
ii After payment, the claim could still be asserted as a billing error, however.
iii See 15 U.S.C. § 1666; See also National Consumer Law Center, Truth in Lending § 5.8 (4th ed. 1999 and Supp.).
iv Official Staff Commentary § 226.13(a)(3).