|June 28, 2002
Dear Mr. Secretary:
I am writing on behalf of the State of Maryland to supplement the record for the Telemarketing Sales Rule Review, and to provide data which illustrates the hazards inherent in the use of pre-acquired account information.
Maryland is receiving an increasing number of consumer complaints about companies that telemarket via "tag sales" or "upsells," in which a consumer calls in response to an advertisement for a product, and at the conclusion of the sale of the product for which they called, the consumer is offered another product or service, usually a membership with a "free trial offer." Often, the second offer is presented as a thank you gift. The telemarketers need not get the consumers' billing information to charge them for this second purchase, as they already have obtained it to complete the sale for the first product. The consumers are then billed at the end of the trial period. Consumers who never intended to purchase the other product or service complain after the charge appears on their credit card statement. Many do not even recall the solicitation, while some remember the solicitation and expressly declined the offer.
The companies' own records show that they are well aware of the problem of unauthorized charges. Maryland obtained one company's cancellation code lists, which revealed the reason codes to be the following:
The billing serves as the catalyst for the consumer cancellations. The experience of one company that we are currently investigating illustrates this point. Of the 73,730 consumers who were billed, 39,391 canceled after billing. The time period in which they canceled breaks down as follows.
Cancelled 0 - 30 days after billed: 24,785
Cancelled 31 - 60 days after billed: 10,450
Cancelled 61 - 90 days after billed: 1,854
Canceled over 90 days after billed: 2,842
Total billed and cancelled: 39,931
I hope this data is helpful to the Commission in its consideration of the issues. Thank you for your attention.