FTC Testifies on Fighting Fraudulent and Abusive Telemarketing

The Federal Trade Commission today told the Senate Committee on Commerce, Science, and Transportation Subcommittee on Consumer Affairs, Insurance, and Automotive Safety that targeting fraudulent and abusive telemarketing is a top priority at the agency. Lydia Parnes, Director of the FTC Bureau of Consumer Protection, told the subcommittee, “From 1991 to present, the FTC has brought more than 350 telemarketing cases. The vast majority of these involved fraudulent marketing of investment schemes, business opportunities, sweepstakes pitches, and the sales of various goods and services, including health care products.”

The testimony notes that in addition to halting the deceptive telemarketing, “The Commission has secured orders providing for more than $500 million in consumer restitution,” or where that was not practical, the money was returned to the U.S. Treasury. “During this same time period, the Commission, through cases filed on its behalf by the U.S. Department of Justice, has obtained civil penalty orders totaling nearly $17 million.”

“As an example, just last week the FTC halted the allegedly unlawful telemarketing operations of Suntasia Marketing,” which tricked consumers into divulging their bank account numbers by pretending to be affiliated with the consumers’ banks. They then debited many consumers’ accounts on a recurring basis. The FTC halted the operation working in cooperation the United States Postal Service and state and local law enforcement. “The FTC . . . works with various federal, state, local, and foreign partners to conduct law enforcement ‘sweeps’– multiple simultaneous law enforcement actions – that focus on specific types of telemarketing fraud, and works to promote joint filing of telemarketing actions with the states,” the testimony states.

The testimony notes that the Commission does not have criminal law enforcement authority but recognizes the value of criminal prosecution in deterring criminal activity and maintaining consumer confidence that wrongdoers will be brought to justice. “Accordingly, the Commission routinely refers matters appropriate for criminal prosecution to federal and state prosecutors through its Criminal Liaison Unit. Since October 1, 2002, 214 people have been indicted in criminal cases involving telemarketing fraud that arose from referrals made by CLU, including cases where an FTC attorney was designated a Special Assistant U.S. Attorney to help with the criminal prosecution. Of those 214 charged, 111 were convicted or pleaded guilty. The rest are awaiting trial, in the process of extradition from a foreign country, or are fugitives from justice.”

The testimony notes that list brokers can play a role in facilitating telemarketing fraud, and the FTC has taken law enforcement action targeting list brokers who knew or consciously avoided knowing that they were supplying lists to telemarketers who were violating the law. “The FTC also has challenged other third-party actors, such as payment processors, without whose assistance telemarketers would be able to gain access to consumers’ bank accounts. Generally, the FTC has alleged that these payment processors knew or consciously avoided knowing that they were facilitating fraudulent telemarketing operations . . . .”

In addition to law enforcement initiatives targeting fraudulent telemarketing, the FTC enforces the National Do Not Call Registry, the testimony states. “Consumers have registered more than 146 million telephone numbers since the Registry became operational in June 2003, and the Do Not Call program has been tremendously successful in protecting consumers’ privacy from unwanted telemarketing calls. A Harris Interactive Survey released in January 2006 showed that 94% of American adults have heard of the Registry and 76% have signed up for it . . . Violating Do Not Call subjects telemarketers to civil penalties of up to $11,000 per violation. Twenty-seven of the Commission’s telemarketing cases have alleged Do Not Call violations, resulting in $8.6 million in redress . . .” or return of ill gotten gains to the Treasury.

The testimony states that the committee is in the process of reauthorizing the Do Not Call Implementation Act. “The Commission believes that the bill can be strengthened by statutorily mandating the fees to be charged to telemarketers accessing the National Registry, and specifically mandating such fees in an amount sufficient to enable the Commission to enforce the TSR.”

The Commission vote to authorize the testimony was 5-0.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click https://www.ftccomplaintassistant.gov/ or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.