Demand Drafts Update
The Green Sheet published an article on "Demand Drafts" on June 24, 1996, Issue 96:06:02, which raised a number of questions from our readers, not the least of which was the title of the article, "Federal Trade Commission Targets Demand Drafts."
While the information for this article was accurate, and similarly stated in the Washington Post on March 20, 1996, some readers felt that without more of the flavor of the actual FTC objective, which is to reduce Telemarketing and Consumer Fraud and Abuse, it would appear to have more impact on Demand Drafts, than it actually will have.
We leave the conclusion of Demand Draft impact to our readers, while sharing a portion of the information sent to us by The CFI Group:
Dear Mr. Green:
In response to your article "Federal Trade Commission Targets Demand Drafts" in the 6/24 issue of The Green Sheet, I have enclosed the synopsis of that legislation which has already been passed.
Your article was somewhat inaccurate and has caused some mild alarm within our customer base.
I would think that you would research a subject a little better before you printed an article of that nature, especially when it is out of your field of endeavor. We have been a third party draft company for over two years now and have become one of the leaders in the industry. If you have questions about our industry, we would be glad to share information with you if you think it is pertinent.
If you can find the space in a future issue I think you should make your readers aware of the legislation, who it affects and how.
Thank you for your time.
Jim Mattox
Sales Manager
The CFI Group
The following is a portion of the legislation highlighted by CFI:
Required Disclosures:
Under the new rule, telemarketers will have to promptly disclose to consumers the fact that it's a sales call, the identity of the seller, the nature of the goods or services being offered and, if it's a prize-promotion, the fact that no purchase is necessary to win. In addition, before telemarketers can ask consumers for any credit card or bank account information or before they make arrangements for a courier to pick up payment, they will have to disclose to consumers (either orally or in writing):
1. The total costs of the goods or services being offered and any material restrictions or conditions on obtaining or using them;
2. The terms and conditions of any refund, exchange or repurchase policy mentioned in the offer or the fact that the sale is final and nonrefundable; and
3. How to enter any prize promotion and the odds of winning.
Collecting Payment from Consumers:
A new provision (not included in draft versions of the rule) will prohibit telemarketers from debiting a consumer's checking account without the consumer's express, verifiable authorization. For example, the authorization could be in writing, or a telemarketer could tape record the sales call,but in that instance the tape will have to evidence that the consumer received certain disclosures and the telemarketer will have to make the tape available to the consumer's bank on request. (Debiting involves using a "demand draft," a check created by the seller and imprinted with the account number provided by the consumer, to be presented to the consumer's bank for payment).
310.6 Exemptions.
The following acts or practices are exempt from this Rule:
(a) The sale of pay-per-call services subject to the Commission's "Trade Regulation Rule Pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992," 16 CFR Part 308;
(b) The sale of franchises subject to the Commission's Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures," 16 CFR Part 436;
(c) Telephone calls in which the sale of goods or services is not completed, and payment or authorization of payment is not required, until after a face-to-face sales presentation by the seller;
(d) Telephone calls initiated by a customer that are not the result of any solicitation by a seller or telemarketer;
(e) Telephone calls initiated by a customer in response to an advertisement through any media, other than direct mail solicitations; provided, however, that this exemption does not apply to calls initiated by a customer in response to an advertisement relating to investment opportunities, goods or services described in 310.4(a)(2) or (3), or advertisements that guarantee or represent a high likelihood of success in obtaining or arranging for extensions of credit, if payment of a fee is required in advance of obtaining the extension of credit;
(f) Telephone calls initiated by a customer in response to a direct mail solicitation that clearly, conspicuously, and truthfully discloses all material information listed in _310.3(a)(1) of this Rule for any item offered in the direct mail solicitation; provided, however, that this exemption does not apply to calls initiated by a customer in response to a direct mail solicitation relating to prize promotions, investment opportunities, goods or services described in 310.4(a)(2) or (3), or direct mail solicitations that guarantee or represent a high likelihood of success in obtaining or arranging for extensions of credit, if payment of a fee is required in advance of obtaining the extension of credit; and
(g) Telephone calls between a telemarketer and any business, except calls involving the retail sale of non-durable office or cleaning supplies; provided, however, that _310.5 of this Rule shall not apply to sellers or telemarketers of non-durable office or cleaning supplies.
