FTC Announces Settlement Over Alleged Telemarketing Sales Rule Violations

FTC Telemarketing Sales Rule

On February 11, the FTC announced that an Atlanta-based Independent Sales Organization (ISO) agreed to settle charges that it violated the Telemarketing Sales Rule (TSR) by assisting and facilitating deceptive telemarketing acts. According to the FTC, from 2010 through January 2013, the ISO knowingly, or with deliberate ignorance, enabled a deceptive telemarketing operation to obtain and maintain merchant accounts so that it could process consumers’ credit card payments through certain payment networks. The FTC alleged that the ISO ignored a series of red flags concerning the operation’s deceptive telemarketing scheme, such as (i) a high volume of returns and chargebacks; (ii) numerous chargeback complaints from consumers claiming to be victims of fraud; and (iii) alerts from other financial institutions that the operation engaged in fraudulent or deceptive activities. The FTC and the states of New York and Florida sued the operation in 2013, and only then did the ISO terminate its relationship with the operation. In addition to imposing a $2.6 million monetary judgment, which the FTC partially suspended due to financial constraints, the February 3 settlement order requires the ISO to (i) screen prospective clients that meet certain criteria; (ii) monitor sales activity to identify signs of deceptive conduct; and (iii) terminate contracts with persons engaged in deceptive conduct. Finally, the ISO is “banned from payment processing or acting as an ISO for several categories of clients and prohibited from assisting or facilitating any merchant it knows, or should know, is violating the FTC Act or the TSR.”