What Information Must Sellers and Telemarketers Provide to Consumers?

What Information Must Sellers and Telemarketers Provide to Consumers?

Sellers and Telemarketers Must Disclose Material Information

The TSR requires sellers and telemarketers, whether making outbound calls to consumers or receiving inbound calls from consumers, to provide certain material information before the consumer pays for the goods or services that are the subject of the sales offer. Material information is information that would likely affect a person’s choice of goods or services or the person’s decision to make a charitable contribution. More simply, it is information a consumer needs to make an informed decision about whether to buy goods or services or make a donation. Sellers and telemarketers may provide the material information either orally or in writing. Failure to provide any of the required information truthfully and in a “clear and conspicuous” manner, before the consumer pays for the goods or services offered, is a deceptive telemarketing act or practice that violates the TSR and subjects a seller or telemarketer to a civil penalty of $43,280 for each violation.

Clear and Conspicuous: Clear and conspicuous means that information is presented in a way that is difficult to miss and that ordinary consumers will easily notice and understand, so that required disclosures are communicated as effectively as the sales message.

When written, clear and conspicuous information must be printed in the same language(s) as the sales offer(s) in a type size that a consumer can readily see and understand; that has the same emphasis and degree of contrast with the background as the sales offer; and that is not buried on the back or bottom, or in unrelated information that an ordinary consumer wouldn’t think important enough to read. When a seller or telemarketer makes required disclosures in a written document that is sent to a consumer and follows up with an outbound sales call to the consumer, the disclosures are considered clear and conspicuous only if they are sent close enough in time to the call so that the consumer associates the call with the written disclosures.

When disclosures are oral, clear and conspicuous means at an understandable speed and pace, and in the same language(s)and in the same tone and volume as the sales offer(s) so that ordinary consumers can easily hear and understand it. When making outbound calls, a telemarketer must promptly disclose certain types of information to consumers orally in the sales presentation.  For purposes of the TSR, “promptly” means before any sales pitch is given and before any charitable solicitation is made. Required information about a prize promotion must be given before or when the prize offered is described.

Before a Consumer Consents to Pay: Sellers and telemarketers must give a consumer the information required by Section 310.3(a)(1) of the TSR before:

• Getting a consumer’s consent to buy — or persuading a consumer to send full or partial payment by check.

• Asking for any credit card, bank account or other payment information.

• Requesting, arranging for, or asking a consumer to request or arrange for a courier to pick up payment for the goods or services offered. Couriers include Federal Express, DHL, UPS, agents of the seller or telemarketer, or any other person who will go to a consumer’s home or other location to pick up payment for the goods or services being offered.

When sellers and telemarketers have pre-acquired account information, they must provide the required disclosures before the customer provides express informed consent. Pre-acquired account information is any information that enables you to cause a charge against a consumer’s account without obtaining the account number directly from the consumer during the transaction for which the consumer will be charged.

 

What Information Must Sellers and Telemarketers Provide to Consumers?

When sellers and telemarketers offer to sell goods or services, they must provide the consumer with material information about the offered goods or services necessary to avoid misleading consumers. The term material means likely to affect someone’s choice of goods or services or decision to make a charitable contribution, or someone’s conduct with regard to a purchase or donation.

The TSR specifies seven broad categories of material information that sellers and telemarketers must give consumers:

1. Cost and Quantity

The TSR requires sellers and telemarketers to disclose the total cost to buy, receive, or use the offered goods or services. While disclosing the total number of installment payments and the amount of each payment satisfies this requirement, the number and amount of such payments must correlate to the billing schedule that will be implemented. For example, the TSR’s requirements would not be met if you were to state the product’s cost per week if the consumer has to pay installments on a monthly or quarterly basis. The TSR also requires you to tell a consumer the total quantity of goods the consumer must pay for and receive. You must provide both these items of material information to the consumer before the consumer pays for the goods or services that are the subject of the sales offer. You may provide this material information orally or in writing, as long as the information is clear and conspicuous.

Sometimes, the total cost and quantity are not fixed when the initial transaction takes place, but, instead, are determined over time. For example, in a negative option plan, like those offered by some book clubs, the consumer may agree to buy a certain number of items over a specified time period. The consumer gets periodic announcements of the selections; each announcement describes the selection, which will be sent automatically and billed to the consumer unless the consumer tells the company not to send it. Similarly, a continuity plan is a type of negative option plan that offers subscriptions to collections of goods. During the course of the plan, the consumer can choose to purchase some or all the items offered in the collection. Consumers who agree to buy an introductory selection also agree to receive additional selections on a regular schedule until they cancel their subscription to the plan.

Both negative option and continuity plans are structured to give consumers the opportunity to buy a series of products over time. The cost of the plan as a whole is determined by the number and type of items the consumer decides to accept in the series, and at the time of the initial sales offer, neither the seller nor the consumer necessarily knows how much product the consumer will purchase, or the total cost of the products.

To comply with the TSR, a seller or telemarketer offering a negative option or a continuity plan must disclose the total costs and quantity of goods or services that are part of the initial offer; the total quantity of additional goods or services that a consumer must purchase over the duration of the plan; and the cost, or range of costs, to purchase each additional good or service separately. You may provide this material information orally or in writing, as long as the information is clear and conspicuous. In addition, some negative option plans are subject to the FTC’s Negative Option Rule (16 C.F.R. Part 426).

Cost and Quantity Disclosure in the Marketing of Credit Products: If sellers and telemarketers are offering credit products subject to the Truth in Lending Act (TILA) or Regulation Z, compliance with the credit disclosure requirements and the timing of the disclosures mandated by TILA or Regulation Z constitute compliance with the total cost and quantity disclosure requirements of the TSR with respect to the credit instrument. Nevertheless, the cost and quantity of any goods or services purchased with that credit also must be disclosed.

2. Material Restrictions, Limitations, or Conditions

The TSR requires sellers and telemarketers to disclose all material restrictions, limitations, or conditions to purchase, receive, or use goods or services that they are offering to the consumer. Material information is information that a consumer needs to make an informed purchasing decision. A material restriction, limitation, or condition is one that, if known to the consumer, would likely affect the decision to purchase the goods or services offered; to purchase them at the offered price; to purchase them from that particular seller; or to make a charitable contribution. Examples of material information that must be disclosed include:

• in the case of an offer of a credit card, a requirement that a consumer make a deposit in order to receive and use the card (that is, that the credit card is a secured card).

• in the case of a vacation certificate, a restriction, limitation, or condition that prevents a purchaser from using the certificate during the summer; or that requires a purchaser to make reservations a year in advance to travel using the certificate; or that requires the consumer to incur expenses beyond the price of the certificate to redeem the certificate for a vacation.

• the underlying illegality of goods or services, such as the illegality of foreign lottery chances.

Sellers and telemarketers may disclose orally or in writing information about material restrictions, limitations, or conditions to purchase, receive, or use the goods or services being offered, as long as the information is clear and conspicuous and disclosed before the consumer pays.

3. No-Refund Policy

If there’s a policy of honoring requests for refunds, cancellations of sales or orders, exchanges, or re-purchases, sellers and telemarketers must disclose information about the policy only if they make a statement about the policy during the sales presentation. If the sales presentation includes a statement about such a policy, it also must include a clear and conspicuous disclosure of all terms and conditions of the policy that are likely to affect a consumer’s decision on whether to buy the goods or services offered.

If the seller’s policy is that “all sales are final” — that is, no refunds, cancellations of sales or orders, or exchanges or re-purchases are allowed — the TSR requires you to let consumers know before they pay for the goods or services being offered. You may give this information to consumers orally or in writing, as long as the information is clear and conspicuous.

4. Prize Promotions

A prize promotion includes any sweepstakes or other game of chance, and any representation that someone has won, has been selected to receive, or may be eligible to receive a prize or purported prize. A prize is anything offered and given to a consumer by chance.

For the element of chance to be present, all that is necessary under the TSR is that if the consumer is guaranteed to receive an item, at the time of the offer the telemarketer does not identify the specific item that the person will receive. For example, say you send a solicitation promising recipients that they will receive one of four or five listed items but you do not tell recipients which of the listed items they will receive. In that case, any item the consumer receives is a prize, and the solicitation is a prize promotion.

A seller or telemarketer that offers a prize promotion must provide consumers with several items of information before the consumer pays for any goods or services being offered. This information may be given to consumers orally or in writing, as long as the information is clear and conspicuous. You must tell consumers:

• the odds of winning the prize(s). If the odds can’t be calculated in advance because they depend on the number of people who enter the promotion, for example, you must tell that to consumers, along with any other factors used to calculate the odds.

• that they can participate in the prize promotion or win a prize without buying anything or making any payment, and that any purchase or payment will not increase the chances of winning. When offering a prize promotion in outbound calls, you must disclose this information orally and promptly. A legitimate prize promotion does not require any purchase or payment of money for a consumer to participate or win. If a purchase or payment of money is required for eligibility for a prize, it is not a prize promotion; it is a lottery, which is generally unlawful under federal and state lottery laws.

• how they can enter the prize promotion without paying any money or purchasing any goods or services. This disclosure must include instructions on how to enter, or an address or local or toll-free telephone number where consumers can get the no-purchase/no-payment entry information.

• any material costs or conditions to receive or redeem any prize. For example, if one of the offered prizes is a “vacation,” but the recipient must pay for her own accommodations, that’s a cost or condition that is likely to affect the consumer’s response to the offer and therefore, must be disclosed.

5. Credit Card Loss Protection

A seller or telemarketer offering a credit card loss protection plan — one that claims to protect, insure, or otherwise limit a consumer’s liability in the event of unauthorized use of a customer’s credit card — must disclose the limits on a cardholder’s liability under federal law for unauthorized use of a credit card (15 U.S.C. § 1643).  Since the law limits cardholder liability for unauthorized use — for example, when a credit card is lost or stolen — to no more than $50, disclosure of this information to consumers will help ensure that they have the material information necessary to decide whether the protection plan offered is worth the cost.

6. Negative Option Features

The term “negative option feature” is used in the TSR. This occurs when the seller interprets the consumer’s silence, or failure to take an affirmative action to reject goods or services or cancel an agreement, as acceptance of the offer. One type of negative option offer is a “free-to-pay conversion” offer (also known as a “free-trial offer”), where customers receive a product or service for free for an initial period and then have to pay for it if they don’t take some affirmative action to cancel before the end of the period. Other types of negative option features include continuity plans and other arrangements where consumers automatically receive and incur charges for shipments in an ongoing series unless they take affirmative action to stop the shipment.

Under the TSR, any seller or telemarketer whose offer of a product or service involves a negative option feature must truthfully, clearly, and conspicuously disclose three pieces of information:

1. the fact that the customer’s account will be charged unless he or she takes an affirmative action — such as canceling — to avoid the charge.

2. the date(s) on which the charge(s) will be submitted for payment.

3. the specific steps the customer must take to avoid the charges.

While the best practice is to provide an actual date on which payment will be submitted, it is acceptable to give an approximate date if you don’t — or can’t — know the actual date, provided the approximate date gives the consumer reasonable notice of when to expect the debit or charge. As for disclosing how the consumer can avoid charges, it is not sufficient under the TSR to say that a consumer would have to call a toll-free number to cancel without giving the number.

7. Debt Relief Services

The TSR defines a “debt relief service” as a program that claims directly, or implies, that it can renegotiate, settle, or in some way change the terms of a person’s debt to an unsecured creditor or debt collector. That includes reducing the balance, interest rates or fees a person owes.

Under the TSR, any seller or telemarketer of a debt relief service must truthfully, clearly, and conspicuously disclose five pieces of information:

• how much the service costs as well as any material restrictions, limitations or conditions on the debt relief service. If the sales presentation includes a statement about the refund policy, you must also include a clear and conspicuous disclosure of all terms and conditions of the policy;

• how long it will take the consumer to achieve the represented results based on a good faith estimate;

• how much money a customer must save before you’ll make a settlement offer to creditors;

• the possible consequences if the customer fails to make timely payments to creditors; and

• the customer’s rights regarding dedicated accounts if you ask or require your customers to set aside funds in a dedicated account.

 

Prompt Oral Disclosures in Outbound Sales Calls and Upselling Transactions

An outbound call is a call initiated by a telemarketer to a consumer. The TSR requires that a telemarketer making an outbound sales call promptly disclose, before any sales pitch is given, the following four items of information truthfully, clearly, and conspicuously:

1. The identity of the seller. The seller is the entity that provides goods or services to the consumer in exchange for payment. The identity of the telemarketer, or person making the call, need not be disclosed if it is different from the identity of the seller. If the seller commonly uses a fictitious name that is registered with appropriate state authorities, it is fine to use that name instead of the seller’s legal name.

2. That the purpose of the call is to sell goods or services. The TSR requires that the purpose of the call be disclosed truthfully and promptly to consumers. How you describe or explain the purpose of the call is up to you, as long as your description is not likely to mislead consumers. For example, it would be untruthful to state that a call is a “courtesy call” if it’s a sales call.

3. The nature of the goods or services being offered. This is a brief description of items you are offering for sale.

4. In the case of a prize promotion, that no purchase or payment is necessary to participate or win, and that a purchase or payment does not increase the chances of winning. If the consumer asks, you must disclose — without delay — instructions on how to enter the prize promotion without paying any money or purchasing any goods or services.

These same disclosures must be made in an upselling transaction if any of the information in these disclosures is different from the initial disclosures (if the initial transaction was an outbound call subject to the TSR) or if no disclosures were required in the initial transaction, like a non-sales customer service call. For example, in an external upsell, where the second transaction in a single telephone call involves a second seller, you must tell the consumer the identity of the second seller — the one on whose behalf the upsell offer is being made. On the other hand, in an internal upsell, where additional goods or services are offered by the same seller as the initial transaction, no new disclosure of the seller’s identity is necessary because the information is the same as that provided in the initial transaction.

 

Prompt Oral Disclosures in Outbound Calls to Solicit Charitable Contributions

Telefunders must make two clear and conspicuous oral disclosures promptly before any charitable solicitation is made:

1. The identity of the charitable organization on whose behalf the solicitation is being made. The charitable organization is the entity on whose behalf a charitable contribution is sought. The identity of the telemarketer, or person making the call, need not be disclosed. If the charitable organization commonly uses a fictitious name that is registered with appropriate state authorities, that name may be disclosed instead of the charitable organization’s legal name.

2. That the purpose of the call is to solicit a charitable contribution. The TSR requires that the purpose of the call be disclosed promptly to consumers. How the purpose of the call is described or explained is up to you, as long as your description or explanation is not likely to mislead consumers.

How does a for-profit company that telemarkets for a non-profit organization make the required oral disclosures? When a for-profit company makes interstate calls to solicit charitable contributions for a non-profit organization, the for-profit telemarketer must make the required prompt disclosures for charitable solicitation calls. The company must identify the entity on behalf of which the charitable solicitation is made, and state that the purpose of the call is to solicit a charitable contribution. However, if a for-profit company solicits charitable contributions on behalf of a charity and offers goods or services that are of more than nominal value — a book, magazine subscription, or perhaps a membership — to induce donations, the required oral disclosures for both sales and charitable contributions must be made. “Nominal” means a value less than the amount of any contribution being solicited. In a situation where the goods or services offered are of nominal value, stating the name of the non-profit organization on whose behalf the call is being made is sufficient.

Examples:

“I am calling on behalf of [name of non-profit organization] to offer you a subscription to the organization’s newsletter, which [description of newsletter], and to ask for a donation to help support the work of [name of non-profit organization].”

“I am calling for [name of non-profit organization] to seek your support. For a donation of $25 or more, [name of non-profit organization] will extend to you a one-year membership, which entitles you to [description of the membership]. Your donation will help us to continue the [non-profit organization’s] important work . . .”

Multiple Purpose Calls. Some calls have more than one purpose. They may involve the sale of goods or services and another objective, like conducting a prize promotion or determining customer satisfaction. They may involve a charitable solicitation combined with a prize promotion. In any multiple purpose call where the seller or telemarketer is planning to sell goods or services in at least some of the calls, the four sales disclosures above must be made promptly — that is, during the first part of the call before the non-sales portion of the call. Similarly, in any multiple purpose call where the telemarketer is planning to solicit charitable contributions in at least some of the calls, the two charitable solicitation disclosures must be made promptly — that is, during the first part of the call, before the noncharitable solicitation part of the call.

 

Example:

A seller calls a consumer to determine whether he or she is satisfied with a previous purchase and then plans to move into a sales presentation if the consumer is satisfied. Since the seller plans to make a sales presentation in at least some of the calls (the seller plans to end the call if the consumer is not satisfied), the four sales disclosures above must be made promptly during the initial portion of the call and before inquiring about customer satisfaction.

However, a seller may make calls to welcome new customers and ask whether they are satisfied with goods or services they recently purchased. If the seller doesn’t plan to sell anything to these customers during any of these calls, the four oral sales disclosures are not required. That’s the case even if customers ask about the sellers’ other goods or services, and the seller responds by describing the goods or services. Because the seller has no plans to sell goods or services during these calls, the disclosures are not required.

 

Misrepresentations are Prohibited

The TSR prohibits sellers and telemarketers from making false or misleading statements to induce anyone to pay for goods or services or make a charitable contribution. For example:

• you cannot falsely claim that you need a consumer’s bank account number or credit card number only for identification purposes, when, in fact, you will use the number as payment for the goods or services offered.

• a seller of precious metals cannot induce anyone to invest by falsely claiming that the seller offers the metals at or near wholesale price.

• it would be illegal under the TSR to solicit a charitable contribution by claiming that 100 percent of the funds collected would benefit the stated charity, when only 30 percent of the money goes to the charity.

In addition, the TSR prohibits sellers and telemarketers from misrepresenting specific categories of information about a telemarketing transaction that are likely to affect a consumer’s decision to purchase the goods or services offered. The TSR also prohibits both express and implied misrepresentations. Sellers and telemarketers cannot circumvent the TSR by creating a false impression in a consumer’s mind through the artful use of half-truths or misleading or incomplete information.

 

In sales transactions, the TSR prohibits misrepresentations about the following:

1. Cost and Quantity

The TSR prohibits sellers and telemarketers from misrepresenting the total costs to purchase, receive, or use the goods or services offered, or the quantity of goods or services offered at the stated price. For example, you may not tell consumers that they may purchase a magazine subscription for three years at $1.50 a month, when that rate is an introductory rate that will expire after the first year. 

2. Material Restrictions, Limitations, or Conditions

The TSR prohibits sellers and telemarketers from misrepresenting any material restriction, limitation, or condition to purchase, receive, or use goods or services offered to the consumer. For example, you may not falsely claim that a hotel certificate may be used any time at any major hotel chain in the country, when it can be used only at certain times or at a limited number of hotels.

3. Performance, Efficacy, or Central Characteristics

The TSR prohibits sellers and telemarketers from misrepresenting any material aspect of the performance, efficacy, nature, or central characteristics of the goods or services offered to the consumer. For example, it’s a violation of the TSR to falsely claim that:

• a water processor offered for sale can eliminate all known contaminants from tap water.

• a service offered by the seller can improve a person’s credit rating.

• a machine will operate properly without maintenance.

• precious metals outperform other types of investments.

• a seller can recover money lost by the consumer in a previous transaction.

• a purchaser of a business venture can earn “more money in a week than you now earn in a year” or achieve specific levels of income.

4. Refund, Repurchase, or Cancellation Policies

The TSR prohibits sellers and telemarketers from misrepresenting any material aspect — one that likely would have an effect on the consumer’s purchasing decision — of the nature or terms of the seller’s refund, cancellation, exchange, or repurchase policies. For example, the TSR prohibits you from claiming that “our policy is to make our customers happy — if at any time you’re not absolutely delighted, just send the merchandise back,” if there are time limits, “restocking” charges, or other important restrictions on the return of the goods. It also prohibits sellers and telemarketers from claiming that tickets may be cancelled any time up to the date of an event when such cancellation requests would not be honored.

5. Material Aspects of Prize Promotions

The TSR prohibits sellers and telemarketers from misrepresenting any material aspect of a prize promotion: you may not lie about any aspect of a prize promotion that is likely to affect a consumer’s decision to buy any goods or services offered in conjunction with a prize promotion, to buy them at the offered price, or to buy them from you. For example, you may not misrepresent:

• the odds of being able to receive a prize (for example, falsely saying that everyone who enters is guaranteed to win a prize, or falsely claiming that a particular person is “the top winner in the entire state”).

• the nature or value of a prize (for example, falsely claiming a prize is an “expensive genuine diamond tennis bracelet,” when the prize has only nominal value or doesn’t contain any diamonds).

• that a purchase or payment is required to win a prize or participate in a prize promotion (for example, falsely claiming that a consumer must buy magazine subscriptions to enter a prize promotion).

6. Material Aspects of Investment Opportunities

The TSR prohibits sellers and telemarketers from misrepresenting any material aspect of an investment opportunity. You may not make any false or misleading statements about an investment opportunity that are likely to affect a prospective purchaser’s decision to invest. You may not misrepresent any information needed to make an informed investment decision. Examples of material aspects of an investment opportunity include: the risk involved in the investment, the liquidity of the investment, or the earnings potential or profitability of the investment. Depending on the nature of the investment opportunity, other material aspects may include markup over acquisition costs; past performance, marketability, or value of an investment; or fees charged in credit-financed purchases of precious metals.

7. Affiliations, Endorsements, or Sponsorships

The TSR prohibits sellers and telemarketers from misrepresenting affiliations with — or endorsements or sponsorships by — any person, organization, or government entity. For example, you cannot falsely claim that you’re a member of the Better Business Bureau or the local chamber of commerce, or that you’re affiliated with the local police or some national charity. Neither can you create the impression in a consumer’s mind that the postal permit number displayed on a mail solicitation is a sign that the U.S. Postal Service has approved a promotion. In addition, sellers and telemarketers cannot falsely claim or create the impression in a consumer’s mind that they are related to or affiliated with a company with which the consumer usually does business.

8. Credit Card Loss Protection

The TSR prohibits sellers and telemarketers from misrepresenting that any customer needs offered goods or services to receive protection against unauthorized charges that he or she already has under federal law (15 U.S.C. § 1643). For example, you cannot falsely claim that a consumer who doesn’t buy the credit card loss protection you’re offering might be liable for thousands of dollars in unauthorized charges should a credit card be stolen. In fact, the law caps a customer’s liability for unauthorized charges on her credit card at $50.

9. Negative Option Features

The TSR prohibits sellers and telemarketers from misrepresenting any material aspect of a negative option feature of an offer, including: the fact that the consumer’s account will be charged unless the consumer takes an affirmative action to avoid the charges, the dates the charges will be submitted for payment, and the specific steps the customer must take to avoid the charges. For example, the TSR prohibits you from representing that to avoid being charged, the consumer need only call a toll-free number to cancel if, in fact, the number is never answered. In this case, you would be misrepresenting the specific steps the customer must take to avoid the charge, because the steps described wouldn’t achieve that purpose.

10. Debt Relief Services

The TSR prohibits sellers and telemarketers from misrepresenting any material aspect of a debt relief service, either explicitly or by implication, including: the amount of money or the percentage of the debt someone may save by using your service; the amount of time necessary to get the results you represent; the amount of money or the percentage of each outstanding debt the customer must accumulate before you'll begin your attempts to negotiate, settle or modify the terms with creditors; the amount of money or the percentage of each outstanding debt the customer must accumulate before you’ll make a bona fide offer to negotiate, settle or modify the terms with creditors; the effect of your service on the customer’s creditworthiness; the effect of your service on the collection efforts of any creditors or debt collectors; the percentage or number of customers who have gotten the results you represent; and whether your business is a bona fide nonprofit entity.

 

For more information, see here:  https://www.ftc.gov/tips-advice/business-center/guidance/complying-telemarketing-sales-rule

 

These materials were obtained directly from the Federal Government public website and are posted here for your review and reference only.  No Claim to Original U.S. Government Works.  This may not be the most recent version.  The U.S. Government may have more current information.  We make no guarantees or warranties about the accuracy or completeness of this information, or the information linked to.  Please check the linked sources directly.