FTC enforcement needs teeth or loopholes will be abused 

Action has been taken by the Federal Trade Commission 66 times since 2003 against alleged violators of the Do Not Call registry and related telemarketing sales rules. It closed 52 of the cases.

Recently, Talbots, the national women’s clothing retailer, and its telemarketer, SmartReply, settled for $161,000 for making more than 3.4 million robocalls. Though the calls went to previous customers (and were thus possibly exempted from the rule), the messages failed to promptly alert consumers that they could opt out of future pitches.

Though the FTC fined telemarketers more than $44 million as of last year, it collected less than $20 million of the fines. The law considers parties’ ability to pay.

“The purpose is not to put a company out of business. It’s supposed to include an amount to discourage conduct,” and the commission can suspend a penalty or part of it, said FTC Do Not Call coordinator Michael Tankersley.

SmartReply only had to pay less than half its penalty because it said it couldn’t afford the entire $112,000.

Another example: Braglia Marketing Group of Nevada agreed in a 2005 settlement to pay $526,939 for calling hundreds of thousands of names on the list to sell time-share vacations. It was a good deal for Braglia: It paid only $3,500 by showing it didn’t have enough cash to pay the full fine.

The FTC fared worse on collecting money for defrauded and deceived consumers. Violators were charged or agreed to pay more than $224 million in refunds for aggrieved parties, but thus far the FTC has only collected about $11 million.

Many companies closed, leaving little or nothing in assets.

For example, in 2004, a federal court shut down the nonprofit National Consumer Council, a debt counseling firm, after the FTC accused it of multiple counts of telemarketing and other fraud. The FTC found the council and its officers had taken more than $84 million in improper fees from consumers. They only paid about $3.8 million after defendants showed they couldn’t afford more.

Of the 66 cases, 17 involved sales of financial products, such as debt counseling, credit cards, mortgages and easy money.

Nine cases strictly went after marketing or fundraising firms acting on behalf of clients. Eight went after purveyors of satellite services, while three involved vacation sellers.

The FTC also shut down four operators of “registry scams,” who pretended that for a fee, they could put your name on the registry. A few represented themselves as charities. Some targeted specific groups, such as Hispanics or seniors.

Six cases involved “entity-specific” violations, where callers did not honor specific requests to be removed from the company’s call list, as opposed to the national registry.

Three cases involved only “call abandonment.” Telemarketers are required to put a live representative on the line within two seconds of a call being answered. In these cases, call recipients heard more than two seconds of silence, were hung up on or transferred to a recording instead of a live operator.

So though the law has saved us all from millions of annoying dinnertime interruptions, it still has plenty of loopholes and lets the violators off too easily. Only an overburdened Congress could fix that.

Charles Pekow is a freelance reporter in Washington, D.C.

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