PINDROP BLOG

FTC Rule Change Cracks Down on Payment Methods Used by Fraudsters

The Federal Trade Commission is trying to cut off some of the sources of money that flow from consumers to phone scammers by tightening up the rules on how specific forms of payment can be used.

The changes come as consumers are facing an onslaught of increasingly sophisticated and persistent campaigns from scammers pretending to be IRS agents, bank fraud investigators, hapless teens trapped in London, or police officers. Though the scams differ in their details, they all rely on the scammers being able to get victims to send them large sums of money quickly. Typically this happens through cash transfers or prepaid, reloadable cash cards.

Now, the FTC has published rules that prevent telemarketers from accepting four different types of payments that often are demanded by scammers. The commission has amended its Telemarketing Sales Rule to prohibit the acceptance of remotely created checks and payment orders, reloadable cash cards, and cash-to-cash transfers.

“Con artists like payments that are tough to trace and hard for people to reverse.”

The main goal for scammers is to get as much money from victims as quickly as possible, and these payment mechanisms help make it easier for them to achieve that goal. FTC officials say that legitimate telemarketers don’t use those payment methods, so the rule changes are designed to put a dent in the ability of scammers to wring money from their targets.

“Con artists like payments that are tough to trace and hard for people to reverse,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “The FTC’s new telemarketing rules ban payment methods that scammers like, but honest telemarketers don’t use.”

Fraudsters know that the payment methods now banned by the FTC have another advantage: they don’t create any trails. And that’s a key reason for the FTC’s decision to amend its rule.

“The NPRM proposed to prohibit the use of four types of ‘novel payment methods’ in telemarketing, namely: remotely created checks, remotely created payment orders, cash-to-cash money transfers, and cash reload mechanisms. The Commission distinguishes these four payment methods from ‘conventional payment methods,’ such as credit cards, and electronic fund transfers, such as debit cards,” the rule says.

“The conventional payment methods are processed or cleared electronically through networks that can be monitored systematically for fraud. Further enhancing the security of conventional payment methods is the fact that they are subject to federal laws that provide statutory limitations on a consumer’s liability for unauthorized transactions and standard procedures for resolving errors.”

The new rule will go into effect in late January.

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