Fraudulent telemarketers have been stealing from Americans, particularly elderly Americans, for many years.  That much is constant.  But techniques and operational details have changed over time.  It’s been an arms race with the authorities.  Law enforcement develops techniques for catching the scammers, and they in turn develop new ways to work the scams and avoid being caught.

 

About 15 years ago the Iowa Attorney General’s Office developed an effective method for capturing fraudulent phone pitches on tape and criminally prosecuting the telemarketers, who were typically calling Iowans from another state.  But since then, the predatory telemarketers have moved their operations across international boundaries – to Canada, Costa Rica, and elsewhere – which makes investigation and prosecution by state authorities extremely challenging.

 

So increasingly we’ve focused our attention on the stable, US-based operations that facilitate the telemarketing scams.  The thinking is that by making the facilitators answer for the frauds to which they provide support, they’ll withdraw that support from dubious operators and make it more difficult for the perpetrators to claim victims.

 

So attention has been directed to banks and payment processing operations that provide the means for scammers to extract money from the bank accounts of victims.  And attention has also been directed to the list builders, list brokers, and list managers that help scammers identify elderly Americans who would be especially susceptible to being cheated by a stranger over the phone.

 

List builders are operations that actually create lists of people vulnerable to being scammed.  They may do prospecting mailings to tens or hundreds of thousands of individuals, promoting vague and misleading opportunities to win prizes or cash in on a sweepstakes.  These prize-oriented mailings ask the consumer to send back a small check, say $20, as an “administrative fee” or the like.

 

People who send a check in response to such mailings are prime candidates for further victimization.  They are typically older, and have demonstrated a willingness to send money to a stranger in a distant place in response to vague claims regarding a sweepstakes or a prize.

 

These list building mailings often ask for information that will make it easier for fraudulent telemarketers later.  They may ask for the consumer’s telephone number, and credit card information.  And, of course, they also obtain access to the consumer’s bank account, because the routing numbers appear at the bottom of the small check the consumer is asked to send in.

 

These lists of responsive, sweepstakes-oriented elderly may then be rented out through the efforts of list brokers and list managers.  These list brokers and managers may be stable, well-established businesses that deal in a wide variety of customer and prospect lists.  Too often such dealers in lists may exhibit little or no interest in how the lists were made – that is, whether the people on the list are fraud victims – and how someone obtaining the list plans to use it. 

 

In summary, law enforcement attention on the facilitators is continuing, on the part of the FTC, enforcing the Telemarketing Sales Rule (TSR), and on the part of states, enforcing the TSR as well as state law counterparts to the FTC Act.  We believe that these efforts are making it harder for scammers to claim victims, elderly and otherwise, by making needed support structures less available.

 

 

 

Under the Telemarketing Sales Rule, a person who is providing “substantial assistance or support” to a telemarketer can be held responsible when that person “knows or consciously avoids knowing” that the telemarketer is violating the law.  That involves establishing the mental state of the facilitator, which is very challenging.  A better approach would be to hold a facilitator responsible if he or she “knows or should know” that the telemarketer is violating the law.  This is more in the nature of an objective standard – what a reasonable person should be expected to conclude from the surrounding circumstances – and would be a helpful change. 

 

 

Eliminate “demand drafts,” aka “remotely created checks,” which are used by many telemarketing scammers to reach directly into the bank accounts of their elderly victims -- victims who may not know what happened or know what to do about it.

 

Lift the preemption constraints that hinder state attorneys general from enforcing laws against national banks.  Some national banks have neglected any semblance of a gate-keeping function by making their banking services available to fraudulent operators.  Banks in that position should not be shielded from having to answer to state law enforcement authorities, as well as to federal banking authorities.

 

 

The broadest approach, and perhaps the least realistic in terms of legislative feasibility, would be to require solicitors that intend to market their lists to expressly inform consumers, before the transaction is consummated, that by responding the consumer’s name and other information will be made available to other phone and mail solicitors.  Consumers for whom that was an important consideration could simply choose not to enter into the transaction, and could thus stay off the list.