The Federal Trade Commission needs to update and strengthen the Telemarketing Sales Rule, according to a letter from 38 state attorneys general, to reflect the “realities of today’s marketplace.”

Sent on behalf of the National Association of Attorneys General, the letter responded to four specific topics presented by the FTC when it issued a request for public comment as part of the agency’s review of the TSR.

The TSR should be amended to specifically prohibit the use of preacquired account information that is obtained through telemarketing, the AGs wrote. The 2003 amendments to the rule stopped short of a complete ban, and the attorneys general said the use of such data remains a serious problem, particularly for vulnerable groups like the elderly and non-English-speaking consumers.

“[T]he best way to ensure that a consumer has consented to a transaction is to prohibit the use of preacquired account information, and to require that the entire transaction be recorded so that law enforcement will be able to analyze telemarketers’ disclosures in their full context,” according to the letter. The AGs analogized to the prohibition on “data pass” for online transactions and said a similar ban should be put in place in the telemarketing context.

Negative option features should also be addressed in an updated TSR, the AGs said. The Rule should include a requirement that negative option terms be stated separately from the other terms of the offer and contain a provision that permits a separate audible acceptance to the negative option terms. In addition, telemarketers should be required to send a confirmation to the consumer about enrollment in the negative option feature that “clearly and conspicuously set[s] forth the terms of the negative option plan.”

The existing consumer protections of the Rule should be expanded to cover inbound telemarketing calls that are triggered by general media advertising, the letter added. It included examples of consumer complaints received by AGs in Illinois, Indiana, and Vermont about such scams.

Other changes suggested in the letter: a requirement that sellers and telemarketers create and maintain call records (with the AGs bemoaning having to “issue subpoena after subpoena” to obtain call records) as well as restrictions on certain “novel” payment methods.

At a minimum the agency should restrict the use of remotely created checks and payment orders, as well as cash-to-cash money transfers and cash reload mechanisms as payment in telemarketing transactions. The regulators also support an outright ban on the methods they said are frequently used in fraudulent telemarketing transactions.

The letter also expressed support for the FTC’s efforts to hold money transfer companies responsible for facilitating fraud through the use of their payments systems.

To read the letter from the state AGs, click here.

Why it matters: The AGs expressed a long-standing “keen interest” in the area of telemarketing and negative option marketing fraud. They noted that their offices are often on the “front line” in “fielding consumer complaints, taking up investigations, and pursuing legal actions against those who prey on victims through telemarketing and negative options scams.” The state regulators advocated a host of additional TSR restrictions that include a prohibition on the use of preacquired account information, a ban on certain payment methods, as well as a requirement that call records be maintained.