FTC Proposes TSR Extension That Could Impact SMB Lending – Financial Services

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On April 28, 2022, the Federal Trade Commission (FTC) issued a press release announcing a Notice of Proposed Rulemaking (NPRM) and Notice of Proposed Rulemaking (ANPR) seeking public comment on possible amendments to the telemarketing sales rule (TSR) “extend protections against telemarketing tricks and pitfalls to small businesses” and address other concerns. TSR implements the Telemarketing and Prevention of Consumer Fraud and Abuse Act (the Act) which targets deceptive and abusive telemarketing practices.

The TSR was first enacted in 1995 and has since been amended four times, most recently in 2015, to reflect developments in the field of telemarketing. “Telemarketing” is defined for the purposes of the Act and the TSR as “a plan, program or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by means of multiple phones and that involves more than one interstate phone call.”

Although the NPRM and ANPR include a range of proposals to address recent telemarketing trends, the changes that should be of particular concern to small and medium enterprise (SME) lenders are those that would extend the reach of TSR beyond from consumer transactions to more types of business-to-business (B2B) transactions. Various provisions of the TSR and past actions of the FTC and other agencies confirm that “credit products” fall within the scope of the TSR.

Specifically, the NPRM would amend Section 310.6 of the TSR to narrow the existing exemption for B2B transactions to provide that such transactions are subject to the requirements of Sections 310.3(a)(2) and 310.3(a)(4) of the TSR. Section 310.3(a)(2) prohibits “[m]represents, directly or by implication, in the sale of goods or services “several specific items of “Material Information”, including without limitation”[t]the total cost of buying, receiving or using and the quantity of any good or service offered for sale” and “[a]any material aspect of the performance, effectiveness, nature or essential characteristics of the goods or services which are the subject of an offer for sale. »[m]make a false or misleading statement to induce a person to pay for goods or services…”

ANPR would go one step further, and the FTC invites comment on, among other things, “whether the TSR should continue to exempt B2B telemarketing at all.” In this regard, the FTC stated that “its law enforcement experience with deceptive business-to-business telemarketing as well as the changing market forces influencing where consumers perform their jobs and the nature of those jobs raise the question of whether the TSR should continue to exempt these calls. “, noting elsewhere in the ANPR that”[t]he digital marketing landscape has become increasingly complex and rife with opportunities for salespeople or telemarketers to defraud small businesses by selling them services to help them advertise their businesses online.”

Compliance with the TSR is difficult, and an expansion to cover more B2B transactions would increase marketing compliance, disclosure, service and other obligations for SME lenders. Accordingly, small business lenders should consider submitting comments to the FTC on the proposed expansion of the TSR with respect to B2B transactions. Comments on the NPRM and ANPR will be due 60 days after publication in the Federal Register.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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