What Has to Happen Before a Phone Order Charges Your Account

Answer first: the rule asks for two different things, in two different places

The Telemarketing Sales Rule contains two consent requirements that are easy to mistake for one. They sit in different sections, use different words, and carry different exceptions.

The first is at § 310.3(a)(3), inside the list of deceptive practices. It makes it a violation to cause "billing information to be submitted for payment, or collecting or attempting to collect payment for goods or services or a charitable contribution, directly or indirectly, without the customer's or donor's express verifiable authorization." That provision carries an exception: it does not apply "when the method of payment used is a credit card subject to protections of the Truth in Lending Act and Regulation Z, or a debit card subject to the protections of the Electronic Fund Transfer Act and Regulation E."

The second is at § 310.4(a)(7), inside the list of abusive practices, and it has no card exception. It makes it a violation to cause "billing information to be submitted for payment, directly or indirectly, without the express informed consent of the customer or donor," and then states the duty affirmatively: "In any telemarketing transaction, the seller or telemarketer must obtain the express informed consent of the customer or donor to be charged for the goods or services or charitable contribution and to be charged using the identified account."

Read together, the structure is this. Paying by card removes the express-verifiable-authorization requirement of the first provision, because the card statutes supply their own protections. It does not remove the express-informed-consent requirement of the second, which applies in any telemarketing transaction. The phrase "and to be charged using the identified account" is doing separate work: consent to buy and consent to the specific account being charged are two consents.

What makes an authorization verifiable

Section 310.3(a)(3) does not leave "verifiable" to interpretation. It states that authorization "shall be deemed verifiable if any of the following means is employed," and lists three.

The first is "Express written authorization by the customer or donor, which includes the customer's or donor's signature." A footnote to the part states that "signature" includes "an electronic or digital form of signature, to the extent that such form of signature is recognized as a valid signature under applicable federal law or state contract law."

The second is an audio recording, and the rule specifies what the recording must capture. It must be "Express oral authorization which is audio-recorded and made available upon request to the customer or donor, and the customer's or donor's bank or other billing entity," and it must evidence both authorization and the person's receipt of eight specific items: "An accurate description, clearly and conspicuously stated, of the goods or services"; "The number of debits, charges, or payments (if more than one)"; "The date(s) the debit(s), charge(s), or payment(s) will be submitted for payment"; "The amount(s)"; the person's name; "The customer's or donor's billing information, identified with sufficient specificity such that the customer or donor understands what account will be used"; "A telephone number for customer or donor inquiry that is answered during normal business hours"; and "The date of the customer's or donor's oral authorization."

That list is a useful reading of what "informed" means in this rule. It is not a general impression that money will change hands. It is how many charges, on what dates, in what amounts, against which account, with a working number to call.

The third means is written confirmation mailed before the charge — "identified in a clear and conspicuous manner as such on the outside of the envelope, sent to the customer or donor via first class mail prior to the submission for payment," containing the same items and "a clear and conspicuous statement of the procedures by which the customer or donor can obtain a refund" if the confirmation is inaccurate. The rule then withdraws this option in one situation, discussed next.

Preacquired account information, and why it raises the bar

The rule defines "preacquired account information" as "any information that enables a seller or telemarketer to cause a charge to be placed against a customer's or donor's account without obtaining the account number directly from the customer or donor during the telemarketing transaction pursuant to which the account will be charged."

That describes a common commercial arrangement: the seller already has the number, from an earlier purchase, from a partner, or from a form. The rule's response is to require more, not less.

Section 310.4(a)(7)(ii) sets the baseline for any transaction involving preacquired account information. The seller or telemarketer must "At a minimum, identify the account to be charged with sufficient specificity for the customer or donor to understand what account will be charged," and must "Obtain from the customer or donor his or her express agreement to be charged for the goods or services and to be charged using the account number identified."

Where the offer also has a free-to-pay conversion feature, the requirements tighten again. The rule defines a free-to-pay conversion as "a provision under which a customer receives a product or service for free for an initial period and will incur an obligation to pay for the product or service if he or she does not take affirmative action to cancel before the end of that period." In that combination, § 310.4(a)(7)(i) requires the seller to "Obtain from the customer, at a minimum, the last four (4) digits of the account number to be charged"; to obtain express agreement to be charged and to be charged using that account; and to "Make and maintain an audio recording of the entire telemarketing transaction."

The last four digits requirement is the point of the provision. A person who cannot supply four digits of the account is a person who did not know which account was about to be charged.

The same combination also closes the mailed-confirmation route. The third means of verifiable authorization at § 310.3(a)(3)(iii) states that it "shall not be deemed verifiable in instances in which goods or services are offered in a transaction involving a free-to-pay conversion and preacquired account information."

Payment methods the rule takes off the table

Three provisions in § 310.4(a) address the instrument rather than the consent, and they exist because certain payment methods are hard to reverse.

Section 310.4(a)(9) makes it abusive to create, "or cause to be created, directly or indirectly, a remotely created payment order as payment for goods or services offered or sold through telemarketing." The rule defines a remotely created payment order as "any payment instruction or order drawn on a person's account that is created by the payee or the payee's agent and deposited into or cleared through the check clearing system," including a remotely created check, but excluding orders cleared through the Automated Clearinghouse network or subject to the Truth in Lending Act.

Section 310.4(a)(10) makes it abusive to accept, "directly or indirectly, a cash-to-cash money transfer or cash reload mechanism as payment." The rule's definitions of those terms describe money-transfer services that deliver cash to a recipient in another location, and devices or codes that convert cash into a form usable to load a prepaid card or a payment-intermediary account.

Section 310.4(a)(6) reaches account numbers as a commodity rather than as a payment. It makes it abusive to disclose or receive, "for consideration, unencrypted consumer account numbers for use in telemarketing," while carving out "the disclosure or receipt of a customer's or donor's billing information to process a payment for goods or services or a charitable contribution pursuant to a transaction." Processing a payment is permitted; selling the numbers is not.

The rule's definition of "billing information" is broad: "any data that enables any person to access a customer's or donor's account, such as a credit card, checking, savings, share or similar account, utility bill, mortgage loan account, or debit card."

The record the seller has to be able to produce

Consent under this rule is not only a moment. It is a document the seller must keep and, in one case, a recording it must maintain.

Section 310.5(a)(8) requires a seller or telemarketer to keep "All verifiable authorizations or records of express informed consent or express agreement," and defines what a complete record contains: "The name and telephone number of the person providing Consent"; "A copy of the request for Consent in the same manner and format in which it was presented to the person providing Consent"; "The purpose for which Consent is requested and given"; "A copy of the Consent provided"; and "The date Consent was given."

It then adds a cross-reference that pulls in the specifics: for consent given under § 310.3(a)(3) or § 310.4(a)(7), among others, "a complete record must also include all information specified in those respective sections." The retention period at § 310.5(a) is five years from the date the record is produced.

The phrase "in the same manner and format in which it was presented" is the interesting one. It means the record is not a note that consent was obtained. It is the thing the person was shown or read, in the form they encountered it.

One scope limit belongs here, as it does on every page about this rule. Section 310.6 exempts most calls a customer places in response to an advertisement, and calls a customer places that are not the result of any solicitation — but neither exemption covers upselling within the call, which the rule treats as a separate telemarketing transaction. Two of the payment provisions, § 310.4(a)(9) and (a)(10), are expressly excluded from those exemptions, meaning the remotely-created-payment-order and cash-transfer prohibitions apply to those calls as well.