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FTC zaps more scammer loopholes with ban on wire transfers, cash cards

No worries – if you're legitimate you'd never need to use those, says government

The US Federal Trade Commission (FTC) has issued new restrictions on how marketers can accept payments, in hopes of curbing the most popular ways scammers collect cash from victims.

The FTC said under its new rules, anyone who uses telemarketing will no longer be able to take customer payments via wire "cash-to-cheque" transfers, reloadable payment cards, and certain types of checks and money orders that can be remotely created by the marketer.

The rules will also have an impact on online marketers who combine web ads with call-in numbers and telemarketing.

Such tactics have recently been used by shady parties to perform such common scams as phony tech-support operations where victims are served fake error notices and asked to call up a "phone support" line where they are sold a useless or potentially harmful software package or remote access tool.

The new rules amend the FTC Telemarketing Sales Rule (TSR), a set of anti-fraud protections the FTC uses to prevent fraudulent activity. The latest amendments include provisions such as mandating the use of "swipe reload" payment cards that must be loaded in-person and banning remotely created checks or money order payments.

Scammers favor such payment methods because, once completed, they cannot be traced and funds cannot be recovered. Remotely created checks, for example, allow a merchant who knows the customer's account information to withdraw funds without the need for a signature or direct authorization by printing a "pre-authorized" check.

A cash-to-cash transfer takes a deposit from the customer and pays out cash to the seller/scammer at another location, while "cash reload" payment cards can be loaded by a customer on one card and the balance then transferred to a card controlled by the scammer, a hard-to-trace tactic popular for laundering stolen credit or bank card funds.

"Like remotely created checks and payment orders, cash-to-cash money transfers and cash reload mechanisms are categorized herein as 'novel' telemarketing payment methods because they lack the same error resolution rights and liability limits," the FTC said in the amended rules [PDF].

Any company that uses these methods for taking payments will now be subject to fines and court actions. The FTC hopes that in doing so, it will force companies that use telemarketing to now rely on payment methods (such as credit card transactions or personal checks) that can be traced, reversed, and subjected to further laws and oversight.

Legitimate businesses will not be impacted, the FTC argues, as reputable businesses have no need for the prohibited transaction methods and, by and large, already use the traceable payment systems to collect from customers.

"Con artists like payments that are tough to trace and hard for people to reverse," FTC consumer protection bureau director Jessica Rich said.

"The FTC's new telemarketing rules ban payment methods that scammers like, but honest telemarketers don't use." ®

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