Checks by fax, Checks by Phone, and Checks by E-Mail can be taken with any form of written authorization from a consumer is acceptable, as is voice authorization. For example, a consumer may transmit written authorization to the seller or telemarketer by facsimile, or may send a "voided" signed check as written authorization.
The Rule requires verifiable authorization for use of bank account information to obtain payment. The Rule requires that a seller or telemarketer have a consumer's "express verifiable authorization" to use that consumer's bank account information to obtain payment through so called "phone checks" or "demand drafts." (This requirement does not apply to conventional checks, written, signed, and mailed to the seller or telemarketer by the consumer.) The requirement for verifiable authorization for "phone checks" can be satisfied by an advance written authorization from the consumer, by a tape recording of the consumer giving express oral authorization, or by a written confirmation of the transaction sent to the consumer prior to the submission of the draft for payment. If the tape recording method is used, the seller or telemarketer must provide the consumer's bank, upon request, with a copy of the consumer's verifiable authorization. If the post-sale written confirmation method is used, the seller or telemarketer must offer, and at the consumer's request provide, a full refund to the consumer in the event the confirmation is inadequate or incorrect. The seller or telemarketer must keep the consumer's verifiable authorization for two years from the date of the sales transaction.
Any form of written authorization from a consumer is acceptable. For example, a consumer may transmit written authorization to the seller or telemarketer by facsimile, or may send a "voided" signed check as written authorization.
Tape Recorded Authorization
Any tape recorded authorization2 for a demand draft must clearly demonstrate that the consumer has received each of six specific pieces of information about the transaction and that the consumer has authorized that funds be taken from his or her bank account based on the required disclosures that the seller or telemarketer has provided. Without more, a general question such as "Do you understand all the terms of the sale?" followed by a consumer's "uh-huh" or "yeah" is not enough to demonstrate authorization. The tape recording must show that the consumer received each piece of information listed below and that, based on that information, the consumer understood and acknowledged each term of the transaction, and authorized the transaction. A consumer must be told and must acknowledge:
Authorization by Written Confirmation
If a seller or a telemarketer opts for verifiable authorization by means of a written confirmation, the confirmation must be sent to the consumer before any check, draft, or other form of negotiable paper bearing that consumer's bank account information is submitted for payment. That does not mean that a seller or telemarketer must wait to submit this information until a consumer receives the confirmation; it must only be sent before the check, draft, or other form of negotiable paper is submitted for payment.
The written confirmation must contain all the information required in a tape recorded authorization. Additionally, if a seller or telemarketer chooses to use written confirmations, the seller or telemarketer must have a refund policy in place, and must disclose in the written confirmation how to obtain a refund in the event the consumer disputes the written confirmation. (Of course, the Rule's prohibition on misrepresenting a refund policy, applies in the context of obtaining verifiable authorization by means of written confirmation.)
The Rule leaves it to the seller or telemarketer to determine what procedures are necessary to ensure that confirmations are sent prior to submission, to put such procedures in place, and to ensure that records are generated and maintained to document that confirmations are sent at the appropriate time and that required refunds are provided.
|Who is responsible for obtaining
verifiable authorization? Under the Rule, sellers and telemarketers
that receive payment by means of "phone checks" are responsible for obtaining
verifiable authorization on those phone checks. That means that even if a seller
or telemarketer uses the services of some other party to process or submit phone
checks, the seller or telemarketer remains responsible to ensure that the
disclosure requirements of the Rule for verifying authorization are fulfilled.
Under the Rule, a third party can also be held liable for violating the Rule if,
as explained later, the third party substantially assists a seller or
telemarketer and knows or consciously avoids knowing that the seller or
telemarketer is violating the Rule.
Processing and submitting bank account information constitutes substantial assistance to a seller or telemarketer. Therefore, if a third party is processing bank account information for a seller or telemarketer, that third party should ensure that whoever is obtaining consumers' account information obtains verifiable authorization in accordance with the Rule's requirements. A third party who processes and submits bank account information cannot avoid liability by not asking questions about whether authorization procedures comply with the Rule. Likewise, they can be held liable under the Rule if they know that the authorization procedures do not comply with the Rule and they process or submit bank account information for payment anyway.
Does the Rule apply if I only supply the software to process or submit bank account information for payment? Maybe. Providing the means to submit a consumer's bank account information for payment constitutes substantial assistance to a seller or telemarketer. If a seller or telemarketer who is using the software is violating the Rule, a law enforcement agency may inquire as to the extent the software provider ensured that authorization procedures were in place to comply with the Rule. A software provider cannot merely sell its product with its eyes closed to the business practices used by the software purchaser, consciously avoiding any knowledge of the wrongdoing. Demand drafts are a favorite payment method of deceptive telemarketers. Therefore, third parties should be aware of who they are doing business with and whether those they do business with are complying with the Rule.
Checks by Fax Software Company ~ Quick Pay Office Pro ~ Sales by MIS
Checks by Fax Software Company owned and Operated by MIS
PO Box 3251 Holiday Island AR 72631
Voice 479-696-9401 ~ Fax 479-696-9400
MIS 1995, 2002