The FTC’s Northwest Regional Office has, for decades, led federal law enforcement efforts to investigate and shut down alleged fraud in the charity fundraising industry (state attorneys general are even more active in this space, as we’ve noted in previous writings). While the Northwest Region was somewhat active in the 1990s and early 2000s, its appetite for policing fundraising telemarketers clearly received a boost from its collaboration with state regulators against several allegedly sham charities in 2015. Just last year, we reported that enforcement against perceived charitable fundraising fraud remained a top FTC priority. With the beginning of 2018 upon us, the trend continues.

On January 10, 2018, the FTC asked the Department of Justice to file a complaint against Ohio-based charity and political fundraiser InfoCision, Inc., alleging violations of the FTC’s Telemarketing Sales Rule (for a good primer on why the FTC may refer litigation to the DOJ when it alleges violations of the TSR or other FTC trade regulation rules, click here). According to the complaint, InfoCision misrepresented the purpose of calls it placed to consumers in some of its telemarketing campaigns. The DOJ alleges that InfoCision told consumers at the beginning of the call that the purpose of the call was not to ask for a donation; however, the company’s telemarketers would then ask consumers to mail or hand-deliver materials to family, friends, or neighbors, asking for money donations to InfoCision’s charity client. In some cases, according to the DOJ, telemarketers would also ask the call recipient to make a charitable donation in contradiction of the initial representation that the purpose of the call was not to seek such a donation.

With the complaint, the DOJ also filed a proposed stipulated order settling the litigation. InfoCision agreed to pay $250,000 in civil penalties, and will be bound by standard injunctive and scofflaw provisions commonly found in FTC stipulated judgments. The FTC’s investigation, culminating with the DOJ’s filings, should reinforce the importance of TSR compliance for telemarketers who call consumers on behalf of charitable organizations. Such tele-funders must remember that certain TSR provisions apply explicitly to their solicitations, even though the calls are made on behalf of non-profit clients. It is a TSR violation for any telemarketer soliciting charitable contributions to, among other things:

• Misrepresent the nature, purpose, or mission of the charity on whose behalf the call is made;
• Misrepresent that any charitable contribution is tax deductible in whole or in part;
• Misrepresent the purpose for which a monetary contribution to the charity will be used (some state regulators have interpreted analogous provisions of state law very broadly, attacking solicitation scripts that tell donors “you know where your money is going,” or “your dollar goes a very long way” when, in fact, the majority of the donation will be used to pay the fundraiser); and
• Misrepresent the percentage or amount of any monetary donation that will go to a charity or a charitable program (however, tele-funders need not disclose their compensation as part of their solicitation, and regulators cannot assume deceptive or fraudulent conduct based solely on the fact that fundraisers are paid a certain fee by their charity clients).

In addition, the TSR requires that charity telemarketers orally disclose the identity of the charitable organization on whose behalf they are calling and that the purpose of the call is to solicit a charitable donation clearly and promptly in outbound solicitation calls. Remember, too, that the breadth of the TSR’s prerecorded calls prohibition is currently being litigated and the outcome will impact charity telemarketers who utilize soundboard technology. That case is currently before the U.S. Court of Appeals for the D.C. Circuit. In sum, the FTC continues to aggressively pursue alleged TSR violators, and charity fundraisers would be well-advised to make sure they understand the Rule’s provisions and the enforcement landscape.