WASHINGTON -- With Senate approval of the crime bill last Thursday, Congress has taken its second swipe this year at telemarketing fraud and credit card laundering.
Provisions in the crime bill, which now goes to the White House for President Clinton's signature, will stiffen penalties for laundering credit card receipts and other fraud. It also will extend the Credit Card Fraud Act to cover the whole gamut of telemarketing fraud.
After the signing of the Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 earlier this month, the crime bill's approval marks the second step in an all-out offensive by lawmakers on telemarketing fraud this year.
"This is a real one-two punch that Congress gave to the President this year," said Lamar Smith, vice president of government relations at Visa U.S.A. "The credit card industry has been working on this for years. Now we have both a civil and a criminal bill enacted and that will significantly reduce the losses of our members from telemarketing fraud."
According to Visa, telemarketing fraud costs U.S. financial institutions about $800 million a year.
Provisions in the bill will make it a crime for merchants to launder fraudulent receipts from merchants who for one reason or another cannot enter into a valid contract with a bank themselves.
In an effort to curb the selling of fraudulent credit cards, the measure will criminalize soliciting cards without issuer authorization.
Sen. Orrin Hatch, R-Utah, added provisions that increase penalties for fraud against people more than 55 years old.
Some financial institutions have become reluctant to process credit card transactions for telemarketers because of the growing risk of fraud.
Many credit card organizations, like Visa, allow chargebacks on transactions for up to 18 months, but the merchant bank can end up taking a loss on transactions tied to telemarketers that have gone out of business.
"These people are hard to catch," said Greg Benson, program manager for retail banking at Savings and Community Bankers of America. "Many banks hold a pretty big credit card portfolio, so often there's no way to find the fraudulent telemarketers, and the banks eat the losses."
The enactment of the telemarketing and consumer fraud bill earlier this month created a private right of action that permits victims of telemarketing fraud to sue. It also mandated that the Federal Trade Commission develop rules defining telemarketing fraud.
The new law also permits state attorneys general to bring enforcement actions in federal court, making it easier to prosecute credit card con artists who operate across state borders.
"Often these telemarketers will set up a shop in, say, Nevada and sell into California," Mr. Smith said. "The California attorneys general had a hard time prosecuting them under state law.
Now, moving from state to state doesn't help fraudulent telemarketers."
The crime bill will add teeth to many of the provisions in the fraud bill, upping the punishment for fraud from fines to jail time.
The FTC has estimated that consumer losses resulting from telemarketing fraud may run as high as $40 billion per year.