Washington State Department of Financial Institutions

Bank Alert

DATE: June 15, 2006

TO: Chief Executive Officer/President

SUBJECT: Do Not Call Policy Scam

There is a new predator in town - targeted at banks - and, if you think he can be ignored, you might be facing a lawsuit or a legal settlement. His modus operandi is to contact a bank, ask to be taken off of their telemarketing list, and demand a copy of the bank's Do Not Call policy. It appears that he intentionally contacts banks that have never before called him, so the target often assumes that the request can be ignored.

However, under Federal law, if you contact any business prospect whatsoever by telephone, you are required to maintain a Do Not Call policy and to provide that policy upon demand. Based on a regulatory interpretive letter from 1996, you must provide your policy to anyone who asks, and not just to persons that your bank has called. Failure to do so exposes your bank to civil money penalties.

The scope is broad. Has your bank ever hired someone away from a competitor and then allowed or encouraged that person to contact former customers to try to obtain their business? If she telephoned those persons, she likely has telemarketed and your bank likely needs to have a Do Not Call policy.

Does your bank ever call existing customers for the purpose of offering different or new products and services? That also is telemarketing and requires a Do Not Call policy.

In our recent experience this predator's claims are relatively small in amount, typically less than $5,000.

However, he threatens to bring his claims in a Minnesota court, often thousands of miles from his victim. For many banks, it is significantly cheaper to settle his claims than it would be to fight the claims in Minnesota. Moreover, even if the bank does no telemarketing whatsoever, the bank might be subject to liability anyway if it failed to deliver its Do Not Call policy on demand.

If anyone demands a copy of your Do Not Call policy, deliver it promptly. If you do not have a policy, confirm that your bank never contacts any business prospects by telephone, because that might be your only defense.