It is not unusual for a financial institution to hire a telemarketing company to market add-on products or services ancillary to its deposit and loan relationships. Not often, but also not infrequently, those telemarketing relationships end in disaster. If a financial institution has an add-on product that it wants to sell to its customer base, its marketing folks may feel that a written advertisement stuffed with the customer’s periodic statement will not have much impact and that a more direct, personal contact will have better results. Hence, the telemarketing company.
A recent case is that of Santander Bank. In 2010, the Regulation E rules changed; financial institutions were prohibited from charging an overdraft fee for ATM and one-time debit card transactions unless the customer opted in to the program. The bank had an “Account Protector” overdraft service to handle those transactions. Apparently, its initial solicitation of its customers to opt-in to the service was not successful; so, it hired a telemarketing company to solicit participation from the bank’s customers. As part of the contract, the telemarketing company would be paid an incentive if it hit certain marketing targets. So far, so good.
Realize that the folks that are dialing for dollars are probably not being paid by the hour but are on a commission basis of some kind. A call that does not result in a sale does not put food on the table. Someone once told me that good salesmanship is telling the truth attractively. Apparently, the telemarketer's dialers ignored the truth and emphasized the attractive. Among other things they:
- signed up people who did not consent to the service;
- they deceived customers that the service was free;
- they deceived customers about the fees they would face if they did not opt-in; and
- they falsely claimed that the call was not a sales call.
In stepped the Consumer Financial Protection Bureau with a $10,000,000 fine against the bank and other sanctions.
There is nothing wrong with a financial institution using a telemarketing company. But if you do, there are some precautions you should take. First, make sure that you are dealing with a responsible, financially strong company. Second, in your contract, set out very specifically and finitely what the representatives of the company may say and what they may not say. You cannot listen in to every solicitation call, but you can approve the script that the telemarketers will use and the canned answers that they will give to customer questions. And, you can require that the solicitors stick to the script.
Finally, add a provision to the contract that the telemarketer will be responsible for any fine or other damage that may be imposed on your bank because of its activities. Were it mine to do and I had an opportunity where the services of a telemarketer would be valuable, I would not shy away from using the service. On the other hand, I would enter the relationship with my eyes open understanding the risk and take all of the steps I could take to mitigate that risk.
The same risks exist any time you provide a third party access to your customers and allow them to sell a service, such as credit monitoring. You are going to receive fees from the service which is a good thing. Just make sure that your customers are not being deceived which is a bad thing.