Telemarketing-Curbs Plan Gets Support : Banking: A House panel backs an industry call for a law aimed at stopping telephone solicitors from bilking people with credit cards.

WASHINGTON â€”  A House Government Operations subcommittee has endorsed a call from the credit card industry for a law to combat telemarketing fraud.

In a report released Sunday, the panel said it should be illegal for a merchant to process credit card transactions for other businesses without permission from its processing bank.

The report could mark the beginning of a legislative effort to attack a burgeoning problem that the MasterCard and Visa associations say costs their member banks about $200 million a year.

According to the report, financial institutions are being subjected to unreasonable risks by telemarketers and their co-conspirators--merchants who process their sales through credit card networks.

In these crimes, marketing companies make illicit, high-pressure sales pitches to cardholders over the telephone and use collusive merchants to obtain the funds.

“It is apparently not unusual for a merchant to process, or ‘launder,’ $100,000 in sales drafts in one day for a very active telemarketer, on which the merchant might earn $6,000 to $15,000,� the House report noted.

Financial institutions have become reluctant to process credit card transactions for telemarketers because of the growing risk of fraud, the panel’s study said.

The Visa organization, for example, allows charge-backs on transactions for up to 18 months, and the merchant bank often ends up taking a loss on transactions tied to telemarketers that have long since gone out of business.

A merchant who serves as a middleman for clearing the fraudulent transactions could be bankrupted by such losses.

Visa U.S.A. officials told the House panel that at least one institution, Gateway National Bank of Phoenix, failed because of telemarketing losses.

Other institutions, including Citizens Fidelity Bank & Trust Co. of Louisville, Ky., and the failed CenTrust Bank of Miami were said to be seriously affected by losses from charge-backs on telemarketing transactions.

The report, prepared by the Government Operations subcommittee on commerce, consumer, and monetary affairs, also recommended that it be made a criminal offense to request a customer’s credit or debit card number without a purchase order.

The panel said a task force of banking regulators, credit card companies and others should be established to address telemarketing fraud’s effect on financial institutions.

Visa and its bank card competitor, MasterCard International, have repeatedly looked to the courts to help them battle telemarketing fraud. In April, they jointly sued the operators of a nationwide telemarketing network, asserting that it used phony offers for low-rate credit cards to bilk consumers out of millions of dollars.