ESA puts its foot down on deceptive alarm sales practices

You've undoubtedly heard the stories on your local news channels. A sleazy alarm systems sales person cajoles a homeowner into believing he is with their alarm company and has to do some sort of service or upgrade. He works his way into the house and "takes over" the security system - sometimes by swapping out equipment, and he then convinces the homeowner to sign a new contract. They often claim to be from "the alarm company" and before the homeowner knows it, this door-to-door sales person has put the homeowner in a compromised position; the homeowner is still legally under contract with their prior alarm company but has now signed a contract with a new company, even as their existing equipment has been yanked out and replaced, or at the very least reprogrammed.

It's been a regular problem in the industry for years, and it crops up regularly in media coverage, painting a bad image of the security industry. Just this past week, Pinnacle Security was in the news for settling a lawsuit in Illinois because the company was said to have conducted their business this way.

Now, the industry is starting to fight deceptive door-to-door alarm sales tactics. Today, at the ISC West 2010 trade show in Las Vegas, the Electronic Security Association (ESA) has announced a new code of ethics and standards of conduct specifically designed for alarm system companies. The code is designed to combat the problem of deceptive door-to-door alarm sales efforts.

To help stop the deceptive practices, the code of conduct requires, among other things:

  • Sales representatives carry ID cards and that they fully identify themselves and what company they are with
  • Sales introductions have to be specific in the nature of the business meeting
  • Proper licensing of all representatives and installers, and adherence to all laws, codes and ordinances of that jurisdiction
  • Door-to-door representatives must leave promptly upon request
  • No telephone marketing calls before 8 a.m. or after 9 p.m.
  • Adherence to FTC telemarketing guidelines
  • Alarm company representatives must get the express permission of the homeowner/business owner before removing a competing company's sign from the customer's yard
  • Representatives not to make financial claims about other alarm companies
  • Representatives not falsely claim to be with the homeowner's current alarm service provider
  • Marketing materials must be clear and explicit in what is being offered/done
  • Alarm companies must honor refunds and disclose termination agreements
  • Alarm company representatives to not quote statistics or provide other information that is known to be false or misleading (a common tactic of door-to-door alarm sales persons is to claim that the local police are seeing increased crime rates in the neighborhood and are advising residents to update their alarm system or install a system)

This is just a handful of the requirements and prohibitions introduced in the new code of ethics; the full document is available from the Electronic Security Association by request, and is in the document titled "ESA Code of Ethics and Standards of Conduct (amended Feb. 24, 2010)."

As part of the introduction of the code of ethics, the ESA had a public signing of its code of ethics by a number of companies in the industry. Some have been victims of the deceptive sales tactics, others were known for their deceptive sales tactics. The list of signatures on the code of ethics included ADT, APX Alarm, Broadview, Monitronics, Moon Security, the aforementioned Pinnacle Security, Protection One and Smoky Mountain Alarm Systems.

Although the code of ethics generated a photo-opportunity of support from the alarm industry, the challenge for the code of ethics is likely to be enforcement. The code is voluntary and provides only for self-enforcement according to ESA Executive Director Merlin Guilbeau, who noted that the association is limited in how it can enforce the code of ethics. Despite the limited ability to enforce the code (the code of ethics only requires the offending company do a prompt investigation of the alleged complaint and respond to the complaint internally), Guilbeau said that the association can turn to outside assistance to apply industry peer pressure and even negative media coverage to the offending company if necessary. Unfortunately, Guilbeau said that some instances of deceptive door-to-door alarm sales come from companies outside of the ESA's membership, and when the actions come from outside of the association's membership, the ESA is a weak position to enforce its policies against deceptive alarm sales practices.

Some companies already had internal prohibitions against such practices. ADT Security Services' Jay Hauhn said his employer already has had internal policies in place that prohibited deceptive sales practices. ADT attorney David Bleisch noted that ADT has been a victim of such practices and has recently filed suit against two companies involved in such practices. He said that ADT already makes sure their representatives have photo IDs available and use ADT badges to clearly indicate their commercial affiliation. Bleisch noted the company already has a developed internal training program to make sure such practices don't crop up in their sales teams.

The ESA's Merlin Guilbeau said the revised code of ethics (an earlier code has been in place already) has been an issue that the association has been working on for a year and a half. Asked about the conspicuous signatures of a couple known offenders in deceptive practices, Guilbeau said the change from the companies was coming from within. "These companies have reached out to the ESA; they know they needed to make changes."

Mike Miller of Moon Security signed the code of ethics and noted that his alarm company has been victimized by competitors who employed such practices. Sometimes, he said, those deceptive competitors can be dissuaded of their actions by strongly written letters, threats of lawsuits or even lawsuits. Miller, who serves as the president of the ESA, said that it was time that the industry took a strong stand against those practices.

"The overall number of complaints is small, but the impact to the industry is big," Miller said. "This is a black eye to the security industry."

According to most involved in the code of ethics who I spoke with at the press conference, the issue of deceptive alarm sales practices is often more of an issue with "bad apples" in the sales staff than any sort of orchestrated sales efforts. According to Guilbeau, the offending companies can likely avoid such practices by 1) adopting the code of ethics and 2) fully training their sales staff in terms of what is acceptable and what is not.

While ESA President Miller and Executive Director Guilbeau championed the code of ethics, they noted that the code certainly doesn't prohibit door-to-door alarm sales. Guilbeau said that door-to-door sales are a proven marketing effort, and that done correctly (i.e., done by following the ESA code of ethics) door-to-door efforts can be a valuable part of any alarm company's sales and marketing process.

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