The following is a sample of questions asked from members about how to comply with the new Telemarketing Sales Rule. This general advice is not a substitute for seeking advice from your attorney prior to any telemarketing campaign.
The FTC has stated that it will hire a contractor to purge the list of disconnected and re-assigned numbers. The FTC will be issuing another proposed rule making to explain the mechanics of the national registry.
The record keeping requirements under the TSR (Section 310.5) sets forth a 24-month period to retain records.
At this time, the FTC has not addressed this issue. The FTC will be issuing another proposed rule making to explain the mechanics of the national registry.
The FTC has indicated that the national list could contain 40 to 60 million consumer phone numbers.
And four additional state bills are expected to be signed into law soon:
|Mississippi||New Jersey||South Dakota||Utah|
|Arizona||Maryland||New Hampshire||South Carolina||West Virginia|
|Delaware||Mississippi||North Dakota||South Dakota||Hawaii|
The DMA is currently evaluating the future of TPS.
The Rule allows for an 18-month time limit where there has been a purchase, rental, lease or financial transaction between the consumer and the seller. The 18-month time limit for an established business relationship runs from the date of the last payment, shipment of product or transaction.
In the case of inquiries and applications, the Rule allows a 3-month time limit after the date of application or inquiry. Although the FTC did not specifically address sweepstakes, we believe that this may fall under the “inquiry” category and allow you a 3-month window.
A change of address or customer service inquiry leads us to believe that the consumer is an existing customer and we do not believe that this would delay your window of opportunity. The 18-month window would apply from the last date of shipment, payment or transaction – not from the date of the change of address or customer service inquiry.
A telemarketing service bureau calling on your behalf would fall within the EBR exception.
The fine would be $11,000 for each violation.
Financial institutions are not subject to the TSR. However, if you have a third-party entity making the calls then they would be subject to the TSR and yes they would be allowed to contact your customers during the 18-month period of the closing date. The Rule allows for an 18-month time limit where there has been a purchase, rental, lease or financial transaction between the consumer and the seller. The 18-month time limit for an established business relationship runs from the date of the last payment, shipment of product or transaction.
To the extent that the third party is a separate and distinct entity from the mortgage servicer then the EBR between the mortgage servicer and its customers would not extend to the third party. However, if the third party entity was calling on behalf of the mortgage servicer to offer its customers the mortgage servicer’s products or services then the EBR would extend to the third party entity.
a) Is it correct that we assume that with the scenario above that we would be exempt from the "Do Not Call" list due to this pre-existing relationship?
Yes. This is correct.
b) Again we will not have account information and are not doing any free-to-pay offers so will we have to track any proof of the sale?
The TSR does set forth record-keeping requirements under Section 310.5 p. 255.
The Rule sets a 24-month period to retain records and lists what records should be retained.
If you’ve already paid the fee, your outside vendor(s) will not also be required to pay it. On the other hand, if you didn’t pay the fee, then your outside vendor could submit the fee on your behalf. In addition, outside vendors cannot buy one list on behalf of all of its clients. The annual fee has not been set yet. The FTC will be issuing another proposed rule-making to explain the mechanics and fees of the national registry.
The FTC will be issuing another proposed rulemaking to explain the mechanics of the national registry. In the meantime, we suggest you ask yourself: what is the consumer perception? For instance, do they know that the parent company and its subsidiaries are “related?” Additionally, if the parent company is sharing the list with its subsidiaries, then you would want to make sure that any company specific DoNot-Call requests received by the parent company would also be shared with its subsidiaries and vice versa.
The EBR exemption to affiliates and subsidiaries is discussed in the commentary to the Rule under Section 310.2(n) page 39. The FTC discusses that in determining whether the EBR exemption should be extended to affiliates and subsidiaries that the seller should consider consumer expectations.
If your “bill me” offer accepts payment from consumers other then by credit or debit card then this would constitute a novel payment. You would need to receive the consumer’s express verifiable authorization. You can obtain this authorization as outlined in Section 310.3(a)(3) pp. 247-248. This can be accomplished at the same time that you’re sending the bill by having the consumer sign and return the payment.
Yes, the negative option feature requirements apply to “bill me” offers if the customer’s failure to take an affirmative action to reject the goods or services or to cancel the agreement is interpreted by you as acceptance of the offer. You can make the necessary disclosures in a follow-up direct mail piece but before payment is received. If you’re mailing C.O.D., then the disclosures must be sent or made prior to this delivery. See Section 310.3 Footnote 1 page 245.
We believe that the Caller-ID requirements would only apply to the initial call not to the up-sell that was transferred to another line. You only need to record the entire transaction if calling under a free-to-pay conversion program that uses pre-acquired account information. Additionally, you must obtain from the consumer the last 4 digits of the credit or debit card in a free-to-pay conversion program.
In your example, an up-sell has occurred and as such you would need to provide the consumer any new disclosures not initially provided. The Rule under Section 310.2(dd) p. 244 defines up-sells as “soliciting the purchase of goods or services following an initial transaction during a single telephone call.”
Yes. The same requirements would apply. It does not matter if the up-sell occurs during an inbound or an outbound telemarketing call.
No. You would not have to record the transaction but before you up-sell, you must disclose the identity of the seller, that the purpose of the call is to sell goods or services and the nature of the goods or services being offered. If you are offering multiple up-sells then you must disclose any new disclosures not provided during your previous disclosures. In addition, you are subject to the Rule’s record-keeping requirements under Section 310.5 page 255.
You would only have to record the transaction if you were using pre-acquired account information in a free-to-pay situation or in certain situations when using a novel payment system (not a debit or credit card transaction).
You are only required to obtain from the consumer the last 4 digits of the consumer’s credit or debit card if offering a free-to-pay conversion program that uses pre-acquired account information. The FTC discusses in its commentary on the Rule on p. 106 Footnote #449 that “it is the very act of pulling out a wallet and providing an account number that consumers generally equate with consenting to make a purchase, and that this is the most reliable means of ensuring that a consumer has indeed consented to a transaction.” The FTC is silent on other methods of payment.
With regard to up-sells, you must disclose the identity of the seller, that the purpose of the call is to sell goods or services and the nature of the goods or services being offered. If you are offering multiple up-sells, for each up-sell that contains a free-to-pay offer that uses pre-acquired account information you need to obtain from the consumer the last 4 digits of the account number and you must disclose any new disclosures not provided in the initial offer.
The Rule does not contemplate this type of scenario. In order to eliminate potential legal exposure, we know that some attorneys have advised their clients in this type of situation to not offer the free-to-pay conversion program in order to be in technical compliance with the Rule. We are in the process of trying to get a more definitive response from the FTC.
The definition of “seller” is found in Sec. 310.2(z) p. 244 and is defined as the one who “provides or arranges to provide goods or services to the customer in exchange for consideration.”
Yes. The same requirements would apply during an outbound telemarketing call.
If you have a negative option plan and free-to-pay conversion plan without using pre-acquired account information then you are subject to section 310.3(a)(1)(vii) page 246 and you would need to disclose to your customers that:
Please note that you are not required to record the transaction under this scenario.
Under the TSR, you can call customers with whom you have an established business relationship within the last 18 months of the end of their subscription, membership or last transaction/payment/shipment and you can call consumers who have inquired or applied within the last 3 months. You may also call consumers after you have obtained their written consent to do so. This written consent would include the consumer’s authorization and phone number that you may call as set forth in Section 310.4 (b) (B).
Any additional conditions of your membership agreement must comply with existing federal and state laws.
It depends on how the .99 cents fee is described or characterized to the consumer. If the fee is described as a payment then it would appear not to technically be a free-to-pay conversion program. However, we caution you that the FTC has not directly addressed a nominal charge that later coverts to a full-charge offer.
It depends on how the processing fee and program is described or characterized to the consumer. If you, or the consumer, would view your program as a free-to-pay conversion program then you would be required to make the appropriate free-to-pay conversion disclosures. It does not matter if the offer is made during an inbound or outbound call. However, the important factor is that the consumer must pay at the start and from the same payment form.
Yes. Under the TSR, you are required to obtain from the consumer the last 4 digits of the consumer’s credit or debit card, if you are offering a free-to-pay conversion program and are using pre-acquired account information. If it is impossible to obtain the last 4 digits, this business model appears to be outlawed by the TSR as written.
The amended TSR considers it an abusive telemarketing practice to disclose or receive, for consideration, un-encrypted consumer account numbers for use in telemarketing. The exception to that prohibition is that you can receive un-encrypted account information only to process payment for a transaction.
This is problematic. The FTC discusses in its commentary on the Rule on p. 106 Footnote #449 that “it is the very act of pulling out a wallet and providing an account number that consumers generally equate with consenting to make a purchase, and that this is the most reliable means of ensuring that a consumer has indeed consented to a transaction.” The FTC is silent on other methods of payment. Of course, most consumers cannot “pull out a wallet and provide a [mortgage] account number.”
Under the Rule, you are required to record the entire telemarketing transaction. The Commission discusses in its commentary on the Rule on pp. 114-115 that “not only the material terms provided the consumer, but also the context and manner in which the offer is presented are vital to determining the consumer’s consent.” Whether or not you need to obtain permission from the consumer is subject to numerous wiretap laws at the federal and state levels. In the states that require two party consent, you would have to ask the consumer’s permission before beginning to tape the call i.e. at the beginning of the call.
Live representatives hanging up on consumers is a violation of the TSR. There is only a “safe harbor” for marketers using technology such as predictive dialers. All calls made by predictive dialers or similar technology that are not answered by a live representative within 2 seconds of the called party’s completed greeting are considered abandoned calls, but the FTC allows for an error rate/abandoned rate of 3% of calls per day in a marketing campaign. All calls not answered by a live representative within the 2-second period must be followed by a tape-recorded message providing the company who is calling and a number the consumer can call back during normal business hours. By providing the tape-recorded message you will fall under the FTC’s “safe harbor.” However, you still cannot exceed a 3% abandoned rate per day in a marketing campaign. [Note: companies have until October 1, 2003 to meet the abandoned call requirements and associated safe harbor provisions.]
Yes. All calls that are not answered by a live representative within 2 seconds of the called party’s completed greeting are considered abandoned calls. The FTC allows for an error rate/abandoned rate of 3% of calls per day in a marketing campaign. All calls not answered by a live representative within the 2-second period must be followed by a tape-recorded message providing who is calling and a number the consumer can call back during normal business hours. By providing the tape-recorded message you will fall under the FTC’s “safe harbor.” However, you still cannot exceed a 3% abandoned rate per day in a marketing campaign.
No. The pre-recorded message provision only applies to companies that wish to meet all of the safe harbor requirements for abandoned calls.
First, for calculation purposes, you should not break the calls into segments. Second, you should calculate the number of calls that are answered by live consumers per day in a marketing campaign. For instance if you make 10,000 calls a day but only 1,000 calls are answered by live consumers then you could not abandon more than 30 calls or 3% of the 1,000 calls.
A call is considered “abandoned” if a person answers it and the telemarketer does not connect the call to a sales representative within 2 seconds of the called party’s completed greeting. Calls answered by answering machines are not included in the calculation.
You can route a call to a representative during or immediately after the pre-recorded message; however, such calls would still be considered abandoned by the FTC. A call is considered “abandoned” if a person answers it and the telemarketer does not connect the call to a sales representative within 2 seconds of the called party’s completed greeting. The call would not be considered abandoned if the consumer hangs up before 2 seconds after he/she completes the greeting.
You can route a call to a representative during or immediately (not 4 to 5 seconds) after the pre-recorded message, regardless the call would still be considered abandoned by the FTC. DMA guidelines require that you immediately release the line once the call is abandoned.
The Rule is silent on this matter. At this time, we believe that the FTC would not allow any additional information. Providing additional information might also conflict with requirements under the Telephone Consumer Protection Act.
Regardless if you’re contacting customers or prospects, you must transmit your phone number and if available your company name. You are allowed to substitute the name and number of whom you are calling on behalf as long as the number you provide is answered during regular business hours. Please see Sec. 310.4(a)(7) p. 251.
Research surveys are not subject to the Rule; therefore, you would not be required to display caller identification.
The phone number you provide should be answered during normal business hours. Please see Sec. 310.4(a)(7) p. 251.
The Commission suggests in its commentary to the Rule on p. 124 that telemarketers using a T-1 trunk can “have their carriers assign a telephone number to the trunk for transmission to consumers’ Caller ID services.”
The Rule applies to any company calling American consumers including phone companies calling from offshore. The FTC is aggressively enforcing fraudulent and deceptive offshore telemarketers. The FTC recently held a workshop on cross-border fraud to address trends and partnerships. For more information about the recent workshop, please visit the FTC online at: http://www.ftc.gov/opa/2003/02/crossborder.htm.
Yes. Insurance companies that are regulated by state law are exempt from the Rule.
Even though the insurance company is exempt from the Rule, the telemarketing company would be considered a third party entity that does fall under FTC jurisdiction and; therefore, would have to meet the requirements of the Rule.
On January 29, 2003, the Data & Marketing Association (DMA) filed a lawsuit in the U.S. District Court in Oklahoma City challenging the Federal Trade Commission's (FTC) establishment of a national do-not-call (DNC) registry and additional other amendments to the Telemarketing Sales Rule (TSR). In its lawsuit, The DMA asserts that: