The majority of the changes will become
effective immediately. Creation of the "do not call" registry, however,
requires additional time. Information about the TSR amendments and the "do
not call" registry is available at FTC's
DO NOT CALL web site. It is planned that the system will be ready to
begin accepting consumer registrations about four months after funding
approval by Congress. Registration via the Internet will be available
nationwide at that time, but registration via toll-free number will be
phased in by region. Approximately two months after the completion of the
phased-in registration, telemarketers will be able to access the registry to
"scrub" their call lists so that they can avoid calling consumers on the
registry. A month after that, the Commission will begin enforcing the "do
not call" registry provisions. Registration will be good for five years, or
until the consumer changes his or her phone number or moves.
"These amendments redefine the nature of
telemarketing for both consumers and businesses," said FTC Chairman Timothy
J. Muris. "They protect consumers' privacy, give them a choice about whether
to receive most telemarketing calls, and provide enhanced protections
against fraudulent telemarketers. Soon, signing up for the national "do not
call" registry will be just a mouse click or toll-free call away."
The National "Do Not Call"
Registry
Under the amended Rule, the FTC will
establish a centralized national "do not call" registry to enable consumers
to stop most unwanted telemarketing calls by making just one request per
phone number to the Commission, either via the Internet on a dedicated Web
site or by calling a toll-free number. The Commission's decision to develop
such a registry comes after nearly a year of analysis, in which more than
60,000 public comments were received, the overwhelming majority of which
supported a national "do not call" list.
It is important to note that it will
take the Commission time to develop the national "do not call" registry
system and put it into place. Consumers will not be able to sign up
immediately. It is expected that once funding approval is received from
Congress, it will take about four months to develop the system and another
two months for phased-in registration before consumers will receive fewer
unwanted telemarketing calls. The Commission will announce the toll-free
number and the order in which regions can enroll, as well as instructions
for Internet registration, at a later date. A separate sign-up will be
required for each telephone number a consumer wishes to register.
There will be no charge to consumers to
register their phone number with the FTC's national "do not call" registry.
Telemarketers will, however, be required to pay for access to the names on
the list, and will have to "scrub" their calling lists every three months to
remove any consumers' telephone numbers that are included in the new
registry.
The amended Rule contains a narrowly
tailored exemption under which telemarketers may continue to call consumers
with whom they have an "established business relationship," if the consumer
has purchased, leased, or rented goods or services from the company within
18 months preceding the call, or if the consumer has submitted an
application or made an inquiry to the company within the three months
preceding the call. Even if there is an "established business relationship,"
consumers can make a specific request to the company not to call. Also, if
there is a particular company from whom a consumer wants to receive
telemarketing calls, the consumer can give that company written permission
to call, even if the consumer is on the national registry.
In addition, the amended Rule retains
the existing company-specific "do not call" provisions that require a
telemarketer to maintain its own "do not call" list and to honor consumers'
requests to be placed on that list and receive no further calls. Finally,
the amended Rule exempts telemarketers calling to solicit charitable
contributions from compliance with the provisions of the national registry,
but requires that they accept entity-specific "do not call" requests.
Billing Authorization Provisions
The Rule review and Rule amendment
proceeding focused considerable attention on telemarketers and sellers
billing charges to consumers' credit card and other accounts without the
account holder's authorization or knowledge. In some instances, these
unauthorized charges result from the fact that telemarketers and sellers
often obtain consumers' account numbers or other billing information from
sources other than the account holders themselves before they even place a
sales call to the account holders. The amended Rule contains a number of
provisions to address this problem.
First, telemarketers will be prohibited
from receiving unencrypted consumer account numbers, except when the
disclosure or receipt of these unencrypted numbers is for the purpose of
processing a payment for goods or services (or a charitable contribution)
according to the terms of a transaction approved by the consumer.
Second, in every telemarketing
transaction, the amended Rule bans unauthorized billing, prohibiting
telemarketers from processing any billing information for payment without
the express informed consent of the customer or donor. It also specifies
exactly how express informed consent must be obtained whenever a
telemarketer: 1) has the ability to charge the consumer's account without
the consumer divulging his or her account number, and 2) the offer the
telemarketer is promoting involves a so-called "free-to-pay conversion"
feature - where there is a free trial period after which the consumer
automatically incurs charges, unless he or she takes affirmative action to
cancel. In such a scenario, the telemarketer must: obtain the consumer's
express agreement to be charged, and to be charged using a particular
account number; elicit from the consumer at least the last four digits of
the account number to be charged; and make and maintain an audio recording
of the entire telemarketing transaction.
The amended Rule broadly requires
disclosure of all material terms of any offer that involves a free trial
period after which the consumer automatically incurs charges, unless he or
she takes affirmative action to cancel. The Rule also prohibits specific
misrepresentations in connection with such offers.
The amended TSR also tightens the
existing provisions governing transactions where a novel or unfamiliar
payment method is used - such as "demand drafts" (or "phone checks" - where
a consumer's checking account is debited based only on the consumer's
disclosure of the account number, not on writing a check), or charges to an
existing mortgage account, or a utility account. The amended Rule specifies
the information that telemarketers must disclose to ensure that consumers
have given their "express verifiable authorization" to incur charges using
such novel payment methods. These provisions apply for any payment method
other than credit cards subject to the Fair Credit Billing Act or debit
cards subject to the Electronic Funds Transfer Act.
Charitable Solicitations
The amended Rule modifies the definition
of telemarketing to include interstate calls made to solicit charitable
contributions. It also requires telemarketers calling to solicit such
contributions to promptly disclose the name of the organization making the
request and that the purpose of the call is to ask for a charitable
contribution - as required by the USA PATRIOT Act. These new provisions,
like analogous provisions applicable to commercial sales calls in the
original Rule, will ensure that consumers quickly receive key information
necessary to enable them to decide whether to prolong the initial intrusion
into their privacy, or to terminate the call. They will also help to protect
consumers from deceptive and fraudulent charitable fundraising. Also as
required by the USA PATRIOT Act, the amended TSR expressly prohibits certain
misrepresentations in charitable fundraising calls. Finally, the amended
Rule exempts charitable fundraising calls from compliance with the Rule's
new national "do not call" registry, but does require that such
telemarketers accept and adhere to entity-specific "do not call" requests
from consumers.
Call Abandonment and Caller ID
During the public comment period, many
consumers expressed concern about the number of "dead-air" calls that they
were receiving at home. Such calls typically occur when telemarketers use
"predictive dialers" or other automatic dialing software to call many
consumers at once. The automatic equipment is very efficient for
telemarketers, but it inevitably makes more calls that connect to consumers
than there are available sales representatives to handle the calls. The
"dead air" actually results from calls that are abandoned because there are
not enough sales representatives available to talk to every consumer who
answers the phone.
Call abandonment violates the amended
Rule. The amended Rule, however, gives businesses a "safe harbor" on call
abandonment if they meet certain requirements. Specifically, businesses will
not be liable for violating this provision of the Rule if they: 1) ensure
that no more than three percent of calls that are answered by a person are
abandoned, measured per day per calling campaign; 2) allow each called
consumer's telephone to ring for at least 15 seconds or four rings before
disconnecting; 3) connect each call to a sales representative within two
seconds of the consumer's greeting, or, if a sales representative is not
available to speak with the consumer within two seconds of the call being
answered, they play a recorded message stating the name and telephone number
of the seller - the message cannot include a sales pitch; and 4) maintain
records showing compliance with the requirements for abandonment rate, ring
time and recorded message.
Regarding the use of Caller-ID devices,
the amended Rule requires telemarketers to transmit their telephone number
to a consumer's Caller-ID service. Further, if the telemarketer's carrier
makes it possible to transmit the calling company's name, the telemarketer
will have to transmit this information as well. This will help consumers to
know exactly who is calling and to protect their own privacy. It will also
increase telemarketers' accountability, and aid law enforcement in
identifying companies violating the "do not call" and other provisions of
the amended Rule. When sending this information, the telemarketer will be
allowed to substitute the name and customer or donor service number of the
seller or charitable organization on behalf of which the call is being
placed. Telemarketers will have 12 months to come into compliance with each
of the new requirements related to Caller-ID.
The Commission vote to approve
publication of a notice of final rulemaking in the Federal Register
announcing the amendments to the TSR was 5-0, with Commissioner Orson
Swindle issuing a separate concurring statement.
In his concurring statement,
Commissioner Orson Swindle stated, "I wholeheartedly support the amendments
to the Telemarketing Sales Rule . . . because I believe that they will help
protect consumers from deceptive and abusive telemarketing practices. In
particular, these amendments will give consumers the ability to avoid the
sheer volume of unwanted telemarketing calls that many consider to be a
nuisance."
Commissioner Swindle explained that he
believed the national "do-not-call" registry would go a long way to help
consumers prevent unwanted intrusions into their homes. He noted, however,
that a number of entities were not subject to the TSR's requirements. The
Commission lacks jurisdiction, in whole or in part, over the calls of
entities such as banks, telephone companies, airlines, insurance companies,
credit unions, charities, political campaigns, and political fund raisers.
"From the perspective of consumers," Commissioner Swindle stated, "the right
to be let alone is invaded just as much by unwanted calls from exempt
entities (e.g., banks, telephone companies, or political fund-raisers) as it
is by such calls from covered entities. . . . Therefore, I believe that the
entire spectrum of entities that make telemarketing calls to consumers
should be subject to do-not-call requirements."
Commissioner Swindle also stated that he
agreed for the most part with the Commission's method of determining what
constitutes an abusive practice under the Telemarketing Act and the TSR.
When the Commission seeks to identify practices as abusive that are less
distinctly within the parameters of the examples included in the
Telemarketing Act, the Commission employs its unfairness analysis.
Commissioner Swindle stated that he would have preferred it had the
Commission looked to the plain meaning of the term "abusive," and then
formulated a separate standard to identify abusive telemarketing practices.
Commissioner Swindle nevertheless agreed with the Commission's conclusion
that a telemarketing practice that meets the strict unfairness standard will
constitute an abusive practice for purposes of the Telemarketing Act and the
TSR. In light of the rulemaking record, he supported the TSR amendments that
are analyzed under this standard.
