[Federal Register Volume 66, Number 87 (Friday, May 4, 2001)]
[Notices]
[Pages 22562-22564]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11238]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Proposed Collection; 
Comment Request; Extension

AGENCY: Federal Trade Commission (FTC).

ACTION: Notice.

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SUMMARY: The information collection requirements described below will 
be submitted to the Office of Management and Budget (OMB) for review, 
as required by the Paperwork Reduction Act (PRA). The FTC is seeking 
public comments on its proposal to extend through August 31, 2004 the 
current PRA clearance for information collection requirements contained 
in its Telemarketing Sales Rule, 16 CFR part 435 (``TSR'' or ``Rule''). 
That clearance expires on August 31, 2001.

DATES: Comments must be submitted on or before June 4, 2001.

ADDRESSES: Send written comments to Secretary, Federal Trade 
Commission, Room H-159, 600 Pennsylvania Ave., NW., Washington, DC 
20580. All comments should be captioned ``Telemarketing Sales Rule: 
Paperwork comment.''

FOR FURTHER INFORMATION CONTACT: Requests for additional information or 
copies of the proposed information requirements should be addressed to 
Karen Leonard, Attorney, Division of Marketing Practices, Bureau of 
Consumer Protection, Federal Trade Commission, Room H-238, 600 
Pennsylvania Ave., NW., Washington, DC 20580, (202) 326-3597.

SUPPLEMENTARY INFORMATION: Under the PRA (44 U.S.C. 3501-3520), Federal 
agencies must obtain approval from OMB for each collection of 
information they conduct or sponsor. ``Collection of information'' 
means agency requests or requirements that members of the public

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submit reports, keep records, or provide information to a third party. 
44 U.S.C. 3502(3), 5 CFR 1320.3(c). As required by section 
3506(c)(2)(A) of the PRA, the FTC is providing this opportunity for 
public comment before requesting that OMB extend the existing paperwork 
clearance for the TSR (OMB Control Number 3084-0097).
    The FTC invites comments on: (1) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (2) the accuracy of the agency's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used; (3) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (4) ways 
to minimize the burden of the collection of information on those who 
are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses.
    The TSR implements the Telemarketing and Consumer Fraud and Abuse 
Prevention Act, 15 U.S.C. 6101-6108 (``Act''). The Act seeks to prevent 
deceptive or abusive telemarketing practices. It mandates certain 
disclosures by telemarketers, and directs the Commission to consider 
recordkeeping requirements in its promulgation of a telemarketing rule 
to address such practices. As required by the Act, the TSR mandates 
certain disclosures regarding telephone sales and requires 
telemarketers to retain certain records regarding advertising, sales, 
and employees. The disclosures provide consumers with information 
necessary to make informed purchasing decisions. The records are 
available for inspection by the Commission and other law enforcement 
personnel to determine compliance with the Rule. Records may also yield 
information helpful to measuring and redressing consumer injury 
stemming from Rule violations.

Burden Statement

Estimated Annual Hours Burden: 2,301,000 Hours

    The estimated recordkeeping burden is 50,000 hours for all industry 
members affected by the Rule. The estimated burden related to the 
disclosures that the Rule requires is 2,251,000 hours (rounded to 
nearest thousand) for all affected industry members, for a total of 
2,301,000 burden hours.
    Recordkeeping: At the time the Commission issued the Rule, it 
estimated that during the initial and subsequent years after the Rule 
took effect, 100 new telemarketing entities per year would find it 
necessary to revise their practices to conform with it, each requiring 
approximately 100 hours to develop a compliant recordkeeping system, 
for a cumulative yearly total of 10,000 burden hours. The Commission 
received no comments relating to this estimate either when it issued 
the Rule nor during the ensuing rule review and PRA clearance 
processes, and staff believes the estimate remains representative. 
There is no reason to believe that the number of affected new entrants 
each year has increased.
    Of the estimated 39,900 industry members who have already assembled 
and retained the required records in their recordkeeping systems, staff 
estimates that each member requires only one hour per year to file and 
store records required by the Rule. For purposes of estimation, staff 
has rounded by the cumulative sub-total of 39,900 hours to 40,000 
hours. Thus, total estimated annual recordkeeping burden for new and 
existing entities is 50,000 hours.
    Disclosure: Staff believes that a substantial majority of 
telemarketers now make in the ordinary course of business the 
disclosures the Rule requires because to do so constitutes good 
business practice.\1\ To the extent this is so, the time and financial 
resources needed to comply with disclosure requirements do not 
constitute ``burden.'' 16 CFR 1320.3(b)(2). Moreover, many state laws 
require the same or similar disclosures the Rule mandates. Thus, the 
disclosure hours burden attributable solely to the Rule is far less 
than the total number of hours associated with the disclosures overall. 
As before when last seeking OMB clearance and related public comment, 
staff estimates that the disclosures the Rule requires would be made in 
at least 75 percent of telemarketing presentations even absent the 
Rule. See 63 FR 40713, July 30, 1998. Staff received no comments at 
that time refuting this estimate. Accordingly, staff determined that 
the hours burden estimate for the Rule's disclosure requirements is 25 
percent of the total hours associated with disclosures of the type the 
TSR requires. Staff estimates the portion attributable to the Rule to 
be 2,251,000, rounded to the nearest thousand. The components of this 
total are detailed in the immediately following paragraphs that address 
hours burden.
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    \1\ Although telemarketing fraud causes significant harm to 
consumers--Congress has estimated that misrepresentations or 
material omissions in telemarketing sales presentations result in $3 
billion to $40 billion annually in consumer injury--the harm caused 
by telemarketing fraud remains a small fraction of the $400 billion 
in total annual sales through telemarketing.
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    In connection with the Rule's issuance and in the ensuing rule 
review and PRA clearance processes, staff estimated that the 39,900 
(rounded to 40,000) industry members make approximately 9 billion calls 
per year, or 225,000 calls per year per company. The TSR provides that 
if an industry member chooses to solicit inbound calls from consumers 
by advertising media other than direct mail or by using direct mail 
solicitations that make certain required disclosures (providing for an 
inbound telephone call as a possible response) that member is exempted 
from complying with the Rule's oral disclosures. Staff estimates that 
at least 9,000 firms will choose to adopt marketing methods that exempt 
them from complying with the Rule's oral disclosure requirements. This 
assumption is based on industry data indicating that slightly over 20% 
of industry members engage in direct mail solicitations involving 
telemarketing \2\ (and staff's corollary assumption that these 
solicitations will include written disclosures the Rule alternatively 
requires).
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    \2\ Direct Marketing Association Statistical Fact Book 2000 (22d 
ed. 2000) (based on data for 1997-1998, the two most recent years 
included within this source information).
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    When the Commission issued the TSR, staff estimated that it takes 7 
seconds for telemarketers to disclose the required outbound call 
information orally. Staff also estimated that a least 60 percent of 
calls result in ``hang-ups'' before the seller or telemarketer can make 
all the required disclosures and the ``hang-up'' calls consume only 2 
seconds. Accordingly, staff estimates that the total time associated 
with these initial disclosure requirements is approximately 250 hours 
per firm (90,000 non-hang up calls (.40  x  225,000)  x  7 seconds per 
call) + (135,000 hang-up calls (.60  x  225,000)  x  2 seconds per 
call). Thus, the total time expenditure for the 31,000 firms choosing 
marketing methods that require these oral disclosures is 7.75 million 
hours. When it initially published this estimate, the Commission 
received no comments on it nor had the Commission received related 
comments in the ensuing Rule review and PRA clearance processes. Staff 
believes the estimate remains reasonable. Based on the assumption

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that no more than 25 percent of this time constitutes ``burden'' 
imposed solely by the Rule (as opposed to the normal business practices 
of most affected entities apart from the Rule's requirements), the 
burden subtotal attributable to these basic disclosures is 1,937,500 
hours.
    The TSR also requires further disclosures before the customer pays 
for goods or services. Specifically, telemarketers must disclose the 
total cost of the offered goods or services; all material restrictions; 
and all material terms and conditions of the seller's refund, 
cancellation, exchange, or repurchase policies (if a representation 
about such a policy is a part of the sales offer). If a prize promotion 
is involved in connection with the sale of goods or services, the 
telemarketer must also disclose information about the non-purchase 
entry method for the prize promotion. Staff estimates that these 
disclosures consume approximately 10 seconds. However, the Rule 
requires these disclosures only when a call results in a sale. Staff 
estimates that sales occur in approximately 6 percent to telemarketing 
calls. Accordingly, the estimated amount of time for these disclosures 
is 37.5 hours per firm (13,500 calls resulting in a sale (.06  x  
225,000  x  10 seconds) or 1.163 million hours for the 31,000 firms 
choosing marketing methods that require oral disclosures. When it 
initially published this estimate, the Commission received no comments 
on this estimate nor had it received related comments in the ensuing 
Rule review and PRA clearance processes. Again, staff believes the 
estimate remains reasonable. Based on the assumption that no more than 
25 percent of this time constitutes ``burden'' imposed solely by the 
Rule, the burden subtotal attributable to these additional disclosures 
is 290,750 hours.
    As noted above, staff estimates that approximately 9,000 
telemarketing firms will choose the written disclosure option. Firms 
electing this option are likely to be those using written advertising 
materials. Thus, the burden of adding the required disclosures should 
be minimal. Staff previously estimated that a typical firm will spend 
approximately 10 hours per year engaged in activities ensuring 
compliance with this provision of the Rule, for an estimated total 
burden of 90,000 hours for all 9,000 firms using written disclosure. As 
was the case regarding the other estimates stated above, when the 
Commission initially published this estimate, it received no comments 
on it nor had the Commission received any such comments in the ensuring 
Rule review and PRA clearance processes. Staff believes this estimate 
also remains reasonable. Based on the assumption that no more than 25 
percent of this time constitutes ``burden'' imposed solely by the Rule, 
residual burden attributable to these written disclosures is 22,500 
hours.

Estimated Annual Labor Cost Burden: $34,361,000

    The estimated labor cost for recordkeeping is $600,000. Assuming a 
cumulative burden of 10,000 hours/year to set up compliant 
recordkeeping systems, and applying to that a skilled labor rate of 
$20/hour, start-up costs would approximate $200,000 yearly for all new 
telemarketing entities. Staff also estimates that existing industry 
members require 40,000 hours, cumulatively, to maintain compliance with 
the TSR's recordkeeping provisions. Applying a clerical cost rate of 
$10/hour, cumulative recordkeeping maintenance would cost approximately 
$400,000 annually. The estimated labor cost for disclosure is 
$33,765,000, based on an estimate of 2,251,000 disclosure burden hours 
and a wage rate of $15/hour. Thus total labor cost, rounded to the 
nearest thousand, is $34,361,000.

Estimated Annual Non-Labor Cost Burden: $10,022,000

    Total capital and start-up cost: Staff estimates that the capital 
and start-up costs associated with the TSR's information collection 
requirements are de minimis. The Rule's recordkeeping requirements 
mandate that companies maintain records but not in any particular form. 
While those requirements necessitate that affected entities have a 
means of storage, industry members should have that already regardless 
of the Rule. Even if an entity finds it necessary to purchase a storage 
device, the cost is likely to be minimal, especially when annualized 
over the item's useful life. The Rule's disclosure requirements require 
no capital expenditures.
    Other non-labor cost: Affecters entities need some storage media 
such as file folders, computer diskettes, or paper in order to comply 
with the Rule's recordkeeping requirements. Although staff believes 
that most affected entities would maintain the required records in the 
ordinary course of business, staff estimated that the approximately 
40,000 industry members affected by the Rule spend a annual amount of 
$50 each on office supplies as a result of the Rule's recordkeeping 
requirements, for a total recordkeeping cost burden of $2,000,000.
    To comply with the Rule's disclosure requirements, telemarketing 
firms likely incur additional cost for telephone service, assuming that 
the firms spend more time on the telephone with customers due to the 
required disclosures. As further detailed above, staff believes that 
the burden relating to the required oral disclosures amounts to 
8,913.000 hours (7.75 million initial disclosure hours + 1.163 million 
hours regarding sales). Assuming all calls to customers are long 
distance, at a commercial calling rate of 6 cents per minute ($3.60 per 
hour), affected entities as a whole may incur up to $32,086,800 in 
telecommunications cost as a result of the Rule's disclosure 
requirements. However, as also noted above, staff estimates that only 
25 percent of such disclosures constitute ``burden.'' Accordingly, the 
oral disclosure cost burden, adjusted for this apportionment, is 
$8,022,000, rounded to the nearest thousand.
    Staff believes that the estimated 9,000 entities choosing to comply 
with the Rule through written disclosures incur no additional capital 
or operating expenses as a result of the Rule's requirements because 
they are likely to provide written information to prospective customers 
in the ordinary course of business. Adding the required disclosures to 
that written information likely requires no supplemental expenditures.
    Thus, total estimated non-labor cost burden associated with the 
Rule is $10,022,000 ($2,000,000 for recordkeeping + $8,022,000 for oral 
disclosures).

Christian S. White,
Acting General Counsel.
[FR Doc. 01-11238 Filed 5-2-01; 8:45 am]
BILLING CODE 6750-01-M