Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules 8313

1 15 U.S.C. 6101.

competitiveness, and employment of

small entities.

Subsequent to the receipt of public

comments, it will be decided whether

the preparation of a final regulatory

flexibility analysis is warranted.

In light of the above, it is certified that

the proposed amendments will not have

a significant economic impact on a

substantial number of small entities. 5

U.S.C. 605(b) (1982). This notice serves

as certification to that effect for the

purposes of the Small Business

Administration.

List of Subjects in 16 CFR Part 307

Health warnings, Smokeless tobacco,

Trade practices.

Accordingly, it is proposed that part

307 of 16 CFR be amended as follows:

PART 307—REGULATIONS UNDER

THE COMPREHENSIVE SMOKELESS

TOBACCO HEALTH EDUCATION ACT

OF 1986

1. The authority for part 307

continues to read as follows:

Authority: 15 U.S.C. 4401 et seq.

2. Section 307.12 is amended by

revising paragraph (b) to read as follows:

§ 307.12 Rotation, display, and

dissemination of warning statements in

smokeless tobacco advertising.

* * * *

[b] Each manufacturer, packager, or

importer of a smokeless tobacco product

must submit a plan to the Commission

or its designated representative that

ensures that the three warning

statements are rotated every 4 months in

alternating sequence. There may be

more than one system, however, that

complies with the Act and these

regulations. For example, a plan may

require all brands to display the same

warning during each 4-month period or

require each brand to display a different

warning during a given 4-month period.

A plan shall describe the method of

rotation and shall include a list of the

designated warnings for each 4-month

period during the first year for each

brand. A plan shall describe the method

that will be used to ensure the proper

rotation in different advertising media

in sufficient detail to ensure compliance

with the Act and these regulations,

although a number of different methods

may satisfy these requirements. For

example, a satisfactory plan for

advertising in newspapers, magazines,

or other periodicals could provide for

rotation according to either the cover or

closing date of the publication. A

satisfactory plan for posters and

placards, other than billboard

advertising, could provide for rotation

according to either the scheduled or the

actual appearance of the advertising. A

satisfactory plan for point-of-sale and

non-point-of-sale promotional materials

each as leaflets, pamphlets, coupons,

direct mail circulars, paperback book

inserts, or non-print items, or for

utilitarian objects, could provide for

rotation according to the date the

materials or objects are ordered by the

smokeless tobacco manufacturer, or the

date the objects or materials are

scheduled to be disseminated, provided

that the production of such materials or

objects is carried out in a manner

consistent with customary business

practices.

* * * * *

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 95–3536 Filed 2–13–95; 8:45 am]

BILLING CODE 6750–01–M

16 CFR Part 310

Telemarketing Sales Rule

AGENCY: Federal Trade Commission.

ACTION: Notice of proposed rulemaking.

SUMMARY: In this document, the Federal

Trade Commission (‘‘FTC’’ or

‘‘Commission’’) proposes to implement

the Telemarketing and Consumer Fraud

and Abuse Prevention Act

(‘‘Telemarketing Act’’ or ‘‘the Act’’).

Section 3 of the Act directs the FTC to

prescribe rules, within 365 days of

enactment of the Act, prohibiting

deceptive telemarketing acts or practices

and other abusive telemarketing acts or

practices.

DATES: Written comments must be

submitted on or before March 31, 1995.

Due to the time constraints of this

rulemaking proceeding, the Commission

does not contemplate any extensions of

this comment period or any additional

periods for written comment or rebuttal

comment.

Following the period for written

comments, Commission staff plan to

conduct a Public Workshop Conference

to afford Commission staff and

interested parties an opportunity to

explore and discuss issues raised during

the comment period. Notification of

interest in representing an affected,

interested party at the Public WorkshopConference must be submitted on or

before March 6, 1995. A list of affected

interests appears in Section D of the

Supplementary Information section.

The Public Workshop-Conference will

be held in Chicago, Illinois on April 18

through 20, 1995, from 9 a.m. until 5

p.m. each day.

ADDRESSES: Five paper copies of each

written comment should be submitted

to the Office of the Secretary, Room 159,

Federal Trade Commission,

Washington, DC 20580. To encourage

prompt and efficient review and

dissemination of the comments to the

public, all comments also should be

submitted, if possible, in electronic

form, on either a 51⁄4 or a 31⁄2 inch

computer disk, with a label on the disk

stating the name of the commenter and

the name and version of the word

processing program used to create the

document. (Programs based on DOS are

preferred. Files from other operating

systems should be submitted in ASCII

text format to be accepted.) Individuals

filing comments need not submit

multiple copies or comments in

electronic form. Submissions should be

captioned: ‘‘Proposed Telemarketing

Sales Rule,’’ FTC File No. R411001.

Notification of interest in the Public

Workshop-Conference should be

submitted in writing to Carole

Danielson, Division of Marketing

Practices, Federal Trade Commission,

Washington, D.C. 20580.

The Public Workshop-Conference will

be held in Chicago, Illinois, at the

Chicago Hilton Hotel, 720 South

Michigan Avenue, Chicago, Illinois

60605.

FOR FURTHER INFORMATION CONTACT:

David M. Torok, (202) 326–3140, or

Judith M. Nixon, (202) 326–3173,

Division of Marketing Practices, Bureau

of Consumer Protection, Federal Trade

Commission, Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

Section A. Background

On August 16, 1994, the President

signed into law the Telemarketing Act,

Public Law No. 103–297. In enacting the

Telemarketing Act, Congress made the

following findings, set forth in section 2

of the Act: 1

(1) Telemarketing differs from other

sales activities in that it can be carried

out by sellers across State lines without

direct contact with the consumer.

Telemarketers also can be very mobile,

easily moving from State to State.

(2) Interstate telemarketing fraud has

become a problem of such magnitude

that the resources of the Federal Trade

Commission are not sufficient to ensure

adequate consumer protection from

such fraud.

(3) Consumers and others are

estimated to lose $40 billion a year in

telemarketing fraud.

(4) Consumers are victimized by other

forms of telemarketing deception and

abuse.
8314 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules

2 15 U.S.C. 6102(b).

3 15 U.S.C. 6102(a)(2).

4 Id.

5 15 U.S.C. 6102(a)(3).

6 Id.

7 15 U.S.C. 45. The Telemarketing Act provides

that the FTC rule shall be treated as a rule issued

under section 18(a)(1)(B) of the FTC Act, 15 U.S.C.

57a(a)(1)(B).

8 15 U.S.C. 6103.

9 15 U.S.C. 6104.

10See 15 U.S.C. 6106(4).

11The Act’s definition of the term

‘‘telemarketing’’ states that the plan, program, or

campaign must be conducted to induce the

purchase of goods or services. The proposed rule

states that the plan, program, or campaign must be

conducted to induce payment for goods or services.

This change is intended to make clear that the

definition of telemarketing includes plans,

programs, or campaigns conducted to induce

rentals or leases, as well as certain donations.

12Since telemarketing includes the use of

computer modems and other telephonic media, the

proposed definition states that telemarketing

involves not just telephone calls, but also telephone

connections.

13The Telemarketing Act and the proposed rule

require catalogs to include multiple pages of written

descriptions or illustrations of the goods or services

being offered for sale, to include a business address

of the seller, and to be issued not less frequently

than once a year.

(5) Consequently, Congress should

enact legislation that will offer

consumers necessary protection from

telemarketing deception and abuse.

Based on the above findings, Congress

directed the Commission to issue a rule,

within 365 days from the date of

enactment of the Act, prohibiting

deceptive and abusive telemarketing

acts and practices.2 The Act specifies

that the rule shall contain a definition

of deceptive telemarketing acts or

practices.3 According to the statute, this

definition may include acts or practices

of entities or individuals that assist or

facilitate deceptive telemarketing,

including credit card laundering.4 The

Act further specifies that, in order to

prohibit other abusive acts or practices,

the rule shall include:

(1) A requirement prohibiting a

pattern of unsolicited telephone calls

which the reasonable consumer would

consider coercive or abusive of such

consumer’s right to privacy;

(2) Restrictions on the hours when

unsolicited telephone calls can be made

to consumers; and

(3) A requirement that telemarketers

promptly and clearly disclose to the

person receiving the call that the

purpose of the call is to sell goods or

services, and make any other

disclosures the Commission deems

appropriate, including the nature and

price of the goods or services being

sold.5 The Act also directs the

Commission to consider recordkeeping

requirements.6

Enforcement actions for violations of

the final rule will be brought by the

Commission in the same manner as for

other rules with respect to unfair or

deceptive acts or practices under section

5 of the FTC Act.7 In addition, Section

4 of the Telemarketing Act 8 authorizes

the attorneys general of the States to

enforce compliance with the final rule

by instituting Federal court enforcement

actions, after serving prior written

notice upon the Commission when

feasible. Moreover, Section 5 of the

Telemarketing Act 9 authorizes actions,

in Federal district court, by private

persons adversely affected by any

pattern or practice of telemarketing

which violates the final rule, where the

amount in controversy exceeds $50,000

in actual damages for each such person.

As with State actions, such private

persons must give prior written notice

to the Commission, when feasible.

Section B of this notice discusses the

proposed rule that the Commission has

drafted pursuant to the Telemarketing

Act.

Section B. Discussion of the Proposed

Rule

Section 310.1 Scope of the Regulations

Section 310.1 states that this part

implements the Telemarketing Act, and

shall be referred to as the

‘‘Telemarketing Sales Rule.’’

Section 310.2 Definitions

Section 310.2 of the proposed rule

defines the following terms: Acquirer;

attorney general; business venture;

cardholder; Commission; credit card;

credit card sales draft; credit card

system; customer; goods or services;

investment opportunity; material;

merchant; merchant agreement; person;

premium; prize; prize promotion; seller;

State; telemarketer; telemarketing;

telephone solicitation; and verifiable

retail sales price.

The definition of ‘‘telemarketing’’ sets

the parameters of the proposed rule’s

coverage. It tracks the definition of

‘‘telemarketing’’ included in the

Telemarketing Act, with certain

additions noted below.10 As set forth in

the Act, telemarketing is defined as any

plan, program, or campaign which is

conducted to induce payment for goods

or services by use of one or more

telephones and which involves more

than one interstate telephone call.11 One

addition to the definition in the

proposed rule clarifies that

telemarketing includes the use of a

facsimile machine, computer modem, or

any other telephonic medium.12

Another addition to the definition

explicitly states that telemarketing

includes not just calls initiated by

telemarketers, but also calls initiated by

persons in response to any form of

promotional messages used by or on

behalf of the seller, including postcards,

brochures and advertisements.

The Telemarketing Act and the

proposed rule exempt from the

definition of telemarketing all

solicitations of sales through the mailing

of a catalog,13 when the person making

the solicitation does not call customers

but only receives calls from customers

in response to the catalog and only takes

orders during those calls, without

further solicitation. The proposed rule

states that during such calls from

customers, the person taking the order

may provide further information to the

customer about, or may try to sell, any

other item included in the same catalog

which prompted the customer’s calls

without losing the exemption from the

definition of ‘‘telemarketing.’’

A number of terms are used in the

proposed rule’s prohibitions on credit

card laundering. The term ‘‘acquirer’’ is

defined, in § 310.2(a) of the proposed

rule, to include any business

organization, financial institution, or

agent of such organization or institution

that has authority from an organization

that operates or licenses a credit card

system to authorize merchants to accept,

transmit, or process payment by credit

card through the credit card system for

anything of value. The term ‘‘credit

card’’ is defined expansively, in

§ 310.2(f), to include any instrument or

device, however named, used by a

cardholder to obtain money, goods,

services, or anything else of value.

§ 310.2(g) defines a ‘‘credit card sales

draft’’ as any record or evidence,

including a writing or an electronic or

magnetic transmission or record, of a

credit card transaction. The term ‘‘credit

card system’’ is defined, in § 310.2(h), as

any method or procedure used to

generate, transmit, or process for

payment a credit card sales draft. For

purposes of this rule, the term

‘‘merchant’’ is narrowly defined, in

§ 310.2(m), to include only those

persons authorized under a written

contract with an acquirer to honor or

accept, transmit, or process credit cards

in payment for goods or services.

Finally, § 310.2(n) defines the term

‘‘merchant agreement’’ as the written

contract between a merchant and an

acquirer.

The proposed rule includes certain

requirements for the telemarketing sale

of business ventures and investment

opportunities. The term ‘‘business

venture’’ is defined, in § 310.2(c) of the
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules 8315

14The term ‘‘franchise’’ is defined in the FTC

Franchise Rule, formally entitled ‘‘Disclosure

Requirements and Prohibitions Concerning

Franchising and Business Opportunity Ventures,’’

at 16 CFR 436.2(a).

15The application of the proposed rule to

investment opportunities is limited, to some extent,

by sections 3(d) and (e) of the Telemarketing Act,

15 U.S.C. 6102(d) and (e), which exclude from rule

coverage any of the following persons: A broker,

dealer, transfer agent, municipal securities dealer,

municipal securities broker, government securities

broker, government securities dealer (as those terms

are defined in section 3(a) of the Securities and

Exchange Act of 1934, 15 U.S.C. 78c(a)), an

investment adviser (as that term is defined in

Section 202(a)(11) of the Investment Advisers Act

of 1940, 15 U.S.C. 80b-2(a)(11)), an investment

company (as that term is defined in section 3(a) of

the Investment Company Act of 1940, 15 U.S.C.

80a-3(a)), any individual associated with those

persons, or any persons described in section 6(f)(1)

of the Commodity Exchange Act, 7 U.S.C. 8, 9, 15,

13b, 9a.

16The term ‘‘goods or services’’ specifically

includes any charitable service that is promoted in

conjunction with any offer of a prize, chance to win

a prize, or opportunity to purchase any other goods

or services. Thus, plans, programs, or campaigns

conducted to induce payment for such charitable

services are the only charitable solicitations covered

by the proposed rule. In addition, only charitable

solicitations conducted by an entity ‘‘organized to

carry on business for its own profit or that of its

members’’ are within the jurisdiction of the

Commission. See 15 U.S.C. 44.

17The Commission’s Deception Statement, first

set out in a letter dated October 14, 1983, to the

Honorable John D. Dingell, Chairman,

Subcommittee on Oversight and Investigations,

Committee on Energy and Commerce, is attached as

an appendix to Cliffdale Associates, 103 F.T.C. 110

(1984). See also Thompson Medical Co., 104 F.T.C.

648, 816 (1984).

18 It is possible for a person to be both a seller and

a telemarketer in the same transaction, if that

person both provides the goods or services in

exchange for consideration or a donation and

engages in the telephone calls with consumers.

19 16 CFR Part 233.

20The proposed rule permits sellers or

telemarketers to discuss the price of goods or

services with potential customers before disclosing

the required information, but they may not ask that

payment be made until after the disclosures are

made.

proposed rule, to include any written or

oral business arrangement, however

named, including but not limited to

franchises,14 which consists of the

payment of consideration for (1) the

right or means to offer, sell, or distribute

goods or services, and (2) the promise of

more than nominal assistance in

establishing, maintaining or operating a

new business, or an existing business

that is entering into a new line or type

of business. The term ‘‘investment

opportunity’’ is defined, in § 310.2(k), to

include anything, tangible or intangible,

except a business venture, that is

offered, offered for sale, sold, or traded

either for purposes of profit or income

or based on express or implied

representations about income, profit, or

appreciation.15 In addition, these two

definitions state that any business

arrangement in which persons acquire,

or purportedly acquire, governmentissued licenses, or interests in one or

more businesses derived from the

possession of such licenses, are

considered to be an ‘‘investment

opportunity,’’ and not a ‘‘business

venture.’’

The term ‘‘goods or services’’ is

defined expansively, in § 310.2(j), to

cover virtually any item for which

payment can be induced over the

telephone. A list of specific items is

included in the definition for

illustrative purposes only.16

The proposed definition for

‘‘material,’’ in § 310.2(l), is taken from

the Commission’s deception

statement.17 It states that material means

likely to affect a consumer’s choice of,

or conduct regarding, goods or services.

The proposed rule defines ‘‘prize’’

and ‘‘premium’’ in a relatively parallel

fashion. Section 310.2(q) states that a

‘‘prize’’ means anything offered, or

purportedly offered, to a person at no

cost and with no obligation to purchase

goods or services and given, or

purportedly given, by chance. A

‘‘premium,’’ on the other hand, is

defined in § 310.2(p) as anything offered

or given, independent of chance, to

customers as an incentive to purchase

goods or services offered through

telemarketing.

The proposed definition of ‘‘prize

promotion,’’ set forth in § 310.2(r),

includes the traditional sweepstakes or

other game of chance as well as any oral

or written representation that a person

has won, has been selected to receive,

or may be eligible to receive a prize or

purported prize. Thus, the definition of

‘‘prize promotion’’ covers not only

legitimate contests or sweepstakes, but

also fraudulent representations that a

consumer has won a prize, when no

such prize is to be distributed.

A ‘‘seller’’ is defined, in § 310.2(s) of

the proposed rule, as any person who,

in conjunction with telemarketing,

provides or offers to provide goods or

services in exchange for consideration

or a donation. A ‘‘telemarketer,’’ on the

other hand, is defined in § 310.2(u) as

any person who, in connection with

telemarketing, initiates or receives a

telephonic communication from a

customer. Since many of the provisions

in the proposed rule apply to both the

seller and the telemarketer, these two

definitions make clear that the proposed

rule’s obligations run not only to the

person making or answering a telephone

call or telephonic communication from

a consumer, but also to the business

providing the goods or services to be

sold during that call.18

The definition of ‘‘telephone

solicitation,’’ in § 310.2(w) of the

proposed rule, is intended to include

only out-bound sales calls, i.e.,

telephone calls that are initiated by a

telemarketer to a customer to induce

payment for goods or services.

Finally, the definition of ‘‘verifiable

retail sales price,’’ in § 310.2(x), is based

on the Commission’s Guides Against

Deceptive Pricing.19 The term means the

actual, bona fide price at which one or

more retailers, in the area of the seller’s

principal place of business, has made a

substantial number of sales. The seller

must be able to document such a retail

sales price.

Section 310.3 Deceptive Telemarketing

Acts or Practices

Section 310.3 of the proposed rule

includes lists of specific, deceptive

telemarketing acts or practices

prohibited under the rule. It also sets

forth prohibited acts or practices that

assist and facilitate deceptive

telemarketing. This Section ends with

prohibitions on the practice of credit

card laundering.

1. Prohibited Deceptive Telemarketing

Acts or Practices

Section 310.3(a) of the proposed rule

states that certain acts or practices,

when conducted by any seller or

telemarketer, are considered deceptive

telemarketing acts or practices and

violations of the rule. The first

subsection prohibits the failure to

disclose certain information before

payment is requested for goods or

services. The second subsection lists a

series of prohibited misrepresentations

covering all telemarketing transactions,

while the third subsection lists

prohibited misrepresentations in

connection with the offer, offer for sale,

or sale of any business venture. The

final two subsections prohibit obtaining

funds without proper authorization.

Section 310.3(a)(1) of the proposed

rule states that it is a prohibited

deceptive telemarketing practice for any

seller or telemarketer to fail to disclose

certain material information before

payment is requested for goods or

services offered.20 These disclosures

must be made in the same manner and

form as the payment request. The

information required to be disclosed is

as follows: First, the total costs, terms

and material restrictions, limitations, or

conditions of receiving any goods or

services; second, the quantity of any

goods or services sold; and third, all

material terms and conditions of the

seller’s refund, cancellation, exchange,

or repurchase policies, including a
8316 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules

21 Given the definition of the term ‘‘material,’’ in

Section 310.2(l) of the proposed rule, any seller or

telemarketer would be prohibited from

misrepresenting any restriction, limitation, or

condition that would be likely to affect a

consumer’s choice of, or conduct regarding, goods

or services.

22Based on the definition of ‘‘goods or services,’’

in § 310.2(j) of the proposed rule, only charitable

services promoted in conjunction with an offer of

a prize, chance to win a prize, or opportunity to

purchase any goods or services would be covered

by these provisions.

statement that no such policies exist, if

that is the case.

Section 310.3(a)(2) sets forth 24

different misrepresentations prohibited

in connection with telemarketing. The

first five subsections go to the heart of

any telemarketing sales transaction,

prohibiting misrepresentations of the

total costs, terms or material

restrictions, limitations, or conditions 21

of receiving any goods or services.

These subsections also prohibit

misrepresentations of the quantity of

any goods or services, or any material

aspect of the performance, efficacy, or

central characteristics of any goods or

services. In addition, sellers and

telemarketers are prohibited from

misrepresenting the duration of any

offer made, as well as the nature or

terms of the seller’s refund,

cancellation, exchange, or repurchase

policies.

Sections 310.3(a)(2) (vi) through (viii)

of the proposed rule prohibit

misrepresentations about prizes. It is a

violation of the proposed rule to

misrepresent that any person has been

selected to receive a prize, i.e. an item

offered, or purportedly offered, at no

cost and with no other obligation to

make a purchase and given, or

purportedly given, by chance.

Therefore, a telemarketer could not

claim that a consumer has won a prize,

when in fact the consumer must pay

shipping and handling charges to

receive the prize. In addition, a seller or

telemarketer is prohibited from

misrepresenting that a premium is a

prize. Thus, for example, a telemarketer

could not claim that a consumer has

‘‘won’’ an item, when in fact many

consumers will be given that item as an

incentive to purchase goods or services,

without any element of chance involved

in selecting the ‘‘winners.’’ Finally, a

seller or telemarketer is prohibited from

misrepresenting the odds of winning

any prize.

The next three prohibited practices, in

§§ 310.3(a)(2) (ix) through (xi) of the

proposed rule, deal with

misrepresentations about compliance

with various laws or about an affiliation

with law enforcement authorities. Any

seller or telemarketer is prohibited from

misrepresenting its compliance with

any Federal, State, or local law, statute,

regulation, or ordinance, or from falsely

claiming that such compliance

constitutes an endorsement or approval,

by the government agency, of the seller’s

or telemarketer’s business or conduct.

Thus, a telemarketer cannot falsely

claim that it is registered with a State,

or, even if registered, that such

registration indicates that the State had

approved the telemarketer’s method of

operation. In addition, it is also a

violation of the proposed rule to

misrepresent any affiliation, association,

connection, or relationship with law

enforcement, a public safety

organization, or other Federal, State, or

local government agency.

Under § 310.3(a)(2)(xii) of the

proposed rule, any seller or telemarketer

is prohibited from misrepresenting the

purpose for which the seller or

telemarketer will use information

relating to a person’s checking, savings,

share, or similar account number, credit

card account number, or social security

number. This prohibits, for example, a

telemarketer from asking for a

consumer’s credit card number ‘‘to

verify’’ the consumer’s identity, when in

fact the telemarketer plans to charge a

fee to that account.

Sections 310.3(a)(2)(xiii) and (xiv) of

the proposed rule prohibit

misrepresentations particularly common

to certain charitable solicitations.22 Any

seller or telemarketer is prohibited from

misrepresenting the seller’s or

telemarketer’s non-profit, tax-exempt, or

charitable status, purpose, affiliation, or

identity. Also prohibited are

misrepresentations that a person is

eligible or likely to receive a tax

deduction, loan, or other benefit if the

person pays money to the seller or

telemarketer.

It is a prohibited deceptive

telemarketing act or practice, under

§ 310.3(a)(2)(xv) of the proposed rule,

for any seller or telemarketer to

misrepresent the nature, terms, or

existence of any prior affiliation,

association, connection, or relationship

with any person. Under

§ 310.3(a)(2)(xvi), neither a seller nor a

telemarketer may misrepresent the

nature, terms, or existence of any prior

purchase or agreement to purchase by

any person. These sections prohibit, for

example, claims that a telemarketer is

calling to confirm a prior order, when

no such order exists, or claims that a

telemarketer is calling all of its

customers to ask if they would like to

purchase additional products, when in

fact the person called was not a prior

customer of that telemarketer.

Sections 310.3(a)(2)(xvii) through (xx)

of the proposed rule prohibit

misrepresentations concerning

investment opportunities. Any seller or

telemarketer is prohibited from

misrepresenting key attributes of any

investment opportunity, such as the

level of risk, liquidity, markup over

acquisition costs, past performance,

earnings potential, or market value. Any

seller or telemarketer is also prohibited

from misrepresenting the likelihood that

the market value for an investment

opportunity will either increase or

decrease. In addition, a seller or

telemarketer cannot misrepresent the

seller’s success in assisting persons to

liquidate goods or services they

purchased from the seller, or the profit

derived from such liquidation. Thus, for

example, false claims about an ability to

resell an investment opportunity for a

profit are prohibited.

Sections 310.3(a)(2)(xxi) and (xxii) of

the proposed rule address the problem

of deceptive credit repair or credit

opportunity telemarketing claims.

Section 310.3(a)(2)(xxi) prohibits

misrepresentations that certain goods or

services can or are likely to improve a

person’s credit history, credit record, or

credit rating, or that certain goods or

services can result in a person obtaining

credit. Section 310.3(a)(2)(xxii)

prohibits misrepresentations about the

eligibility or likelihood that a person,

regardless of that person’s credit history,

will obtain a loan or other credit-related

service.

Section 310.3(a)(2)(xxiii) of the

proposed rule prohibits

misrepresentations that a seller or

telemarketer can recover or otherwise

effect or assist in the return of money or

any other item of value to a person. This

would prohibit, for example,

telemarketers from falsely claiming that

for a fee, paid in advance, they can

obtain a refund for a consumer who has

been victimized in the past by a

telemarketing scam.

Finally, § 310.3(a)(2)(xxiv) of the

proposed rule prohibits the

misrepresentation of any other

information required to be disclosed

under this rule. For example, a

telemarketer cannot misrepresent the

verifiable retail sales price of a prize or

premium, or misrepresent that the sales

price of a prize or premium is less than

$20.00, when that information is

required to be disclosed under §§

310.4(d)(3) and (4) of the proposed rule.

The next section of the proposed rule,

§ 310.3(a)(3), prohibits any seller or

telemarketer from misrepresenting

important information in connection

with the offer, offer for sale, or sale of

any business venture. This information
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules 8317

23Thus, practices not included on this list could

still be found to provide substantial assistance or

support to telemarketing.

24As defined in § 310.2(m), a merchant is the

person who is under a contractual agreement with

an acquirer to honor or accept, transmit, or process

credit cards in payment for goods or services.

includes the level of earnings for the

business venture, the extent or nature of

the market for the goods or services to

be sold, and the nature or availability of

any territory. Thus, a seller of business

ventures could not falsely inflate the

sales levels of previous owners, or

incorrectly claim that a purchaser

would obtain exclusive rights to market

goods or services in a certain territory.

The proposed rule also prohibits

misrepresentations about (1) the

existence, availability, or provision of

retail outlets or accounts; (2) the

locations or sites for vending machines,

rack displays, or any other sales display;

or (3) the nature or availability of any

services offered to secure any such

outlets, accounts, locations, sites or

displays. Also prohibited are

misrepresentations that any person

owns or operates a business venture

purchased from the seller, or that a

person can give an accurate,

independent description of his or her

experience as an owner or operator of

such a business venture. These

provisions prohibit, for example, false

claims that a shill—a phony reference

that is paid to tout a business

opportunity he does not own or

operate—has actually purchased a

business venture, or false claims about

any person’s experience as a business

venture owner.

Under § 310.3(a)(4) of the proposed

rule, it is a prohibited deceptive

telemarketing act or practice for a seller

or telemarketer to obtain or submit for

payment from a person’s checking,

savings, share, or similar account, a

check, draft, or other form of negotiable

paper without that person’s express

written authorization. For example, a

telemarketer cannot submit an unsigned

draft on a consumer’s bank account

without that consumer’s prior written

authorization. Similarly, § 310.3(a)(5) of

the proposed rule prohibits the

collection of any amount of money from

a person through any means, unless

such amount is expressly authorized by

the person. This section is intended to

cover other forms of payment, in

addition to unsigned drafts, and to

prohibit misrepresentations of the

amount collected. For example, if a

consumer pays for goods or services by

credit card, no amount may be charged

to the consumer’s account unless the

consumer authorizes that charge. This

authorization does not have to be in

writing, however.

2. Assisting and Facilitating

Section 310.3(b)(1) of the proposed

rule sets forth a general prohibition

against assisting or facilitating deceptive

telemarketing acts or practices. This

section states that it is a deceptive

telemarketing act or practice, and a

violation of the rule, for a person to

provide substantial assistance or

support to any seller or telemarketer

when that person knows or should

know that the seller or telemarketer is

engaged in any act or practice that

violates the rule.

Section 310.3(b)(2) of the proposed

rule lists five specific types of conduct

that provide substantial assistance or

support to telemarketing. This list is not

meant to limit, in any way, the general

scope of § 310.3(b)(1) concerning

assisting or facilitating deceptive

telemarketing acts or practices.23

Assistors who engage in these activities

will violate the rule if they know, or

should know, that the person they are

assisting is engaged in an act or practice

that violates the rule.

The five types of assisting and

facilitating activities listed in the

proposed rule are as follows: First,

providing lists of customer contacts to a

seller or telemarketer (e.g., serving as a

list broker); second, receiving

consideration in exchange for providing

a testimonial, endorsement,

certification, appraisal, or financing, or

for serving as a reference, with respect

to any business venture or investment

opportunity (e.g., acting as a paid shill

or an art appraiser, or providing

financing for a business opportunity);

third, securing retail outlets or accounts

for the sale of goods or services, or

locations or sites for vending machines,

rack displays, or any other sales

displays, used in connection with any

business venture (e.g., operating as a

locating company); fourth, furnishing

any certificate or coupon which may

later be exchanged for goods or services

(e.g., producing generic vacation

certificates used in prize promotion

scams); and fifth, providing any script,

advertising, brochure, promotional

material, or direct marketing piece to be

used in telemarketing.

3. Credit Card Laundering

Section 310.3(c) of the proposed rule

prohibits credit card laundering, or the

practice of depositing into the credit

card system a sales draft that is not the

result of a credit card transaction

between the cardholder and a

merchant.24 For example, credit card

laundering involves a merchant with

access to the credit card system

deceiving an acquirer by submitting for

payment credit card transactions that

are not the merchant’s own. This

deception is crucial for telemarketers

engaged in fraud, since such

telemarketers find it difficult, if not

impossible, to obtain merchant accounts

to process their credit card transactions.

Credit card laundering facilitates

deceptive telemarketing acts or practices

by providing fraudulent telemarketers

with ready access to cash through the

credit card system.

This Section of the proposed rule is

divided into three parts. Section

310.3(c)(1) of the proposed rule deals

with merchants who engage in credit

card laundering. Under this section, it is

a deceptive telemarketing act or

practice, and a violation of the rule, for

a merchant to present to or deposit into

the credit card system for payment, a

credit card sales draft generated by a

telemarketing transaction that is not the

result of a telemarketing credit card

transaction between the cardholder and

the merchant. It is also a deceptive act

or practice for a merchant to cause

another person to present to or deposit

into the credit card system for payment

such a credit card sales draft.

Section 310.3(c)(2) of the proposed

rule deals with telemarketers, brokers,

or others who employ merchants to

engage in credit card laundering. This

section states that it is a deceptive

telemarketing act or practice, and a

violation of the proposed rule, for any

person to employ, solicit, or otherwise

cause a merchant or an employee,

representative, or agent of a merchant,

to present to or deposit into the credit

card system for payment, a credit card

sales draft generated by a telemarketing

transaction that is not the result of a

telemarketing credit card transaction

between the cardholder and the

merchant.

Finally, § 310.3(c)(3) prohibits joint

ventures or other business relationships

between a merchant and a telemarketer

for the purpose of engaging in credit

card laundering. Specifically, this

section prohibits any person from

obtaining access to the credit card

system through the use of a business

relationship or an affiliation with a

merchant, when such access is not

authorized by the merchant agreement.

Section 310.4 Abusive Telemarketing

Acts or Practices

Section 310.4 of the proposed rule

begins with a list of specific abusive

conduct that is prohibited. This section

also prohibits repeated telemarketing

calls and calls to persons who have

stated that they do not wish to receive

such calls. In addition, this section sets
8318 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules

25The proposed rule makes clear that nothing in

the rule alters the requirement in the Fair Credit

Reporting Act, 15 U.S.C. 1681, that a consumer

report may only be obtained for a specified

permissible purpose.

26By limiting this prohibition to offering or

selling goods or services through telephone

solicitations, this Section does not prevent

consumers from calling telemarketers to make an

additional purchase before the first transaction is

complete.

27A seller may cause a telemarketer to engage in

such calls by providing the telemarketer with a

customer contact list that includes customers that

should not be called.

28The person may give prior consent either orally

or in writing.

restrictions on the times when

telemarketers may make calls, and

includes oral and written disclosures

that must be made. This Section of the

proposed rule ends with a prohibition

on the sale or distribution of lists of

customer contacts by persons found to

have violated certain provisions of this

rule.

1. Abusive Conduct Generally

Section 310.4(a) of the proposed rule

sets forth eight different abusive

telemarketing acts or practices that are

violations of the rule. The first such

practice is the use of threats or

intimidation in connection with

telemarketing. The second prohibited

practice is providing for or directing a

courier to pick up a payment from a

customer. This prohibition is intended

to address a prevalent practice used by

fraudulent telemarketers of sending an

overnight courier to a consumer’s home

to pick up cash or a check shortly after

a successful sales pitch. In this manner,

the telemarketer obtains payment from

the consumer before the consumer has

adequate time to think about the

transaction or obtain information about

the telemarketer. The proposed rule

would prohibit this practice.

Section 310.4(a)(3) of the proposed

rule restricts the telemarketing of credit

repair services. This section prohibits

any seller or telemarketer from

requesting or receiving payment of any

fee or consideration for goods or

services represented to improve a

person’s credit history, credit record, or

credit rating until the contract for the

services has expired and the promised

results have been achieved. Specifically,

two events must occur before payment

can be requested or received for these

services: first, either the term of the

contract or the time frame in which the

seller has represented the goods or

services will be provided has expired;

and second, the seller has provided the

purchaser with documentation showing

that the promised results have been

achieved. This documentation may be

either (1) from the original furnisher or

provider of the information to the

consumer reporting agency, confirming

that the promised results have been

achieved; or (2) in the form of a

consumer report from the consumer

reporting agency demonstrating that the

promised results have been achieved.

Such a report must have been issued

more than six months after the results

were achieved.25

Recovery room scams are the focus of

§ 310.4(a)(4). In these operations, a

telemarketer typically calls a consumer

who has lost money in a previous scam,

promising that, for a fee paid up front,

the telemarketer can recover the money

the consumer previously lost. After the

consumer pays the requested fee, the

promised services are not delivered. In

fact, the consumer may never hear from

the telemarketer again. This Section of

the proposed rule prohibits any seller or

telemarketer from requesting or

receiving payment of any fee or

consideration for goods or services

represented to recover or otherwise

effect or assist in the return of money or

any other item of value to a person until

three days after such money or other

item is delivered to that person. The

proposed rule states that this provision

does not apply to goods or services

provided to a person by a licensed

attorney or licensed private investigator

pursuant to a written agreement with

that person.

Section 310.4(a)(5) of the proposed

rule is intended to limit advance fee

loan scams and similar practices, in

which telemarketers guarantee that they

will obtain a loan or other credit-related

service for a consumer, if the consumer

pays them a fee in advance. As with

recovery room scams, after the

consumer pays the fee, the promised

services typically are not provided.

Under this section of the proposed rule,

any seller or telemarketer is prohibited

from requesting or receiving payment of

any fee or consideration in advance of

obtaining a loan or any credit service

when the seller or telemarketer has

guaranteed or represented a high

likelihood of success in obtaining or

arranging a loan or credit service for a

person.

Prize promotions conducted through

telemarketing are the subject of

§ 310.4(a)(6). Any seller or telemarketer

conducting such promotions must

distribute all prizes or purported prizes

offered within 18 months of the initial

offer to any person.

Section 310.4(a)(7) of the proposed

rule addresses the problem of reloading,

the practice of offering to sell additional

goods or services to a person who

previously has made a purchase from

that seller. In deceptive telemarketing

scams, consumers may be victimized

numerous times by reloading that

occurs prior to delivery of the first items

sold, before realizing they have been

deceived. This serial deception often

occurs because consumers have not seen

the goods or services already purchased,

and therefore do not know that they

were deceived in the previous

transaction. The proposed rule prohibits

any seller or telemarketer from offering

or selling goods or services through a

telephone solicitation to a person who

previously has paid the same seller for

goods or services, until all terms and

conditions of the initial sales

transaction have been fulfilled.26 The

proposed rule makes clear that all prizes

or premiums offered in conjunction

with the initial transaction must also be

distributed before a second offer or sale

can be made.

The final abusive telemarketing act or

practice prohibited by the proposed rule

concerns the use of shills. Section

310.4(a)(8) of the proposed rule

prohibits any seller or telemarketer from

identifying a person as a reference for a

business venture unless the following

three criteria are satisfied: (1) Such

person has actually purchased the

business venture; (2) such person has

operated the business venture for at

least six months or the seller or

telemarketer has disclosed the length of

time the reference has operated the

business venture; and (3) such person

does not receive consideration for any

statements made to prospective

purchasers.

2. Pattern of Calls

Section 310.4(b) of the proposed rule

deals with repeated telemarketing calls,

and calls to persons who have indicated

an unwillingness to receive such calls.

This section prohibits a telemarketer

from engaging in such calls, or a seller

from causing a telemarketer to engage in

such calls.27 Specifically, this Section

states that it is an abusive act or practice

and a violation of the rule to call a

person’s residence to offer, offer for sale,

or sell, on behalf of the same seller, the

same or similar goods or services more

than once within any three-month

period. This prohibition does not apply

if the person gives prior consent to more

frequent calls,28 or if the person is not

reached during an earlier attempted call.

It also does not apply to verification

calls—those calls made solely to verify

a previous telephone sale.

The proposed rule also prohibits calls

to a person’s residence when that

person previously has stated that he or

she does not wish to receive telephone

solicitations made by or on behalf of the
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules 8319

29Based on the definition of ‘‘telephone

solicitation’’ in § 310.2(w) of the proposed rule,

these calling time restrictions apply only to

outbound telemarketing calls.

30As with the pattern of calls requirement in

§ 310.4(b)(1), the person may give prior consent

either orally or in writing.

31The disclosures required by this section are in

addition to the disclosures required under

§ 310.3(a)(1) of the proposed rule, which must be

made before any payment is requested for goods or

services.

32These disclosures include the total costs, terms,

and material restrictions, limitations, or conditions

of receiving any goods or services, the quantity of

any goods or services, and all material terms and

conditions of the seller’s refund, cancellation,

exchange, or repurchase policies.

33 If a purchase or payment were required in a

prize promotion that by definition involves a game

of chance, that promotion would be an illegal

lottery. See 18 U.S.C. 1301.

34Misrepresenting the retail sales price would be

a violation of § 310.3(a)(2)(xxiv) of the proposed

rule because such information is required to be

disclosed under the rule.

seller whose goods or services are being

offered.

Sellers and telemarketers are given a

limited safe harbor against liability for

violating these provisions. Section

310.4(b)(2) of the proposed rule states

that a seller or telemarketer will not be

liable for such violations once in any

calendar year per person called if the

following four requirements are met: (1)

It has established and implemented

written procedures to comply with

§§ 310.4(b)(1)(i) and (ii); (2) it has

trained its personnel in those

procedures; (3) the seller, or the

telemarketer acting on behalf of the

seller, has maintained and recorded lists

of persons who may not be contacted, in

compliance with §§ 310.4(b)(1)(i) and

(ii); and (4) any subsequent call is the

result of administrative error.

3. Calling Time Restrictions

Under § 310.4(c) of the proposed rule,

any telemarketer is prohibited from

engaging in telephone solicitations 29 to

a person’s residence at any time other

than between 8 a.m. and 9 p.m. local

time at the called person’s location. This

prohibition does not apply if the person

called gives his or her prior consent to

receive a call at a different time.30

4. Required Oral Disclosures

Section 310.4(d) of the proposed rule

sets forth certain oral disclosures that

must be made in telemarketing.31 The

preamble to this section states that it is

an abusive telemarketing act or practice,

and a violation of the rule, for a

telemarketer to fail to make any of these

required oral disclosures.

All telephone solicitations must begin

by disclosing key information to the

person called. This information

includes the caller’s true first and last

name, the seller’s name, and that the

purpose of the call is to sell goods or

services. The proposed rule does not

require that the telemarketer’s name be

disclosed, if it is different from the

seller’s. In addition, the proposed rule

does not set forth the exact language

that must be used to convey the message

that the purpose of the call is to sell

goods or services. The choice of

language is left to the telemarketer.

If the telephone solicitation includes

a charitable solicitation, slightly

different and additional information

must be disclosed at the beginning of

the call. Not only must the caller’s true

first and last name and the name of the

seller or charity be disclosed, but the

telemarketer’s name also must be

disclosed in these calls. In addition, the

telemarketer’s status as a paid

professional fundraiser must be

disclosed, as well as the fact that the

purpose of the call is to solicit

charitable donations. If other goods or

services are offered for sale during the

call, the caller must disclose that the

purpose of the call is also to sell goods

or services.

Section 310.4(d)(2) of the proposed

rule states that if a caller verifies a

telemarketing sale, either during the call

containing the original sales

presentation or in a separate call, the

caller verifying the sale must repeat all

of the disclosures required under

§ 310.3(a)(1).32 In this fashion,

consumers will hear all of the important

terms and conditions of the sale at the

time they are verifying that purchase.

Section 310.4(d)(3) of the proposed

rule requires three additional oral

disclosures for any telemarketing which

includes a prize promotion. The first

disclosure is that no purchase or

payment is necessary to win.33 Second,

the caller must disclose the verifiable

retail sales price of each prize offered,

or a statement that the retail sales price

of the prize offered is less than $20.00.34

The third required disclosure is the

odds of winning each prize offered. A

true statement that the odds of winning

cannot be determined in advance, or

that the odds of winning are determined

by the number of entrants, would satisfy

this requirement.

Under § 310.4(d)(4) of the proposed

rule, any telemarketing which includes

an offer of a premium must make the

additional disclosure of the verifiable

retail sales price of such premium or

comparable item, or a statement that the

retail sales price of the premium is less

than $20.00.

5. Written Disclosures/

Acknowledgements

Section 310.4(e) of the proposed rule

states that it is an abusive telemarketing

act or practice for a seller or

telemarketer that conducts a prize

promotion or offers for sale any

investment opportunity to request or

accept any payment from a person

without first providing the person with

a written disclosure, in duplicate, and

receiving from the person a written

acknowledgement that the person has

read the disclosure. The information

required to be disclosed must be printed

in not less than 10-point type (unless

otherwise noted), in a color or shade

that readily contrasts with the

background of the notice. The

information in the investment

opportunity disclosure must be

segregated from all other information

that may be included in the document,

while the information in the prize

promotion disclosure must be on one

page.

Both disclosures must be sent in an

envelope that contains no other

enclosures except for a return envelope,

if the seller or telemarketer wishes to

include such an envelope. The envelope

for the prize promotion disclosure may

not contain any writing representing

that the person to whom the envelope

is addressed has been selected or may

be eligible to receive a prize.

For prize promotions, the following

information is required: (1) The seller’s

legal name and telephone number, and

the complete street address of the

seller’s principal place of business; (2)

if the seller has been in operation under

any other name(s), each such name and

the length of time the seller operated

under each name; (3) the verifiable retail

sales price of each prize offered, or a

statement that the retail sales price of

the prize offered is less than $20.00; (4)

the odds of winning each prize offered

and the number of persons who will

receive each prize; (5) the total amount

and description of any shipping or

handling fees or any other charges that

must be paid to receive or use a prize;

(6) a complete description of any

restrictions, conditions, or limitations

on eligibility to receive or use a prize,

including all steps a person must take

to receive the most valuable prize

offered; (7) the statement: ‘‘No purchase

or payment is necessary to win,’’ with

a description of the no-purchase entry

method; (8) a statement that a list of

winners is available and the address to

which a person may write to obtain

such a list; (9) a statement that it is a

violation of this rule for the seller to

accept payment in any form unless the
8320 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules

35The enumerated sections cover all of the

prohibited deceptive telemarketing acts or

practices, the eight general abusive telemarketing

acts or practices, and the written disclosures and

acknowledgements required for prize promotions

and investment opportunities.

seller has received from the person a

written disclosure acknowledgement;

and (10) the statement: ‘‘I have read and

understand this disclosure.’’ This final

statement must be in at least 12-point

bold face type, immediately preceding a

signature block.

For investment opportunities, the

following information must be included

in the written disclosure: (1) The seller’s

legal name and telephone number, and

the complete street address of the

seller’s principal place of business; (2)

if the seller has been in operation under

any other name(s), each such name and

the length of time the seller operated

under that name; (3) the complete cost

to make the investment and a detailed

list of all present charges and any

anticipated future charges; (4) a

description of all known risks

associated with the investment

opportunity, including the possibility

that additional payments might be

required for a person purchasing the

investment opportunity to retain that

person’s interest in the investment

opportunity, to realize the projected or

stated returns of the investment

opportunity, to prevent total loss of the

investment opportunity, or for any other

reason; (5) the length of time the seller

has been in business and has offered the

particular investment opportunity; (6) a

statement disclosing whether or not the

seller is licensed and, if so, with whom,

the type of license, and the length of

time the seller has held such license; (7)

a statement that it is a violation of this

rule for the seller to effect an investment

transaction unless the seller has

received from the person a written

disclosure acknowledgement; and (8)

the statement: ‘‘I have read and

understand this disclosure.’’ This final

statement must be in at least 12-point

bold face type, immediately preceding a

signature block.

Additional written disclosures,

provided in duplicate, are required for

certain types of investment

opportunities. If a seller or telemarketer

offers for sale any investment

opportunity involving tangible assets,

§ 310.4(e)(2)(ii) of the proposed rule

requires the following additional

information to be included in the

written investment disclosure: (1) The

percentage markup that the seller places

on the item above its own cost in

acquiring the item; and (2) an estimate

of the value that persons would be

likely to receive if they were to liquidate

the asset through a market sale

immediately following the purchase.

The proposed rule makes clear that all

such estimates must be substantiated by

competent and reliable evidence.

If sellers or telemarketers offer for sale

any investment opportunity involving

tangible assets sold on credit or

leverage, they must include in the

written disclosure all of the information

set forth in §§ 310.4(e)(2)(i) and (ii) of

the proposed rule, as well as the

following: (1) The percentage of a

person’s down payment that would be

devoted to fees and costs by the end of

the first six months after the investment

is made; (2) the percentage of a person’s

down payment that would be devoted to

fees and costs by the end of the first year

after the investment is made; and (3) a

statement that all such investment

opportunities are extremely risky.

Finally, if a seller or telemarketer

offers for sale any investment

opportunity involving the acquisition of

government-issued licenses or interests

in businesses derived from the

possession of such licenses, the

following additional information must

be included in the written disclosure set

forth in § 310.4(e)(2)(i) of the proposed

rule: (1) All material terms and

limitations of any government-issued

license(s) that serve as the basis for the

investment opportunity, including

whether and to whom the license or

licenses have been issued; (2) the

percentage of the person’s payment that

will be used to acquire any applicable

license(s) from the licensee(s) or from

any person or entity not affiliated in any

way with the seller; and (3) the

percentage of the person’s payment that

will be used to capitalize any business

derived from such license(s).

6. Distribution of Lists

The final abusive practice set forth in

§ 310.4 of the proposed rule involves the

distribution of lists of customer

contacts. Section 310.4(f) states that it is

an abusive telemarketing act or practice,

and a violation of the rule, for any

person, subject to any federal court

order resolving a case in which the

complaint alleged a violation of § 310.3,

310.4(a), or 310.4(e) of this rule,35 and

the court did not dismiss or strike all

such allegations from the case, to sell,

rent, publish, or distribute any list of

customer contacts from that person. In

other words, any such person will be

prohibited from circulating its customer

contact lists in any fashion.

Section 310.5 Recordkeeping

Requirements

Section 310.5 of the proposed rule

requires any seller or telemarketer to

keep, for 24 months from the date the

record is produced, certain records

relating to its telemarketing activities.

Failure to keep those records shall be

considered a violation of the rule. The

seller and its telemarketer are not

required to keep duplicative records, if

they have entered into a written

agreement allocating responsibility for

the recordkeeping requirements of the

proposed rule. The terms of any such

agreement shall govern, unless those

terms are unclear as to whom must

maintain any required records. In that

case, the responsibility for

recordkeeping shall fall on the seller.

Section 310.5(c) of the proposed rule

sets forth the parties responsible for

maintaining records at the end of, or

after a change in ownership of, the

seller’s or telemarketer’s business. In the

event of dissolution or termination of

such business, the principal of the seller

or telemarketer is required to maintain

these records. On the other hand, in the

event of any sale, assignment,

succession, or other change in

ownership of the seller’s or

telemarketer’s business, the successor

business is required to maintain the

records.

Section 310.6 Exemptions

Certain acts or practices are exempt

from the proposed rule. The first

exemption, set forth in § 301.6(a), is for

incidental telemarketing sales—that is,

sales by any person who engages in

fewer than ten sales each year through

the use of the telephone. Second,

telephonic contacts between businesses

also are exempt, except for such

contacts that involve the sale of office or

cleaning supplies, or the inducement of

payment for any charitable service

promoted in conjunction with (1) an

offer of a prize, (2) a chance to win a

prize, or (3) the opportunity to purchase

any goods or services. Finally, on

§ 310.6(c) of the proposed rule exempts

any telephonic contact made solely by

a person, when there has been no initial

sales contact directed to that particular

person, by telephone or otherwise, from

the seller or telemarketer. However, this

exemption does not apply to calls

regarding employment services where

the seller or telemarketer requests or

receives payment prior to providing the

promised services, business ventures,

investment opportunities, prize

promotions, or credit-related programs.

Given the definition of

‘‘telemarketing’’ in § 310.2(v) and the
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules 8321

36See 15 U.S.C. 6103 and 6104.

exemptions set forth in this section, the

proposed rule covers all outbound

telephone calls intended to induce

payment for goods or services, except

for calls made by a person who engages

in fewer than ten telephone sales each

year, or for telephonic contacts made

from one business to another that do not

involve the sale of office or cleaning

supplies or certain charitable

solicitations. The only inbound

telemarketing calls covered are those

received from a person who is

responding to an initial communication,

other than a catalog, from the seller or

telemarketer that was directed to that

particular person. In addition, all

inbound telemarketing calls related to

business ventures, investment

opportunities, prize promotions, or

credit-related programs are covered.

Section 310.7 Actions by States and

Private Persons

The Telemarketing Act permits

certain State officials and private

persons to bring civil actions in an

appropriate Federal district court for

violations of this rule.36 Section 310.7 of

the proposed rule sets forth the notice

such parties must provide to the

Commission concerning those actions.

Such parties must serve written notice

of its action on the Commission, if

feasible, prior to initiating an action

under this rule. The notice must include

a copy of the complaint and any other

pleadings to be filed with the court. If

prior notice is not feasible, the State

official or private person must serve the

Commission with the required notice

immediately upon instituting its action.

Section 310.8 Federal Preemption

Section 310.8 of the proposed rule

states that nothing in the rule shall be

construed to preempt any State law that

is not in direct conflict with any

provision of the rule. Thus, State

statutes concerning telemarketing that

contain prohibitions or requirements

that are not imposed by this rule would

remain in effect, as long as those

statutes do not conflict with this rule.

Section 310.9 Severability

Section 310.9 of the proposed rule

sets forth the Commission’s intent that

the provisions of this rule be separate

and severable from one another. Thus,

if any provision is stayed or determined

to be invalid, the remaining provisions

shall continue in effect.

Section C. Invitation to Comment

Before adopting this proposed rule as

final, consideration will be given to any

written comments submitted to the

Secretary of the Commission on or

before March 31, 1995. Comments

submitted will be available for public

inspection in accordance with the

Freedom of Information Act (5 U.S.C.

552) and Commission regulations, on

normal business days between the hours

of 8:30 a.m. and 5 p.m. at the Public

Reference Section, Room 130, Federal

Trade Commission, 6th Street and

Pennsylvania Avenue, N.W.,

Washington, D.C. 20580.

Section D. Public Workshop-Conference

The FTC staff will conduct a Public

Workshop-Conference to discuss written

comments received in response to the

Notice of Proposed Rulemaking. The

purpose of the conference is to afford

Commission staff and interested parties

a further opportunity to openly discuss

and explore issues raised in the

rulemaking proceeding, and, in

particular, to examine publicly any

areas of significant controversy or

divergent opinions that are raised in the

written comments. The conference is

not intended to achieve a consensus

opinion among participants or between

participants and Commission staff with

respect to any issue raised in the

rulemaking proceeding. Commission

staff will consider the views and

suggestions made during the conference,

in conjunction with the written

comments, in formulating its final

recommendation to the Commission

concerning the proposed rule.

Commission staff will select a limited

number of parties, from among those

who submit written comments, to

represent the significant interests

affected by the proposed regulations.

These parties will participate in an open

discussion of the issues. It is

contemplated that the selected parties

might ask and answer questions based

on their respective comments.

In addition, the conference will be

open to the general public. Members of

the general public who attend the

conference may have an opportunity to

make a brief oral statement presenting

their views on issues raised in the

rulemaking proceeding. Oral statements

of views by members of the general

public will be limited to a few minutes

in length. The time allotted for these

statements will be determined on the

basis of the time allotted for discussion

of the issues by the selected parties, as

well as by the number of persons who

wish to make statements.

Written submissions of views, or any

other written or visual materials, will

not be accepted during the conference.

The discussion will be transcribed and

the transcription placed on the public

record.

To the extent possible, Commission

staff will select parties to represent the

following affected interests: Sellers;

telemarketers; list providers;

representatives of the credit card

system; consumers; Federal, State and

local law enforcement and regulatory

authorities; and any other interests that

Commission staff may identify and

deem appropriate for representation.

Parties to represent the abovereferenced interests will be selected on

the basis of the following criteria:

1. The party submits a written

comment during the 45-day comment

period.

2. The party notifies Commission staff

of its interest and authorization to

represent an affected interest within 20

days of publication of the Notice of

Proposed Rulemaking.

3. The party’s participation would

promote a balance of interests being

represented at the conference.

4. The party’s participation would

promote the consideration and

discussion of a variety of issues raised

in the rulemaking proceeding.

5. The party has expertise in activities

affected by the proposed regulations.

6. The party adequately reflects the

views of the affected interest(s) which it

purports to represent, not simply a

single entity or firm within that interest.

7. The number of parties selected will

not be so large as to inhibit effective

discussion among them.

A neutral third-party facilitator will

be retained for the conference. It will be

held over the course of three

consecutive days, on April 18–20, 1995.

Parties interested in participating and

authorized to represent an affected

interest at the conference must notify

Commission staff by March 6, 1995.

Prior to the conference, parties selected

to represent an affected interest will be

provided with computer disks

containing copies of the comments

received in response to this notice.

Section E. Communications by Outside

Parties to Commissioners or Their

Advisors

Pursuant to Commission Rule

1.26(b)(5), communications with respect

to the merits of this proceeding from

any outside party to any Commissioner

or Commissioner advisor during the

course of this rulemaking shall be

subject to the following treatment.

Written communications, including

written communications from members

of Congress, shall be forwarded

promptly to the Secretary for placement

on the public record. Oral

communications, not including oral
8322 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules

communications from members of

Congress, are permitted only when such

oral communications are transcribed

verbatim or summarized at the

discretion of the Commissioner or

Commissioner advisor to whom such

oral communications are made and are

promptly placed on the public record,

together with any written

communications and summaries of any

oral communications relating to such

oral communications. Oral

communications from members of

Congress shall be transcribed or

summarized at the discretion of the

Commissioner or Commissioner advisor

to whom such oral communications are

made and promptly placed on the

public record, together with any written

communications and summaries of any

oral communications relating to such

oral communications.

Section F. Regulatory Flexibility Act

The provisions of the Regulatory

Flexibility Act relating to an initial and

final regulatory analysis (5 U.S.C. 603,

604) are not applicable to this document

because it is believed that these

regulations, if promulgated, will not

have a significant economic impact on

a substantial number of small entities (5

U.S.C. 605).

The Telemarketing Act requires the

Commission to issue regulations, not

later than 365 days after the date of

enactment, prohibiting deceptive

telemarketing acts or practices and other

abusive telemarketing acts or practices.

The Act limits the scope of the

regulations to entities that engage in

telemarketing through one or more

interstate telephone calls; telemarketing

sales by local companies to local

customers would most likely be

intrastate calls and thus outside the

parameters of the proposed rule. The

Act also exempts certain catalog sales

operations from the scope of the

regulations. In addition, the proposed

rule exempts incidental telemarketing

sales, i.e., calls made by any person who

engages in fewer than ten sales each

year through the use of the telephone.

The proposed rule also exempts certain

contacts between businesses, and

certain calls initiated by a person when

there is no initial sales contact directed

to that particular person from a seller or

telemarketer.

As a result of these statutory and

regulatory limitations, we believe that

many small entities will fall outside the

scope of the regulations. In addition,

any economic costs imposed on small

entities remaining within the

parameters of the rule are, in many

instances, specifically imposed by

statute. Where they are not, efforts have

been made to make the proposed rule’s

requirements flexible, in part to

minimize any unforeseen burden on

small entities, as described elsewhere in

this notice.

To ensure that no substantial

economic impact is being overlooked,

public comment is requested on the

effect of the proposed regulations on the

costs to, profitability and

competitiveness of, and employment in

small entities. Subsequent to the receipt

of public comments, it will be decided

whether the preparation of a final

regulatory flexibility analysis is

warranted. Accordingly, based on

available information, the Commission

hereby certifies under the Regulatory

Flexibility Act, 5 U.S.C. 605(b), that the

proposed regulations will not have a

significant economic impact on a

substantial number of small entities.

This notice serves as certification to that

effect for the purposes of the Small

Business Administration.

Section G. Questions on the Proposed

Rule

The Commission seeks comments on

various aspects of the proposed rule.

Without limiting the scope of issues it

seeks comment on, the Commission is

particularly interested in receiving

comments on the questions that follow.

Responses to these questions should be

itemized according to the numbered

questions in this Notice. In responding

to these comments, include detailed,

factual supporting information

whenever possible.

Section 310.2 Definitions

1. The proposed rule defines the

following terms for use in the

prohibition on credit card laundering:

‘‘acquirer,’’ ‘‘cardholder,’’ ‘‘credit card,’’

‘‘credit card sales draft,’’ ‘‘credit card

system,’’ ‘‘merchant,’’ and ‘‘merchant

agreement.’’

a. Are these definitions clear,

meaningful, and appropriate?

b. Are there other approaches to

defining these terms that would be more

useful?

2. The proposed rule defines the term

‘‘business venture.’’

a. Is this definition clear, meaningful,

and appropriate? What are the

advantages and disadvantages of

defining the term in this manner?

b. Is the definition as drafted

sufficiently comprehensive to

encompass the types of business

ventures which have been, are, or may

be sold through telemarketing?

c. Are there other approaches to

defining the term ‘‘business venture’’

that would be more useful?

3. The proposed rule defines the term

‘‘goods or services.’’

a. Is this definition clear, meaningful,

and appropriate? What are the

advantages and disadvantages of

defining the term in this manner?

b. Is the definition as drafted

sufficiently comprehensive to

encompass the types of products,

services, or other offers which have

been, are, or may be sold through

telemarketing?

c. Are there other approaches for

defining the term ‘‘goods or services’’

that would be more useful?

4. The proposed rule defines the term

‘‘investment opportunity.’’

a. Is this definition clear, meaningful,

and appropriate? What are the

advantages and disadvantages of

defining the term in this manner?

b. Is the definition as drafted

sufficiently comprehensive to

encompass the types of investment

opportunities which have been, are, or

may be sold or traded through

telemarketing?

c. Are there other approaches to

defining the term ‘‘investment

opportunity’’ that would be more

useful?

5. The proposed rule defines the

terms ‘‘premium,’’ ‘‘prize,’’ and ‘‘prize

promotion.’’

a. Are these definitions clear,

meaningful, and appropriate? Are the

distinctions between a ‘‘premium’’ and

a ‘‘prize’’ clear, meaningful, and

appropriate? What are the advantages

and disadvantages of defining these

terms in this manner?

b. Are the definitions as drafted

sufficiently comprehensive to

encompass the types of premiums,

prizes, and prize promotions which

have been, are, or may be offered

through telemarketing?

c. Are there other approaches to

defining these terms that would be more

useful?

6. The proposed rule defines the

terms ‘‘seller’’ and ‘‘telemarketer.’’

a. Are these definitions clear,

meaningful, and appropriate? Are the

distinctions between a ‘‘seller’’ and a

‘‘telemarketer’’ clear, meaningful, and

appropriate? What are the advantages

and disadvantages of defining these

terms in this manner?

b. Are there other approaches to

defining these terms that would be more

useful?

c. Since most of the provisions of the

proposed rule apply to sellers and/or

telemarketers, do these definitions

reflect the appropriate scope of the rule?

7. The proposed rule states that the

term ‘‘telemarketing’’ includes the use

of a facsimile machine, computer
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules 8323

modem, or any other telephonic

medium, as well as calls initiated by

persons in response to postcards,

brochures, advertisements, or any other

printed, audio, video, cinematic, or

electronic communications by or on

behalf of the seller.

a. Is this definition clear, meaningful,

and appropriate?

b. Is the definition of ‘‘telemarketing’’

sufficiently broad to encompass current

as well as future technology?

c. Are there other approaches to

defining the term ‘‘telemarketing’’ that

would be more useful?

8. The proposed definition of

‘‘telemarketing’’ includes within the

rule’s coverage on-line information

services which a person accesses by

computer modem.

a. Is such coverage appropriate?

b. Is the proposed rule as drafted

sufficiently comprehensive to regulate

the types of plans, programs, or

campaigns for the sale of goods or

services that have been, are, or may be

conducted through such computer

information services?

9. The proposed definition of

‘‘telemarketing’’ tracks the

Telemarketing Act in exempting catalog

sales from coverage under the rule. One

of the requirements of this exemption is

that ‘‘the person making the solicitation

* * * only receives calls initiated by

customers in response to the catalog and

during those calls takes orders only

without further solicitation.’’ The

proposed rule states that the term

‘‘further solicitation’’ does not include

providing the customer with

information about, or attempting to sell,

any other item included in the same

catalog which prompted the customer’s

call.

a. Does the proposed rule sufficiently

clarify the types of solicitation activities

that are permitted in connection with

catalog sales?

b. How much will the additional

flexibility provided by this definition

benefit catalog sellers? How will it affect

law enforcement efforts to stop

fraudulent or deceptive telemarketers?

10. The proposed rule defines the

term ‘‘verifiable retail sales price.’’

a. Is this definition clear, meaningful,

and appropriate?

b. Are there other approaches to

defining this term that would be more

useful?

Section 310.3 Deceptive Telemarketing

Acts or Practices

11. Section 310.3(a) of the proposed

rule sets forth certain conduct that will

be considered a deceptive telemarketing

act or practice and a violation of the

rule, including the failure to make

certain disclosures and the

misrepresentation of certain

information. Questions 13 through 18

seek comments on the particular types

of acts and practices included in this

Section of the proposed rule. Looking at

§ 310.3(a) as a whole:

a. Would it be appropriate to include

in the final rule a general prohibition

against material misrepresentations or

the failure to disclose material

information? What would be the

advantages and disadvantages to this

approach?

b. Are there other approaches to

prohibiting deceptive telemarketing acts

or practices that would be more useful

to consumers? That would be more

useful to law enforcement authorities? If

so, how would these alternatives affect

the burden the rule places on businesses

forced to comply with it?

c. Are there other approaches to

prohibiting deceptive telemarketing acts

or practices that would reduce the

burden imposed on legitimate

businesses attempting to comply with

the rule’s requirements? If so, how

would these alternatives affect the

usefulness of the rule to consumers? To

law enforcement authorities?

12. Section 310.3(a) of the proposed

rule makes both the seller and the

telemarketer equally liable for any

deceptive telemarketing acts or

practices.

a. Are there parts of this Section that

should apply only to the seller or to the

telemarketer? If so, what specific

Sections should apply only to sellers?

To telemarketers? Why are such

limitations appropriate?

b. What are the benefits of making

both sellers and telemarketers jointly

liable for violations?

c. What additional costs or other

burdens will the rule impose on sellers

and/or telemarketers if the rule makes

both liable for any violations of this

Section? If the rule makes telemarketers

jointly liable with sellers, will this

reduce the ability of telemarketers to

respond to the needs of their clients in

a timely fashion?

d. If telemarketers are not jointly

liable for deceptive practices of the

sellers for whom they work, would

some telemarketers simply seek to avoid

knowledge of any questionable practices

of the sellers from whom they work?

Are there alternative ways to keep

telemarketers from taking such an

approach, without imposing full

liability for all of the actions taken by

their clients?

13. Section 310.3(a)(1) of the

proposed rule requires that certain

disclosures be made before payment is

requested for any goods or services

offered, and that the disclosures be

made in the same manner and form as

the payment request.

a. Are there other disclosures that

should be required? Are any of the

required disclosures unnecessary?

b. Is the description of the

information to be disclosed clear,

meaningful, and appropriate?

c. What are the current practices of

sellers and telemarketers regarding such

disclosures?

d. What costs will this disclosure

requirement impose on legitimate

businesses?

e. What are the advantages or

disadvantages of requiring these

disclosures before payment is

requested? Is it more appropriate to

require these disclosures at some other

time?

14. As part of the prohibition against

deceptive telemarketing acts or

practices, § 310.3(a)(2) of the proposed

rule prohibits specific

misrepresentations in connection with

telemarketing.

a. Are there other misrepresentations

that should be included in the

prohibited list? Are any of the

prohibited misrepresentations

unnecessary?

b. Is the description of the prohibited

misrepresentations clear, meaningful,

and appropriate?

c. How will this section benefit

consumers or law enforcement efforts?

What, if any, costs will this Section

impose on legitimate businesses?

15. As part of the prohibition against

deceptive telemarketing acts or

practices, § 310.3(a)(3) of the proposed

rule prohibits specific

misrepresentations in connection with

the offer, offer for sale, or sale of any

business venture.

a. Are there other misrepresentations

that should be included in the

prohibited list? Are any of the

prohibited misrepresentations

unnecessary?

b. Is the description of the prohibited

misrepresentations clear, meaningful,

and appropriate?

c. How will this section benefit

consumers or law enforcement efforts?

What, if any, costs will this Section

impose on legitimate businesses?

16. Section 310.3(a)(4) of the

proposed rule prohibits obtaining or

submitting a check, draft, or other form

of negotiable paper for payment from a

person’s checking, savings, share, or

similar account without that person’s

express written authorization.

a. Is this prohibition clear,

meaningful, and appropriate?

b. What are the advantages or

disadvantages of this prohibition?
8324 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules

c. Is the proposed prohibition

sufficiently broad to encompass all

forms by which a person’s account

could be debited in this manner for

payment of goods or services?

d. What will be the economic impact

on sellers and telemarketers of requiring

express written authorization prior to

debiting a person’s account in this

manner?

e. What are the current practices of

entities regarding authorizations for

debiting a person’s checking, savings,

share, or similar account?

17. Section 310.3(a)(5) of the

proposed rule prohibits obtaining any

amount of money from a person through

any means unless the amount is

expressly authorized by the person.

a. Is this prohibition clear,

meaningful, and appropriate?

b. What are the advantages or

disadvantages of this prohibition?

c. Is the proposed prohibition

sufficiently broad to encompass all

forms by which a seller or telemarketer

could obtain unauthorized amounts of

money?

18. Under § 310.3(b)(1) of the

proposed rule, it would be a deceptive

telemarketing act or practice for any

person to provide substantial assistance

or support to any seller or telemarketer

when that person knows or should

know that the seller or telemarketer is

engaged in any act or practice that

violates the rule.

a. What are the advantages or

disadvantages to providing such a

general prohibition against ‘‘assisting

and facilitating?’’

b. Is this general prohibition against

‘‘assisting and facilitating’’ clear,

meaningful, and appropriate?

c. Are there other approaches to

prohibiting ‘‘assisting and facilitating’’

that would be more useful to

consumers? That would be more useful

to law enforcement authorities? If so,

how would these alternatives affect the

burden the rule places on businesses

forced to comply with it?

d. Are there other approaches to

prohibiting ‘‘assisting and facilitating’’

that would reduce the burden imposed

on legitimate businesses attempting to

comply with the rule’s requirements? If

so, how would these alternatives affect

the usefulness of the rule to consumers?

To law enforcement authorities?

19. Section 310.3(b)(2) of the

proposed rule lists specific acts or

practices that provide substantial

assistance or support to telemarketing.

a. Is it appropriate to single out the

acts and practices listed in this section?

b. Are there other acts or practices

which should be included in this

section?

c. Is the description of the listed acts

or practices clear, meaningful, and

appropriate?

20. Under § 310.3(c) of the proposed

rule, certain acts or practices that

constitute ‘‘credit card laundering’’ will

be considered deceptive and a violation

of the rule.

a. Is the description of prohibited acts

or practices clear, meaningful, and

appropriate?

b. What are the advantages or

disadvantages of this provision?

c. Is the proposed prohibition

sufficiently comprehensive to

encompass all forms of credit card

laundering which have been, are, or

may be used in connection with

telemarketing?

d. Are there other approaches to

prohibiting credit card laundering that

would be more useful to consumers? To

law enforcement authorities? If so, how

would these alternatives affect the

burden the rule places on businesses

required to comply with it?

e. Are there other approaches to

prohibiting credit card laundering that

would reduce the burden imposed on

legitimate businesses attempting to

comply with the rule’s requirements? If

so, how would these alternatives affect

the usefulness of the rule to consumers?

To law enforcement authorities?

f. Will the regulations against credit

card laundering interfere with current

practices of legitimate businesses?

Section 310.4 Abusive Acts or

Practices

21. Section 310.4(a) of the proposed

rule lists specific activities that will be

considered to be abusive telemarketing

acts or practices and a violation of the

Telemarketing Sales Rule. Is there other

conduct that should be included in

§ 310.4(a)?

22. Section 310.4(a) of the proposed

rule makes both the seller and the

telemarketer equally liable for engaging

in the listed abusive telemarketing acts

or practices.

a. Are there parts of this Section that

should apply only to the seller or to the

telemarketer? If so, what specific

sections should apply only to sellers?

To telemarketers? Why are such

limitations appropriate?

b. What are the benefits of making

both sellers and telemarketers jointly

liable for violations?

c. What additional costs or other

burdens will the rule impose on sellers

and/or telemarketers if the rule makes

both liable for any violations of this

Section? If the rule makes sellers and

telemarketers jointly liable, will this

reduce the ability of telemarketers to

respond to the needs of their clients in

a timely fashion?

d. If telemarketers are not jointly

liable for abusive practices of the sellers

for whom they work, would some

telemarketers simply seek to avoid

knowledge of any questionable practices

of the sellers from whom they work?

Are there alternative ways to keep

telemarketers from taking such an

approach, without imposing full

liability for all of the actions taken by

their clients?

23. Section 310.4(a)(1) of the

proposed rule prohibits any seller or

telemarketer from engaging in threats or

intimidation.

a. Is it appropriate to include this

practice as an abusive act or practice?

b. Is the description of the prohibited

activity clear, meaningful, and

appropriate?

c. Are there other approaches to

prohibiting this type of activity?

d. Do the terms ‘‘threats’’ and

‘‘intimidation’’ need additional

definition in order to specify the type of

behavior that would violate the rule, or

are the terms self-explanatory?

24. Section 310.4(a)(2) prohibits a

seller or telemarketer from providing for

or directing a courier to pick up

payment from a customer.

a. Is it appropriate to include this

practice as an abusive act or practice?

b. Is the description of the prohibited

activity clear, meaningful, and

appropriate?

c. Are there other approaches to

prohibiting this type of activity?

d. What will be the economic impact,

and the costs and benefits, of this

provision?

e. Do legitimate telemarketers use

couriers to pick up payments? If so, in

what circumstances? How would these

businesses be affected if they could not

use couriers to pick up payments?

f. Will a prohibition on courier pickups be effective in reducing the

consumer injury that results from

telemarketing fraud? How will a

fraudulent telemarketer adjust his or her

practices in response to this

prohibition?

25. Section 310.4(a)(3) of the

proposed rule prohibits requesting or

receiving payment of any fee or

consideration for ‘‘credit repair’’ goods

or services until the time frame in

which the seller has represented the

goods or services will be provided has

expired and the seller has provided

documentation that the promised results

have been achieved.

a. Is it appropriate to include this

practice as an abusive act or practice?

b. Is the description of the prohibited

activity clear, meaningful, and

appropriate?
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules 8325

c. Are there other approaches to

prohibiting this type of activity?

d. What will be the economic impact,

and the costs and benefits, of this

provision?

e. Are there any legitimate services

that could not be provided, or would be

more costly to provide, if this

prohibition were promulgated? If such

services exist, how could the rule be

crafted to prohibit deceptive credit

repair services while still permitting

these legitimate activities?

26. Section 310.4(a)(4) of the

proposed rule prohibits requesting or

receiving payment of any fee or

consideration for goods or services

represented to recover or otherwise

assist in the return of money or any

other item of value to a person until

three days after such money or other

item is delivered to that person. This

provision does not apply to a licensed

attorney or licensed private investigator

who has a written agreement with that

person.

a. Is it appropriate to include this

practice as an abusive act or practice?

b. Is the description of the prohibited

activity clear, meaningful, and

appropriate?

c. Are there other approaches to

prohibiting this type of activity?

d. What will be the economic impact,

and the costs and benefits, of this

provision?

e. Are there any legitimate services

that could not be provided, or would be

more costly to provide, if this

prohibition were promulgated? If such

services exist, how could the rule be

crafted to prohibit deceptive recovery

services while still permitting these

legitimate activities?

f. Is it necessary, useful, and

appropriate to exempt licensed

attorneys and licensed private

investigators from this provision?

g. Does this prohibition impact on

legitimate businesses other than

licensed attorneys or licensed private

investigators?

27. Section 310.4(a)(5) of the

proposed rule prohibits requesting or

receiving payment of any fee or

consideration in advance of obtaining a

loan or any credit service when the

seller or telemarketer has guaranteed or

represented a high likelihood of success

in obtaining or arranging a loan or credit

service for a person.

a. Is it appropriate to include this

practice as an abusive act or practice?

b. Is the description of the prohibited

activity clear, meaningful, and

appropriate?

c. Are there other approaches to

prohibiting this type of activity?

d. What will be the economic impact,

and the costs and benefits, of this

provision?

e. Are there any legitimate services

that could not be provided, or would be

more costly to provide, if this

prohibition were promulgated? If such

services exist, how could the rule be

crafted to prohibit deceptive advancefee loan schemes while still permitting

these legitimate activities?

28. Section 310.4(a)(6) of the

proposed rule prohibits failing to

distribute all prizes or purported prizes

offered in a telemarketing prize

promotion within 18 months of the

initial offer to any person.

a. Is it appropriate to include this

practice as an abusive act or practice?

b. Is the description of the prohibited

activity clear, meaningful, and

appropriate?

c. Are there other approaches to

prohibiting this type of activity?

d. What will be the economic impact,

and the costs and benefits, of this

provision?

e. What are the current practices of

sellers or telemarketers regarding the

time frame within which prizes are

distributed in telemarketing prize

promotions?

f. Is 18 months an appropriate period

of time in which to require that all

prizes or purported prizes be

distributed?

29. Section 310.4(a)(7) of the

proposed rule prohibits offering or

selling goods or services through a

telephone solicitation to a person who

previously has paid the same seller for

goods or services, until all terms and

conditions of the initial transaction have

been fulfilled, including the distribution

of all prizes and premiums offered in

conjunction with the initial transaction.

a. Is it appropriate to include this

practice as an abusive act or practice?

b. Is the description of the prohibited

activity clear, meaningful, and

appropriate?

c. Are there other approaches to

prohibiting this type of activity?

d. What will be the economic impact,

and the costs and benefits, of this

provision?

e. What are the current practices of

sellers and telemarketers regarding

making additional telephone

solicitations before fulfilling the terms

and conditions of the initial sales

transaction?

f. Are there telemarketing activities

for which this prohibition would not be

feasible?

30. Section 310.4(a)(8) of the

proposed rule prohibits identifying a

person as a reference for a business

venture unless certain requirements are

met.

a. Is it appropriate to include this

practice as an abusive act or practice?

b. Are the descriptions of the

prohibited activity and of the stated

requirements clear, meaningful, and

appropriate?

c. Are there other approaches to

prohibiting this type of activity?

d. What will be the economic impact,

and the costs and benefits, of this

provision?

e. What are the current practices of

telemarketers regarding the use of

references in the telemarketing of

business ventures?

31. Section 310.4(b)(1) of the

proposed rule prohibits more than one

telephone solicitation in any threemonth period to a person’s residence to

offer, offer for sale, or sell the same or

similar goods or services on behalf of

the same seller, without the person’s

prior consent. The requirement does not

apply to calls made solely to verify

previous sales or attempted calls which

do not reach a person. This Section also

would prohibit calling a person’s

residence when that person has stated

that he or she does not wish to receive

further telephone solicitations made by

or on behalf of the seller.

a. Are the descriptions of the

prohibited activities clear, meaningful,

and appropriate?

b. Are there other approaches to

prohibiting this type of activity?

c. Should these prohibitions be

extended to business-to-business calls?

d. What will be the economic impact,

and the costs and benefits, of

prohibiting more than one telephone

solicitation within any three-month

period? Is a three-month period of time

appropriate?

e. What will be the economic impact,

and the costs and benefits, of

prohibiting further calls after a person

has asked not to receive telephone

solicitations by or on behalf of the

seller?

f. What are the current practices of

sellers and telemarketers regarding the

number of calls to a person’s residence

within a specified period of time for the

same or similar goods or services on

behalf of the same seller?

g. What are the current practices of

sellers and telemarketers regarding

identifying those persons who do not

wish to receive further telephone

solicitations by or on behalf of the

seller?

32. Section 310.4(b)(2) of the

proposed rule sets forth certain actions

that a seller or telemarketer can take that

would provide a defense against

liability for violating §§ 310.4(b)(1).
8326 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules

a. Is it appropriate to provide a

defense against potential liability with

regard to these activities?

b. Is it appropriate to limit this

defense to one erroneous call per person

called in any calendar year?

c. Are there other requirements which

should be included in the list of

practices which provide a defense

against potential liability? Are any of

the activities required by the proposed

rule inappropriate?

d. Is the description of the

requirements to avoid liability clear,

meaningful, and appropriate?

e. Are there other approaches to

providing a defense for potential

liability that would be more useful?

f. What will be the economic impact,

and the costs and benefits, of taking the

actions set forth in § 310.4(b)(2)?

g. What are the current practices of

sellers or telemarketers with respect to

the activities set forth in § 310.4(b)(2)?

33. Section 310.4(c) of the proposed

rule prohibits telephone solicitations to

a person’s residence at any time other

than between the hours of 8 a.m. and 9

p.m. local time at the called person’s

location, without the prior consent of

the person being called.

a. Is the description of the prohibited

activity clear, meaningful, and

appropriate?

b. What will be the economic impact,

and the costs and benefits, of this

provision?

c. What are the current practices of

telemarketers regarding the times during

which telephone solicitations are made

to residences?

d. Should the period when telephone

solicitations are permitted be narrowed

or expanded? Why or why not?

e. Should this prohibition be

extended to contacts between

businesses?

34. Section 310.4(d)(1) of the

proposed rule requires that certain oral

disclosures be made at the beginning of

all telephone solicitations.

a. Are the descriptions of the required

disclosures clear, meaningful, and

appropriate?

b. Are there other oral disclosures that

should be required? Are any of the

required disclosures unnecessary?

c. What will be the economic impact

of requiring these disclosures at the

beginning of the telephone solicitation?

If these disclosures are not required at

the beginning of the telephone

solicitation, when should they be

required? What are the advantages or

disadvantages of this alternative?

d. Are the disclosure requirements for

those engaged in charitable solicitations

necessary? Will these disclosure

requirements provide useful

information to consumers? If so, how

will this information be useful to

consumers? What impact will these

disclosure requirements have on

professional fundraisers? What impact

will these disclosure requirements have

on charities that use these professional

fundraisers?

e. Do telemarketers currently make

the disclosures required by

§ 310.4(d)(1)? Why or why not?

f. The proposed rule would prohibit

the use of aliases by persons making

telephone solicitations. Is this

appropriate? What are the costs and

benefits of prohibiting the use of

aliases? Is there an alternative approach

that would permit the use of aliases

while still ensuring that consumers and

law enforcement authorities could

identify a particular caller? What are the

costs and benefits of such an

alternative?

35. Section 310.4(d)(2) of the

proposed rule requires that certain oral

disclosures be made whenever a caller

verifies a telemarketing sale.

a. Are the descriptions of the required

disclosures clear, meaningful, and

appropriate?

b. Are there other oral disclosures that

should be required? Are any of the

required disclosures unnecessary?

c. What will be the economic impact

of requiring these disclosures in any

verification call?

d. Do telemarketers currently make

the disclosures required by

§ 310.4(d)(2)? Why or why not?

36. Sections 310.4(d)(3) and (4) of the

proposed rule require additional

disclosures where telemarketing

includes a prize promotion or an offer

of a premium.

a. Is it appropriate to classify the

failure to make these additional

disclosures as an abusive act or

practice?

b. Are the descriptions of the required

disclosures clear, meaningful, and

appropriate?

c. Are there other oral disclosures that

should be required? Are any of the

required disclosures unnecessary?

d. What will be the economic impact

of requiring these additional oral

disclosures? Will these additional oral

disclosures help consumers protect

themselves from fraudulent or deceptive

telemarketers?

e. Is it appropriate to require that

these disclosures be made both orally

and in writing, as is required by

§ 310.4(e)(1), or would it be sufficient to

permit either an oral or a written

disclosure alone? How would the

economic costs of this Section be

affected if the latter approach were

adopted?

f. What are the current practices of

telemarketers regarding the disclosure of

the information required by

§§ 310.4(d)(3) and (4)?

37. In addition to the oral disclosures

required during telephone solicitations,

§ 310.4(e) of the proposed rule requires

that written disclosures be provided in

duplicate in connection with

telemarketing involving a prize

promotion or the offer for sale of any

investment opportunity.

a. What are the advantages and

disadvantages of these required

disclosures? Are written disclosures

appropriate or necessary?

b. Is it appropriate to include a failure

to make these disclosures as an abusive

act or practice?

c. Are the descriptions of the required

disclosures, their timing, size, and other

requirements clear, meaningful, and

appropriate?

d. Are there other written disclosures

that should be required? Are any of the

required written disclosures

unnecessary?

e. Are there any forms of prize

promotions or investment opportunities

for which the disclosures would not be

feasible?

f. Section 310.4(e) specifies the size of

the disclosures, what else can be

included in the envelope with the

disclosure, and, for prize promotions,

what may appear on the face of the

envelope. Are these specifications

necessary to ensure the clarity of the

disclosures and to ensure that

consumers pay attention to them, or

would a more general standard (e.g.,

clear and conspicuous) be equally or

more effective? How would the costs of

complying with the requirements of this

Section be affected if the more general

standard were employed?

g. Section 310.4(e)(2)(iii) of the

proposed rule requires, for the sale of

any investment opportunity involving

tangible assets sold on credit or

leverage, the written disclosure of the

percentage of the purchaser’s down

payment that would be devoted to fees

and costs by the end of both the first six

months and the first year after the

investment is made. Are these time

frames useful and appropriate? Would it

be better not to have a time frame in this

disclosure requirement?

h. What will be the economic impact,

and the costs and benefits, of requiring

these disclosures? Of requiring a written

acknowledgement prior to payment?

i. What are the current practices of

telemarketers regarding the disclosures

required in § 310.4(e)? Regarding

written acknowledgement prior to

payment?
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules 8327

j. What will be the economic impact,

and the costs and benefits, of requiring

that the written disclosures be provided

in duplicate? Will this requirement

ensure that consumers retain a copy of

the required disclosure, or are there

other approaches to achieve this goal?

What are the costs and benefits of these

alternative approaches?

k. How many telemarketing

campaigns per year will be required to

comply with the written disclosure

requirements? How many prize

promotions per year are conducted as

part of telemarketing campaigns? How

many people participate in the average

prize promotion conducted via

telemarketing?

l. How many telemarketing campaigns

per year involve sales of investment

goods? What particular investment

goods are sold via telemarketing by

legitimate sellers? On average, how

many people buy investments as a result

of a telemarketing campaign?

38. Section 310.4(f) of the proposed

rule prohibits any person who is subject

to any federal court order resolving a

case in which the complaint alleged a

violation of certain sections of the rule,

and the court did not dismiss or strike

all such allegations from the case, to

sell, rent, publish, or distribute any list

of customer contacts from that person.

a. Is this prohibition appropriate? Is

the description of the prohibited

activities clear, meaningful, and

appropriate?

b. What will be the economic impact,

and the costs and benefits, of

prohibiting the sale of lists by such

persons?

c. What are the current practices of

telemarketers regarding the sale of lists?

Specifically, under what circumstances

do sellers or telemarketers sell or

otherwise distribute lists to others?

d. What would be the effect if this

prohibition only applied for a certain

period of time after the court order was

entered? How would this limitation

hinder law enforcement efforts? What

would be an appropriate period of time

following the entry of an order to

prohibit list sales?

e. Should this prohibition extend to a

broader class of rule violations than that

currently proposed? A narrower class?

39. In addition to or in lieu of some

of the provisions in § 310.4 of the

proposed rule, would it be more

appropriate that telemarketing sales be

subject to a cooling-off rule, or a period

of time in which the purchaser can

cancel a transaction? How would such

a rule be structured? Should all

telemarketing sales be subject to such a

rule? What is an appropriate ‘‘coolingoff’’ time period? Should payment be

permitted at the time of sale, or should

payment be prohibited until the end of

the cooling-off period? Would it be more

appropriate to impose a mandatory right

to a refund in all telemarketing sales?

How long of a period would be

appropriate for consumers to examine a

product before returning it?

Section 310.5 Recordkeeping

Requirements

40. Section 310.5(a) of the proposed

rule requires sellers or telemarketers to

keep certain records relating to their

telemarketing activities for a period of

24 months from the date the record is

produced.

a. Are the specified records

appropriate to verify compliance with

the rule? Are any of the required records

unnecessary to verify compliance with

the rule? Should any additional records

be required? Specifically, should sellers

and telemarketers keep copies of any

consumer complaints they receive? How

burdensome would it be to maintain

such complaints? How many consumer

complaints will the average legitimate

firm have involving its telemarketing

sales?

b. Is the 24-month record retention

period appropriate? Why or why not? If

not, what period is appropriate?

c. Are there other approaches to

recordkeeping requirements that would

be more useful?

d. What are the current record

retention policies and practices of

sellers and telemarketers with respect to

the records listed in § 310.5?

Specifically, what records, required to

be maintained by § 310.5(a), currently

are maintained by sellers or

telemarketers? How long are they

maintained?

e. What will be the economic impact,

and the costs and benefits, of these

recordkeeping requirements?

f. If the records listed are not required

to be retained, how would rule

compliance be verified?

g. What has been the experience of

State and local law enforcement

agencies with respect to record retention

requirements? Have such requirements

been useful? If yes, how? If no, why not?

What types of enforcement issues could

arise if recordkeeping were not

required?

h. What volume of records will have

to be maintained to comply with the

requirements of § 310.5(a)? In particular,

how many telemarketing campaigns will

the average firm conduct on an annual

basis? How many different scripts are

used during an average campaign? How

many consumers are called during an

average telemarketing campaign, and

what percentage of the persons called

agree to buy goods or services? How

many employee records will have to be

maintained by the average firm engaged

in telemarketing?

41. Under Section 310.5(b) of the

proposed rule, a seller and a

telemarketer calling on behalf of that

seller need not keep duplicative records,

but can enter into a written agreement

allocating recordkeeping responsibilities

between themselves. Section 310.5(c) of

the proposed rule sets forth the

recordkeeping requirements in the event

of the dissolution, termination, or

change in ownership of a seller or

telemarketer.

a. Are these provisions clear,

meaningful, and appropriate?

b. What are the advantages or

disadvantages to these provisions?

c. What are the current practices of

sellers and telemarketers regarding the

distribution of responsibility for

maintaining records? Regarding the

maintenance of records in the event of

the dissolution, termination, or change

in ownership of a seller or telemarketer?

Section 310.6 Exemptions

42. The proposed rule exempts the

solicitation of sales by any person who

engages in fewer than ten telephone

sales per year.

a. Is this proposed exemption clear,

meaningful, and appropriate?

b. Is the scope of the proposed rule

sufficiently limited to exempt those

persons who do not regularly engage in

telemarketing?

c. Are there other approaches to

limiting the scope of the rule that would

be more useful?

d. Does this exemption pose problems

for law enforcement efforts to stop

deceptive or abusive telemarketing acts

or practices?

43. The proposed rule also exempts

telephonic contacts between businesses,

except such contacts involving the sale

of office or cleaning supplies or certain

charitable solicitations.

a. Is this proposed exemption clear,

meaningful, and appropriate?

b. Are there other types of goods or

services sold in business-to-business

contacts which should not be exempted

from the rule?

c. Are there other approaches to

limiting the scope of the rule that would

be more useful?

d. Does this exemption pose problems

for law enforcement efforts to stop

deceptive or abusive telemarketing acts

or practices?

44. Finally, the proposed rule

exempts a telephonic contact made

solely by a person when there has been

no initial sales contact directed to that

particular person by the seller or
8328 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules

telemarketer, except for such contacts

related to certain employment services,

business ventures, investment

opportunities, prize promotions, or

credit-related programs.

a. Is this proposed exemption clear,

meaningful, and appropriate?

b. Is the scope of the proposed rule

sufficiently limited to exempt

businesses, such as restaurants, car

rental companies, travel agents, and

providers of services, such as plumbers,

that rely on the telephone for the taking

of orders or the scheduling of

appointments?

c. Is it appropriate to exclude from

this exemption contacts related to

employment services, business

ventures, investment opportunities,

prize promotions, or credit-related

programs? Are there other types of

goods or services sold through these

types of contacts that should not be

exempted from the rule?

d. Is this exemption appropriate for

on-line computer information services?

How would this exemption affect

advertising on computer bulletin

boards? Is it more appropriate to include

all contacts made over computer

information services in the rule?

e. Are there other approaches to

limiting the scope of the rule that would

be more useful?

f. Does this exemption pose problems

for law enforcement efforts to stop

deceptive or abusive telemarketing?

45. Are there other telemarketing

activities, such as the sale of particular

products or other particular kinds of

telemarketing, currently covered by the

proposed rule but which should be

exempted? How would the exemption of

these firms or activities affect the ability

of law enforcement to stop deceptive or

abusive telemarketing acts or practices?

How would such exemptions affect

consumers? How would they benefit the

firms exempted from the rule’s

coverage? How many firms would be

exempted from the coverage of the rule

if any proposed change were adopted?

46. How many firms in the United

States sell their products, either in

whole or in part, through telemarketing,

as that term is defined in the proposed

rule? How many of these firms engage

in telemarketing on their own behalf?

How many employ others to engage in

telemarketing for them? How would the

number of firms subject to the rule be

changed if one or more of the

exemptions in § 310.6 were eliminated?

Section 310.8 Federal Preemption

47. Under § 310.8 of the proposed

rule, State laws are preempted only

when they are in direct conflict with

any provision of the rule. Is this

preemption standard clear, meaningful,

and appropriate?

Other

48. Is it appropriate for the proposed

rule to take effect 30 days after its date

of publication in the Federal Register?

a. Would 30 days be sufficient time to

come into compliance with the rule?

Why or why not?

b. For which specific provisions of the

rule would compliance be possible

within 30 days, and for which specific

provisions would compliance take

longer? Would a staggered effective date

be more appropriate?

c. If 30 days is an insufficient period

of time, what time period would be

sufficient?

49. One of the findings which led

Congress to pass the Telemarketing Act

was that telemarketing differs from

other sales activities because it can be

carried out across State lines without

direct, face-to-face contact with the

consumer. Are there new types of

technology by which sales can be made

without direct contact between the

buyer and seller? Is the proposed rule

broad enough to encompass such forms

of technology? Will the proposed rule

requirements be appropriate and/or

feasible for such other technology?

50. What kinds of technological

changes may be anticipated in the area

of telemarketing? Will the proposed rule

requirements be appropriate and/or

feasible after these technological

changes are implemented?

51. As already noted in Section F,

comment is invited on the effect of the

proposed rule with regard to costs,

profitability, competitiveness, and

employment of small business entities.

52. To the extent not otherwise

addressed by the questions above, are

there any regulatory alternatives that

would reduce any adverse economic

impact of the proposed rule, yet fully

implement the Telemarketing Act?

53. What are the aggregate costs and

benefits of the proposed rule? Are there

any provisions in the proposed rule that

are not necessary to implement the

statute or that impose costs not

outweighed by benefits? Who will

benefit and who will bear the cost? Can

we expect either the costs or benefits of

the rule to dissipate over time?

54. Does the proposed rule overlap or

conflict with other Federal, State, or

local government laws or regulations?

List of Subjects in 16 CFR Part 310

Telemarketing, Trade practices.

Accordingly, it is proposed that

chapter I of 16 CFR be amended by

adding a new part 310 to read as

follows:

PART 310—TELEMARKETING SALES

RULE

Sec.

310.1 Scope of regulations in this part.

310.2 Definitions.

310.3 Deceptive telemarketing acts or

practices.

310.4 Abusive telemarketing acts or

practices.

310.5 Recordkeeping requirements.

310.6 Exemptions.

310.7 Actions by states and private persons.

310.8 Federal preemption.

310.9 Severability.

Authority: 15 U.S.C. 6101–6108.

§ 310.1 Scope of regulations in this part.

This part implements the

Telemarketing and Consumer Fraud and

Abuse Prevention Act (15 U.S.C. 6101–

6108).

§ 310.2 Definitions.

(a) Acquirer means a business

organization, financial institution, or an

agent of a business organization or

financial institution that has authority

from an organization that operates or

licenses a credit card system to

authorize merchants to accept, transmit,

or process payment by credit card

through the credit card system for

money, goods or services, or anything

else of value.

(b) Attorney General means the chief

legal officer of a State.

(c) Business venture means any

written or oral business arrangement,

however denominated, including but

not limited to a ‘‘franchise,’’ as that term

is defined in the ‘‘Franchise Rule,’’ 16

CFR 436.2(a), which consists of the

payment of any consideration for:

(1) The right or means to offer, sell,

or distribute goods or services (whether

or not identified by a trademark, service

mark, trade name, advertising, or other

commercial symbol); and

(2) The promise of more than nominal

assistance to any person or entity in

connection with or incidental to the

establishment, maintenance, or

operation of a new business or the entry

by an existing business into a new line

or type of business.

The term ‘‘business venture’’ does not

include any business arrangement in

which persons acquire, or purportedly

acquire, government-issued licenses or

interests in one or more businesses

derived from the possession of such

licenses.

(d) Cardholder means a person to

whom a credit card is issued or who is

authorized to use a credit card on behalf

of or in addition to the person to whom

the credit card is issued.

(e) Commission means the Federal

Trade Commission.

(f) Credit card means any instrument

or device, whether known as a credit
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules 8329

card, credit plate, bank service card,

banking card, check guarantee card,

charge card, or debit card, or by any

other name, issued with or without a fee

for the use of the cardholder in

obtaining money, goods, services, or

anything else of value.

(g) Credit card sales draft means any

record or evidence of a credit card

transaction, including but not limited to

any paper, sales record, instrument, or

other writing, or any electronic or

magnetic transmission or record.

(h) Credit card system means any

method or procedure used to generate,

transmit, or process for payment a credit

card sales draft.

(i) Customer means any person who is

or may be required to pay for goods or

services offered through telemarketing.

(j) Goods or services means any goods

or services, including but not limited to:

Any investment opportunity; any

business venture; any certificate or

coupon which may be later exchanged

for a product or service; any

membership; any license right; any

timeshare or campground interest; any

offer to list a timeshare or campground

interest for sale; any real property

interest; any offer to improve a person’s

credit record, history, rating, or to

obtain an extension of credit; any

charitable service promoted in

conjunction with an offer of a prize,

chance to win a prize, or the

opportunity to purchase any other goods

or services; any service promoted by an

employment agency; any multi-level

marketing service; and any offer of

advice or assistance to a person.

(k) Investment opportunity means

anything, tangible or intangible,

excluding a business venture, that is

offered, offered for sale, sold, or traded

(1) to be held, wholly or in part, for

purposes of profit or income; or (2)

based wholly or in part on

representations, either express or

implied, about past, present or future

income, profit, or appreciation. The

term ‘‘investment opportunity’’

includes, but is not limited to, any

business arrangement where persons

acquire, or purportedly acquire,

government-issued licenses or interests

in one or more businesses derived from

the possession of such licenses.

(l) Material means likely to affect a

person’s choice of, or conduct regarding,

goods or services.

(m) Merchant means a person who is

authorized under a written contract

with an acquirer to honor or accept,

transmit, or process credit cards in

payment for goods or services.

(n) Merchant agreement means a

written contract between a merchant

and an acquirer authorizing the

merchant to honor or accept, transmit,

or process credit cards in payment for

goods or services.

(o) Person means any individual,

group, unincorporated association,

limited or general partnership,

corporation, or other business entity.

(p) Premium means anything offered

or given, independent of chance, to

customers as an incentive to purchase

goods or services offered through

telemarketing.

(q) Prize means anything offered, or

purportedly offered, to a person at no

cost and with no obligation to purchase

goods or services and given, or

purportedly given, by chance.

(r) Prize promotion means:

(1) A sweepstakes or other game of

chance; or

(2) An oral or written representation

that a person has won, has been selected

to receive, or may be eligible to receive

a prize or purported prize.

(s) Seller means any person who, in

connection with telemarketing, provides

or offers to provide goods or services in

exchange for consideration or a

donation.

(t) State means any State of the United

States, the District of Columbia, Puerto

Rico, the Northern Mariana Islands, and

any territory or possession of the United

States.

(u) Telemarketer means any person

who, in connection with telemarketing,

initiates or receives a telephonic

communication from a customer.

(v) Telemarketing means a plan,

program, or campaign which is

conducted to induce payment for goods

or services by use of one or more

telephones (including the use of a

facsimile machine, computer modem, or

any other telephonic medium) and

which involves more than one interstate

telephone call or connection. The term

includes, but is not limited to, calls

initiated by persons in response to

postcards, brochures, advertisements, or

any other printed, audio, video,

cinematic or electronic communications

by or on behalf of the seller. The term

does not include the solicitation of sales

through the mailing of a catalog which:

Contains a written description or

illustration of the goods or services

offered for sale; includes the business

address of the seller; includes multiple

pages of written material or

illustrations; and has been issued not

less frequently than once a year, when

the person making the solicitation does

not solicit customers by telephone but

only receives calls initiated by

customers in response to the catalog and

during those calls takes orders only

without further solicitation. For

purposes of the previous sentence, the

term ‘‘further solicitation’’ does not

include providing the customer with

information about, or attempting to sell,

any other item included in the same

catalog which prompted the customer’s

call.

(w) Telephone solicitation means the

initiation of a telephone call by a

telemarketer to induce payment for

goods or services.

(x) Verifiable retail sales price means

the actual, bona fide price at which one

or more retailers, in the area of the

seller’s principal place of business, has

made a substantial number of sales,

which the seller has documented.

§ 310.3 Deceptive telemarketing acts or

practices.

(a) Prohibited deceptive telemarketing

acts or practices.

It is a deceptive telemarketing act or

practice and a violation of this Rule for

any seller or telemarketer to engage in

the following conduct:

(1) Before payment is requested for

goods or services offered, failing to

disclose any of the following

information in the same manner and

form as the payment request:

(i) The total costs, terms, and material

restrictions, limitations, or conditions of

receiving any goods or services;

(ii) The quantity of any goods or

services; and

(iii) All material terms and conditions

of the seller’s refund, cancellation,

exchange, or repurchase policies,

including, if applicable, a statement that

no such policies exist;

(2) Misrepresenting, directly or by

implication, any of the following:

(i) The total costs, terms, or material

restrictions, limitations, or conditions of

receiving any goods or services;

(ii) The quantity of any goods or

services;

(iii) Any material aspect of the

performance, efficacy, or central

characteristics of any goods or services;

(iv) The duration of any offer made;

(v) The nature or terms of the seller’s

refund, cancellation, exchange, or

repurchase policies;

(vi) That any person has been selected

to receive a prize;

(vii) That a premium is a prize;

(viii) The odds of winning any prize;

(ix) That a seller or telemarketer is in

compliance with any Federal, State, or

local law, statute, regulation, or

ordinance;

(x) That compliance with any Federal,

State, or local law, statute, regulation, or

ordinance constitutes an endorsement

or approval of the seller’s or

telemarketer’s business or conduct;

(xi) Any affiliation, association,

connection, or relationship with law
8330 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules

enforcement, a public safety

organization, or any Federal, State, or

local government agency;

(xii) The purpose for which the seller

or telemarketer will use a person’s

checking, savings, share, or similar

account number, credit card account

number, social security number, or

related information;

(xiii) The nonprofit, tax-exempt, or

charitable status, purpose, affiliation, or

identity of the seller or telemarketer;

(xiv) A person’s eligibility or

likelihood to receive a tax deduction,

loan, or other benefit if the person pays

money to the seller or telemarketer;

(xv) The nature, terms, or existence of

any prior affiliation, association,

connection, or relationship with any

person;

(xvi) The nature, terms, or existence

of any prior purchase or agreement to

purchase by any person;

(xvii) The level of risk, liquidity,

markup over acquisition costs, past

performance, or earnings potential of

any investment opportunity;

(xviii) The market value of any

investment opportunity;

(xix) The likelihood that the market

value for an investment opportunity

will either increase or decrease;

(xx) The seller’s success in assisting

persons to liquidate goods or services

they purchased from the seller, or the

profit derived from such liquidation;

(xxi) That goods or services can or are

likely to improve a person’s credit

history, credit record, or credit rating, or

result in a person obtaining credit;

(xxii) The eligibility of, or likelihood

that, a person, regardless of that

person’s credit history, will obtain a

loan or other credit-related service;

(xxiii) That a seller or telemarketer

can recover or otherwise effect or assist

in the return of money or any other item

of value to a person; or

(xxiv) Any other information required

to be provided under this Rule;

(3) Misrepresenting, directly or by

implication, in connection with the

offer, offer for sale, or sale of any

business venture, any of the following:

(i) The level of earnings;

(ii) The extent or nature of the market

for the goods or services to be sold;

(iii) The nature or availability of any

territory;

(iv) The existence, availability, or

provision of retail outlets or accounts

for the sale of goods or services;

(v) The existence, availability, or

provision of locations or sites for

vending machines, rack displays, or any

other sales display;

(vi) The nature or availability of any

services offered to secure any retail

outlets, accounts, sites, locations, or

displays;

(vii) That any person owns or operates

a business venture purchased from the

seller; or

(viii) That a person can give an

accurate, independent, description of

his or her experience as an owner or

operator of a business venture

purchased from the seller;

(4) Obtaining or submitting for

payment from a person’s checking,

savings, share, or similar account, a

check, draft, or other form of negotiable

paper without the person’s express

written authorization; or

(5) Obtaining any amount of money

from a person through any means,

unless such an amount is expressly

authorized by the person.

(b) Assisting and facilitating. (1) It is

a deceptive telemarketing act or practice

and a violation of this Rule for a person

to provide substantial assistance or

support to any seller or telemarketer

when that person knows or should

know that the seller or telemarketer is

engaged in any act or practice that

violates this Rule.

(2) Substantial assistance or support

to telemarketing for purposes of

§ 310.3(b)(1) includes, but is not limited

to, the following:

(i) Providing lists of customer contacts

to a seller or telemarketer;

(ii) Receiving consideration in

exchange for providing a testimonial,

endorsement, certification, appraisal, or

financing, or for serving as a reference,

with respect to any business venture or

investment opportunity offered by a

seller;

(iii) Securing retail outlets or accounts

for the sale of goods or services, or

locations or sites for vending machines,

rack displays, or any other sales

displays, used in connection with any

business venture;

(iv) Providing any certificate or

coupon which may later be exchanged

for goods or services; or

(v) Providing any script, advertising,

brochure, promotional material, or

direct marketing piece to be used in

telemarketing.

(c) Credit card laundering. It is a

deceptive telemarketing act or practice,

and a violation of this Rule, for:

(1) A merchant to present to or

deposit into, or cause another to present

to or deposit into, the credit card system

for payment, a credit card sales draft

generated by a telemarketing transaction

that is not the result of a telemarketing

credit card transaction between the

cardholder and the merchant;

(2) Any person to employ, solicit, or

otherwise cause a merchant or an

employee, representative, or agent of the

merchant, to present to or deposit into

the credit card system for payment, a

credit card sales draft generated by a

telemarketing transaction that is not the

result of a telemarketing credit card

transaction between the cardholder and

the merchant; or

(3) Any person to obtain access to the

credit card system through the use of a

business relationship or an affiliation

with a merchant, when such access is

not authorized by the merchant

agreement.

§ 310.4 Abusive telemarketing acts or

practices.

(a) Abusive conduct generally. It is an

abusive telemarketing act or practice

and a violation of this Rule for any

seller or telemarketer to engage in the

following conduct:

(1) Threats or intimidation;

(2) Providing for or directing a courier

to pick up payment from a customer;

(3) Requesting or receiving payment

of any fee or consideration for goods or

services represented to improve a

person’s credit history, credit record, or

credit rating until:

(i) The term of the contract, or time

frame in which the seller has

represented all of the goods or services

will be provided to that person, has

expired; and

(ii) The seller has provided the person

with documentation:

(A) From the original furnisher or

provider of the information to the

consumer reporting agency, confirming

that the promised results have been

achieved; or

(B) In the form of a consumer report

from the consumer reporting agency

demonstrating that the promised results

have been achieved, such report having

been issued more than six months after

the results were achieved. Nothing in

this Rule alters the requirement in the

Fair Credit Reporting Act, 15 U.S.C.

1681, that a consumer report may only

be obtained for a specified permissible

purpose.

(4) Requesting or receiving payment

of any fee or consideration for goods or

services represented to recover or

otherwise assist in the return of money

or any other item of value to a person

until three (3) days after such money or

other item is delivered to that person.

This provision shall not apply to goods

or services provided to a person by a

licensed attorney or licensed private

investigator pursuant to a written

agreement with that person;

(5) Requesting or receiving payment

of any fee or consideration in advance

of obtaining a loan or any credit service

when the seller or telemarketer has

guaranteed or represented a high

likelihood of success in obtaining or
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules 8331

arranging a loan or credit service for a

person;

(6) Failing to distribute all prizes or

purported prizes offered in a prize

promotion, within 18 months of the

initial offer to any person;

(7) Offering or selling goods or

services through a telephone solicitation

to a person who previously has paid the

same seller for goods or services, until

all terms and conditions of the initial

transaction have been fulfilled,

including but not limited to the

distribution of all prizes or premiums

offered in conjunction with the initial

transaction; or

(8) Identifying a person as a reference

for a business venture unless:

(i) Such person has actually

purchased the business venture;

(ii) Such person has operated that

business venture for a period of at least

six (6) months, or the seller or

telemarketer discloses the length of time

the person has operated such business

venture; and

(iii) Such person does not receive

consideration for any statements made

to prospective business venture

purchasers.

(b) Pattern of calls. (1) It is an abusive

telemarketing act or practice and a

violation of this Rule for a telemarketer

to engage in, or for a seller to cause a

telemarketer to engage in, the following

conduct:

(i) Without a person’s prior consent,

calling that person’s residence to offer,

offer for sale, or sell, on behalf of the

same seller, the same or similar goods

or services more than once within any

three (3) month period. This

requirement does not apply to

attempted calls which do not reach a

person or to calls made solely to verify

a previous telephone sale; or

(ii) Calling a person’s residence when

that person previously has stated that he

or she does not wish to receive

telephone solicitations made by or on

behalf of the seller whose goods or

services are being offered.

(2) A seller or telemarketer will not be

liable for violating § 310.4(b)(1) once in

any calendar year per person called if:

(i) It has established and implemented

written procedures to comply with

§ 310.4(b)(1) (i) and (ii);

(ii) It has trained its personnel in the

procedures established pursuant to

§ 310.4(b)(2)(i);

(iii) The seller, or the telemarketer

acting on behalf of the seller, has

maintained and recorded lists of

persons who may not be contacted, in

compliance with § 310.4(b)(1) (i) and

(ii); and

(iv) Any subsequent call is the result

of administrative error.

(c) Calling time restrictions. Without

the prior consent of a person, it is an

abusive telemarketing act or practice

and a violation of this Rule for a

telemarketer to engage in telephone

solicitations to a person’s residence at

any time other than between 8 a.m. and

9 p.m. local time at the called person’s

location.

(d) Required oral disclosures. It is an

abusive telemarketing act or practice

and a violation of this Rule for a

telemarketer to fail to make any oral

disclosures set forth in this section.

(1) All telephone solicitations shall

begin by disclosing:

(i) The caller’s true first and last

name, the seller’s name, and that the

purpose of the call is to sell goods or

services; or

(ii) If a telephone solicitation includes

a charitable solicitation, the caller’s true

first and last name, the telemarketer’s

name, the telemarketer’s status as a paid

professional fundraiser, the seller’s

name, that the purpose of the call is to

solicit charitable donations, and if other

goods or services are offered, that the

purpose of the call is also to sell goods

or services.

(2) If a caller verifies a telemarketing

sale, the caller verifying the sale must

repeat the disclosures required under

§ 310.3(a)(1).

(3) Any telemarketing which includes

a prize promotion must disclose, in

addition to all other disclosures

required under this Section, the

following information:

(i) That no purchase or payment is

necessary to win;

(ii) The verifiable retail sales price of

each prize offered or a statement that

the retail sales price of the prize offered

is less than $20.00; and

(iii) The odds of winning each prize

offered.

(4) Any telemarketing which includes

an offer of a premium must disclose, in

addition to all other disclosures

required under this Section, the

verifiable retail sales price of such

premium or comparable item, or a

statement that the retail sales price of

the premium is less than $20.00.

(e) Written disclosures/

acknowledgements. It is an abusive

telemarketing act or practice and a

violation of this Rule for a seller or

telemarketer to fail to make any written

disclosures set forth in this section.

(1) Prize promotions. If a seller or

telemarketer conducts a prize

promotion, the seller or telemarketer

may not request that a person pay for

goods or services, or accept a payment

in any form from a person, without first

providing the person with a written

disclosure, in duplicate, and receiving

from the person a written

acknowledgement that the person has

read the disclosure. The information

shall be disclosed on one page, in not

less than 10-point type (unless

otherwise noted), and of a color or

shade that readily contrasts with the

background of the notice. This

disclosure shall be sent in an envelope

that contains no writing representing

that the person to whom the envelope

is addressed has been selected or may

be eligible to receive a prize and shall

contain no other enclosures except for a

return envelope, if the seller or

telemarketer wishes to include such an

envelope. This disclosure must contain

the following information:

(i) The seller’s legal name and

telephone number, and the complete

street address of the seller’s principal

place of business;

(ii) If the seller has been in operation

under any other name(s), each such

name and the length of time the seller

has operated under each name;

(iii) The verifiable retail sales price of

each prize offered or a statement that

the retail sales price of the prize offered

is less than $20.00;

(iv) The odds of winning each prize

offered and the number of persons who

will receive each prize;

(v) The total amount and description

of any shipping or handling fees or any

other charges that must be paid to

receive or use a prize;

(vi) A complete description of any

restrictions, conditions, or limitations

on eligibility to receive or use a prize,

including all steps a person must take

to receive the most valuable prize

offered;

(vii) The statement: ‘‘No purchase or

payment is necessary to win,’’ with a

description of the no-purchase entry

method;

(viii) A statement that a list of

winners is available and the address to

which a person may write to obtain

such a list;

(ix) A statement that it is a violation

of this Rule for the seller to accept

payment in any form unless the seller

has received from the person the written

disclosure acknowledgment required

pursuant to § 310.4(e)(1); and

(x) The statement: ‘‘I have read and

understand this disclosure,’’ in at least

12-point bold face type immediately

preceding a signature block.

(2) Investment opportunities. (i) If a

seller or telemarketer offers for sale any

investment opportunity, the seller or

telemarketer may not request that a

person pay, or accept a payment in any

form from a person, for that investment

opportunity without first providing the

person with a written disclosure, in
8332 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules

duplicate, and receiving from the person

a written acknowledgement that the

person has read the disclosure. The

information shall be disclosed in not

less than 10-point type (unless

otherwise noted), of a color or shade

that readily contrasts with the

background of the notice, and

segregated from all other information.

This disclosure shall be sent in an

envelope that contains no other

enclosures except for a return envelope,

if the seller or telemarketer wishes to

include such an envelope. This

disclosure must contain the following

information:

(A) The seller’s legal name and

telephone number, and the complete

street address of the seller’s principal

place of business;

(B) If the seller has been in operation

under any other name(s), each such

name and the length of time the seller

has operated under each name;

(C) The complete cost to make the

investment and a detailed list of all

present charges and any anticipated

future charges;

(D) A description of all known risks

associated with the investment

opportunity, including the possibility

that additional payments might be

required for a person purchasing the

investment opportunity to retain that

person’s interest in the investment

opportunity, to realize the projected or

stated returns of the investment

opportunity, to prevent total loss of the

investment opportunity, or for any other

reason;

(E) The length of time the seller has

been in business and has offered the

particular investment opportunity;

(F) A statement disclosing whether or

not the seller is licensed and, if so, with

whom, the type of license, and the

length of time the seller has held such

license;

(G) A statement that it is a violation

of this Rule for the seller to effect an

investment transaction unless the seller

has received from the person the written

disclosure acknowledgement required

pursuant to § 310.4(e)(2); and

(H) The statement: ‘‘I have read and

understand this disclosure,’’ in at least

12-point bold face type immediately

preceding a signature block.

(ii) If a seller or telemarketer offers for

sale any investment opportunity

involving tangible assets, the following

additional information must be

included in the written disclosure set

forth in § 310.4(e)(2)(i):

(A) The percentage markup that the

seller places on the item above its own

cost in acquiring the item; and

(B) An estimate of the value that

persons are likely to receive if they were

to liquidate the asset through a market

sale immediately following the

purchase. All such estimates must be

substantiated by competent and reliable

evidence.

(iii) If a seller or telemarketer offers

for sale any investment opportunity

involving tangible assets sold on credit

or leverage, the following additional

information, as well as the information

set forth in § 310.4(e)(2)(ii), must be

included in the written disclosure set

forth in § 310.4(e)(2)(i):

(A) The percentage of a person’s down

payment that would be devoted to fees

and costs by the end of the first six

months after the investment is made;

(B) The percentage of a person’s down

payment that would be devoted to fees

and costs by the end of the first year

after the investment is made; and

(C) A statement that all such

investment opportunities are extremely

risky.

(iv) If a seller or telemarketer offers for

sale any investment opportunity

involving the acquisition of

government-issued licenses or interests

in businesses derived from the

possession of such licenses, the

following additional information must

be included in the written disclosure set

forth in § 310.4(e)(2)(i):

(A) All material terms and limitations

of any government-issued license(s) that

serve as the basis for the investment

opportunity, including but not limited

to whether and to whom the license or

licenses have been issued;

(B) The percentage of the person’s

payment that will be used to acquire

any applicable license(s) from the

licensee(s) or from any person or entity

not affiliated in any way with the seller;

and

(C) The percentage of the person’s

payment that will be used to capitalize

any business derived from such

license(s).

(f) Distribution of lists. It is an abusive

telemarketing act or practice and a

violation of this Rule for any person

who is subject to any federal court order

resolving a case in which the complaint

alleged a violation of §§ 310.3, 310.4(a)

or 310.4(e) of this Rule, and the court

did not dismiss or strike all such

allegations from the case, to sell, rent,

publish, or distribute any list of

customer contacts from that person.

§ 310.5 Recordkeeping requirements.

(a) Any seller or telemarketer shall

keep, for a period of 24 months from the

date the record is produced, the

following records relating to its

telemarketing activities:

(1) All advertising, brochures,

telemarketing scripts, and promotional

materials;

(2) The name and address of each

prize recipient and the prize awarded;

(3) The name and address of each

customer, the goods or services

purchased, the date such goods or

services were shipped or provided, and

the amount paid by the customer for the

goods or services;

(4) The name, home address and

telephone number, and job title(s) for all

current and former employees directly

involved in telephone sales; and

(5) Any written notices, disclosures,

and acknowledgements required to be

provided or received under this Rule.

(b) Failure to keep all records required

by § 310.5(a) shall be a violation of this

Rule. The seller and telemarketer calling

on behalf of the seller are not required

to keep duplicative records if the seller

and telemarketer have entered into a

written agreement allocating

responsibility for the recordkeeping

required by this Section. When a seller

and telemarketer have entered into such

an agreement, the terms of that

agreement shall govern. If the agreement

is unclear as to whom must maintain

any required record(s), the seller shall

be responsible for keeping such

record(s).

(c) In the event of any dissolution or

termination of the seller’s or

telemarketer’s business, the principal of

that seller or telemarketer shall maintain

all records as required under this

Section. In the event of any sale,

assignment, succession, or other change

in ownership of the seller’s or

telemarketer’s business, the successor

business shall maintain all records

required under this Section.

§ 310.6 Exemptions.

The following acts or practices are

exempt from this Rule:

(a) The solicitation of sales by any

person who engages in fewer than ten

(10) sales each year through the use of

the telephone;

(b) Telephonic contacts between

businesses, except such contacts

involving the sale of office or cleaning

supplies or the inducement of payment

for any charitable service promoted in

conjunction with an offer of a prize,

chance to win a prize, or the

opportunity to purchase any goods or

services; and

(c) A telephonic contact made solely

by a person when there has been no

initial sales contact directed to that

particular person, by telephone or

otherwise, from the seller or

telemarketer; provided, however, that

this exemption does not apply to such
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Proposed Rules 8333

1 Guidance for the Initial Implementation of

Section 112(g), Memorandum from John S. Seitz to

EPA Regional Air Division Directors, June 28, 1994.

2For State and regulated community comments

submitted on the proposed section 112(g) rule, see

Docket Number A–91–64 inserts IV-D–199, IV-D–

213, IV-D–217, IV-D–219, IV-D–222, IV-D–229, IVD–255, IV-D–295, IV-D–323, IV-D–333, IV-D–337,

IV-D-PH217, IV-D–199, IV-D–213, IV-D–295, IV-DPH221, and IV-D-PH222.

contacts related to employment services

where the seller or telemarketer requests

or receives payment prior to providing

the promised services, business

ventures, investment opportunities,

prize promotions, or credit-related

programs.

§ 310.7 Actions by States and private

persons.

Any attorney general or other officer

of a State authorized by the State to

bring an action under the Telemarketing

and Consumer Fraud and Abuse

Prevention Act, and any private person

who brings an action under that Act,

shall serve written notice of its action

on the Commission, if feasible, prior to

its initiating an action under this Rule.

The notice shall be sent to the Office of

the Director, Bureau of Consumer

Protection, Federal Trade Commission,

Washington, D.C. 20580, and shall

include a copy of the State’s or private

person’s complaint and any other

pleadings to be filed with the court. If

prior notice is not feasible, the State or

private person shall serve the

Commission with the required notice

immediately upon instituting its action.

§ 310.8 Federal preemption.

Nothing in this Rule shall be

construed to preempt any State law that

is not in direct conflict with any

provision of this Rule.

§ 310.9 Severability.

The provisions of this Rule are

separate and severable from one

another. If any provision is stayed or

determined to be invalid, it is the

Commission’s intention that the

remaining provisions shall continue in

effect.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 95–3537 Filed 2–13–95; 8:45 am]

BILLING CODE 6750–01–P

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 63

[AD–FRL–5155–2]

Hazardous Air Pollutants: Provisions

Governing Constructed,

Reconstructed or Modified Major

Sources

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Interpretive notice.

SUMMARY: This notice announces the

EPA’s revised interpretation of the

Clean Air Act’s (Act) requirements

regarding the effective date of section

112(g) of the Act. The interpretation

adopted here postpones the effective

date of section 112(g) until after the EPA

has promulgated a rule addressing that

provision.

EFFECTIVE DATE: February 14, 1995.

FOR FURTHER INFORMATION CONTACT: Ms.

Kathy Kaufman at (919) 541–0102,

Information Transfer and Program

Integration Division (MD–12), U. S.

Environmental Protection Agency,

Research Triangle Park, North Carolina

27711.

SUPPLEMENTARY INFORMATION:

I. Summary of EPA’s Policy

The Administrator of the EPA is today

announcing the EPA’s interpretation of

the Act requirements regarding the

effective date of section 112(g) during

the period prior to promulgation of a

Federal rule addressing implementation

of that section. This notice effects

changes from the view embodied in the

preamble to the proposed rulemaking

under section 112(g), Federal Register

notices of proposed and final approvals

of operating permits programs under

title V of the Act, and in guidance

issued by the EPA’s Office of Air

Quality Planning and Standards

(OAQPS).

For the reasons set forth in this notice,

the EPA now interprets section 112(g)

not to take effect before the EPA issues

notice and comment guidance

addressing implementation of that

section. In the interim period before this

guidance is promulgated, States may, as

a matter of State law, implement a

program for the review of section 112(g)

modifications, constructions, or

reconstructions. However, the section

112(g) requirement that major source

modifications, constructions, or

reconstructions meet the maximum

achievable control technology

(MACT)—as determined on a case-bycase basis where no Federal standard for

a source category has been set—will not

take effect as a matter of Federal law

until the section 112(g) rule is

promulgated.

II. Discussion

A. Requirements of Section 112(g).

Previous Policy Position

After the effective date of a title V

permit program in a State, section 112(g)

prohibits any person from constructing

or reconstructing a major source of

hazardous air pollutants (HAP), or

modifying a major HAP’s source,

without a determination from ‘‘the

Administrator (or the State)’’ that MACT

will be met. The determination must be

on a case-by-case basis by ‘‘the

Administrator (or the State)’’ if no

MACT standard has been issued.

Section 112(g)(1)(B) also provides that

the Administrator ‘‘shall, after notice

and opportunity for comment and not

later than [May 15, 1992] publish

guidance with respect to

implementation of this subsection.’’ The

guidance must address the relative

hazard of HAP in a manner ‘‘sufficient

to facilitate the offset showing’’ allowed

in the definition of ‘‘modification.’’

The EPA proposed a rule

implementing section 112(g) on April 1,

1994 (59 FR 15504). The EPA currently

anticipates promulgation of this rule

during the summer of 1995. In

anticipation of the fact that many title

V permit programs would be approved

before the section 112(g) rule was

promulgated, the OAQPS issued a

guidance memorandum on June 28,

1994 1 to assist States in their

implementation of section 112(g) during

this transition period. The guidance

states that section 112(g) takes effect

upon approval of a title V program in a

State regardless of whether the EPA’s

rule has been promulgated. The

guidance also offers suggestions for how

States may implement section 112(g)

during the transition period.

To date, the EPA has approved several

title V programs, the first of which was

for the State of Washington on

November 9, 1994 (59 FR 55813). EPA

also has proposed approval of numerous

other programs. In each of these notices,

the Agency has restated its position that

the requirements of section 112(g)

would take effect in these States upon

approval of the title V program, and has

described its understanding of how

section 112(g) would be implemented in

that State during the transition period.

B. Reconsideration Based on Concerns

Raised

States and the regulated community

have voiced considerable concern with

the impracticality of implementation of

section 112(g) during the transition

period.2 These concerns have focused

on the provisions for determining the

applicability of section 112(g), and in

particular on provisions addressing de

minimis levels and offsets for

modifications, as well as the definition

of ‘‘major source’’ for constructions and