Nonprofit Solicitation under the Telemarketing Sales Rule

I. INTRODUCTION II. FTC STATUTORY AUTHORITY TO REGULATE NONPROFIT SOLICITATION III. FREE SPEECH PROTECTION FOR CHARITABLE SOLICITATION A. Fraud as a Compelling Interest to Support Regulation of Nonprofit Solicitation under the TSR B. Privacy as a Compelling Interest to Support Regulation of Nonprofit Solicitation under the TSR C. Narrow Tailoring of the TSR IV. CONCLUSION I. INTRODUCTION In 2003, the Federal Trade Commission ("FTC") revised its Telemarketing Sales Rule ("TSR") to establish a national Do-Not-Call Registry for commercial telemarketing. (1) Thereafter, Congress directed the Federal Communications Commission ("FCC") to coordinate its telemarketing regulations under the Telephone Consumer Protection Act ("TCPA") of 1991 (2) to achieve maximum consistency between the two agencies' telemarketing restrictions. (3) Now, the two agencies enforce a single list containing the personal telephone numbers of consumers who do not wish to receive calls from telemarketers. (4) Based on the agencies' different statutory authorities, some parties are exempt from the FTC rule (banks and insurance companies for example) but are covered by the FCC rules. Nonprofit solicitation is exempt from the national Do-Not-Call Registry, (5) but is covered by other provisions of the FTC rule. (6) The TSR created a new in-house no-call list requirement and imposed additional restrictions not previously known for nonprofit solicitors. (7) These restrictions apply, however, only if a commercial telemarketer is conducting the solicitation call. (8) The federal Do-Not-Call System does not preempt any existing state registry. (9) Many states have merged their registries with the federal list, saving their residents from having to register twice. Some states, however, believe their systems provide better consumer protection, usually because of narrower exceptions. These states will continue to enforce their lists separately. (10) Most states exempt nonprofit solicitation from their requirements. North Dakota had rules that covered nonprofit solicitation if it was conducted by a for-profit telemarketer, similar to the FTC construct. (11) In 2004, the Tenth Circuit Federal Court of Appeals upheld the validity of the new federal Do-Not-Call Registry. (12) The Supreme Court declined to hear the matter on appeal, leaving the Mainstream Marketing opinion as the final constitutional law regarding the national Do-Not-Call List. (13) Nevertheless, its outcome expressly does not apply to any solicitation on behalf of nonprofit organizations. (14) The separate nonprofit provisions of the TSR raise different issues regarding the scope of FTC authority and First Amendment rights of nonprofit organizations. These regulations are being disputed in separate litigation from the challenge to the national Do-Not-Call Registry. (15) This Article looks at the current state of regulatory activity targeting charitable telephone solicitation. First, the Article examines the FTC's authority to adopt the provisions of the TSR that apply to nonprofit organizations. (16) Second, this Article explains the free speech jurisprudence that charitable solicitation cannot be regulated like other commercial messages. (17) Finally, the Article looks at the new FTC restrictions on nonprofit solicitation to determine if they can withstand Constitutional scrutiny. (18) II. FTC STATUTORY AUTHORITY TO REGULATE NONPROFIT SOLICITATION The FTC's restrictions on nonprofit solicitation are based on new mandates under the Uniting and Strengthening America by Providing Appropriate Tools Required to Interrupt and Obstruct Terrorism Act of 2001 ("USA PATRIOT Act"). (19) Often lost in the public debate regarding the USA PATRIOT Act are the provisions that swept charitable solicitation into existing telemarketing statutes. Previously, telephone solicitation by nonprofit organizations had been exempt from the federal Telemarketing and Consumer Fraud and Prevention Abuse Act, which is the FTC's statutory authority underlying the Telemarketing Sales Rule. …