Source: http://www.ftc.gov/tips-advice/business-center/complying-telemarketing-sales-rule
Timestamp: 2015-01-29 06:24:35
Document Index: 102995090

Matched Legal Cases: ['art 435', 'art 308', 'art 436', 'art 437', '§ 1643', '§ 1693']

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Telemarketing Sales Rule If your business or organization uses telemarketing, this in-depth guide is a “must read.” Review the dos and don’ts to make sure you’re up on the law, including the ban on most prerecorded robocalls. Introduction
Unsolicited Calls from Consumers Most Calls in Response to a Catalog
Business-to-Business Solicitation Calls, Unless They Involve the Sale of Nondurable Office or Cleaning Supplies
Calls Relating to the Sale of Franchises and Business Opportunities
Sellers and Telemarketers Must Disclose Material Information What Information Must Sellers and Telemarketers Provide to Consumers? Cost and Quantity Material Restrictions, Limitations, or Conditions
No-Refund Policy Prize Promotions
Credit Card Loss Protection Negative Option Features Debt Relief Services
Cost and Quantity Material Restrictions, Limitations, or Conditions
Performance, Efficacy, or Central Characteristics
Refund, Repurchase, or Cancellation Policies
Material Aspects of Prize Promotions Material Aspects of Investment Opportunities Affiliations, Endorsements, or Sponsorship
Charitable Solicitation Calls The Nature, Purpose, or Mission of Entity on Whose Behalf Solicitation is Made
Tax Deductibility Purpose of a Contribution Percentage or Amount of Contribution that Goes to a Charitable Organization or Program Material Aspects of Prize Promotions
Affiliations, Endorsements, or Sponsorship Payment Methods Other than Debit and Credit Cards
Assisting and Facilitating Sellers or Telemarketers Who Violate the Rule is Prohibited Credit Card Laundering is Prohibited Unauthorized Billing Express Informed Consent is Required in Every Telemarketing Transaction Obtaining Express Informed Consent in Telemarketing Transactions Involving Pre-acquired Account Information
When the offer includes a free-to-pay conversion feature
When the offer does not include a free-to-pay conversion feature Protecting Consumers’ Privacy The Do Not Call Provisions
Small, Home-Based Sellers Do Not Call Safe Harbor
Exemptions to the National Do Not Call Registry Provisions The Established Business Relationship Exemption The Written Permission to Call Exemption Other Provisions Relating to Do Not Call Selling or Using a Do Not Call List for Purposes Other than Compliance Denying or Interfering with Someone’s Do Not Call Rights Calling Time Restrictions Call Abandonment and Safe Harbor Telemarketing Calls That Deliver Prerecorded Messages
The Written Agreement Requirement
The Requirement that Prerecorded Telemarketing Messages Include an Automated Interactive Opt-Out Mechanism
Calls that Deliver Purely “Informational” Prerecorded Messages
Exemptions from the Prerecorded Call Requirements
Healthcare Message Exemption
Charitable Fundraising Message Exemption
Transmitting Caller ID Information Threats, Intimidation, and Profane or Obscene Language Calling Consumers Repeatedly or Continuously, with the Intent to Annoy, Abuse, or Harass
Payment Restrictions on Sales of Credit Repair Services Payment Restrictions on Sales of Recovery Services Payment Restrictions on Sales of Advance-Fee Loans Payment Restrictions on Sales of Debt Relief Services
Recordkeeping Requirements Advertising and Promotional Materials Information about Prize Recipients Sales Records
Employee Records Verifiable Authorizations or Records of Express Informed Consent or Agreement
The Federal Trade Commission (FTC) has issued amendments to the Telemarketing Sales Rule (TSR) in 2003, 2008, and 2010. Like the original TSR issued in 1995, the amended Rule gives effect to the Telemarketing and Consumer Fraud and Abuse Prevention Act. This legislation gives the FTC and state attorneys general law enforcement tools to combat telemarketing fraud, gives consumers added privacy protections and defenses against unscrupulous telemarketers, and helps consumers tell the difference between fraudulent and legitimate telemarketing.
In August 2008 the Commission adopted additional amendments to the TSR that directly address the use of prerecorded messages in telemarketing calls. These amendments are fully explained in this manual.
In August 2010 the Commission further amended the TSR to address deceptive and abusive practices associated with debt relief services. These amendments are explained in this manual.
The Federal Communications Commission (FCC) enforces the Telephone Consumer Protection Act (TCPA), which also regulates telemarketing. The FCC recently amended its TCPA regulations, which touch on many of the topics covered by the TSR. For more information about the TCPA, contact the FCC at www.fcc.gov. The TSR and the TCPA regulations cover nearly all telemarketing with similar rules.
If your telemarketing campaigns involve any calls across state lines — whether you make outbound calls or receive calls in response to advertising — you may be subject to the TSR’s provisions. This guide describes the types of organizations and activities that are subject to the TSR and explains how to comply. It is the FTC staff ’s view of the law’s requirements and is not binding on the Commission.
creates an "established business relationship" exception to the National Do Not Call provisions so that a company may call a consumer with whom it has such a relationship, even if the consumer's number is on the Registry.
allows a company to call a consumer who has given the company express written permission to call, even if the consumer's number is on the Registry.
prohibits denying or interfering with a consumer's Do Not Call request.
covers charitable solicitations placed by for-profit telefunders. (The National Do Not Call Registry provisions do not apply to for-profit telefunders; rather, for-profit telefunders must keep their own Do Not Call lists and honor call recipients' requests not to be called.)
requires sellers and telemarketers to disclose specific information regarding debt relief services.
prohibits misrepresentations in the sale of debt relief services.
prohibits sellers and telemarketers from collecting any fees for a debt relief service from a customer before settling or otherwise resolving the consumer's debts.
requires sellers and telemarketers to get a consumer's express informed consent before submitting the consumer's billing information for payment.
sets out guidelines for what constitutes evidence of express informed consent in transactions involving "pre-acquired account information" and "free-to-pay conversion" offers.
requires telemarketers, for purposes of Caller ID, to transmit the telephone number, and, when made available by the telemarketer's telephone company, the telemarketer's name.
prohibits telemarketing calls placed on and after September 1, 2009, that deliver prerecorded messages, whether answered in person by a consumer or by an answering machine or voicemail service, unless the seller has previously obtained the call recipient's written and signed agreement (which may be obtained electronically under the E-Sign Act) to receive such calls.
requires any permitted prerecorded message telemarketing call that could be answered in person by a consumer to include an automated interactive opt-out mechanism available at all times during the message.
requires any permitted prerecorded message telemarketing call that could be answered by an answering machine or voice mail service to include a toll-free telephone number that enables the call recipient to call back and connect directly to an automated opt-out mechanism
exempts from the written agreement requirement of the amendment charitable solicitation calls placed by for-profit telemarketers (“telefunders”) that deliver prerecorded messages on behalf of non-profits to members of, or previous donors to the non-profit, but requires that such calls include a prompt keypress or voice-activated opt-out mechanism.
exempts healthcare-related prerecorded message calls that are subject to the Health Insurance Portability and Accountability Act of 1996 from the prohibition on telemarketing calls that deliver prerecorded messages.
extends the applicability of most provisions of the Rule to "upselling."
narrows certain of the original TSR’s exemptions.
The USA PATRIOT Act, passed in 2001, brought charitable solicitations by for-profit telemarketers within the scope of the TSR. As a result, most of the TSR’s provisions now are applicable to “telefunders” — telemarketers who solicit charitable contributions.
include in any prerecorded message call on behalf of a non-profit organization to a member of, or previous donor to, the non-profit, a prompt keypress or voice-activated opt-out mechanism.
placing “cold” calls that deliver prerecorded messages.
The amended TSR regulates “telemarketing” — defined in the Rule as “a plan, program, or campaign . . . to induce the purchase of goods or services or a charitable contribution” involving more than one interstate telephone call. (The FCC regulates both intrastate and interstate calling. More information is available from www.fcc.gov.) With some important exceptions, any businesses or individuals that take part in “telemarketing” must comply with the Rule. This is true whether, as “telemarketers,” they initiate or receive telephone calls to or from consumers, or as “sellers,” they provide, offer to provide, or arrange to provide goods or services to consumers in exchange for payment. It makes no difference whether a company makes or receives calls using low-tech equipment or the newest technology — such as voice response units (VRUs) and other automated systems. Similarly, it makes no difference whether the calls are made from outside the United States; so long as they are made to consumers in the United States, those making the calls, unless otherwise exempt, must comply with the TSR’s provisions. If the calls are made to induce the purchase of goods, services, or a charitable contribution, the company is engaging in “telemarketing.”
Some types of businesses, individuals, and activities are outside the FTC’s jurisdiction, and therefore, not covered by the TSR. Certain calls or callers are exempt from the Rule, too. Moreover, some of the exemptions from the original Rule have been narrowed in the Amended Rule. As a result, some calls or callers may be completely exempt or they may be partially exempt — that is, they may have to comply with some of the Rule’s provisions. The following sections explain the coverage of the Rule and the exemptions. Be aware that the FCC also regulates telemarketing practices; its jurisdiction extends to some entities and activities that are not subject to regulation by the FTC. For more information about the FCC’s rules, visit www.fcc.gov.
common carriers — such as long-distance telephone companies and airlines — when they are engaging in common carrier activity.
non-profit organizations — those entities that are not organized to carry on business for their own, or their members’, profit.
The McCarran-Ferguson Act provides that the FTC Act, and by extension, the TSR, are applicable to the business of insurance to the extent that such business is not regulated by state law. Whether the McCarran-Ferguson exemption removes insurance-related telemarketing from coverage of the TSR depends on the extent to which state law regulates the telemarketing at issue and whether enforcement of the TSR would conflict with, and effectively supersede, those state regulations. Unlike the jurisdictional exemptions for banks and non-profit organizations, which do not extend to third-party telemarketers making calls on their behalf, in the case of the telemarketing of insurance products and services, the TSR does not necessarily apply simply because the campaign is conducted by a third-party telemarketer.
Consumer calls in response to a recorded message: Calls are not considered “unsolicited” when placed by consumers in response to a recorded message — whether left on the consumer’s answering machine, or presented when the consumer answers under the call abandonment “safe harbor.”
the catalog seller doesn’t solicit consumers by telephone, but only receives calls initiated by consumers in response to the catalog, and during the calls, only accepts orders without additional solicitation. The catalog seller may provide the consumer with information about — or attempt to sell the consumer — other items in the same catalog that prompted the consumer’s call or in a similar catalog.
If a telemarketer offers goods or services that are not in the catalog that prompted the consumer’s call — or in a substantially similar catalog — the sales transaction is covered by the Rule. Regardless of the TSR’s application to a particular sale, catalog merchandise sales also are covered by the FTC’s Mail or Telephone Order Merchandise Rule (16 C.F.R. Part 435).
Most phone calls between a telemarketer and a business are exempt from the Rule. However, telemarketing calls that solicit consumers at their work – i.e., calls to business lines that solicit individual employees to purchase products or services for their own use or make personal charitable contributions – are not business-to-business solicitations and therefore are not exempt from the Rule.
In addition, business-to-business calls to induce the retail sale of nondurable office or cleaning supplies are not exempt. Examples of nondurable office or cleaning supplies include paper, pencils, solvents, copying machine toner, and ink — in short, anything that, when used, is depleted, and must be replaced. Such goods as software, computer disks, copiers, computers, mops, and buckets are considered durable because they can be used again.
The Rule generally does not apply to consumer calls made in response to general media advertising, including: television commercials; infomercials; home shopping programs; print advertisements in magazines, newspapers, the Yellow Pages, or similar general directories; radio ads; banner ads on the Internet; and other forms of mass media advertising and solicitation. Nevertheless, if a seller or telemarketer “upsells” a consumer during a call initiated by the consumer, the upsell is covered by the Rule. In addition, the Rule does cover calls from consumers in response to general media advertisements relating to:
franchises not covered by the FTC's Amended Franchise Rule,
credit card loss protection,
advance-fee loans, or
investment opportunities 2, or
There is no exemption for calls responding to any direct mail advertising that relates to credit card loss protection, credit repair, recovery services, advance-fee loans, investment opportunities, prize promotions, or business opportunities. This is regardless of whether the advertisement makes the disclosures required by the Rule and contains no misrepresentations.
calls relating to the sale of franchises and business opportunities.
Partial coverage under the TSR does not affect the obligation of sellers and providers of 900-Number Services to comply with the 900-Number Rule (16 C.F. R. Part 308).
Calls relating to the sale of franchises that are covered by the FTC’s Amended Franchise Rule (16 C.F.R. Part 436) and business opportunities subject to the Business Opportunities Rule (16 C.F.R. Part 437) are exempt from most provisions of the TSR. To comply with the TSR, sellers and telemarketers selling franchises subject to the Franchise Rule or business opportunities subject to the Business Opportunities Rule must not:
Partial coverage under the TSR does not affect the obligation of franchisors to comply with the Amended Franchise Rule.
The key to the face-to-face exemption is the direct and personal contact between the buyer and seller. The goal of the Rule is to protect consumers against deceptive or abusive practices that can arise when a consumer has no direct contact with an invisible and anonymous seller other than the telephone sales call. A face-to-face meeting provides the consumer with more information about — and direct contact with — the seller, and helps limit potential problems the Rule is designed to remedy.
The Rule requires sellers and telemarketers, whether making outbound calls to consumers or receiving inbound calls from consumers, to provide certain material information before the consumer pays for the goods or services that are the subject of the sales offer. Material information is information that would likely affect a person’s choice of goods or services or the person’s decision to make a charitable contribution. More simply, it is information a consumer needs to make an informed decision about whether to purchase goods or services or make a donation. Sellers and telemarketers may provide the material information either orally or in writing. Failure to provide any of the required information truthfully and in a “clear and conspicuous” manner, before the consumer pays for the goods or services offered, is a deceptive telemarketing act or practice that violates the Rule and subjects a seller or telemarketer to a civil penalty of $16,000 for each violation.
Before a Consumer Consents to Pay: Before sellers and telemarketers get a consumer’s consent to purchase — or persuade a consumer to send full or partial payment by check, money order, wire, cash, or any other means — they must provide the consumer with the information required by Section 310.3(a)(1) of the Rule. Sellers and telemarketers also must provide the required information before asking for any credit card, bank account, or other information that they will or could use to obtain payment. In addition, sellers and telemarketers must provide the required information before requesting, arranging for, or asking a consumer to request or arrange for a courier to pick up payment for the goods or services offered. Couriers include Federal Express, DHL, UPS, agents of the seller or telemarketer, or any other person who will go to a consumer’s home or other location to pick up payment for the goods or services being offered.
Clear and Conspicuous: Clear and conspicuous means that information is presented in a way that a consumer will notice and understand. The goal is that disclosures be communicated as effectively as the sales message. When written, clear and conspicuous information generally is printed in a type size that a consumer can readily see and understand; that has the same emphasis and degree of contrast with the background as the sales offer; and that is not buried on the back or bottom, or in unrelated information that a person wouldn’t think important enough to read. When a seller or telemarketer makes required disclosures in a written document that is sent to a consumer and follows up with an outbound sales call to the consumer, the disclosures are considered clear and conspicuous only if they are sent close enough in time to the call so that the consumer associates the call with the written disclosures. When disclosures are oral, clear and conspicuous means at an understandable speed and pace and in the same tone and volume as the sales offer.
The law requires that when sellers and telemarketers offer to sell goods or services, they must provide the consumer with material information about the offered goods or services necessary to avoid misleading consumers. The term material means likely to affect someone’s choice of goods or services or decision to make a charitable contribution, or someone’s conduct with regard to a purchase or donation.
The Rule requires sellers and telemarketers to disclose the total costs to purchase, receive, or use the offered goods or services. While disclosing the total number of installment payments and the amount of each payment satisfies this requirement, the number and amount of such payments must correlate to the billing schedule that will be implemented. For example, the Rule’s requirements would not be met if you were to state the product’s cost per week if the consumer has to pay installments on a monthly or quarterly basis. The Rule also requires you to tell a consumer the total quantity of goods the consumer must pay for and receive. You must provide both these items of material information to the consumer before the consumer pays for the goods or services that are the subject of the sales offer. You may provide this material information orally or in writing, as long as the information is clear and conspicuous.
If there’s a policy of honoring requests for refunds, cancellations of sales or orders, exchanges, or re-purchases, sellers and telemarketers must disclose information about the policy only if they make a statement about the policy during the sales presentation. If the sales presentation includes a statement about such a policy, it must also include a clear and conspicuous disclosure of all terms and conditions of the policy that are likely to affect a consumer’s decision on whether to purchase the goods or services offered.
If the seller’s policy is that “all sales are final” — that is, no refunds, cancellations of sales or orders, or exchanges or re-purchases are allowed — the Rule requires you to let consumers know before they pay for the goods or services being offered. You may give this information to consumers orally or in writing, and the information must be clear and conspicuous.
that they can participate in the prize promotion or win a prize without buying anything or making any payment, and that any purchase or payment will not increase the chances of winning. When offering a prize promotion in outbound calls, you must disclose this information orally and promptly. A legitimate prize promotion does not require any purchase or payment of money for a consumer to participate or win. If a purchase or payment of money is required for eligibility for a prize, it is not a prize promotion; it is a lottery, which is generally unlawful under federal and state lottery laws.
A seller or telemarketer offering a credit card loss protection plan — one that claims to protect, insure, or otherwise limit a consumer’s liability in the event of unauthorized use of a customer’s credit card — must disclose the limits on a cardholder’s liability under federal law for unauthorized use of a credit card (15 U.S.C. § 1643). Since the law limits cardholder liability for unauthorized use — for example, when a credit card is lost or stolen — to no more than $50, disclosure of this information to consumers will help ensure that they have the material information necessary to decide whether the protection plan offered is worth the cost.
the fact that the customer’s account will be charged unless he or she takes an affirmative action — such as canceling — to avoid the charge.
While the best practice is to provide an actual date on which payment will be submitted, it is acceptable to disclose an approximate date if you don’t — or can’t — know the actual date, provided the approximate date gives the consumer reasonable notice of when to expect the debit or charge. As for disclosing how the consumer can avoid charges, it is not sufficient under the Rule to disclose that a consumer would have to call a toll-free number to cancel without disclosing the number.
7. Debt Relief Services
The new Rule defines a "debt relief service" as a program that claims directly, or implies, that it can renegotiate, settle, or in some way change the terms of a person's debt to an unsecured creditor or debt collector. That includes reducing the balance, interest rates or fees a person owes.
Under the TSR, any seller or telemarketer of a debt relief service must truthfully, clearly, and conspicuously disclose five pieces of information:
how much the service costs as well as any material restrictions, limitations or conditions on the debt relief service. If the sales presentation includes a statement about the refund policy, you must also include a clear and conspicuous disclosure of all terms and conditions of the policy;
how long it will take the consumer to achieve the represented results based on a good faith estimate;
how much money a customer must save before you'll make a settlement offer to creditors;
the possible consequences if the customer fails to make timely payments to creditors; and
the customer's rights regarding dedicated accounts if you ask or require your customers to set aside funds in a dedicated account.
These same disclosures must be made in an upselling transaction if any of the information in these disclosures is different from the initial disclosures (if the initial transaction was an outbound call subject to the Rule) or if no disclosures were required in the initial transaction, such as a non-sales customer service call. For example, in an external upsell, where the second transaction in a single telephone call involves a second seller, you must tell the consumer the identity of the second seller — the one on whose behalf the upsell offer is being made. On the other hand, in an internal upsell, where additional goods or services are offered by the same seller as the initial transaction, no new disclosure of the seller’s identity is necessary because the information is the same as that provided in the initial transaction.
Multiple Purpose Calls. Some calls have more than one purpose. They may involve the sale of goods or services and another objective, like conducting a prize promotion or determining customer satisfaction. They may involve a charitable solicitation combined with a prize promotion. In any multiple purpose call where the seller or telemarketer is planning to sell goods or services in at least some of the calls, four disclosures must be made promptly — that is, during the first part of the call before the non-sales portion of the call. Similarly, in any multiple purpose call where the telemarketer is planning to solicit charitable contributions in at least some of the calls, two disclosures must be made promptly — that is, during the first part of the call, before the noncharitable solicitation part of the call.
In addition, the Rule prohibits sellers and telemarketers from misrepresenting specific categories of information about a telemarketing transaction that are likely to affect a consumer’s decision to purchase the goods or services offered. The Rule also prohibits both express and implied misrepresentations. Sellers and telemarketers cannot circumvent the Rule by creating a false impression in a consumer’s mind through the artful use of half-truths or misleading or incomplete information.
The Rule prohibits sellers and telemarketers from misrepresenting the total costs to purchase, receive, or use the goods or services offered, or the quantity of goods or services offered at the stated price. For example, you may not tell consumers that they may purchase a magazine subscription for three years at $1.50 a month, when the subscription is available at that price for one year only.
The Rule prohibits sellers and telemarketers from misrepresenting any material aspect — one that likely would have an effect on the onsumer’s purchasing decision — of the nature or terms of the seller’s refund, cancellation, exchange, or repurchase policies. For example, the Rule prohibits you from claiming that “our policy is to make our customers happy — if at any time you’re not absolutely delighted, just send the merchandise back,” if there are time limits, “restocking” charges, or other important restrictions on the return of the goods. It also prohibits sellers and telemarketers from claiming that tickets may be cancelled any time up to the date of an event when cancellation requests like that would not be honored.
The Rule prohibits sellers and telemarketers from misrepresenting affiliations with — or endorsements or sponsorships by — any person, organization, or government entity. For example, you cannot falsely claim that you’re a member of the Better Business Bureau or the local chamber of commerce, or that you’re affiliated with the local police or some national charity. Neither can you create the impression in a consumer’s mind that the postal permit number displayed on a mail solicitation is a sign that the U.S. Postal Service has approved a promotion. In addition, sellers and telemarketers cannot falsely claim or create the impression in a consumer’s mind that they are related to or affiliated with a company with which the consumer usually does business.
10. Debt Relief Services
The Rule prohibits sellers and telemarketers from misrepresenting any material aspect of a debt relief service, either explicitly or by implication, including: the amount of money or the percentage of the debt someone may save by using your service; the amount of time necessary to get the results you represent; the amount of money or the percentage of each outstanding debt the customer must accumulate before you'll begin your attempts to negotiate, settle or modify the terms with creditors; the amount of money or the percentage of each outstanding debt the customer must accumulate before you'll make a bona fide offer to negotiate, settle or modify the terms with creditors; the effect of your service on the customer's creditworthiness; the effect of your service on the collection efforts of any creditors or debt collectors; the percentage or number of customers who have gotten the results you represent; and whether your business is a bona fide nonprofit entity.
Whether a contribution is tax deductible — or an organization is tax exempt — may be an important consideration when potential donors are deciding whether or how much to contribute. The Rule therefore prohibits telefunders from misrepresenting, expressly or by implication, that any charitable contribution is partly or fully tax deductible, or falsely implying that an organization on whose behalf a contribution is solicited is “tax exempt.”
The Rule prohibits telefunders from misrepresenting the percentage or amount of the contribution that goes to a charitable organization or program. This prohibition covers statements made in response to the questions of potential donors, as well as unprompted standalone statements. Even though the TSR does not require you to affirmatively disclose the percentage or amount of the contribution that goes to a charitable organization or program, if a potential donor raises the question, you must answer truthfully and must not misrepresent this information in any way.
The Rule prohibits telefunders from misrepresenting their own or a charitable organization’s affiliation with, or endorsement or sponsorship by, any person, organizations, or government entity. For example, you cannot falsely claim that the organization on whose behalf you are calling is affiliated with, sponsored by, endorsed by, or otherwise approved by any other entity or organization. Nor could you falsely claim to be endorsed or “approved by” the local police. In addition, you cannot falsely claim — or create the impression — that you are related to or affiliated with a charity that the donor has heard of or contributed to in the past.
Who is responsible for obtaining verifiable authorization? Under the Rule, sellers and telemarketers that receive payment by methods other than credit or debit cards are responsible for obtaining verifiable authorization in those transactions. Even if you use the services of a third party to process or submit billing information other than credit or debit card information, you are responsible for ensuring that the disclosure requirements of the Rule for verifying authorization are met. Under the Rule, a third party also can be held liable for violating the Rule if the third party substantially assists a seller or telemarketer and knows — or consciously avoids knowing — that the seller or telemarketer is violating the Rule by failing to obtain verifiable authorization.
Any audio recording of an oral authorization 3 for payment must clearly demonstrate that the consumer has received each of seven specific pieces of information about the transaction and that the consumer has authorized that funds be taken from (or charged to) his or her account based on the required disclosures by the seller or telemarketer. A general question like, “Do you understand all the terms of the sale?” followed by a consumer’s “uh-huh” or “yeah” is not enough to demonstrate authorization. The tape recording must show that the consumer received each piece of information below and that, based on this information, the consumer understood and acknowledged each term of the transaction and authorized the transaction.
The Electronic Fund Transfer Act (EFTA) Other laws, such as the EFTA (15 U.S.C. § 1693 et seq.), may impose different obligations about obtaining a consumer’s authorization of a charge. It is the responsibility of each seller and telemarketer to determine how to comply with all applicable laws and rules. Compliance with the TSR requirements for obtaining authorization does not eliminate the obligation to comply with EFTA and other applicable laws.
If sellers and telemarketers choose verifiable authorization through written confirmation, they must send the confirmation to the consumer via first class mail — and identify it clearly and conspicuously as confirmation of payment — before submitting the consumer’s billing information for payment. That does not mean that you must wait to submit this information until a consumer receives the confirmation: The Rule requires only that you send it before you submit the billing information for payment.
This disclosure ensures that consumers know when to expect the charge or debit. To comply with this requirement, it makes good sense to provide an actual date on which payment will be submitted: “This debit from your checking account will occur on April 14, 2004.” However, it is acceptable for you to disclose an approximate date if you don’t — or can’t — know the actual date, provided the approximate date gives the consumer reasonable notice of when to expect the debit or charge. For example, you could tell a consumer, “The charge will appear on your next mortgage statement,” or “Your account will be charged within two weeks from today.”
Here’s how the system works for companies that make legitimate use of the credit card system: To be able to accept payment from a consumer who wants to charge the price of goods or services to a credit card, a seller or telemarketer must have a “merchant account” with a financial institution that is a member of a credit card system (for example, Visa or MasterCard) that issued the consumer’s credit card. When the consumer pays by credit card, the merchant generates a credit card sales draft. The seller then deposits the draft into the seller’s merchant account, and obtains the cash amount of the deposited draft. The financial institution sends the credit card sales draft through the particular credit card system, which posts a corresponding charge to the consumer’s credit card account.
In credit card laundering work, sellers and telemarketers who are unable to establish a merchant account with a financial institution sometimes use the unlawful services of a launderer (also known, inaccurately, as a “factor”). A launderer opens a “back door” into the credit card system by providing access to a merchant account — and the whole credit card collection and payment system — without the authorization of the financial institution or the credit card system. Except as expressly permitted by a credit card system, it is a Rule violation for anyone:
to obtain access to the credit card system through a business relationship or an affiliation with a merchant, when the access is not authorized under the terms of the merchant account or by the applicable credit card system.
It is a violation of the Rule to cause billing information to be submitted for payment — directly or indirectly — without the express informed consent of the customer or donor. The Rule requires that in any telemarketing transaction, sellers and telemarketers obtain the express informed consent of the customer or donor to be charged a specific amount on a particular identified account, to pay for the goods or services offered, or to make a charitable contribution.
The Rule contains no specific requirements for how sellers and telemarketers must obtain express informed consent in transactions where they do not use pre-acquired account information. As a practical matter, however, in these transactions it would be necessary for you to get the account number to be charged from the consumer, because the information isn’t available any other way. In obtaining this information from the consumer, you must get his express agreement to be charged for the goods or services being offered and to be charged using the account number he or she provides. Any false or misleading statement to induce someone to divulge his or her account information to pay for goods or services or to make a charitable contribution is an additional Rule violation.
For example, consent would not meet the requirement that it be “informed” if the consumer does not receive all the Rule’s required material disclosures — both the prompt oral disclosures for outbound calls and the disclosures of all material information required in all telemarketing transactions. Consent is an affirmative statement that the consumer agrees to purchase the goods or services (or to make the charitable contribution) and is aware that the charges will be billed to a particular account.
Obtaining the last four digits from the customer: To meet the requirement that sellers and telemarketers “obtain from the customer” at least the last four digits of the account number to be charged, you must ask the customer to provide this information, and the customer must provide it to demonstrate an understanding that by doing so, he or she is agreeing to make a purchase. You must inform the customer that you have the customer’s account number or the ability to charge the account without getting the full account number from the consumer. Reading the information to the customer and asking for confirmation of the digits is not complying with the Rule. Neither is it sufficient to read the digits to the customer, and then ask the customer to recite them back. In addition, it is not adequate to reuse digits that a customer may have provided for identification purposes during another portion of the call — such as in an inbound call where you ask the customer to provide his or her account number by pressing digits on the telephone keypad.
Express Agreement to be Charged: To meet the requirement that telemarketers get a customer’s express agreement to be charged for the goods and services — and to be charged using the account number for which he or she has provided at least four digits — you must ensure that the consumer expressly and unambiguously agrees to both the purchase and the means of payment. The four digits the customer provides must actually be the last four digits of the account to be charged. If the four digits the customer provides aren’t the last four digits of the account, the customer hasn’t expressly agreed to be charged, and the transaction is void for lack of express verifiable authorization.
placing an outbound telephone call delivering a prerecorded message to a person without that person’s express written agreement to receive such calls, and without providing an automated interactive opt-out mechanism.
It is a Rule violation to call any consumer who has asked not to be called again (the “entity-specific Do Not Call” provision). A telemarketer may not call a consumer who previously has asked not to receive any more calls from or on behalf of a particular seller or charitable organization. It also is a Rule violation for a seller who has been asked by a consumer not to call again to cause a telemarketer to call that consumer. Sellers and telemarketers are responsible for maintaining their individual Do Not Call lists of consumers who have asked not to receive calls placed by, or on behalf of, a particular seller. Calling a consumer who has asked not to be called potentially exposes a seller and telemarketer to a civil penalty of $16,000 per violation.
On the question of charitable solicitations, telefunders must maintain individual Do Not Call lists for charities on whose behalf they make telemarketing calls. Calling someone who has asked not to be called on behalf of a charitable organization potentially exposes the telefunder who places the call to a civil penalty of $16,000 per violation.
The FTC’s National Do Not Call Registry has been accepting registrations from consumers who choose not to receiving telemarketing sales calls since June 27, 2003. Consumers can place their telephone numbers on the National Registry by making a toll-free telephone call or via the Internet. Only telephone numbers are included in the National Registry. This means that all household members who share a number will stop receiving most telemarketing calls after the number is registered. Consumers may register both their residential “land line” telephone numbers and their wireless telephone numbers.
Sellers, telemarketers, and their service providers have been able to access the Registry through a dedicated Web site since September 2003. It is a Rule violation to make any covered calls beginning October 1, 2003 without having accessed the Registry. Sellers and telemarketers will have to update their call lists — that is, delete all numbers in the National Do Not Call Registry from their lists — at least every 31 days.
As of October 1, 2003, sellers and telemarketers are prohibited from calling any consumer whose number is in the database. Violators will be subject to civil penalties of up to $16,000 per violation, as well as injunctive remedies.
What calls are covered? The Do Not Call provisions of the TSR cover any plan, program, or campaign to sell goods or services involving interstate phone calls. This includes calls by telemarketers who solicit consumers, often on behalf of third-party sellers. It also includes sellers who are paid to provide, offer to provide, or arrange to provide goods or services to consumers. However, sellers and telemarketers should also be aware that the FCC regulates telemarketing calls. For more information, see the FCC’s Web site, www.fcc.gov.
What types of calls are not covered by the National Do Not Call Registry? The Do Not Call provisions do not cover calls from political organizations, charities, telephone surveyors, or companies with which a consumer has an existing business relationship. However, sellers and telemarketers should also be aware that the FCC regulates telemarketing calls. For more information, see the FCC’s Web site, www.fcc.gov.
If a call includes a telephone survey and a sales pitch, is it covered? Yes. Callers purporting to take a survey, but also offering to sell goods or services, must comply with the Do Not Call provisions. But if the call is for the sole purpose of conducting a survey, it is exempt. However, sellers and telemarketers should also be aware that the FCC regulates telemarketing calls. For more information, see the FCC’s Web site, www.fcc.gov.
Who can access the National Registry? Access to the National Registry is limited to sellers, telemarketers, and other service providers. Sellers are companies that provide, offer to provide, or arrange for others to provide goods or services to a customer in return for some type of payment as part of a telemarketing transaction. Telemarketers are companies that make telephone calls to consumers on behalf of sellers. Service providers are companies that offer services to sellers engaged in telemarketing transactions, such as providing lists of telephone numbers to call, or removing telephone numbers from the sellers’ lists.
Can I use numbers on the National Registry for any purpose other than preventing telemarketing calls? No. The National Registry may not be used for any purpose other than preventing telemarketing calls to the telephone numbers on the Registry. Any entity that accesses the National Registry will be required to certify, under penalty of law, that it is accessing the Registry solely to comply with the TSR or to prevent calls to numbers on the Registry.
How can I access the National Registry? The FTC has a fully automated and secure Web site at www.telemarketing.donotcall.gov to provide members of the telemarketing industry with access to the National Registry’s database of telephone numbers, sorted by area code. The first time you access the National Registry, you must provide identifying information about yourself and your company. If you are a telemarketer or service provider accessing the National Registry on behalf of your seller-clients, you will be required to identify your seller-clients and provide their unique account numbers. The only consumer information available from the National Registry is telephone numbers. After you (or the company telemarketing on your behalf) have accessed the National Registry the first time, you’ll have the option of downloading only changes in the data that have occurred since the last time you accessed the Registry.
What information must I provide to access the National Registry? The first time you access the system, you will be asked to provide certain limited identifying information, such as your company name and address, contact person, and the contact person’s telephone number and email address. If you are accessing the National Registry on behalf of a seller-client, you also will have to identify that seller-client.
How often will I have to access the National Registry and remove numbers from my calling list? You must synchronize your lists with an updated version of the National Registry every 31 days.
How often may I download data from the National Registry? You will be able to access data as often as you like during the course of your annual period for those area codes for which you have paid. However, to protect system integrity, you may download data files from the National Registry only once in any 24-hour period.
What information can I access from the National Registry? The only consumer information that companies receive from the National Registry is registrants’ telephone numbers. The numbers are sorted and available by area code. Companies may access as many area codes as desired (and paid for), by selecting, for example, all area codes within a certain state. Of course, companies may access the entire National Registry.
May I check just a few numbers at a time to see if they are registered? Companies that have provided the required identification information and certification and paid the appropriate fee (if they want to access more than five area codes) may check a small number of telephone numbers (10 or less) at a time via interactive Internet pages. This permits small volume callers to comply with the Do Not Call requirements of the TSR without having to download a potentially large list of all registered telephone numbers within a particular area.
What format will the National Registry use? Data is available from the National Registry using Internet-based formats and download methods that serve both small and large businesses. Data also is available in three different sets: full lists, change lists, and small list look-ups. Full lists and change lists are available as flat files or XML tagged data files. You can indicate your preference for flat files or XML tagged data files as part of your profile.
With a Web browser, you can access a secure Web page that allows you to select the download set that you prefer. For the small list look-up, you will be asked to enter from one to 10 telephone numbers on an online form. After entering the numbers and clicking on a button, the National Registry will display the list of numbers you entered and whether each number is in the Registry.
You are limited to the numbers in the area code(s) to which you have subscribed. The full list contains just 10-digit telephone numbers, with a single number on each line. For the change list in flat file format, each line of the file contains a telephone number, the date of the change, and an “A” (for Added) or “D” (for Deleted). The change list data is fixed-width fields.
For those who select XML tagged data, the XML tags include: a login and encrypted password; the name and email address of the company contact person; certification that access to the National Registry is solely to comply with the provisions of the TSR; the account number(s) for which the download is being performed; and whether a full list or change list is to be downloaded.
For both flat files and XML tagged data, if you select a change list, you will be provided all telephone numbers that have been added to, or deleted from, the National Registry since the date of your previous access. Change lists, for both flat files and XML tagged data, are available to provide changes on a daily basis (representing the additions and deletions from the day before).
How much does it cost to access the Registry? The Do-Not-Call Registry Fee Extension Act of 2007 set the annual fees for accessing the Registry in fiscal year 2009; in accordance with the Act, for each fiscal year after 2009, the fees will be increased at the rate of change of the consumer price index, unless the change is less than 1 percent, in which case the fees will not be adjusted. For fiscal year 2013, beginning October 1, 2012, the annual fee will be $58 for each area code of data accessed or $15,963 for access to every area code in the registry, whichever is less. The first 5 area codes of data may be accessed at no charge. Certain exempt organizations may access all data at no charge.
Who must pay the fee? All sellers covered by the TSR must pay the appropriate fee for an area code of data before they call, or cause a telemarketer to call, any consumer within that area code, even those consumers whose telephone numbers are not on the National Registry. The only exceptions are for sellers that call only consumers with which they have an existing business relationship or written agreement to call, and do not access the National Registry for any other purpose. Charities and political organizations that voluntarily want to suppress calls to consumers whose numbers are on the Registry may access the Registry at no cost.
How can I pay the fee? Fees are payable via credit card (which permits the transfer of data in the same session, if the payment is approved) or electronic fund transfer (EFT). EFT requires you to wait approximately three days for the funds to clear before data access can be provided. You must pay the fee prior to gaining access to the National Registry. Sellers and exempt entities can pay the fee directly or through their telemarketers or service providers (to which the seller or exempt entity has provided the necessary authority).
What if I pay for a small number of area codes, and then later in the year expand my business to call more area codes? Will I have to pay twice? If you need to access data from more area codes than you initially selected, you may do so, but you will have to pay for access to those additional area codes. For fiscal year 2013, beginning October 1, 2012, obtaining additional data from the National Registry during the first six months of your annual period will require a payment of $58 for each new area code. During the second six month period, the charge to obtain data from each new area code is $29. Payment for additional data provides you with access to the additional data for the remainder of your annual period.
What happens after I pay for access? After payment is processed, you will be given a unique account number and permitted access to the appropriate portions of the National Registry. Using that account number in future visits to the Web site will speed the time needed for access. On subsequent visits to the Web site, you will be able to download either a full updated list of numbers from your selected area codes or a more limited list, consisting of changes to the National Registry (both additions and deletions) that have occurred since the day of your last download. This limits the amount of data that you need to download during each visit. The change file will consist of each telephone number that has changed, whether it was added or deleted, and the date of the change.
If a telemarketer or service provider is accessing the National Registry directly — that is, if a telemarketer or service provider decides to obtain the information on its own behalf — it will have to pay a separate fee and comply with all requirements placed on sellers accessing the Registry. Such a telemarketer or service provider will be provided an account number that can be used only by that company. In other words, that account number is not transferrable.
What if a seller uses one telemarketer at the beginning of the year and switches to another later in the year? Will the seller have to pay twice? No. Each seller will have a unique account number that it can give to the telemarketers and service providers who may access the National Registry on the seller’s behalf.
What happens to companies that don’t pay for access to the National Registry? A company that is a seller or telemarketer could be liable for placing any telemarketing calls (even to numbers NOT on the National Registry) unless the seller has paid the required fee for access to the Registry. Violators may be subject to fines of up to $16,000 per violation. Each call may be considered a separate violation. However, sellers and telemarketers should also be aware that the FCC regulates telemarketing calls. For more information, see the FCC’s Web site, www.fcc.gov.
What if I call a number that’s not on the National Registry without checking the Registry first? It’s against the law to call (or cause a telemarketer to call) any number on the National Registry (unless the seller has an established business relationship with the consumer whose number is being called, or the consumer agreed in writing to receive calls placed by or on behalf of the seller). But it’s also against the law for a seller to call (or cause a telemarketer to call) any person whose number is within a given area code unless the seller first has paid the annual fee for access to the portion of the National Registry that includes numbers within that area code.
How do the registries operated by the FTC, the, FCC, and the various states fit together? Since June of 2003, the FTC and the FCC jointly and cooperatively have enforced a single National Do Not Call Registry. Together, the FTC and the FCC have jurisdiction over nearly all sales calls placed to U.S. consumers.
Some thirteen states still administer their own do not call registries. The TSR does NOT preempt state law, so sellers, telemarketers, and others who do telemarketing will have to check with various states to determine what is required for compliance at the state level. For information about the FCC’s telemarketing regulations, visit the FCC’s Web site at www.fcc.gov. A full copy of the FCC’s regulations can be found at: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-153A1.pdf.
The FTC and FCC continue to work to harmonize state and federal Do Not Call laws. The goal is to achieve a single National Registry for the convenience and efficiency of consumers as well as businesses.
What if I have problems when I try to access the National Registry? The Web site at www.telemarketing.donotcall.gov has help available online during regular business hours via a secure electronic form.
Nevertheless, small home-based direct sellers should be aware that the Do Not Call regulations of the FCC cover intrastate calls. The FCC regulations exempt “personal relationship” calls — where the party called is a family member, friend, or acquaintance of the telemarketer making the call.
As a matter of goodwill, small direct sellers may want to avoid contacting a person whose number is on the Registry.
Where can I get more information about compliance? The best source of information about complying with the Do Not Call provisions of the TSR is the FTC’s Web site at www.ftc.gov/donotcall. It includes business information about the National Registry. You can view the entire TSR at that site.
To whom does the established business relationship apply? An established business relationship is between a seller and a customer; it is not necessarily between one of the seller’s subsidiaries or affiliates and that customer. The test for whether a subsidiary or affiliate can claim an established business relationship with a sister company’s customer is: would the customer expect to receive a call from such an entity, or would the customer feel such a call is inconsistent with having placed his or her number on the National Do Not Call Registry?
Factors to be considered in this analysis include the nature and type of goods or services offered and the identity of the affiliate. Are the affiliate’s goods or services similar to the seller’s? Is the affiliate’s name identical or similar to the seller’s? The greater the similarity between the nature and type of goods sold by the seller and any subsidiary or affiliate and the greater the similarity in identity between the seller and any subsidiary and affiliate, the more likely it is that the call would fall within the established business relationship exemption.
A consumer who purchased aluminum siding from “Alpha Company Siding,” a subsidiary of “Alpha Corp.,” likely would not be surprised to receive a call from “Alpha Company Kitchen Remodeling,” also a subsidiary of “Alpha Corp.” The name of the seller and the subsidiary are similar, as are the type of goods or services offered — home repair and remodeling.
If a consumer purchases a computer with peripherals — printer, keyboard, speakers — from a local retail store, the consumer will have an established business relationship with that store for 18 months from the date of purchase. In addition, the consumer may have an established business relationship with the computer manufacturer and possibly the manufacturer of the peripherals, as well as the operating system manufacturer, as long as the customer has a contractual relationship with any of these entities. If the printer comes with a manufacturer’s written warranty, the manufacturer of the printer has an established business relationship with the customer. If the operating system comes with a manufacturer’s written warranty, the manufacturer of the system has an established business relationship with the customer, too.
The Rule allows sellers and telemarketers to call any consumer who expressly agrees, in writing, to receive calls by or on behalf of the seller, even if the consumer’s number is in the National Do Not Call Registry. The consumer’s express agreement must be in writing and must include the number to which calls may be made and the consumer’s signature. The signature may be a valid electronic signature, if the agreement is reached online.
If a seller seeks a consumer’s permission to call, the request must be clear and conspicuous, and the consumer’s assent must be affirmative. If the request is made in writing, it cannot be hidden; printed in small, pale, or non-contrasting type; hidden on the back or bottom of the document; or buried in unrelated information where a person would not expect to find such a request. A consumer must provide consent affirmatively, such as by checking a box. For example, a consumer responding to an email request for permission to call would not be deemed to have provided such permission if the “Please call me” button was pre-checked as a default.
The Rule expressly prohibits telemarketers from abandoning any outbound telephone call, but has an alternative that allows some flexibility while enabling you to avoid liability under this provision.
uses technology that ensures abandonment of no more than three percent of all calls answered by a live person, measured over the duration of a single calling campaign, if less than 30 days, or separately over each successive 30-day period or portion thereof that the campaign continues.
To take advantage of the safe harbor, a telemarketer must first ensure that a live representative takes the call in at least 97 percent of the calls answered by consumers. Calls answered by machine, calls that are not answered at all, and calls to non-working numbers do not count in this calculation. (Note that calls that are answered by machine and that deliver prerecorded messages raise other concerns. See the section entitled “Telemarketing Calls That Deliver Prerecorded Messages,” below.)
The “per calling campaign” measure
A telemarketer running simultaneous campaigns (on behalf of the same or different sellers) cannot average the abandonment rates for all campaigns, offsetting for example, a six percent abandonment rate for one campaign with a zero percent abandonment rate for another. Each separate campaign is subject to a maximum abandonment rate of three percent measured over the duration of a single calling campaign, if less than 30 days, or separately over each successive 30-day period or portion thereof that the campaign continues.
Telemarketing Calls That Deliver Prerecorded Messages
In August of 2008, the Commission adopted amendments to the TSR that directly address the use of prerecorded messages in telemarketing. Under those amendments, as of September 1, 2009, the Rule expressly prohibits outbound telemarketing calls that deliver a prerecorded message unless the seller has obtained the call recipient’s prior signed, written agreement to receive such calls from that seller. The prohibition applies to prerecorded message calls regardless of whether they are answered by a person or by an answering machine or voice mail service. With certain exceptions (explained on pages 61 and 62), the prohibition applies to all calls that deliver a prerecorded message, regardless of whether the number called is listed on the National Do Not Call Registry.
Moreover, as of December 1, 2008, even when the seller has the call recipient’s prior agreement to receive prerecorded message calls, the message must provide an automated interactive opt-out mechanism that is announced and made available at the outset of the message (right after the required prompt disclosures described on page 21). The opt-out mechanism must remain available throughout the duration of the call. If a call delivering a prerecorded message possibly might be answered “live” by a consumer, the message must include a voice-activated or telephone keypress automated mechanism that will automatically add the number called to the seller’s entity-specific Do Not Call list and then immediately terminate the call. If a call possibly might be picked up by an answering machine, or voicemail service, then the message must include a toll-free number that, when called, will connect a caller to the same automated opt-out mechanism, which must be available for the duration of the calling campaign.
In addition, sellers or telemarketers placing calls that deliver a prerecorded message must also comply with three additional requirements that mirror those of the abandoned call prohibition. Specifically, they must:
allow the telephone to ring for at least fifteen (15) seconds or four (4) rings before disconnecting an unanswered call;
play the prerecorded message within two seconds after the recipient of the call completes his or her greeting; and
comply with all other requirements of the TSR and other applicable federal and state laws.
As of September 1, 2009, calls delivering a prerecorded message may be placed only to individuals who have provided the seller with a signed, written agreement to receive such calls. Thus, prerecorded message calls are prohibited if the seller does not possess a written agreement from the individual to whom such a call is placed to receive such calls. As of September 1, 2009, the existence of an “established business relationship” no longer provides an adequate basis for placing any covered call that delivers a prerecorded message.
The Rule requires that the seller have a written agreement with the called party for all calls delivering prerecorded messages, with the two exceptions discussed, below. The written agreement is required regardless of whether the number called is on the National Do Not Call Registry. Nor does it matter whether a call delivering a prerecorded message is answered “live” by a person or by an answering machine or voicemail service. In all cases, the seller must have the call recipient’s prior written agreement to receive prerecorded message calls at the number called.
What must the written agreement contain?
A written agreement need only contain: (1) unambiguous evidence that a call recipient is willing to receive telephone calls that deliver a prerecorded message by or on behalf of a specific seller; (2) the telephone number to which such messages may be delivered; and (3) the call recipient’s signature. Although no particular form or language is required, an acceptable model is provided below that sellers are free to use.
I would like to receive telephone calls that deliver prerecorded messages
from [ABC Co.] that provide special sales offers such as ____________
_________________at this telephone number: (_____)____________.
Does a consumer’s written agreement to receive prerecorded message calls from a seller permit others, such as the seller’s affiliates or marketing partners, to place such calls? No. The Rule requires that the written agreement identify the single “specific seller” authorized to deliver prerecorded messages. The authorization does not extend to other sellers, such as affiliates, marketing partners, or others.
Are there specific procedures for obtaining a consumer’s written agreement to receive calls that deliver prerecorded messages? There are three essentials:
Before the consumer agrees, the seller must clearly and conspicuously disclose the consequences of agreeing — namely, that the agreement will result in the seller delivering prerecorded messages to the consumer via telemarketing calls;
The seller may not require, directly or indirectly, that a consumer agree to receive prerecorded message calls as a precondition for purchasing or receiving any good or service; and
The seller must give the consumer an opportunity to designate the telephone number to which the calls may be placed.
Sellers bear the burden of demonstrating that these prererequisites have been met, and that they possess the required written agreements from consumers to receive prerecorded calls for all such calls that they place.
Is there a particular medium or format the seller must use in obtaining a consumer’s written agreement to receive calls that deliver prerecorded messages? A seller need not obtain or retain the consumers agreement in paper form. The Rule expressly permits sellers to use electronic records that comply with the Electronic Signatures In Global and National Commerce Act (“E-SIGN”). Therefore, a seller may use a written agreement that is both created and retained in electronic form, so long as the seller can demonstrate that the seller’s procedures comply with E-SIGN, and conform to the Rule’s written agreement requirements. Thus, consumers’ express agreements to receive prerecorded message calls could be obtained by means of email, a website form, a telephone keypress during a live call with a sales agent, or a voice recording.
Calls that deliver a prerecorded message must include an automated interactive opt-out mechanism that is announced and made available for the call recipient to use at the outset of the message. This requirement became effective December 1, 2008. The opt-out must follow immediately after the initial disclosures — explained in the section on Prompt Disclosures in Outbound Telemarketing Calls — that the TSR imposes on all telemarketing calls.
In the case of a prerecorded message to induce the purchase of a good or service, the opt-out mechanism must be announced and made available to use immediately after the mandatory disclosures — the seller’s identity, that the purpose of the call is to sell goods or services, the nature of the goods or services, and, if a prize promotion is offered, the fact that no purchase or payment is necessary to participate.
In the case of a prerecorded message call placed by a telefunder to solicit charitable contributions on behalf of a non-profit organization, the opt-out mechanism must be announced and made available to use immediately after the mandatory disclosure of the identity of the charitable organization on behalf of which the call is made, and the fact that the purpose of the call is to solicit a charitable contribution.
Sellers and telemarketers using prerecorded telemarketing calls must employ automated technology capable of automatically placing a consumer’s telephone number on the seller’s Do Not Call list in response either to spoken words, or the pressing of a specified key on the telephone keypad.
If it is possible that a prerecorded telemarketing call may be answered by a consumer in person, the message must disclose at the outset (as discussed above) how to use the required voice-or-keypress-activated interactive opt-out mechanism to add one’s number to the seller’s entity-specific Do Not Call list. Moreover, the opt-out mechanism must:
be available for call recipients to use at any time during the message;
when invoked, automatically add the call recipient’s number to the seller’s entity-specific Do Not Call list; and
after the call recipient’s number has been added to the seller’s internal Do Not Call list, immediately disconnect the call.
By contrast, if it is possible that a prerecorded telemarketing call may be picked up by an answering machine or voice mail service, the message must disclose at the outset (as discussed above) a toll-free number that, when called, connects the caller directly to the same type of voice-or-keypress-activated interactive opt-out mechanism that will add the number called to the seller’s Do Not Call list. The opt-out mechanism provided must:
be accessible at any time throughout the telemarketing campaign, including non-business hours;
automatically add the call recipient’s number to the seller’s entity-specific Do Not Call list; and
immediately thereafter disconnect the call.
When would both a voice or keypress activated mechanism and a toll-free number be required? Both would be required whenever a seller or telemarketer could not be certain that no consumer would answer the call in person.
May the opt-out mechanism transfer an opt-out request to an operator or sales representative? No, the opt-out provision specifies that the mechanism must “automatically add the number called to the seller's entity-specific Do Not Call list.” This means the mechanism must work in a way that does not require human intervention. The additional requirement that the opt-out mechanism “once invoked, immediately disconnect the call” after adding the call recipient’s telephone number to the seller’s Do Not Call list bars the intervention of an operator or sales representative.
May the opt-out mechanism require a repeat confirmation of the opt-out request before adding a number to the seller’s Do Not Call list? No, the provision specifies that the opt-out mechanism must “automatically add” the number called to the seller’s entity-specific Do Not Call list.”
May the opt-out mechanism connect to a menu that includes the required opt-out option? No, the opt-out mechanism, once invoked, must “automatically add” the number called to the seller’s entity-specific Do Not Call list, then immediately terminate the call.
If a recipient of a call delivering a prerecorded message calls the toll-free number provided in the message, must the call recipient’s number automatically be added to the seller’s internal Do Not Call list? Yes. All calls to the toll free number must “connect directly” to an opt-out mechanism that “automatically adds” the number originally called to the seller’s entity-specific Do Not Call list. The provision assumes that the recipient of the prerecorded message call will call back the number provided on the same line on which he or she received the prerecorded call. As a practical matter, ANI (automatic number identification) may be used to capture the telephone number that calls into the toll-free number. This is the “number called” to which the prerecorded message was delivered.
Must the toll-free number provided in a prerecorded telemarketing message, regardless of when it receives a return call from a consumer, connect the return call to an automated opt-out mechanism? Yes. The 2008 TSR amendment specifies that the opt-out mechanism must be “accessible at any time throughout the duration of the telemarketing campaign.” This means that both the toll-free number and the opt-out mechanism itself be operational “24/7" so that regardless of the day or time that a consumer listens to a prerecorded message on his or her answering machine or voice mail service, the consumer, if he or she wishes, can immediately exercise the right to opt-out of future calls.
If a prerecorded telemarketing campaign lasts only a short time (e.g., one or two days), how long must the toll-free number provided in the prerecorded message be accessible? The toll-free number must be available for the “duration of the telemarketing campaign.” In the case of a short one or two-day campaign, the toll-free number should be available for a reasonable time thereafter to permit consumers to exercise their opt-out rights after listening to the message.
The TSR amendments prohibiting prerecorded messages in telemarketing do not apply to calls delivering prerecorded messages that are purely informational — for example, flight cancellation messages. Purely informational calls — as opposed to calls soliciting sales or charitable contributions — do not fall within the Rule’s definition of “telemarketing” — “a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution.” Thus, the prohibition on prerecorded telemarketing messages does not apply to purely informational messages. The following are examples of purely informational messages:
a reminder of a single appointment previously scheduled at the call recipient’s request;
reminders of a series of recurring appointments previously scheduled at the call recipient’s request (e.g., weekly dance class reminders; quarterly pest control service reminders);
an update on a prior sales transaction (e.g., a notification of order status, shipping information, delivery dates and times, or overdue payments); or
a recall notification.
“Mixed” Messages: Any prerecorded informational message that includes a sales or solicitation component to induce, directly or indirectly, a purchase of goods or services or a charitable contribution is prohibited, unless the seller has obtained the call recipient’s prior written agreement to receive prerecorded message calls. If a call delivers a prerecorded message that includes any content tending to induce a consumer to purchase a good or service (whether or not the good or service is related to a prior purchase), or to alter the terms of a prior transaction, then the call is not purely informational. Instead, such a call is a telemarketing message that is prohibited, unless agreed to in advance. Examples of informational messages that are prohibited because they are combined with a telemarketing message include messages that provide any information about:
the availability of any product or service, whether or not the message provides a means for purchasing it;
the availability of additional options or upgrades for a previously purchased product or service;
the availability of alternative terms or conditions for a previously purchased product or service; and
the availability of an extended warranty (or service contract) on a previously purchased product or service.
Two general types of prerecorded message calls that would otherwise be prohibited under the 2008 amendments to the TSR are nevertheless expressly exempted from coverage. First, the new amendments completely exempt certain prerecorded healthcare message calls. Second, the new amendments partially exempt prerecorded message calls placed on behalf of a non-profit charitable organization by a for-profit telemarketer to members of, or previous donors to, the charitable organization on behalf of which the calls are being placed. The paragraphs immediately below explain these exemptions in greater detail.
This exemption is limited to calls permitted under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), pursuant to regulations issued by the Department of Health and Human Services. The only healthcare calls that are exempt are those “made by, or on behalf of, a covered entity or its business associate, as those terms are defined in the HIPAA Privacy Rule, 45 CFR 160.103.”
The HIPAA Privacy Rule permits only three types of calls, whether “live” or prerecorded, by a healthcare provider or its business associates without a patient’s prior authorization – namely: (1) calls to describe a health-related product or service that is provided by, or included in a plan of benefits of, the covered entity making the communication; (2) calls for treatment of the individual; and (3) calls for case management or care coordination for the individual, or to direct or recommend alternative treatments, therapies, health care providers, or settings of care to the individual. Only these three categories of prerecorded healthcare message calls are exempt from the 2008 TSR amendments prohibiting telemarketing calls that deliver a prerecorded message. Some examples of exempt healthcare-related HIPAA calls are:
Prerecorded message calls made by or on behalf of a pharmacy to provide prescription refill reminders;
Prerecorded message calls made by or on behalf of a medical provider to provide medical appointment or other reminders (e.g., availability of flu shots or mammograms);
Prerecorded message calls made by or on behalf of a durable medical equipment supplier to document that a patient has used his or her current supply (e.g., of insulin needles or respiratory supplies) before sending additional supplies; and
Prerecorded message calls by or on behalf of a case manager to check on a patient’s condition.
Prerecorded messages involving products or services not prescribed by a doctor or other healthcare provider as part of a plan of treatment, and therefore not within the healthcare exemption would include, for example:
Prerecorded message calls made by or on behalf of a provider of vitamins, minerals, or alternative medical therapies;
Prerecorded message calls made by or on behalf of a provider of gym or health club memberships; or
Prerecorded message calls made by or on behalf of a provider of weight loss products or programs.
Charitable Fundraising Messages Exemption
As noted on page 8, non-profit organizations — those entities that are not organized to carry on business for their own, or their members.' profit – are not covered by the TSR because The FTC Act specifically exempts them from the FTC's jurisdiction. As explained on page 6, however, the USA PATRIOT Act, passed in 2001, brought charitable solicitations by for-profit telemarketers within the scope of the TSR. As a result, most of the TSR's provisions now are applicable to "telefunders" — telemarketers who solicit charitable contributions.
Nevertheless, the Commission has partially exempted certain calls placed by telefunders from the prerecorded message prohibition. Under this exemption, telefunders may place calls delivering prerecorded messages to prior donors and members of the charity on behalf of which the calls are placed, even if the charity does not have the call recipients’ express written agreement to receive such calls.
The exemption is only a partial exemption because telefunders still must comply with the other requirements of the prohibition, including the automated interactive opt-out requirements and the three additional requirements that mirror those of the abandoned call prohibition. Specifically:
to allow the telephone to ring for at least fifteen (15) seconds or four (4) rings before disconnecting an unanswered call;
to play the prerecorded message within two seconds after the recipient of the call completes his or her greeting; and
to comply with all other requirements of the TSR and other applicable federal and state laws.
The partial exemption only relieves telefunders from complying with the written agreement requirement.
It is a violation of the Rule to fail to transmit or cause to be transmitted the telephone number, and, when available by the telemarketer’s telephone company, the name of the telemarketer to any consumer’s caller identification service. This provision took effect January 29, 2004.
Sellers and telemarketers are prohibited from using threats, intimidation, and profane or obscene language in a telemarketing transaction. This prohibition covers all types of threats, including threats of bodily injury, financial ruin, and threats to ruin credit. It also prohibits intimidation, including acts that put undue pressure on a consumer, or that call into question a person’s intelligence, honesty, reliability, or concern for family. Repeated calls to an individual who has declined to accept an offer also may be viewed as an act of intimidation.
The Rule prohibits any recovery service from asking for or accepting payment for any goods or services purporting to help a consumer recover funds paid in a previous telemarketing transaction — or to recover anything of value promised to a consumer in a previous telemarketing transaction — until seven business days after the funds or other items recovered are delivered to the consumer.
This prohibition does not cover debt collection services. In fact, debt collection services are not covered by the Rule in general, because they are not “conducted to induce the purchase of goods or services” — a prerequisite for Rule coverage as dictated by the Rule’s definition of “telemarketing.” Debt collectors must comply with the FTC’s Fair Debt Collection Practices Act.
Payment Restrictions on Sales of Debt Relief Services
A debt relief service is a program that claims directly, or implies, that it can renegotiate, settle, or in some way change the terms of a person's debt to an unsecured creditor or debt collector. That includes reducing the balance, interest rates or fees a person owes. These services include debt settlement, debt negotiation, and credit counseling.
The Rule prohibits sellers and telemarketers from requesting or receiving payment for providing debt relief services until three requirements are met:
You must have renegotiated, settled, reduced or otherwise changed the terms of at least one of the customer's debts.
Your customer must agree to the settlement agreement, debt management plan, or other result reached with the creditor due to your service. According to the Rule, the agreement from the creditor must be in writing, although your customer may agree to it orally. You can't take your fee in advance by getting your customer to agree to a blanket "pre-approval" of any settlement you might be able to negotiate in the future.
Your customer must have made at least one payment to the creditor or debt collector as a result of the agreement you negotiated.
It is illegal to front-load your fees. If your customer has multiple debts enrolled in your program and you've settled one of them, you may collect a portion of your full fee – as long as you also have completed the three required steps in connection with that debt. The Rule gives you two options for calculating your fee if your customer has enrolled multiple debts:
Proportional fee. According to the Rule, your fee must "bear the same proportional relationship to the total fee for renegotiating, settling, reducing, or altering the terms of the entire debt balance as the individual debt amount bears to the entire debt amount." The "individual debt amount" and the "entire debt amount" refer to what your customer owed at the time her or she enrolled the debt in the service. So if you settle a proportion of a customer's total debt enrolled with you, you may get that same proportion of your total fee.
Percentage of Savings. If you base your fee on a percentage of what your customer saved as a result of your service (often called a contingency fee), the percentage you charge must be the same for each of a customer's debts. Further, the amount saved must be based on the difference between the amount of debt enrolled in the program and the amount of money required to satisfy the debt.
Under the Rule, you may require your customers to set aside your fee and funds to pay debts in a dedicated account as long as:
you don't own or control the company administering the account or have any affiliation with it;
you don't split fees with the company administering the account; and
the customer can stop working with you at any time without penalty. If the customer decides to end the relationship with you, you must return the money in the account to the customer within seven business days (minus any fees you've earned from the account in compliance with the TSR).
The independent company that administers the account may charge the customer a reasonable fee, but it may not transfer any of the customer's funds to you – directly or indirectly – until you have renegotiated, settled, reduced, or otherwise changed the terms of at least one of your customer's debts and met all the related requirements in the Rule.
It's illegal to provide "substantial assistance" to another company if you know they're violating the Rule or if you remain deliberately ignorant of their actions. To avoid liability for facilitating violations of the new Rule, companies that administer dedicated accounts should review the policies, procedures, and operations of the debt relief providers to ensure they're complying with the advance fee ban provision of the Rule, including the provision relating to dedicated accounts. As they continue to administer dedicated accounts, companies also should investigate consumer complaints and disputed payments. Some companies administering dedicated accounts may not be subject to the FTC's jurisdiction, but laws enforced by other government agencies may apply to them.
Sellers and telemarketers do not have to keep duplicative records if they have a written agreement allocating responsibility for complying with the recordkeeping requirements. Without a written agreement between the parties, or if the written agreement is unclear as to who must maintain the required records, telemarketers must keep employee records, while sellers must keep the advertising and promotional materials, information on prize recipients, sales records, and verifiable authorizations. In the event of dissolution or termination of the business of a seller or telemarketer, the principal of the business must maintain all records of the business. In the event of a sale, assignment, or other change in ownership of the seller or telemarketer’s business, the successor business must maintain the records.
State officials also may submit electronic notice, and copies of pleadings, via the Consumer Sentinel Web site. Information about Consumer Sentinel is available at ftc.gov/sentinel.
Anyone who violates the Rule is subject to civil penalties of up to $16,000 per violation. In addition, violators may be subject to nationwide injunctions that prohibit certain conduct, and may be required to pay redress to injured consumers.
The FTC has information available about the following subjects at ftc.gov or from its tollfree HelpLine, 1-877-FTC-HELP:
The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad. The FCC has information about the TCPA.
email: fccinfo@fcc.govwww.fcc.gov/cgb/complaints.html
1These entities are: brokers, dealers, transfer agents, municipal securities dealers, municipal securities brokers, government securities brokers, and government securities dealers (as those terms are defined in Section 202(a)(11) of the Investment Advisers Act of 1940); and futures commission merchants, including brokers, commodity trading advisers, commodity pool operators, leverage transaction merchants, floor brokers, or floor traders (as those terms are defined in Section 6(1) of the Commodity Exchange Act).
2An investment opportunity is anything that is offered, offered for sale, sold, or traded based on representations about past, present, or future income, profit, or appreciation. Examples of investment opportunities include art, rare coins, oil and gas leases, precious or strategic metals, gemstones, or FCC license or spectrum lottery schemes. In addition, business ventures that are not covered by the FTC’s Franchise Rule are investment opportunities.
3State laws vary on permitting the recording of telephone conversations and the requirements to obtain consent of the recorded party. Consult an attorney for guidance on these issues.
February 2011 Your Opportunity to Comment
The National Small Business Ombudsman and 10 Regional Fairness Boards collect comments from small businesses about federal compliance and enforcement activities. Each year, the Ombudsman evaluates the conduct of these activities and rates each agency’s responsiveness to small businesses. Small businesses can comment to the Ombudsman without fear of reprisal. To comment, call toll-free 1-888-REGFAIR (1-888-734-3247) or go to www.sba.gov/ombudsman. February 2011 Utility menuContact