Telemarketing Regulations

1. Telemarketing Regulations “Do Not Call” McGimpsey & Cafferty Thomas J. Cafferty Arlene M. Turinchak

2. Sources Of Telemarketing Regulation

3. The TCPA • Created in 1991 in response to consumer concerns about growing number of unsolicited telephone marketing calls to their homes

4. The TCPA • FCC rules adopted pursuant to TCPA prohibited telephone solicitation calls to a home before 8am or after 9pm • Callers must provide their name, name of person/entity on whose behalf call is made and, if asked, telephone number or address at which the person/entity may be contacted, the number to be called may not be a 900 number or any other number for which charges exceed local or long distance transmission charges

5. Telephone Solicitation • Telephone solicitation is a call that acts as an advertisement • Telephone solicitation does not include: • Calls or messages placed with the receiver’s prior consent • On behalf of a tax exempt non-profit entity • To a person/entity with whom the caller has an established business relationship

6. Established Business Relationship • Where the person has made inquiry, application, purchase, or transaction regarding products or services offered by the caller • Includes both subscribers and advertisers

7. Prerecorded voice messages • Limits artificial or prerecorded voice messages, to where there is prior consent, non-commercial calls, emergency calls necessary to the consumer’s health and safety, calls made by tax exempt entities and calls from businesses where there is a prior business relationship • Prohibits calls to emergency lines, hospitals, wireless numbers, or any other number which would result in a charge to the person called

8. “Autodialers” • Autodialers produce, store and dial telephone numbers using a random or sequential number generator • Calls using autodialer, or prerecorded voice messages may not tie up two or more lines of a business at one time • Must be programmed to release the line within 5 seconds of a caller hang-up

9. Company Specific Do-not-call Lists • The person or business called could request that no more calls be placed to their residence • Caller is required to maintain a do-not-call list • Person or business was to be kept on the list for 10 years

10. Company Specific Do-not-call • Caller required to: • Maintain internal written procedures to comply with the TCPA do-not-call rules • Insure the individual callers provide the required identifying information to person/entity called • Train callers on internal procedures including how to place person/entities on the do-not-call list • Insure that a caller would be provided a copy of the internal policy if they request

11. Changing Landscape • 1991 TCPA enacted – 300,000 solicitors were used to telemarket goods and services to approximately 18 million Americans daily • 1990 sales generated thru telemarketing amounted to 435 billion dollars annually

12. Changing Landscape • 2003 estimated 104 million telemarketing calls to consumers each day • 2003 estimated telemarketing calls generate over 600 billion in sales each year • 2003 telemarketing industry is largest direct marketing system in US, representing 34.6% of total direct market sales

13. National Do-Not-Call List FTC • Maintains the list • Enforces the rules as to interstate calls FCC • Enforces the rules as to intrastate calls and interstate calls outside FTC jurisdiction

14. National Do-Not-Call • Requires FTC and FCC to coordinate and establish rules and regulations for implementation to attain “maximize consistency” and avoid redundancy between the agencies • Goal is a single national database for consumer registration • Permits FTC to collect fees from telemarketers for implementation and enforcement of the national registry

15. 2003 Do-Not-Call Rules • FTC Rules • December 2002 establishes National Do-Not-Call registry effective October 1, 2003 • Consumers can register their telephone numbers by: • Calling toll free number from phone number they wish to register;or • Via the internet

16. Exempt Businesses • FTC do-not-call rules will not apply to entities over which it has no jurisdiction: • Common Carriers • Banks • Insurance companies • Airlines • Intrastate telemarketing calls

17. Exempt Calls • FTC exempts: • Calls made by or on behalf of charitable organizations except where the calls are made by outside telemarketers • Calls to consumers with whom the caller has an established business relationship • Calls to businesses • Calls expressly permitted by the caller

18. FCC Rules • Apply to all businesses including those exempt from FTC jurisdiction • Apply to both inter and intra state telemarketing • Exempts tax exempt non-profit entities except interstate calls by for-profit telemarketers hired by the non-profit to solicit on it’s behalf • Exempts calls made to persons with whom the telemarketer has a “personal relationship” - an individual personally know to the telemarketer

19. Established Business Relationship “a prior or existing relationship formed by a voluntary two-way communication between a person or entity and a residential subscriber with or without an exchange of consideration, on the basis of the subscriber’s purchase or transaction with the entity within the eighteen (18) months immediately preceding the date of the telephone call or on the basis of the subscriber’s inquiry or application regarding products or services offered by the entity within the three (3) months preceding the date of the call, which relationship has not been previously terminated by either party”

20. Established Business Relationship EBR with one company may extend to affiliates and subsidiaries provided the consumer would reasonably expect them to be included given the nature and type of goods or services offered and identity of the affiliate

21. Established Business Relationship EBR does not permit companies to make calls based on referrals from existing customers Any company asserting an EBR must demonstrate, with “clear and convincing” evidence, that EBR exists

22. Application of the EBR rule • 18 months runs from the last date of payment or transaction with the caller • 3 months runs from the date of the inquiry

23. Application of the EBR rule • Inquiry must be the type that a person would expect a call from the business • For example, an inquiry as to location or hours of operation would not create an EBR • EBR is not limited by products and services. Business is permitted to offer full range of services and products

24. EBR may be terminated by the customer by request to be placed on the company specific Do-Not-Call list

25. Non-profit Entities • FCC says calls by a for-profit telemarketer on behalf of the tax exempt non-profit entity are exempt except where bundled with a commercial message for a for-profit entity

26. Non-profit Entities • For-profit can not claim the exemption by stating a portion of the proceeds of the purchase will be donated to a charitable cause • FTC exempts interstate calls by non-profits except where the calls are made by a for-profit telemarketer hired by the non-profit. Calls by the non-profit are subject to the company specific Do-Not-Call rules

27. Automated Telephone Dialing Equipment • TCPA definition • “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential generator; and (B) to dial such numbers” • Key concept is the “capacity” to dial numbers without human intervention • Predictive dialer is equipment that’s dials numbers and predicts when a sales agent will be available to take a call. The principal feature of predictive dialing is a timing function.

28. Prohibitions on Autodialers • Dialing emergency numbers, health care facilities, telephone numbers assigned to wireless services and any other numbers for which the consumer is charged for the call • “War dialing” – the practice of using autodialers to dial large blocks of telephone numbers in order to identify lines that belong to fax machines

29. Artificial or Prerecorded Voice Messages • TCPA prohibits calls using prerecorded or artificial voice to deliver a message to residences without the express consent of the called party unless the call is for emergency purposes or is specifically exempted • In 1992 the FCC exempted non-commercial and commercial calls that do not contain an unsolicited advertisement. The FCC also exempted EBR calls.

30. 2003 Rules • Prerecorded messages containing free offers and information about goods and services that are commercially available are now prohibited by the FTC rules. The FCC rules permit a EBR exception to the prohibition.

31. 2003 Rules • Also prohibited are prerecorded messages that include or introduce an unsolicited advertisement. For example calls from a credit card company to an existing customer offering overdraft protection would constitute unsolicited advertisement or a call from a phone company to customers regarding new calling plans would in most instances constitute unsolicited advertisements.

32. Identification Requirements • Now applies to all live and artificial or prerecorded messages regardless of how delivered. • Must provide: • Legal name under which caller is registered to operate. May use d/b/a or alias provided legal name of business is also stated. • The telephone number or address of the caller. Must be a number that consumer can use during normal business hours to ask not to be called again.

33. Abandoned Calls • Predictive dialers that put the consumer on hold or abandon the call if a sales rep is not available, creating “dead air” or “hang-ups” • Predictive dialer users may not abandon more than 3 percent of calls in a 30 day period (3% per day for interstate calls) • Call is considered abandoned if it is not transferred to a live agent within 2 seconds of recipient’s greeting

34. SUPERVISOR: SUPERVISOR: SUPERVISOR: Abandoned Calls • Abandoned calls must deliver a recorded message providing the telemarketers name, telephone number, and notification that the call was for telemarketing purposes. • Caller must allow the telephone to ring for 15 seconds or 4 rings before disconnecting any unanswered call • Callers must keep records to prove compliance with the 3% rule

35. Wireless Telephone Numbers • Autodialed, prerecorded or artificial voice messages prohibited • FCC rules permit live calls to wireless numbers in recognition that consumers may use a wireless telephone as the primary or only phone

36. Caller ID • All callers must transmit caller ID information • Callers are prohibited from using any technology to block caller ID information • Caller ID requirements not effective until January 29, 2004

37. Unsolicited Faxes • Prohibits the sending of any “unsolicited advertisements” to a fax machine • “unsolicited advertisement” means any material advertising the commercial availability of quality of any property, goods, or services transmitted to any person without prior express consent or invitation

38. Unsolicited Faxes • FCC requires consent to be in writing and include recipient’s signature, and fax number and may not in form of negative option (“call if do not wish to receive faxes”) • EBR does not confer permission to send unsolicited faxes • Prohibition does not become effective until January 2005

39. Time of Day Restrictions • Calls may only be made between 8am and 9pm local time at the recipient’s location

40. Procedures for Compliance • Effective October 1, 2003 • Register with the FTC • Provide identifying information about business • Identify a contact person • Business will be provided a unique account number • Agree to use the telephones numbers for telemarketing only

41. Procedures for Compliance • Obtain a copy of the Do-Not-Call list at least every three months, no more than once every 24 hours • NO TELEMARKETING CALLS TO ANY NUMBERS MAY BE MADE UNTIL THE BUSINESS HAS A COPY OF THE LIST • Business must cease calls to a number within 45 days of it appearing on the list

42. The Do-Not-Call List • List is prepared by area codes and any business is only required to obtain the list for the area code it will be calling • Fees • Cost is $25.00 per area code, paid annually • $15.00 for each area code added to company list in the second 6 months of the annual term • Access to less than 5 area codes is free

43. Types of Lists • List contains only 10 digit telephone numbers, no names or other information • Initial list is the “full list” of all do-not-call numbers in the specified area code • Thereafter business can obtain the “change list” containing the additions and deletions to the list (designated A or D) and the date of the change

44. Third Party Telemarketers • May obtain access to the registry through its own account or through the business’ account, no additional fees for an outside agency using the business’ account number • Business must still register even if using a telemarketing service

45. Company Specific Lists • Business is still required to keep company specific Do-Not-Call lists • Only change is that numbers now remain on the list for only 5 years

46. Safe Harbor • Caller will not be liable for violating the National Do-Not-Call rules if can demonstrate that as part of its routine business practice • It has established and implemented written procedures to comply with the rules and implement the list • It has trained its personnel and any entity assisting in its compliance in the procedures established under the rules • Caller has maintained and recorded a list of telephone numbers the caller may not contact • Caller has accessed the National Do-Not-Call list, and purchased the list of numbers at least every 3 months

47. Safe Harbor • Caller uses a process to prevent telemarketing to any telephone number on any list obtained from the registry no more than 3 months prior to the date the call is made and maintains a records documenting this process • Any subsequent call otherwise violating the rules is the result of error and was not called more than once in the preceding 12 months

48. Private Enforcement • Consumer may file suit in state court for violation of autodialer, artificial or prerecorded voice messages, and unsolicited fax provisions • Consumer may file in state court if received more than one telephone call within any 12 month period by or on behalf of the same entity in violation of the rules

49. Violations and Defenses • Up to $11,000.00 fine per violation if suit is brought by the FCC/FTC • $500 fine per violation if suit by private person • Safe Harbor - defense that the caller had internal policies, performed training, and maintained a do-not-call list • Caller is permitted one call to a person or business on the do-not-call list in a 12 month period

50. State and Federal Do-Not-Call • Goal to permit States to download the State to list to the National list • Federal rules do not create a blanket preemption of state law