On November 18, 2015, the Federal Trade Commission (FTC) released a final rule setting forth a number of key amendments to its Telemarketing Sales Rule (TSR). [FN1] Specifically, in response to changes in the financial marketplace, the final rule prohibits the use of certain payment methods in telemarking. In addition, and of likely much greater significance to the vast majority of legitimate, compliance-focused telemarketers operating today, the TSR amendments update and clarify several provisions related to the National Do Not Call (DNC) Registry, including those concerning: (i) the telemarketing exemption for calls to businesses; (ii) demonstrating the existence of an “established business relationship” with the customer; and (iii) sellers/telemarketers sharing the cost of DNC Registry fees. The FTC also made several important clarifications regarding a consumer’s right to be placed on entity-specific do-not-call lists, as well as with respect to call recordings made to memorialize a customer’s “express verifiable authorization.” In light of these recent changes to the TSR, even the most reputable and well-intentioned sellers and telemarketers will need to reexamine their current practices to ensure compliance with the final rule.
Certain Telemarketing Payment Methods Prohibited
The weighty, 136-page final rule focuses, to a great extent, on further protecting consumers from fraud by banning the use of four types of “novel payment methods” in telemarketing, namely, remotely created checks, remotely created payment orders, cash-to-cash money transfers, and cash reload mechanisms. [FN2] According to Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, these are the “payment methods that scammers like, but honest telemarketers don’t use.” For this reason, the FTC’s amendments in this regard were purposely and narrowly tailored to prohibit just these specific payment methods, thereby allowing for innovations with respect to other payment methods that are used by legitimate companies.
Do-Not-Call Amendments and Clarifications
Of greater consequence to most legitimate businesses engaged in telemarketing activities (i.e., sellers and/or the telemarketers that may be acting on their behalf) are the FTC’s amendments and clarifications with respect to the DNC Registry and other do-not-call requests made by consumers, as follows:
- Existing Business Relationship. If a consumer’s number is on the DNC Registry, the revised TSR expressly states that sellers or telemarketers bear the burden of demonstrating that they have (i) an existing business relationship with the person or (ii) the person’s express written agreement to get calls. [FN3]
- Business-to-Business Exemption. The business-to-business exemption extends only to calls to induce a sale to, or contribution from, a business entity; it does not cover soliciting employees at their places of business to make personal charitable contributions or to purchase goods or services for their individual use.
- Entity-Specific Do-Not-Call Lists.
- The amended TSR illustrates the kind of burdens that would illegally interfere with a consumer’s right to be placed on a seller’s/telemarketer’s entity-specific do-not-call list. For example, impermissible burdens include, among others, harassing consumers who make such a request, hanging up on them, requiring the consumer to listen to a sales pitch before accepting the request, and assessing a charge or fee for honoring the request.
- Further, the TSR now specifies that if a seller or telemarketer does not get the information needed to place a consumer’s number on their entity-specific do-not-call list, the business is disqualified from the safe harbor for isolated or accidental violations.
- DNC Registry Cost Sharing. The revised TSR emphasizes that no person may participate in any arrangement to share the cost of accessing the DNC Registry, including any arrangement with any telemarketer or service provider to divide the costs to access the registry among various clients of that telemarketer or service provider.
Finally, in addition to the do-call-call modifications highlighted above, the FTC also sought to make its enforcement policy more transparent by clarifying that any call recording made to memorialize a customer’s or donor’s “express verifiable authorization” must include an accurate description, clearly and conspicuously stated, of the goods or services or charitable contribution for which payment authorization is sought. Such “express verifiable authorization” must be obtained by sellers and telemarketers prior to billing for telemarketing purchases or donations if payment is not made by credit or debit card. [FN4]
*The DNC Registry and other do-not-call provisions will take effect 60 days after the final rule is published in the Federal Register. The “novel payment method” prohibitions become effective 180 days after Federal Register publication.
[FN1] The FTC promulgated the original TSR in 1995 and subsequently amended it in 2003 and again in 2008 and 2010 to add, among other things, provisions establishing the National Do Not Call Registry and addressing the use of pre-recorded messages and debt relief offers. In general, the TSR requires telemarketers to make specific disclosures of material information; prohibits misrepresentations; sets limits on the times telemarketers may call consumers; prohibits calls to a consumer who has asked not to be called again; and sets payment restrictions for the sale of certain goods and services.
[FN2] The FTC distinguishes these four prohibited payment methods from “conventional payment methods” (e.g., credit cards, and electronic fund transfers, such as debit cards), which are processed or cleared electronically through networks that can be monitored systematically for fraud. Further enhancing the security of conventional payment methods is the fact that they are subject to federal laws that provide statutory limitations on a consumer’s liability for unauthorized transactions and standard procedures for resolving errors. Detailed definitions of these four banned payment methods are set forth in the Federal Register notice announcing the final rule, at Section I.B.1.
[FN3] For purposes of this section of the TSR, the term “signature” includes an electronic or digital form of signature, to the extent that such form of signature is recognized as a valid signature under applicable federal law or state contract law.
[FN4] See 16 CFR 310.3(a)(3).