Telemarketing Rules: Do Not Call!

FTC has issued final rules to modify the telemarketing rule. The new version contains some changes and also sets out the rules for the national "do not call" registry. We'll review the entire rule in this article because most financial institutions don't have routine working familiarity with the existing rule.

Do Not Call
The most significant aspect of this rulemaking is the "do not call" registry. This will be a national registry available to any consumer who wishes to prevent unwanted telemarketing calls. Many consumers consider such calls an inconvenient interruption at best and an invasion of privacy or worse. Consumers have long been looking for ways to stop these calls and FTC has answered their wishes.

FTC will establish a national "do not call"registry, beginning immediately. FTC estimates that it will take up to seven or eight months to complete the project. That provides you with plenty of time to inform customers about how to use the registry.

FTC plans to implement the registry by regions throughout the country. The Commission has not yet announced how the regions will be scheduled or what the regions will be. Tracking this will probably necessitate regular visits to www.ftc.gov to find out what is going on. You may find that it is a good public relations move to advise your customers about the development of the registry and when and how consumers can register.

There will be no cost to consumers for registering. Telemarketers, however, will have to pay for access to the list. Telemarketers will be required to scrub their lists at least every three months using the national registry.

For customers concerned about identity theft, the do-not-call registry has an extra attraction. When a customer has registered but receives a call purporting to be a sales call, chances are quite high that the caller may really be an identity thief. After all, if the caller was a legitimate telemarketer, they shouldn't be calling someone on the registry.

There are limited exemptions for the "do not call" registry. Sellers will be able to call their own customers to solicit additional sales unless the customer specifically requests no calls from that business or telemarketer.

Billing Authorization Protections
A critical element of the privacy lawsuits that led to G-L-B privacy rules was the access of the telemarketer to consumer account information. The telemarketing rule contains restrictions on access to and use of such information.

Telemarketers may not receive unencrypted consumer account numbers except when for the purpose of processing payment for goods or services. Second, telemarketers may not process any billing information or payment without the express informed consent of the consumer. The burden of proof will be on the telemarketer to establish that the consumer was fully informed and gave their express consent. This proof includes maintaining audio recordings of sales conversations.

Unfair or Deceptive Practices
The rule establishes some sales practices that are either unfair or deceptive. These include failing to reveal the total cost of a sale or product, failing to disclose material restrictions or conditions, failing to disclose limitations on refunds, and misrepresentations about chances of or qualifications for winning a prize in connection with the purchase.

The fairness rules also rely on Regulation Z for purposes of cost disclosures and on Regulation E for consumer rights. The rule makes it unfair or deceptive to fail to disclose the full costs related to a sale but provides that Truth-in-Lending disclosures adequately disclose the cost of credit.

Other unfair or deceptive practices are similar to those identified in the Fair Debt Collection Practices Act. These include representation that the telemarketer is in any way connected to or affiliated with a government agency or other sponsorship or that the purchase is necessary to protect purchases the consumer has already made.

Perhaps the rule that will make the most difference - to consumers using caller ID - is the requirement that telemarketers transmit their number and identity when making calls. The rule makes it an unfair or deceptive practice to suppress this information when placing calls. There are specific permissions to use the name of the company on whose behalf the telemarketer is callingThe rule also prohibits abusive telemarketing practices such as threatening or intimidating the consumer.

Telemarketers will be required to establish and maintain a compliance program. The program should include written procedures for compliance and training of all personnel. The program must include procedures for and evidence of compliance with list scrubbing and all other requirements of the rule. Before retaining a telemarketer, any business - especially a financial institution - should require proof of compliance.

The FTC has published Q&As for consumers and for businesses. The Q&As give detailed information about compliance with and rights under the rule.

ACTION STEPS

Advise your marketing staff about the revised telemarketing rule. Be sure they know about the technical requirements for the "do not call" registry and use of account numbers.
Before retaining a telemarketing service, require evidence of compliance with the telemarketing rule. Include these requirements in contracts.
Consider preparing an information campaign for your customers on preventing telemarketing calls and how to identify and prevent predatory lending.
Include information about the "do not call" registry and guidance on identity theft in any financial education seminars or materials.
If your institution plans to use telemarketing to cross-sell products, establish a clear process to allow your customers to opt-out of these calls.