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EFFECTIVE DATES OF NEW FEDERAL TELEMARKETING RULES
SET
Counterpart FCC and FTC Rules Set New Do-Not-Call,
Abandoned Call, Caller ID, and Other Limits
By Robert
Corn-Revere and Ronald
G. London
[July 2003]
Earlier this month, the Federal Communications Commission (FCC)
joined the Federal Trade Commission (FTC) in adopting stringent
new rules regulating telemarketing practices at the federal
level. The regulations broaden the reach of the national “do-not-call”
registry created by the FTC, refine pre-existing company-specific
“do-not-call” rules, mirror the FTC’s regulation
of “abandoned” or “dropped” calls, and
impose caller ID requirements that are identical to those adopted
by the FTC. The FCC also revised its rules pertaining to the
transmission of prerecorded messages and unsolicited fax advertisements.
The full suite of effective dates for the various FCC and FTC
rules is now discernible with publication of the FCC’s
July 3, 2003 Report and Order in the July 25 Federal Register.
The FTC established, and the FCC adopted, Oct. 1, 2003, as the
effective date of the new national “do-not-call”
registry and abandoned call rules, and Jan. 29, 2004, as the
effective date for the new caller ID rules. The FCC rules that
do not overlap with the FTC rules, including those pertaining
to unsolicited fax advertisements, take effect Aug. 25, 2003.
Certain FTC rules that do not overlap with the FCC’s jurisdiction,
such as rules governing the conduct of telemarketing transactions,
took effect March 31, 2003.
The Do-Not-Call Implementation Act and Challenges to
the New FTC and FCC Rules
The FTC kicked off the new round of federal telemarketing regulation
with a series of hearings, workshops, and notices of proposed
rulemaking throughout 2001 and 2002, culminating late last year
in the adoption of new rules under the Telemarketing and Consumer
Fraud and Abuse Protection Act (“Telemarketing Act”).
These new rules supplement those previously adopted by the FTC
in 1995. Shortly before the FTC adopted the amended Telemarketing
Sales Rule in December 2002, the FCC issued its own Notice of
Proposed Rulemaking under the Telephone Consumer Protection
Act of 1991 (TCPA). On March 11, 2003, the Do-Not-Call Implementation
Act was signed into law. It required the FCC to complete its
TCPA rule review within six months, and to adopt rules that
“maximize consistency” with the FTC’s telemarketing
rules.
On June 26, 2003, the FCC announced its new rules, nearly three
months ahead of schedule, and issued its Report and Order adopting
them on July 3, 2003. These rules are summarized below. They
were published in the Federal Register on July 25, 2003. On
the same day requests were lodged with the FCC to stay the effective
date of the new rules, and with the United States Court of Appeals
for the Tenth Circuit to overturn them. These challenges follow
in the wake of no fewer than four separate lawsuits against
the FTC rules, filed in federal district courts in Colorado,
Oklahoma, Maryland, and the District of Columbia.
Summary of the FCC Rules
Scope
The FCC’s rules expand the scope of the national “do-not-call”
registry, abandoned call and caller ID rules adopted by the
FTC. The FTC’s rules are limited by that agency’s
jurisdiction, which excludes banks, savings and loans, credit
unions, common carriers such as phone companies and airlines,
the business of insurance, and non-profit organizations. However,
the FTC applied its rules to third-party for-profit call centers
that conduct telemarketing services for otherwise exempt entities.
Third-party telemarketing on behalf of non-profit organizations
is exempt from the national registry requirements but is subject
to a company-specific “do-not-call“ mandate. The
FTC also disavowed any intent to have its rules apply to intrastate
telemarketing, and declined to preempt state telemarketing laws,
opting instead to “work with” states to “harmonize”
the federal and state “do-not-call” laws. Approximately
two-thirds of the states currently have “do-not-call”
laws.
The TCPA gives the FCC greater authority to regulate telemarketing.
Its new rules cover all industries, including those exempted
from the FTC’s jurisdiction. They also reach intrastate
telemarketing as well as interstate telemarketing. However,
the FCC rules do not apply to telemarketing by or on behalf
of tax-exempt non-profit organizations, which are excluded from
FCC authority by the definition of “telemarketing”
in the TCPA. Consequently, while telemarketing by non-profits
is exempt from both the FCC and FTC rules, telemarketing on
their behalf by for-profit call centers is subject to only the
FTC company-specific “do-not-call,” abandoned call,
and caller ID requirements.
The FCC’s Report and Order describes the FCC’s
new rules as the “floor” for regulating telemarketing
nationwide. This means that the FCC regulations govern telemarketing
calls in any state that has less restrictive or no telemarketing
laws. States with more restrictive telemarketing laws may still
apply them to intrastate telemarketing calls. As to interstate
telemarketing, the FCC stated that any state law that is inconsistent
with the federal law would “almost certainly” conflict
with FCC rules and would probably have to give way to federal
regulation.
“Do-Not-Call” Rules
The FCC’s rules adopted under the TCPA have always included
a provision whereby telephone subscribers could ask a given
telemarketer not to call again, and telemarketers were required
to maintain and comply with such a “company-specific”
list of “do-not-call” requests. The FTC copied this
rule when it first implemented the Telemarketing Act in 1995.
The FCC’s recent Report and Order retains this company-specific
“do-not-call” rule, but now requires company-specific
“do-not-call” requests to be honored within 30 days
after they are lodged. If the telemarketer has the capacity
to honor the request more quickly than 30 days, it is required
do so.
The FCC added to this company-specific regime by adopting rules
that require compliance with the national “do-not-call”
registry, that was created and is to be maintained by the FTC.
Companies subject to the rules must obtain a registry identifier
and purchase access to the registry, on an area code basis,
every 12 months. They must download the list of telephone subscribers
who have placed their phone number on the list at least quarterly
(though it is available to be downloaded on a rolling basis)
and refrain from calling those telephone numbers thereafter.
The only exceptions are telephone subscribers from whom the
telemarketer has obtained advance written consent to receive
calls, evidenced by a signature and the telephone number that
may be called, or subscribers with whom the telemarketer has
an “established business relationship.” As to the
latter, an “established business relationship” exists
for 18 months after a consumer completes a transaction with
a seller (measured from the later of the last delivery, payment
or other activity making up the transaction) or for three months
after the consumer makes an “inquiry” of the seller,
i.e., completes an application, fills out a form seeking
information, etc. Telemarketers may call consumers with whom
they have an established business relationship, even if the
consumer is listed on the national registry, except when a customer
makes a company-specific “do-not-call” request.
The FTC has not yet adopted the final rules that will apply
to payment for access to the national registry, but has proposed
(and the FCC’s Report and Order accepts as fait accompli)
the following: Each company subject to the national registry
rules will have to purchase access to the registry and download
the relevant registrations, for each area code where it intends
to place calls, prior to placing any calls. The fee will be
$29 per area code per year, with a maximum of $7250 per year
(which reflects 250 of the 300+ area codes currently in use),
except that companies that require the data for five area codes
or fewer per year may obtain access to the registry at no cost.
Abandoned Call and Caller ID Requirements
The FCC adopted rules that largely mirror the FTC requirements
for “abandoned calls,” which result from the use
of telemarketing equipment known as “predictive dialers.”
Predictive dialers use algorithms to time the placement of telemarketing
calls, dialing them so as to minimize sales agent “down
time” spent not conversing with call recipients, while
maximizing the likelihood that there will be an agent available
when the called party answers the phone. Due to the predictive
nature of this exercise, called parties sometimes experience
“dropped calls” when the dialer terminates a completed
call because no sales agent is available, or there is “dead
air” for a short period after the called party completes
his or her greeting before the sales agent begins to speak.
The FCC and FTC rules seek to minimize the occurrence of these
“abandoned calls,” i.e., those that are
connected to a person and a sales agent is not available within
two seconds of the called party’s greeting.
The FCC (and FTC) rules require that telemarketers abandon
no more than three percent of all calls completed to a live
person. Calls answered by voicemail or an answering machine,
or that reach a busy signal or other message that the call cannot
be completed, or that are unanswered, do not count toward the
three percent. Telemarketers must let the called party’s
telephone ring four times or for 15 seconds for all calls before
terminating them as unanswered. For calls that reach a live
person that are not connected to a sales agent within two seconds,
the telemarketer must play a recorded message rather than simply
disconnecting the call. Both the FCC and FTC further require
the recorded message to convey the telemarketer’s name
and phone number, and the FCC rules require a statement that
the call was placed for telemarketing purposes. At present,
the FCC requires the three percent abandonment rate to be calculated
on a 30-day basis, while the FTC requires it to be calculated
on a per-day per-campaign basis. These rules will likely be
reconciled under the Do-Not-Call Implementation Act at some
point.
The new FCC rules are also essentially identical to the FTC’s
rules in governing the transmission of caller ID information
by telemarketers. Telemarketers must transmit caller ID information
and are prohibited from blocking its transmission. The information
to be transmitted must include either the telemarketer’s
CPN (calling party number) or ANI (automatic number information),
and, when made available by the telemarketer’s carrier,
the name of the telemarketer. However, a telemarketer may substitute
the name of the seller on behalf of which the telemarketing
call is placed and the seller’s customer service telephone
number. The number provided must permit callers to make a “do-not-call”
request during regular business hours of 9 a.m. to 5 p.m.
Artificial or Prerecorded Voice Messages
The FCC also refined its rules as they apply to artificial
or prerecorded voice messages transmitted by telephone. The
FCC’s rules have long prohibited telephone calls to residences
using an artificial or prerecorded voice to deliver a message
without the prior express consent of the called party, unless
the call is for emergency purposes or is specifically exempted.
However, the FCC exempted prerecorded calls which are non-commercial,
commercial calls that do not contain an “unsolicited advertisement,”
and calls to consumers with whom the telemarketer has an established
business relationship. The rules also permit calls for which
prior express consent is obtained.
In the Report and Order, the FCC clarified that offers for
free goods or services that are part of an overall marketing
campaign to sell property, goods, or services constitute “unsolicited
advertisements,” and that prerecorded messages containing
such offers and/or information about goods and services that
are commercially available are prohibited if not otherwise exempted
(i.e., made with prior consent or under an established
business relationship). The FCC also clarified that “dual
purpose” prerecorded calls that inquire about a customer’s
satisfaction with a product already purchased, but that also
seek to ultimately sell additional goods or services, are advertisements
that are prohibited unless exempted under an established business
relationship or prior express consent.
In addition, the FCC refined the identification requirement
for artificial or prerecorded messages delivered by automatic
telephone dialing systems. Such calls must identify the entity
initiating the call, and the telephone number or address of
such entity. The prerecorded message must contain, at minimum,
the legal name under which the entity calling is registered
to operate and the telephone number in the message must be one
that a consumer can use during normal business hours to make
a “do-not-call” request.
Unsolicited Fax Advertisements
The TCPA prohibits the use of any fax machine, computer or
other device to send to a fax machine any “unsolicited
advertisement” setting forth the commercial availability
or quality of any property, goods, or services to any person
without that person’s prior express invitation or permission.
While such “express permission” previously included
statements of invitation and the existence of an established
business relationship, the FCC modified its rule to require
that the express invitation or permission be in writing and
include the recipient’s signature. This eliminated the
established business relationship exemption. In the written
consent, the recipient must clearly indicate that he or she
agrees to receive faxed advertisements from the company to which
permission is given, and must further provide the fax number
to which faxes may be sent.
If you would like to review the full text of the FCC's telemarketing
decision and the statements of the five Commissioners, please
click on the following link: Report
& Order.
Any questions about this Alert should be directed to:
Robert Corn-Revere, Washington D.C., (202) 508-6625, bobcornrevere@dwt.com
Ronald G. London, Washington D.C., (202) 508-6635, ronnielondon@dwt.com
This Telecom Alert is a publication
of the Telecommunications Department of Davis Wright Tremaine
LLP. Our purpose in publishing this Alert is to inform our clients
and friends of recent developments in the telecom industry.
It is not intended, nor should it be used, as a substitute for
specific legal advice as legal counsel may only be given in
response to inquiries regarding particular situations.
Copyright © 2003, Davis Wright
Tremaine LLP.
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