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

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 nonprofit 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 nonprofit 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 pre-empt 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 nonprofit organizations, which are excluded from FCC authority by the definition of “telemarketing” in the TCPA. Consequently, while telemarketing by nonprofits 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 $7,250 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 3 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 3 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 also are 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 noncommercial, 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:  http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-153A1.pdf