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Research Report 5.0
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Telemarketing
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We have all had the "telemarketing" phone call at our home in the evening. We may even use telemarketing in our own business. The fact is telemarketing works. Our phone number is publicly available. However, the FTC which regulates this information use has established some rules for telemarketing. SmartNews research report 5.0 has some important facts about this popular business tool. If you are using telemarketing in your business, then you must read the "collecting funds" portion of this research report.
The Federal Trade Commission (FTC) has passed a new rule that regulates telemarketers. This rule went into effect December 31, 1995. It makes sweeping changes in the practices of telemarketers, including disclosures they must make to the people they call. The FTC rule implements the federal Telemarketing and Consumer Fraud and Abuse Prevention Act signed into law in 1994.
According to the information published by the FTC with the new rule:
The Rule, in connection with any telemarketing transaction: (1) requires clear and conspicuous disclosures of specified material information, orally or in writing, before a customer pays for goods or services offered; (2) prohibits misrepresenting, directly or by implication, specified material information relating to the goods or services that are the subject of a sales offer, as well as any other material aspects of a telemarketing transaction; (3) requires express verifiable authorization before submitting for payment a check, draft, or other form of negotiable paper drawn on a person's account; (4) prohibits false or misleading statements to induce payment for goods or services; (5) prohibits any person from assisting and facilitating certain deceptive or abusive telemarketing acts or practices; (6) prohibits credit card laundering; (7) prohibits specified abusive acts or practices; (8) imposes calling time restrictions; (9) requires specified information to be disclosed, truthfully, promptly, and in a clear and conspicuous manner, in an outbound telephone call; (10) requires that specified records be kept; and (11) specifies certain acts or practices that are exempt from the Rule.
Required Disclosures
The rule requires disclosure of certain information before payment is requested for goods or services. Required disclosures include total cost, terms and material restrictions; limitations or conditions on receiving any goods or services; and the quantity of any goods of services sold. The caller must also state if there is any policy that would prohibit refunds, cancellations or exchanges. If there is a “prize”, the caller must disclose the odds of winning or, at a minimum, how the winners are determined and all material costs or conditions to receive or redeem a prize that is the subject of the prize promotion.
Prohibited Misrepresentations
The rule prohibits many misrepresentations, both specifically and generally. Many prohibited disclosures concern prizes. For example, it would be a violation of the rule to misrepresent that any person has been selected to receive a prize or given an item at no cost by chance. In other words, telemarketers could not claim that a consumer has won a prize, when in fact the consumer has not been selected at random and must pay shipping and handling charges to receive the prize.
Telemarketers cannot falsely claim an affiliation with the government or any other third party. This would seem to prohibit false claims that a caller has some affiliation with a law enforcement agency or charity.
Collecting Funds
The rule establishes tough standards that telemarketers must observe to collect funds. The rule prohibits obtaining or submitting for payment a check, draft, or other form of negotiable paper drawn on a person's checking, savings, share, or similar account, without that person's express verifiable authorization. Such authorization shall be deemed verifiable if one of the following means is employed:
(i) Express written authorization by the customer, which may include the customer's
signature on the negotiable instrument; or
(ii) Express oral authorization, which is tape recorded and made available upon request to the customer's bank and which evidences clearly both the customer's authorization of payment for the goods and services that are the subject of the sales offer and the customer's receipt of all of the following information:
(A) The date of the draft(s);
(B) The amount of the draft(s);
(C) The payor's name;
(D) The number of draft payments (if more than one);
(E) A telephone number for customer inquiry that is answered during normal business hours; and
(F) The date of the customer's oral authorization; or
(iii)Written confirmation of the transaction, sent to the customer prior to submission for
payment of the customer's check, draft, or other form of negotiable paper, that includes:
(A) All of the information in A-F above and
(B) Procedures for obtaining a refund if the information is inaccurate
Charges to a credit card would not require written authorization, but would otherwise be subject to authorization by the credit card holder.
Call Times and Patterns
Some of the most important parts of the rule for most consumers regulate the pattern and time of calls. Telemarketers are prohibited from calling one consumer to sell the same or similar goods or services more than once with in any three month period. The restriction does not apply if the person is not reached during an earlier attempt.
The also prohibits calls to a residence when the resident previously has stated that he or she does not want to receive telephone solicitations made by or on behalf of the seller whose goods or services are being offered. Under the time restrictions, telemarketers can call only from 8:00 AM to 9:00 PM local time at the called person’s location.
All solicitations would be required to begin by disclosing key information to the person called. This information includes the caller’s name and that the purpose of the call is to sell goods or services.
Other Provisions
The rule includes many other important prohibitions and protections for consumers. For example, it prohibits certain “abusive practices” such as using threats or intimidation in a telemarketing call or letting the phone ring repeatedly to harass someone. The rule permits states and private parties to sue telemarketers that violate the law.
Exempt Calls
A number of different types of calls are exempt from the rule. Some of the more far reaching exemptions include:
- Telephone calls in which the sale of goods or services is not completed, and payment or authorization of payment is not required, until after a face-to-face sales presentation by the seller.
- Telephone calls initiated by a customer that are not the result of any solicitation by the telemarketer.
- Telephone calls initiated by a customer in response to an advertisement through any media, other than direct mail solicitations. This exemption does not apply to calls initiated by a customer in response to an advertisement relating to investment opportunities, for goods or services related to removal of derogatory credit information or recovery of money for goods or services previously sold by the telemarketer, or advertisements that guarantee or represent a high likelihood of success in obtaining or arranging for extensions of credit, if payment of a fee is required in advance of obtaining the extension of credit.
- Telephone calls initiated by a customer in response to a direct mail solicitation that clearly, conspicuously, and truthfully discloses all material information otherwise required in a telemarketer’s call for any item offered in the direct mail solicitation. This exemption does not apply to calls initiated by a customer in response to a direct mail solicitation relating to prize promotions, investment opportunities, for goods or services related to removal of derogatory credit information or recovery of money for goods or services previously sold by the telemarketer or direct mail solicitations that guarantee or represent a high likelihood of success in obtaining or arranging for extensions of credit, if payment of a fee is required in advance of obtaining the extension of credit.
- Telephone calls between a telemarketer and any business, except calls involving the retail sale of nondurable office or cleaning supplies.
If you have questions about this rule or would like more information, call the FTC at either (202) 326-3140 or (202) 326-3173.
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