The national "Do-Not-Call" registry and other recent changes to the Federal Trade Commission's Telemarketing Sales Rule

Army Lawyer, April, 2004 by Carissa D. Gregg

Introduction

As Sergeant Smith is sitting down for dinner, he hears his phone ring. The telemarketer warns Sergeant Smith that if he does not purchase credit card loss protection insurance, he may be liable for all unauthorized charges on his credit card. The telemarketer explains to Sergeant Smith that in this computer age, hackers can access his computer and charge massive amounts on his credit card account. The insurance is only a few dollars per month. Sergeant Smith buys the insurance to avoid the risk of paying thousands of dollars for someone else's charges. Now, Sergeant Smith regrets his hasty decision. Can the law provide him with any relief?

The answer is yes. In January 2003, the Federal Trade Commission (FTC) passed the Telemarketing and Consumer Fraud and Abuse Prevention Act (1) which significantly amended the Telemarketing Sales Rule (TSR). (2) Among these amendments, the TSR now requires that when a telemarketer attempts to sell any type of credit card loss protection insurance, the telemarketer must explain to the consumer that the consumer's maximum liability for unathorized use of his credit card is fifty dollars. (3) Further, the amendments require a telemarketer to provide the consumer's telephone caller identification service with the telemarketer's phone number and, if possible, the telemarketer's company name. (4)

Along with these special protections, the Telemarketing and Consumer Fraud and Abuse Prevention Act amended the TSR in numerous other ways to prevent telemarketing fraud and to thwart the majority of telemarketers from contacting consumers altogether. This note highlights those changes. First, it discusses the "do-not-call" registry, to include exceptions to the registry. Next it covers special protections for certain types of calls. The note then explores unique rules for charity telemarketers, followed by a discussion of the added protections to the unauthorized billing rules. Finally, the note discusses enforcement of the TSR.

The Do-Not-Call Registry

The most far-reaching change stemming from the 2003 amendments to the TSR is the creation of a national do-not-call registry. If a consumer registers (5) his phone number on the FFC's do-not-call list, then a telemarketer cannot call that number (6) unless the telemarketer has express written permission from the consumer to place such calls (7) or the telemarketer and the consumer have an established business relationship. (8) These protections last five years from the original date the phone number is registered. (9) Further, before they make any calls, the TSR requires telemarketers to access and research the FTC registry for each area code they plan to access. (10)

The national do-not-call registry has been a great success story for the FTC. (11) Between 27 June and 31 December 2003, over fifty-five million consumers registered their phone numbers on the do-not-call list. (12) From 11 October through the end of 2003, consumers lodged only a little over 150,000 complaints (13) of violations of the do-not-call registry. (14)

Unfortunately for consumers, registration on the do-not-call list will not block every telemarketer. For example, a telemarketer calling on behalf of a charity may still contact a consumer until the consumer informs the telemarketer that he does not wish to receive a telephone call on behalf of that charitable organization. (15) Furthermore, as discussed in the following sections, certain entities and calls are exempt from FFC jurisdiction.

Entities Exempt from FTC Jurisdiction

Certain businesses are specifically exempt from the FTC's jurisdiction; therefore, the TSR does not apply to them. These businesses are:

(a) banks, federal credit unions, and federal savings and loans; (16)

(b) common carriers such as long distance telephone companies and airlines; (17) and

(c) non-profit organizations, (18) which could include non-profit credit counseling or credit repair companies. (19)

Thus, these businesses may contact a consumer despite a request for them to stop.

Calls Exempt from the TSR

In addition to certain businesses, the TSR is also inapplicable to certain types of telephone calls. (20) These include:

(a) unsolicited calls from the consumer to the seller; (21)

(b) consumer calls to place catalog orders; (22)

(c) business-to-business calls, unless dealing with office or cleaning supplies; (23) and

(d) calls made in response to general media advertising or direct mail advertising, unless the advertisements relates to business opportunities, credit card loss protection, credit repair advance fee loans, or investment opportunities. (24)

Although the TSR normally does not apply to these calls, if the telemarketer attempts to "upsell" the consumer during the telephone call, the TSR will apply. (25) Upselling is when a telemarketer or seller attempts to sell additional goods or services during a single phone call after they complete the initial transaction. (26) For example, if a consumer calls a skin products salesman to order wrinkle cream and, after completing the sale, the seller's employee attempts to sell the consumer diet pills and body lotion, then the TSR would apply to the diet pill and body lotion sales.