Increased state scrutiny of telemarketers

Telemarketing & Call Center Solutions, Oct 1996 by Goldstein, Linda

Although a great deal of attention has been focused on recent federal efforts to further regulate telemarketing activities, little attention is being paid to similar actions taken on the state level. However, telemarketers who ignore current state legislative activities do so at their own peril. State legislatures are becoming increasingly active with respect to the regulation of telemarketing activity. Currently, more than 20 bills are pending in 10 states, each of which significantly regulates or further regulates telemarketing activity.

Just this summer, the State of Ohio enacted a new telemarketing statute which greatly restricts those who wish to engage in telephone solicitations. The act, which was passed on August 7, 1996, requires inbound and outbound telemarketers to register with the state prior to conducting telephone solicitations. A bond in the amount of $50,000 must also be issued by a surety company that is approved by the Ohio Superintendent of Insurance. This bond must be filed with the Attorney General and must be maintained for at least two years after the telephone solicitor ceases to solicit Ohio consumers. The statute also requires the telemarketer to make specific oral disclosures within the first 60 seconds of the telephone call and before conveying any information about the goods or services.

Ohio has also imposed a written confirmation requirement, meaning that no sales agreement is valid or legally binding unless the purchaser signs a written confirmation regarding the sale. This written confirmation must contain specific information concerning the terms of the sale, including but not limited to: a detailed description of the goods or services; an itemized list of all fees and prices requested of the purchaser; all material terms and conditions of the telephone solicitor's policy of making refunds, cancellations, exchanges or repurchases; the address and telephone number at which personal or voice contact with an employee or an agent of the telephone solicitor may be made during normal business hours; and the telephone solicitor's certificate of registration number.

Until the written confirmation is signed, the telephone solicitor cannot make or submit a charge to the purchaser's account, including a checking, savings or credit card account. In the event that goods are sent or services are provided without a signed confirmation, those goods or services are automatically deemed a gift to the consumer.

It is important to note that Ohio provides numerous exemptions to both the registration requirement and the written confirmation requirement. Within the next 60 days, the Attorney General is expected to issue a series of administrative rules that will provide telemarketers with more guidance on how to comply with the new telemarketing act. Additionally, the Attorney General is expected to issue a schedule of fees for registration and renewal.

Another example of increased scrutiny given by states to telemarketing activities can be found in a recently enacted statute passed by the Connecticut legislature. Like Ohio, Connecticut's act provides that no oral sales agreement is binding, valid or enforceable unless the telemarketer receives a written and signed contract that discloses all of the material terms of the sale. Once again, any goods sent or services provided to a consumer without the contract are deemed an unconditional gift. However, unlike Ohio, Connecticut does not require telemarketers to register or post a bond.

Again, it is important to realize that both Connecticut and Ohio provide numerous exemptions from the requirements of their respective acts. Consequently, it may be possible for a telemarketer to restructure its activities so that it falls within one of the exemptions. Accordingly, telemarketers who solicit in Ohio or Connecticut should review the statutes and determine whether further steps are necessary.

The Ohio and Connecticut measures highlight the need to constantly monitor the legislative activities of all 50 states. During the next year, several other states will undoubtedly enact or amend statutes that directly impact telemarketers. Unless each state act is separately addressed, a telemarketer can easily find itself the subject of a disruptive and time-consuming regulatory enforcement action.

Linda Goldstein is a partner in the law firm of Hall Dickler Kent Friedman & Wood LLP, and is also head of the firm's advertising, promotion and new media law department. She represents advertising and sales promotion agencies nationwide and serves as a special advertising counsel to Fortune 500 and leading consumer product companies. She was assisted in the preparation of this article by Richard E. Brooks, an associate at the firm.

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