Before DNC, Telemarketers Face Other Changes

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While the industry has focused on the national no-call registry for the past two months, a host of new rules set to take effect March 30 pose an immediate challenge to telemarketers.


Various changes, part of the Federal Trade Commission's revamp of the Telemarketing Sales Rule, will affect upsells, the use of preacquired account information, predictive dialer use, billing procedures and disclosures. Some industry observers say many telemarketers have yet to get their houses in order.


"People are still scrambling as we speak," said Lewis Rose, an attorney with Washington-based Collier Shannon Scott who specializes in the TSR. "They're all getting it together with their scripts and everything else."


Both the American Teleservices Association and the Direct Marketing Association asked the FTC for more time to let telemarketers catch up with the rule changes, in particular those affecting predictive dialer use. The ATA and DMA also have asked a federal court to delay the effective date of the rules.


Some in telemarketing have grumbled that trade organizations have spent more time and energy mounting legal challenges than they have educating membership about the changes.


"(The trade groups) are paying their lawyers a lot of money on hourly rates," Rose said. "Our clients are saying that they could've had regional seminars and more information. We've been very busy advising our clients."


The ATA and DMA have planned educational events for members. The DMA scheduled a teleconference on compliance for 1 p.m. March 18. The ATA planned a legislative conference March 24-26 in Washington and produced a side-by-side comparison of the old and revised TSRs for distribution to members.


Most "legitimate" telemarketers will be ready by March 30, Rose predicted. However, not all telemarketers are sure that the industry will have widespread readiness by the deadline.


Joan Mullen, vice president for industry relations with Ron Weber and Associates Inc., recalled witnessing many drawn faces at a recent teleservices compliance seminar in which she detailed the impending rule changes.


"Some of them have been in denial," she said. "Really, it hit them, what was going to be required."


Sandy Pernick, president of Pernick & Associates, Chicago, predicted that many telemarketers, smaller agencies in particular, would be unprepared for the changes to predictive dialer rules. The changes state that all abandoned calls violate the TSR but that telemarketers can avoid FTC lawsuits by following "safe harbor" rules, including:


· Keeping abandonment rates at 3 percent or lower.


· Allowing phones to ring 15 seconds or four rings before hanging up.


· Having a sales representative available with two seconds of the consumer answering the phone, or else playing a recorded message identifying the caller.


The FTC gave telemarketers 60 days from the day the rule changes were announced at the end of January to comply. That is barely enough time to get an appointment from a predictive dialer provider to perform the upgrades needed to meet the recording requirement, Pernick and Mullen said.


Making matters worse, many telemarketers waited until the last minute to schedule the upgrades, Mullen said. Given the cost of the upgrades -- upward of $25,000 per location, according to Mullen -- telemarketers wanted to be sure the FTC was going to go through with the changes before investing in the technology.


That cost could be a killer for some smaller agencies that can't afford the upgrades, Pernick said. Indeed, some telemarketing agencies take a positive view of the FTC's increased stringentness and view compliance with the changes as a way to gain an edge over competitors.


"If you're not ahead of the curve and ready for the changes, clients may go elsewhere for their business," said D.J. Cannava, vice president of client services and corporate development and general counsel for Miami Lakes, FL-based Inktel Direct. "Inktel views this as a business opportunity. We believe by the virtue of the fact that we are compliant, we're ahead of the curve."


Yet even if telemarketers are prepared technologically, the new rules are bound to cost money, Rose said.


"Every phone call is going to be longer because the disclosures are more complex," Rose said. "You're going to have to have more people or handle less transactions per hour."


In addition to the predictive dialer rules, other changes include:


· A ban on buying and selling unencrypted customer account numbers for use in telemarketing.


· A requirement that telemarketers using preacquired account information along with "negative option" or free-to-pay offers record the entire call and ask consumers for the last four digits of their credit or debit card numbers, even if they are offering an upsell and have just obtained the whole number during the primary transaction.


· Where a billing method other than credit or debit cards is used, such as a direct draw from a checking account, telemarketers must either obtain written billing consent in the form of a signature, send written confirmation to consumers and allow them to dispute the charges or make a recording of the transaction including the billing terms and the date the bill will be submitted.


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