Follow the FTC's Record-Keeping Rules

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Recent amendments to the Telemarketing Sales Rule involving record keeping may make compliance more complex for telemarketers and sellers. The reason is that the record-keeping requirements have varying degrees of clarity and specificity, particularly regarding a new safe-harbor provision for abandoned calls.


To ensure compliance, telemarketers and sellers must develop a thorough understanding of the requirements and establish appropriate methods for keeping the required records for each type of program.


The Federal Trade Commission adopted the new record-keeping rules as part of a series of amendments to the TSR designed to give consumers greater control over the telemarketing calls they receive. The amendments, which include the development of a national do-not-call registry, include new provisions aimed at cracking down on unauthorized billing by telemarketers; imposing tight restrictions on call abandonment and requiring telemarketers to transmit caller-ID information. As FTC chairman Timothy J. Muris said, "These amendments redefine the nature of telemarketing for both consumers and businesses."


The amendment of greatest concern for telemarketers and sellers is a safe-harbor provision that lets them avoid liability for call abandonment, which is deemed to occur when a consumer is not connected to a sales representative within two seconds of the consumer answering the call so the consumer hears dead air. This delay typically results from automatic-dialing systems that connect a call faster than an agent can connect to it.


Because most telemarketers and sellers will have to claim safe harbor to stay compliant, it will be essential for them to maintain records that are clear, concise, timely and accessible to the FTC. Otherwise, the situation for telemarketers and sellers may become analogous to that of a taxpayer who paid his taxes but became vulnerable to time-consuming investigations and possible sanctions because of insufficient record keeping. Clearly, the negative long-term consequences of noncompliance with record-keeping rules are far more important than the effects of the required short-term effort.


To claim safe harbor and be able to abandon a portion of telemarketing calls, telemarketers must keep accurate records that show they've complied with these requirements for abandonment rate, ring time and recorded message:


o No more than 3 percent of calls that were answered by a person were abandoned (measured per day per calling campaign).


o Each consumer's telephone rang at least 15 seconds or four rings before the call was disconnected.


o Each call was connected to a sales rep within two seconds of the consumer's greeting or, if a sales rep was unavailable to speak with the consumer within two seconds from the time the call was answered, a recorded message stating the name and telephone number of the seller was played (the message cannot include a sales pitch).


Companies must keep these records for at least 24 months.


Some rules, such as maintaining records of customers' payment authorizations and contact information, most likely will be easy to manage because they are typically maintained in the normal course of business. Unlike other sections of the TSR that provide more specific guidance about the form and type of information that must be maintained, the safe-harbor provision offers minimal direction. It also is unclear what criteria the FTC will use to evaluate the accuracy of the records and to determine whether the telemarketer and/or seller is in compliance.


One school of thought is that the lack of direction makes compliance easier by giving telemarketers flexibility in compiling the metrics. But for telemarketers uncertain as to the technologies and processes needed to capture and document the required information, the consequences could be devastating to a company asked to prove compliance. In addition, the development, storage and maintenance of these records will increase direct and indirect costs for some telemarketers.


To help ensure that their programs comply with the record-keeping rules, telemarketers should clearly identify telemarketing programs by type along with all the required reporting metrics for each type. The rationale for this is that the requirements could differ for each type of program.


Before starting new programs as well as for all existing programs, telemarketers should develop, test and implement compliant record-keeping practices. They also should maintain all records with proper physical and technological redundancy and perform regular maintenance and data-quality checks of all compliance metrics.


As the FTC, consumer watchdog organizations and other associations seek more ways to regulate teleservices, implementing telemarketing programs will grow more challenging. To ensure a telemarketing program's success, a seller must select a marketing partner with a track record of compliance as well as an intimate understanding of the seller's industry and customers. Marketers who can deliver and prove compliance will be best positioned for growth.


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