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Forecast for the FTC’s TSR Review

Two anti-telemarketing advocates recently argued at the Federal Trade Commission’s Telemarketing Sales Rule Review Forum that the use of predictive dialers constituted an “abusive act or practice” within the meaning of the rule (DM News, “Predictive Dialers May Violate TSR,” July 31, 2000), and therefore needed to be regulated or even banned.

I gather that these citizens feel the use of a predictive dialer violated the rule’s prohibition on “causing any telephone to ring, or engaging any person in telephone conversation, repeatedly or continuously with intent to annoy, abuse or harass any person at the called number” thus violating ß310.4 of the rule.

It is absolutely ridiculous to argue that one of the most important technological developments ever in this area of telecommunications is designed specifically to annoy consumers. I guess the two forum participants felt that tremendous gains in efficiency and quality of communication in the industry were just accidents or sidelines for the actual intent of telemarketers to annoy consumers using predictive dialers. The use of predictive dialers has helped the industry to respond to the concern that uninterested consumers are bothered by non-targeted solicitations. One of these systems’ main purposes is to deliver calls to people who are likely to be interested.

Don’t expect the FTC to accept this argument when it publishes its proposed revisions to the rule. Unlike some regulators, the FTC usually acts with measured deliberation when passing restrictions. The FTC will not destroy telemarketing by banning predictive dialers.

You can, however, expect some changes. Because the FTC and other federal regulators often will look to the states to determine the concerns of legislators and consumers regarding an activity, and will fashion federal rules similar to existing state laws, we can deduce some clues as to what the changes may be.

I reviewed recent trends in state laws and several of the public comments submitted to the FTC, and I think the FTC may make proposals in the following areas:

• The FTC may change how telemarketers can directly debit consumers’ bank accounts to get payment for purchases. Currently, the TSR bans direct debiting as a deceptive practice unless the consumer verifies the sale in writing, such as by a signature on a check, by an oral recording containing specified information or by a follow-up written confirmation containing the same information. This part of the rule does not apply to credit card charges. The American Association of Retired Persons, Washington, urged that the FTC limit verification solely to the first method, and more rigorous verification requirements for direct debit and credit card charges might be proposed.

o The FTC may change the TSR’s exemption for business-to-business sales. The TSR does not apply to almost all BTB sales. Its sole application is to sales of nondurable business supplies such as toner cartridges. The TSR is similar to most federal and state consumer protection laws that do not apply to BTB sales. The Texas attorney general urged that the TSR apply to more types of BTB sales, and it is possible that the exemption would be limited based on the many types of fraudulent activity directed toward business but heretofore exempt from the TSR.

• The FTC may change the timing and content of required disclosures. Currently, the TSR has two disclosure requirements. First, it requires that the telemarketer promptly disclose the identity of the seller, the purpose of the call and the nature of the goods or services offered. The rule also requires disclosure of total costs of purchases, as well as material restrictions on the use of the goods or services before the consumer pays for the goods. The AARP urged that the second set of disclosures be required before payment is requested, not collected. The FTC may alter the timing to address this and other consumer concerns.

• The FTC may address some aspects of the use of predictive dialers. Kansas became the first state to regulate abandonment rates. Although a change may not come with this revision, federal regulators may soon begin to examine how predictive dialers are used. For example, Kansas’ law requires that a telemarketer or a recording must pick up the call within five seconds of its start.

• Finally, the FTC likely will address privacy and consumer data issues. This category of concerns has been most regulators’ top priority, from state and federal do-not-call lists to the use of consumers’ financial data. The FTC will not fail to notice and account for this regulatory trend.

Although the comment period has closed for this initial review of the TSR, the FTC will propose draft revisions in the future and will allow the public to comment on them before final implementation. Given that the FTC has national jurisdiction and could regulate every call you make, it would be wise to keep track of this announcement and to carefully review any changes when that time comes.

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