Is Teleservices Technology Ahead of Regulations?

Every day the technology of providing teleservices products to marketers advances. But has the regulatory world kept pace with this technology or are the producers of this new technology ignoring old regulations that apply to the new frontiers of teleservices? Perhaps a little of both?

Marketers are reeling from the backlash of over-regulation in their industry due in part to frustration of consumers with marketing practices. New technology may solve this frustration or create more issues if regulatory compliance issues are ignored.

Technology that has raised issues includes telemarketing to answering machines, text messaging to wireless devices and caller ID marketing. Examining these emerging products and analyzing their use under current regulations gives us an idea of the issues on the horizon.

Many consumers are puzzled when they check their caller ID log and it tells them they’ve won a contest and gives them a telephone number to call to claim their prize. Is this legal?

The federal Telemarketing Sales Rule and Telephone Consumer Protection Act both apply to this type of marketing. The Federal Trade Commission enforces the TSR, and the Federal Communications Commission enforces the TCPA. The TSR and TCPA have several requirements that are impossible to comply with using the current business model of caller ID marketing.

For example, the TSR requires sellers to disclose orally to consumers all material terms of the offer (cost, quantity, restrictions, refund policy, etc.). It also requires sellers to provide four prompt oral disclosures including the seller’s name, purpose of the call, etc. An LCD screen on a caller ID box can never provide these disclosures in this manner.

Text messaging to wireless devices seems to face the same problem. But TSR requirements are limited to “telephone calls.” Does an argument exist that these types of marketing are not “telephone calls”? Because the TSR was written years before marketers used this type of technology, the statute provides no answers. The TSR doesn’t even define “telephone call.” The TCPA bans all telemarketing to wireless devices where there is a charge to the consumer.

Jesse Crowe, president of Voice Mail Broadcasting Inc., agrees that these regulations “were written without taking today’s technology into consideration.” Crowe finds it essential to consult with legal experts constantly when using technology to meet his customers’ demands for reduced costs and increased results.

Marketing to answering machines does not have the regulatory issues as described above. Voice mail broadcasts can cover all required oral disclosures.

Problems have arisen, however, for advertising directed to answering machines that are actually answered by a live person. Simply hanging up on the person violates the TCPA requirement that the seller state the caller’s identity at the start of the message and give the caller’s address and phone number during the call. Indicating “sorry, wrong number” or the like will violate most states’ consumer protection statutes that prohibit misrepresentations.

Suggestions for compliance include using a different prerecorded message that meets the federal requirements but is designed for this sole purpose or the option to switch to a live operator. Again, however, this type of flexibility does not exist for text messaging or caller ID marketing.

Crowe suggests the answer lies in technology itself and thinks “regulators will look to new technology to solve their problems in the future” rather than their current practice of trying to regulate it out of existence. He opines that technology could be the saving grace for the future of teleservices.

“Technology will reduce the basic costs of marketing so that the industry can focus on issues like improving telephone reps’ performance and compliance with do-not-call requirements,” he predicts.

But will technology allow more marketing to excess? A recent USA Today editorial scoffed at the ability of wireless marketers to police themselves. Citing computer “spam” as an example, USA Today supported the FTC’s warning of a need for more regulation.

An article in USA Today estimated that consumers exchanged 1 billion text messages in December 2002 compared with just 14 million in December 2000. According to the Mobile Marketing Association, text message marketing should top $8 billion by 2005. It would seem there are many regulatory hurdles before the billion-dollar mark is met. One federal legislator already has introduced a bill in Congress banning unsolicited advertising messages to wireless devices.

And if a question exists about the application of these laws to caller ID marketing and text messaging, what about telephony on the Internet or the use of predictive dialers on the Internet? As no-call lists shut down the kitchen phone as a storefront, will marketers turn to the family PC? If so, the ambiguity in whether these laws apply to these forums leaves cutting-edge marketers in even riskier territory.

One benefit that may arise from all this confusion may be improved targeting of marketing messages. Most laws in this area exempt messages to previous customers or to consumers who give prior consent. If marketers can use technology to target their message to a majority of consumers with an established interest in their product, consumer annoyance should be reduced.

Where does all of this leave marketers who want to embrace new technology and reap the benefits? In a world that has lost its tolerance for excessive marketing and its fear of over-regulation? Afraid, very afraid.

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