Outlook: Telemarketers Know They Must Bolster Compliance Efforts

Last year will be long remembered as the most tumultuous one ever for the teleservices industry. The promulgation of new, more restrictive telephone solicitation rules by the Federal Trade Commission and Federal Communications Commission, including the creation of the national do-not-call registry, were enough to keep industry attorneys on their collective toes throughout the year.

In addition, the legislative and legal roller-coaster ride that was the launch of the national DNC registry provided an unprecedented level of uncertainty and angst across the industry. One day on, the next off, the next day on yet again, the industry experienced a collective case of DNC-induced whiplash.

The legal battle spilled over into 2004, culminating in last month's unanimous decision by the 10th Circuit Court of Appeals that the registry does not violate First Amendment rights. With this major victory in the multi-year battle to create the national DNC list in hand, the FTC and FCC will now be turning their full attention to providing the enforcement punch to what they view as a long-overdue restriction on the industry.

Teleservices professionals accustomed to enforcement at the state level are painfully aware that they now must bolster their compliance and record-keeping practices. A recent FCC fine against Fax.com for $5.4 million provides a cautionary note for the industry: The stakes for DNC are higher, the motivation to find violators is greater and the number of zeros tacked onto fines levied will rise correspondingly. As bad as 2003 was for the industry, it was merely prelude to the enforcement actions that will occur this year.

What must the industry do? The first, and most obvious, answer is to use whatever means are necessary to avoid DNC violations. Though the federal regulations together govern virtually every aspect of a call center's operations, the main entry point for an investigation has always been, and will remain, consumers complaining about DNC infractions.

This is the area of the new rules that garnered the most publicity, and it is the easiest for consumers to understand and act upon. Once on the national registry, consumers will expect that the calls will cease. The FTC and FCC take the position that even one alleged DNC infraction opens the door to an investigation of all aspects of a telemarketer's business.

A Clearer Picture

Now that the FTC and FCC have begun the investigations that will provide the information necessary to start levying fines, the industry has a clearer picture of what to expect when these agencies come calling.

Case in point: Some major telemarketing concerns have received a “Civil Investigative Demand” from the FTC. The purpose of this document is to “determine whether there is, has been or may be a violation of any laws administered by the Federal Trade Commission by conduct, activities or proposed action …”

This language introduces a set of document demands and interrogatories designed to elicit information regarding every aspect of the telemarketer's business operations. The wide scope of the demands extends to the time frame for which the information is sought — normally from the date the DNC list became effective until the time the telemarketer complies with the CID.

The demands and interrogatories take up four pages and can be divided into these categories:

· Background information.

· DNC-related information.

· Abandoned-call information.

· Procedural information.

The background information request, though to be expected, is quite extensive. Along with standard corporate structure and governance information, the CID requires the production of all scripts used; all financial statements dating back to 2002; documents detailing the names, titles and job responsibilities of all employees whose work relates to telemarketing; and detailed information regarding the relationship between the company and all sellers on whose behalf the company provides telemarketing services.

CID Requirements

In terms of eliciting DNC information, the CID requires, among other things: identification of each telemarketing call placed by the company, date and time each call was made and the seller on whose behalf each call was placed; the phone numbers for all “in-house” DNC requests received by the company; identification of all consumers with whom the seller (on whose behalf the call was made) has an established business relationship (and the nature of the relationship and the dates the relationships were established); identification of all phone numbers of consumers who provided express written consent to be called (along with copies of such consent); a list, by campaign, of each telephone number to which a call was placed to any consumer after the consumer made an in-house DNC request, plus the date and time of each such call; a detailed list of each call made to a number that appears on the national DNC registry, and the date and time of each call; and a detailed list of each number called where the seller did not have an established business relationship with the consumer contacted.

The abandoned-call informational requests include: a list of each number to which a call was placed and then abandoned, including date and time; a detailed description of the technology used to ensure a 3 percent abandonment rate; and copies of all recorded messages played where no sales representative is available to speak.

Finally, in terms of internal procedures, the CID requests information regarding maintenance of in-house DNC lists; documents relating to the establishment of written procedures governing in-house and national DNC; information regarding training of personnel on these procedures; information regarding the process used to prevent calls to in-house and national DNC numbers; and information relating to the monitoring of all of the above requested procedures.

Though the above summary does not include the entire set of interrogatories and document demands, it provides a sense of the scope of information that individual telemarketers are expected to produce.

Any entity that finds itself on the regulatory radar screen based on DNC complaints by consumers will have to produce voluminous amounts of information, the purpose of which is to give the enforcing authority what it needs to identify all the violations (if any) that have been made. These can include the original DNC complaints registered by consumers, but also additional DNC violations identified during the investigation; violations with regard to registering and paying for the national DNC list; as well as violations of the abandoned-call, in-house DNC, disclosure and billing information rules. At up to $11,000 per violation, these will add up quickly.

For those seeking to decrease, to the extent possible, the risk of being the subject of such an investigation, there are no guarantees. The key is to avoid being the subject of complaints, specifically DNC complaints, in order to avoid appearing between the investigatory crosshairs. The industry's challenge will be how to achieve the 100 percent level of compliance demanded by enforcement authorities.

Telemarketers who adopt the most effective technologies and procedures will be in the best position to avoid an investigation and, most importantly, any fines that may result.

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