Restrictions Continue to Wind Through Legislatures

Just like the “School House Rock” Saturday morning cartoon showed, telemarketing laws are winding their way through legislatures to someday become law. An important one in Texas is close to becoming a law and three other bills have been passed into laws which affect telemarketing directed toward residents of Delaware, Montana and Arkansas.

Delaware House Bill 10 was signed into law at the end of March. The law deregulates the electrical market in the state, allowing competing sellers of electricity to market service to Delaware’s citizens.

The electrical deregulation movement is picking up speed in many states and could be a huge opportunity for businesses and call centers similar to the opportunity created by deregulation of long-distance telephone service – but not in Delaware.

The law contains an amendment, apparently passed by a one-vote margin, stating that “All electric suppliers are prohibited from using telemarketing to solicit customers.”

This prohibition is probably not constitutional because it discriminates against this particular medium and message without just cause, but it is law, so this market will only be opened if the legislature passes another amendment or the provision is struck down in court.

The important thing to realize is that the legislature could have just as easily banned telemarketing by telecommunications providers, or banks, or all telemarketing. The “slippery slope” dangers this presents are not just that other states may copy the provision with regard to deregulation of electric utilities, but that Delaware or other states may copy it with respect to other industries’ telemarketing attempts. If a state can ban telemarketing by one utility, it is not far-fetched that another state could ban it for other utilities, such as long-distance companies.

Montana passed the Montana Telemarketing Registration and Fraud Prevention Act on April 19. The statute is similar to the registration statutes of several other states in that it provides for exemptions for several types of businesses, usually businesses regulated by state or federal entities.

These exemptions include regulated financial institutions, insurance companies, telecommunications companies and call centers that derive 50 percent of their gross revenues from contracts with businesses that are otherwise exempt from registration as telemarketers.

Nonexempt telemarketers are required to post a $50,000 bond. All telemarketers, exempt from registration or not, are subject to disclosure requirements similar to those required by federal law and must provide a 10-business-day right of cancellation.

Arkansas passed the Arkansas Consumer Telephone Privacy Act on April 15, establishing a state do-not-call list applicable to businesses and, in some cases, nonprofit solicitations.

The law was amended to include several exemptions, including calls by real estate agents, automobile dealers, insurance sales people and stock brokers. As I’ve written previously, these exemptions call their constitutionality into question because government is generally forbidden from treating commercial speech more favorably than a nonprofit’s speech. That an insurance agent can make unsolicited calls to those on the DNC list but a paid solicitor for a charity cannot is constitutionally significant.

The list is to be available by Jan. 1 for purchase by nonexempt telemarketers. Alaska, Florida, Georgia, Kentucky and Oregon have similar requirements.

One radical bill is being considered by Texas’ Legislature, and time may be running out to change it before it becomes law. Texas House Bill 537 passed the House on May 11 and has been referred to the Senate. If passed into law, it would substantially amend the state’s telemarketing statute and affect many businesses which previously were exempt from registration.

Notable changes include:

• The creation of a state DNC list. Citizens will not be charged to add their names to the list and their requests will be effective for five years.

• Telemarketers will be prohibited from obtaining a consumer’s credit card number or financial account information as a condition for a consumer to receive goods or services. This implies that a consumer will receive a good or service without charge, regardless of how the good or service is designated (e.g. a gift or prize).

• Elimination of the exemptions from registration for publicly-traded companies, regulated banks, telecommunications companies, sellers of magazines and third-party call centers calling for otherwise exempt entities.

• Increasing the telemarketing bond required from $10,000 to $25,000.

If passed, Texas would be the first state to require registration for companies, such as banks and long-distance companies, which are already heavily regulated by other state and federal agencies. The law would also require registration for third- party call centers which call exclusively for those types of businesses.

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