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States, FTC Address Call Abandonment

State and federal regulators are proceeding with laws restricting the use of predictive dialers, but the Federal Trade Commission may have the most important role depending on how it asserts its jurisdiction over interstate calls.

The most pressing concern for many telemarketers with regard to predictive dialers is the implementation of the California Public Utilities Commission’s 3 percent abandonment rate by the July 1 deadline. After Jan. 1, the rate will be 1 percent. The PUC has defined an abandoned call, or “error,” to include not only calls in which the predictive dialer disconnects but also calls in which no live telemarketer is connected to a live person answering the call within two seconds. Calls answered by live people only are included in this percentage; it does not include calls answered by machines.

Almost as pressing as the rate itself is implementation of the record-keeping required by the rule as of July 1:

o All errors, including the time and date of the call, the telephone number called and the originating number.

o The number of calls placed by each dialer for each calendar date. These records are to be maintained for at least three years and made available to the PUC upon request.

Another notable aspect of the rule is the source of regulatory authority for the PUC. Unlike other states with laws regulating predictive dialing, the California law empowers the commission to regulate all users of predictive dialing equipment regardless of purpose. Thus, calls by charities, debt collectors or other entities normally exempt from state and federal telemarketing law are subject to the California standard.

This is a new area of law, so it is uncertain how it will be enforced. I think enforcement will be complaint-driven – a consumer will contact the PUC about a certain call, then the commission will request the broad records described above. A single “error” could cause quite a compliance cost, even if the company’s dialers were operating below the allowed percentages.

Oklahoma recently amended its commercial telemarketing law to set a 5 percent limit on abandonment calls per day with predictive dialing systems. The provision is an addition to the Oklahoma telemarketing law and is also effective July 1, 2002. Unlike the California law, the Oklahoma standard applies only if the caller is a “commercial telephone seller.” Many types of calls and businesses are excluded.

Kansas’ abandonment law requires that a recording or live telemarketer be connected to the consumer within five seconds of the start of the call, but similarly does not apply to calls that are not “unsolicited consumer telephone calls.” Calls to established customers are exempt, as are calls that do not involve consumer goods, credit or services. The Kansas law does not set an error percentage, however, nor have Kansas regulators stated that any error percentage is allowed for calls to which the law applies.

The FTC, however, may render moot much of the states’ role in regulating interstate calls as a part of its revision to the Telemarketing Sales Rule. As I’ve written in the past, the FTC’s initial proposal argued that any abandoned call was an “abusive” practice in violation of the TSR; i.e., a 0 percent abandonment rate.

Errol Copilevitz, my law firm’s senior partner, recently participated in the public hearings on the TSR revisions including abandonment and other proposals such as the national do-not-call list, and reported back how the FTC, industry and some members of the public view the FTC’s proposals.

He noted that though the FTC widely publicized its list proposal, the number of attendees was never more than 100 to 125 at any time. The public outpouring against telemarketing calls was not there.

The first and perhaps most prominent issue discussed was how any potential national do-not-call registry should interface with the laws of the various states. State representatives argued against pre-emption. This stance means a business would need to buy the national list as well as all state lists. The FTC list would be just one more to buy and would not reduce the regulatory burden nor allow consumers a single place to register their names.

The discussion evolved around the possibility of one master list that blends state and federal enrollees that could be enforced by either the FTC or the states. The problems are immediately apparent. Exemptions under federal law and state law differ. For example, under federal law calls by long-distance sellers are exempt but under state law they are not.

There is some support for the concept of requiring a nominal fee for consumers to sign on to the list. A nominal fee would add a degree of reliability and integrity to the process. The sign-up period most likely would be two years, though industry representatives pressed for one. Keep in mind also that the FTC has asked for written comments on its user-fee proposal by June 28.

The issue of caller abandonment is one of the industry’s major problems. Too many consumers are getting too many calls that are dead air. AARP representatives discussed the fear in older women such calls cause.

The FTC wanted to know whether a zero abandonment rate was technically feasible. The response was, probably not. If the majority of industry could operate at 5 percent, the FTC wanted to know, could it also operate with a 3 percent abandonment rate? The DMA survey indicated a substantial drop-off of companies that could effectively operate at that reduced level.

Industry members explained to FTC staff that zero abandonment would put the industry back 20 years. Industry representatives also explained that predictive dialing systems provide additional advantages to consumers by allowing the company to determine who is called and when they are called. This control aids compliance with do-not-call and curfew limitations.

It was noted that the highest abandonment rates are in political calling – sometimes more than 40 or 50 percent. Political calling cannot be regulated. The result is that caller abandonment issues will continue because of the FTC’s limited jurisdiction.

At least 10 categories of calls are exempt from FTC jurisdiction: political calls of all kind; calls from religious organizations; calls from employees of charities; calls from banking institutions; calls from credit unions; calls from savings and loans; calls from FCC-regulated common carriers; calls from insurance companies; all calls that are intrastate only; and survey calling.

Carefully follow the progress of the FTC and state rules on this topic. The law is changing very quickly.

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