Telemarketers Question DNC Fee Increase

Second in a two-part series.

Government records show that collections of fees for access to the national no-call list have barely kept ahead of the list's expenses, prompting federal regulators to institute a fee increase that has angered telemarketers.

Few things rankle telemarketers so much as having to foot the bill for the no-call list, a government program that has cut deeply into their profits. But on Sept. 1, the Federal Trade Commission increased industry angst by raising no-call list access fees. The annual fee went from $25 per area code to $40, and the maximum annual fee went from $7,375 to $11,000.

The FTC has undertaken only one major enforcement action under the no-call list. Some telemarketers have said they wonder where the money is going.

“They tell us we're in compliance and then hike the fees,” said Tim Searcy, CEO of the American Teleservices Association. “It sounds like you don't need the budget.”

FTC expense records show that the agency entered into contracts worth $17.6 million through June 14 for work on the no-call program, and FTC officials have said they expect that figure to increase. According to data obtained by DM News through a Freedom of Information Act request, the FTC has collected $18.6 million in access fees since the list's inception in 2003.

Why collections have barely kept pace with expenses is unclear. The FTC received authority from Congress to collect $18.2 million in fees in fiscal 2003, which ended Sept. 30, 2003, and $23.1 million in fiscal 2004. Its budget for fiscal 2005 is not set, but is expected to be roughly $20 million.

As of June 1, only 7,100 telemarketers paid for access to the no-call list whereas the FTC had expected 10,000. Only 1,200 paid for the entire list. More telemarketers than expected — 57,000 — received free access because they accessed five area codes or fewer while another 1,100 qualified for free access as nonprofits.

Lois Greisman, associate director with the FTC's consumer protection bureau in charge of the no-call list, said the agency has seen no evidence of telemarketers “gaming the system” to get free access, yet theories abound in the industry about why so few are paying for access.

One theory is that some telemarketers register with the FTC to receive five or fewer area codes, but download more from private compliance providers who also have the list. Another theory is that agents working for national corporations — as is common in the real estate and insurance sectors — can each access a few area codes individually without their parent companies having to pay for access.

The FTC has encouraged parent companies to buy the list and give their agents access to it, but the companies have resisted for fear of becoming liable for their agents' actions, Greisman said.

“They are wholly incorporated entities,” she said of such agents. “There's nothing wrong with them coming in and getting the one, two, three or four area codes they need.”

Better enforcement against telemarketers who failed to register for the list would help raise money, Searcy said. He also suggested charging a modest fee to the thousands of businesses that access five or fewer area codes, arguing that the burden of paying for the registry shouldn't fall entirely on major telemarketers. The FTC is concerned about the cost of collecting fees from so many companies, but Internet registration should make it fairly inexpensive, Searcy said.

The FTC has denied the ATA's attempts to find out exactly who is accessing the no-call list. In December, the ATA and some private partners filed a FOIA request for information about all the entities that have registered for no-call list access, Searcy said.

The FTC originally said it would cost $1.13 million to process the request. The ATA revised its request a month later, limiting it to only the 872 telemarketers who at the time were paying for full access to the list.

In a March 30 letter, FTC attorney Joan Fina said the FTC had changed its position and denied the ATA's request entirely. The reason for the denial was that some of the telemarketers might be individuals working from home and that there was no way to remove their personal information.

On July 6, DM News filed another FOIA request, asking the FTC to release only the names of those who had accessed the no-call list. An FTC attorney said that the agency was still considering the request because some of the data might contain personal information.

The Sept. 1 fee increase appears to have augmented collections. From Sept. 2, 2003, until Sept. 30, 2003, the FTC collected $5.2 million. From Aug. 31, 2004, to Sept. 24, 2004, — the most recent data available — the FTC collected $6.1 million.

Whether access fees will continue to rise is uncertain, even to the FTC. Eileen Harrington, associate director of marketing practices in the FTC's bureau of consumer protection, told telemarketers recently at the ATA's convention in Miami Beach, FL, that it was too soon to tell.

“I'm not looking forward on that,” she said. “We're dealing year to year, figuring out the costs.”

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