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Trade Groups Oppose Fee Increase for DNC Shortfall

Two trade groups that represent telemarketers said last week that they would oppose the Federal Trade Commission raising fees for access to the national no-call list to cover a $9.4 million budget shortfall.

A report issued last month by the Government Accountability Office showed that in federal fiscal year 2003, the first year of the no-call list's operation, the FTC spent $14.6 million on the list and collected $5.2 million in fees. In fiscal year 2004, the FTC broke even on the list, spending $14 million and collecting the same amount in fees, but not recouping the shortfall.

The report has the American Teleservices Association and the Direct Marketing Association concerned about another fee increase for no-call list access. The FTC already increased the fee once, raising it last year from $25 per area code to $40, and from $7,375 for all area codes to $11,000.

“We've always been concerned that the FTC has the unchecked ability to modify the rules at any time,” said Tim Searcy, CEO of the ATA. “Hopefully, the FTC will not abuse its authority, but will continue in the spirit that they have had recently — in dialogue with us — before making any changes.”

The FTC should be able to make up the shortfall with the already-increased fee, said Jerry Cerasale, DMA senior vice president of government affairs. If anything, the list should get cheaper to operate over time.

“The cost of this program should drop,” he said. “In the long run, this should straighten out.”

In a news release last week, the FTC acknowledged the report and referred to a Jan. 18 response letter to the GAO. The letter does not mention the shortfall, but says that the FTC doesn't disagree with the report's contents. It also states that measuring the no-call program's success is difficult.

“Nonetheless, when reports from consumers, the media, and professional surveyors consistently conclude that the DNC Registry effectively and successfully protects registered consumers against invasions of their privacy by most commercial telemarketing calls, it is reasonable to infer that the program is working as intended,” the FTC said in the letter. “This is especially so when there is no evidence to the contrary.”

The FTC has covered the shortfall so far by using taxpayer dollars, but the agency is required to recoup the cost of the no-call list from access fees. One reason for the shortfall was that the FTC got congressional approval to collect the fees later than expected, the GAO report said.

The FTC began implementing the no-call list near the end of June 2003, but telemarketers didn't get access — and didn't begin paying fees — until September. The federal fiscal year ends Sept. 30, so the FTC racked up high costs, but had only a month to collect fees before the fiscal year ended.

The other reason cited in the report was that the FTC overestimated the number of telemarketers that would pay for access to the list, as well as the amount each would pay on average. The GAO report said the FTC initially expected 10,000 companies to pay for list access and to access 73 area codes each on average. But as of June 1, 2004, about 7,100 companies had accessed the list and averaged 63 area codes per company.

About 57,000 others have accessed the list for free. Most are exempt from the fee because they accessed five area codes or fewer, while others are noncommercial telemarketers such as charity fundraisers.

However, some telemarketers suspect that not all members of the industry are paying their share of the list's costs. The FTC has not been diligent enough in enforcing compliance and ensuring that all telemarketers comply, Searcy said.

Searcy said he was sure, from what he knew of the industry's size, that a significant number of telemarketers aren't paying. As a result, companies that comply bear the entire burden of the list's cost while noncompliant ones pay nothing, he said.

The FTC has resisted releasing the identities of companies that accessed the list, denying industry requests on privacy grounds. In November, following an administrative appeal of an initial denial, the FTC granted a request by DM News for the names of companies that accessed the no-call list. The FTC has provided some of the requested data. The agency is still processing the request and has said that providing all the names will take several more weeks.

The GAO report offers no conclusions about the success of the no-call list. It said the FTC has filed 10 lawsuits under the list while the Federal Communications Commission has issued 16 citations and entered into two consent decrees.

The FTC has conducted two surveys to gauge whether the list has been effective in blocking telemarketing calls, the GAO said. One found that 90 percent reported a decrease in telemarketing calls while the other found 87 percent.

One survey showed an 80 percent reduction in telemarketing among consumers who registered for the list. However, the GAO called the survey suspect because it relied on respondents' memories of how many telemarketing calls they had received.

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