This alert concerns an FTC review of and rulemaking process regarding the Telemarketing Sales Rule that may impact subscription offers made by phone. If you are not engaged in telemarketing, you can stop reading and instead enjoy some fun telephone-related music from Carly Rae Jepsen, Maroon 5 (warning, explicit content), and for all you monsters, the awesome Gaga (with Beyonce!). Legal Note: These artists do not endorse and are not associated with Cobalt or this alert and likely don't care or even know about the TSR.
TL:DR: The FTC is reviewing and considering amending the Telemarketing Sales Rule (TSR) to provide stronger protections for consumers and address other abuses in the telemarketing space, including:
- Removing an exemption for B-B calls,
- Requiring more robust record keeping for all telephonic sellers,
- Prohibiting deceptive tech-support scams that target seniors, and
- Requiring telemarketers to provide consumers with a pre-bill notice and simple way to cancel a subscription plan.
The Full Story: Last week the FTC announced that it is reviewing and considering amending the TSR through an Advance Notice of Proposed Rulemaking (ANPR) as well as a Notice of Proposed Rulemaking (NPR) in the aforementioned areas. While all of these issues will impact companies engaged in telemarketing, for purposes of this audience, I address here only the recordkeeping requirements and subscription cancel proposals. Public comments to both proposals are due 60 days following their posting in the Federal Register, which according to the Federal Register site, has not yet occurred.
Re subscription plans, the ANPR seeks comments on whether telephonic sellers of negative option programs should provide consumers (i) with advance notice of an upcoming renewal with instructions on how to cancel to avoid the charge, (ii) an easy way to cancel the subscription. Except for the Restore Online Shoppers Confidence Act, which only applies to online negative option offers, neither sending a pre-bill notice nor providing consumers an easy way to cancel a negative option offer, is required by federal law (though various state laws do have these requirements). As such, the FTC is seeking comments on these proposals. In addition to seeking comments on the general question of whether these requirements are warranted, pages 53-54 of the ANPR sets forth the FTC's specific questions in this area.
As many subscription companies already send pre-bill notices to and provide their subscribers with an easy way to cancel regardless of where/how its subscribers enroll, these proposals, if approved, may not have any impact on their business operations. Nonetheless, if you have concerns here, especially responses to the various questions posed on pages 53 and 54 of the ANPR, please contact me.
Re record keeping, Section III.A on page 24 of the NPR sets forth the FTC's purpose and proposals for amending Section 310.5 of the TSR in connection with telemarketing record keeping requirements. Under current Section 310.5, the TSR generally requires telemarketers and sellers to keep records of the following for 2 years: (1) any substantially different advertisement, including telemarketing scripts; (2) lists of prize recipients, customers, and telemarketing employees directly involved in sales or solicitations; and (3) all verifiable authorizations or records of express informed consent or express agreement.
The FTC claims these current rules are insufficient to allow it to effectively enforce the law, "The Commission's law enforcement experience has shown that, absent a recordkeeping requirement, it is increasingly difficult to obtain these critical records and associate the records with the nature, purpose, or content of a particular telemarketing campaign, frustrating the Commission's law enforcement efforts."
To address this issue, the FTC posits "The proposed amendments require sellers and telemarketers to retain new categories of information that the Commission considers necessary for it to pursue law enforcement actions against those who have violated the TSR." Specifically, the proposed amendments require the retention of the following new categories:
- A copy of each unique prerecorded message;
- Call detail records of telemarketing campaigns;
- Records sufficient to show a seller has an established business relationship (EBR) with a consumer; (Note: the FTC already requires callers to possess and maintain proof of an EBR if relied upon as an exemption from scrubbing against the DNC registry, See p.8 of the NPR);
- Records of the service providers that a telemarketer uses to deliver outbound calls;
- Records of a seller or charitable organization's entity-specific do-not-call registries; and
- Records of the Commission's DNC Registry that were used to ensure compliance with the TSR.
These proposals are not yet final, as the FTC is seeking public comment on them. But the FTC notes in the NPR that when it began a rule review of the TSR in August 2014, it asked for comments on the costs and burdens that additional record keeping requirements would impose, and in response received no specific data from industry representatives, other than they generally oppose it, "Industry comments generally opposed any mandatory requirement to maintain call detail records, arguing that imposing such a requirement would be overly burdensome, particularly for small businesses. None of the industry comments, however, provided concrete information or data on the costs associated with requiring telemarketers to maintain call detail records, nor did they suggest any alternative solutions that address the Commission's law enforcement challenges while minimizing the burden on industry." This lack of industry opposition at that time may signal the FTC's intention to impose these record keeping requirements, absent any compelling evidence that industry is able to provide in response to the NPR.
As above, if you have any questions or concerns with this proposal, or any specific data demonstrating the costs and burdens these proposals would place on your company, please contact us.
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