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Telemarketing and the Telephone
Consumer Protection Act (TCPA)

Introduction | What you Can Do to Reduce Telemarketing Calls
Telemarketing Law and Practices | News | Previous Top News | Resources | Telemarketing Companies

EPIC maintains two other pages on telemarketing, a page that addresses preemption of state telemarketing law and, and the archived history of the litigation challenging the Do-Not-Call Telemarketing Registry. We also maintain a page on the sale of telephone records.


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Introduction

Telemarketing is a practice where a business initiates a phone call in order to propose a commercial transaction. Millions of telemarketing calls are made to individuals every year. Telemarketing is highly unpopular among Americans; public opinion on telemarketing routinely shows that the vast majority of Americans object to unsolicited sales calls.

Business to consumer telemarketing takes place in two different ways: first, inbound telemarketing is the business use of a telephone to accept consumer calls regarding a product. Inbound telemarketing usually occurs where a consumer responds to direct mail or a television advertisement. Second, outbound telemarketing is the practice of placing calls to consumers for sales purposes. Outbound telemarketing may take place in a "boiler room," a makeshift office that houses persons on an hourly rate to make sales calls. These employees may not be familiar with federal and state telemarketing rules, as there is a 60-70% turnover rate in the industry.

Telemarketing is popular because it is an inexpensive way to market products. Costs are low for the telemarketer, but high on the individual who may be annoyed, inconvenienced, or even psychologically harmed by numerous hang-up calls during the day. In weighing the costs of phone sales, telemarketers and telemarketing industry groups do not consider the costs that are imposed on telephone subscribers, such as the expense incurred from lost time, the monthly cost of caller ID or privacy manager services, the purchase of answering machines to screen calls, and the monthly cost of maintaining an unlisted phone number.

Numerous companies offer advice to individuals who wish to start their own telemarketing venture. For instance, Businesstown.com advises sales callers that they should attempt to gain individuals' trust before reading from the telemarketing script:

"When you are making outbound calls, you must attract the customer’s interest in the first ten to fifteen seconds of the phone call. Engage the customer in a friendly conversation so that you can build trust and establish polite inquiry as to the person’s state of mind. Open with something casual like “How are you today?” Do not attempt to launch into the sales pitch until you get the customer talking and feeling positive about your intentions."

"...As early as possible, you want to smoothly qualify this individual as a prospect without causing him or her to hang up. You must remember that the prospect is thinking "I don't want this" and your job is to reverse this thinking."

What You Can Do to Reduce Telemarketing

Individuals are at a disadvantage when trying to eliminate or reduce the number of telemarketing calls received. There are many call centers in the United States that make tens of thousands of calls per day.

In order to reduce the number of telemarketing calls receive, we suggest these tactics:

Telemarketing Law and Practices

Telemarketing is governed primarily by two statutes: first, the Telephone Consumer Protection Act of 1991 (TCPA), 47 U.S.C. § 227. The Federal Communications Commission (FCC) has authority to collect complaints and institute enforcement actions against violators of the TCPA.

The TCPA's prohibitions and regulations include:

Second, the Telemarketing and Consumer Fraud Abuse Prevention Act, addresses specific aspects of telemarketing, and empowers the Federal Trade Commission (FTC) to issue the Telemarketing Sales Rule (TSR), 16 C.F.R. Part 310. Currently, the TSR restrictions on telemarketers include:

It is important to note that the TSR does not apply to certain forms of telemarketing, including most business-to-business sales calls, telemarketing by banks, federal financial institutions, common carriers (phone companies and airlines), insurance companies, and non-profit organizations.

Two other rules provide additional protections to consumers: the Mail and Telephone Order Rule governs representations regarding the delivery of products purchased through telemarketing. The Telephone Disclosure and Dispute Resolution Act (1992) required federal agencies to develop the 900 Number Rule. The 900 Number rule governs disclosures and procedures associated with pay-per-call services. Both of these rules primarily address consumer protection issues outside the scope of privacy protection.

Unsolicited Commercial Faxes or "Junk Faxes"

The TCPA of 1991 specifically prohibited the sending of unsolicited chimerical fax messages ("junk faxes") to someone without first obtaining their consent. Additionally, all commercial fax messages sent must include accurate information on the time and date they were sent, and the phone number of the sending fax machine.

Unsolicited junk faxes are illegal because they are "cost-shifted" advertising messages. That is, commercial entities can send thousands of solicitations to individuals, and the recipient bears the burden of paying for the fax toner and paper.

The California Public Utilities Commission issued a report in 1991 showing that junk faxes cost California consumers $17 million a year. The Commission has issued a study to update this figure.

In other states, individuals have joined class action lawsuits to limit junk faxes. In 1995, an Augusta, Georgia man brought a large class action against the "Hooters" restaurant chain. In 2001, a Federal Court awarded the class a $12 million verdict against Hooters.

The Federal Communications Commission also pursues junk faxers. In 2001, the FCC fined 21st Century Fax $1 million for sending unsolicited fax messages.

Junk faxes are often sent on behalf of a company by a blast fax centers, such as Fax.com. Fax.com and other junk faxers have been cited many times by the FCC.

Despite these different approaches to enforcement, junk faxes continue to be sent. Junk fax businesses openly sell fax numbers, software, and complete junk faxing packages on the Internet. For instance, Dialcentric markets fax broadcasting systems via E-mail and web sites:

"THE COMPLETE FAX MARKETING SYSTEM!
1 Million Fax Leads & Fax Broadcasting Software Only $149!
Fax broadcasting is the hot new way to market your product or service. You can not beat fax broadcasting for cost effectiveness and reliability. Get your information out to the masses for the lowest price.
People are 4 times more likely to read a fax than junk mail!
THE LIST
List includes fax numbers from every area code in the United States.
List includes business name, fax number, phone number, SIC code, & business description.
All fax numbers were verified 90 days ago.
Fax lists are constantly updated and cleaned.
The list comes on a CD and all fax numbers are fully exportable into most software.
"

Telemarketing and Fraud

Thousands of telemarketing sales calls are made to defraud consumers. Unscrupulous telemarketers even maintain "mooch" lists, databases of people who are most likely to be victimized by fraudulent sales calls.

State Attorneys General have initiated a number of cases to address fraudulent telemarketing. In 1999, Minnesota Attorney General Mike Hatch brought suit against US Bancorp for selling customer account information to MemberWorks, a telemarketing company. The Attorney General alleged that in addition to selling customer contact information, US Bancorp sold credit card numbers, checking account numbers, Social Security numbers, and account balance information. US Bancorp received $4 million and 22% commission on all sales that were completed using the information. US Bancorp settled the case, agreed to pay a $3 million fine, and agreed to end the practice of selling customer information to telemarketers.

Other prominent banks have sold individuals' personal information to telemarketers as well. Capital One, Chase Manhattan, Citibank, First U.S.A., Fleet Mortgage, GE Capital, and MBNA America all have provided their customers' personal and confidential information to fraudulent telemarketers. The financial institutions provided the telemarketers with the names, telephone numbers and other information about their customers. They also gave them the ability to charge customers' accounts without having to ask consumers to provide an account number. In one case, during a thirteen month period a national bank processed 95,573 cancellations of membership clubs and other products that were billed by preacquired account telemarketers without customers' authorization.

In addition to selling fraudulent products and services, "slamming" is a practice often conducted through telemarketing. Slamming is the practice of switching an individual's long distance company without consent.

Predictive Dialers

Telemarketers use special telephone tools to maximize the number of outgoing calls that the company can make. One of the more obnoxious tools is the "predictive dialer." Predictive dialers make many calls at the same time, and connect the telemarketer to the first person who answers the phone. Call recipients who pick up the phone after the first recipient hear "dead air," or a telephone call with no one on the other end, and are disconnected. In the telemarketing industry, the call recipients who hear dead air are termed "abandoned calls."

Some predictive dialers attempt to delay the recipient from hanging up the phone by sending a ring signal to the phone. Many people will remain on the line after hearing the ringing tone, increasing the likelihood that the next available telemarketer will capture the "abandoned call." If the predictive dialer calls a busy line or a line with an answering machine, it automatically schedules the line to be called again later.

The telemarketing industry is aware that predictive dialers cause frustration and the 2002 proposed changes to the TSR would prohibit the use of predictive dialers where they produce "dead air."

Phone Companies Profiteer from Telemarketing Sales and Avoidance of Telemarketing

Phone companies sell both the tools that enable telemarketing and products to help individuals avoid sales calls. To enable telemarketing, phone companies sell dialing equipment, the lines and infrastructure that enable calling multiple persons at one time, and lists of new customers. To help individuals avoid telemarketing, the phone companies sell unlisted numbers, caller ID, and systems such as Privacy Manager.

State Action to Address Telemarketing

In 1991, with the passage of the Telephone Consumer Protection Act, the Federal Communications Commission was directed by Congress to create a national do-not-call (DNC) database for persons who wished to opt-out of telemarketing calls. The FCC failed to create this database. Because of federal inaction on consumer protection in telemarketing and other areas, many states have taken action to address citizen's desires to avoid sales calls.

States have addressed telemarketing in many ways. Some states have passed DNC lists. A DNC list is a database of individuals who wish not to be contacted by telemarketers. Some states have allowed individuals to enroll in DNC lists over the Internet. Initiating a telemarketing call to a person on the DNC list can result in fines. It is important to note that many states have exemptions to the DNC list for certain types of telemarketing. These exemptions may include newspaper telemarketing, public opinion poll calling, calling on behalf of an elected politician or candidate, telemarketing where there was a prior business relationship with the call recipient, and telemarketing on behalf of charitable organizations.

Some states have enacted "no rebuttal statutes." These laws require the telemarketer to end the call when the consumer indicates that she is not interest in the product being sold.

In a similar vein, some states have enacted "permission to continue laws." These statutes require the telemarketer to gain the consumer's permission or interest in the product before continuing the sales pitch.

Telemarketer application, registration, and bonding is required in many states. However, many states exclude well-established businesses from these requirements.

Some states have restricted the hours in which a telemarketer can initiate a sales call beyond the times specified in the TSR. The TSR limits sales calls to the hours of 8 AM to 9 PM in the recipient's time zone.

In order to protect consumers, over half the states require certain telemarketing transactions to be memorialized in a written contract.

Last, some states have supplemented federal law with stronger protections against junk faxes.

The Direct Marketing Association maintains the most up-to-date information on state telemarketing regulation. Additionally, the AARP has a explanation of the state DNC lists and enrollment procedures.

Anti-Telemarketing Technology

There are commercial products that may reduce the number of telemarketing calls received.

These devices work in different ways. Some send a signal over the line when the phone rings. The signal indicates that the line is disconnected to telemarketers using predictive dialers. This type of product only works against telemarketers who use predictive dialers. Smaller telemarketing companies may not possess predictive dialers, and would evade the device.

Other devices play a prerecorded message for the telemarketer requesting that the call recipient be placed on a do-not-call list. There are also services offered by some phone companies that will automatically screen calls that are sent without caller id (CID) information.

Telephone companies themselves offer some services that can help individuals avoid telemarketing calls. These services include Caller ID, anonymous call rejection, and phone services that require the caller to give identification before the recipient's phone line will ring.

Telemarketing and Workplace Privacy

Individuals who work in telemarketing call centers experience invasive monitoring. The telemarketing business is privacy invasive both to its workers and to its customers. Callers are regularly monitored for speed in making calls and the number of times they use the customer's name. For more on this issue, please visit the EPIC Workplace Privacy Page.

News

Previous Top News

The Federal Trade Commission has proposed to create a loophole in telemarketing regulations that will allow companies to deliver "prerecorded message telemarketing" to their existing customers. This type of telemarketing also leaves "answering machine spam," unwanted messages on voicemail. Even those enrolled in the Do-Not-Call Registry will be affected by the proposed loophole. In order to stop this proposed loophole, you need to file comments with the Federal Trade Commission. It will take you less than ten minutes to protect the Do-Not-Call Registry. The Commission is accepting comments until January 10, 2005.

Under the proposal, companies could call their current customers and play a recorded message. The message would have to give the consumer an opportunity to opt out of the calls, either by pressing a button or
by calling a toll-free number. The key to the proposal is the definition of businesses' "current customers." Under the Do-Not-Call Regulations, a business relationship exists whenever an individual makes an inquiry about or buys any product or service. Inquiries create a relationship for three months; purchases for eighteen. During that period, the company can make telemarketing calls even if the individual is enrolled in the Do-Not-Call Registry, and the individual must opt out of each business relationship individually. Technically, under the regulations, buying a cup of coffee creates a business relationship that permits telemarketing for eighteen months.

The Commission's proposal comes at a time where technology and business practices could create the "perfect storm" for a barrage unwanted telemarketing and answering machine spam. Technologically, with Internet telephony (VoIP), it now is easier and less expensive to use a regular computer to initiate automated, prerecorded voice calls. Additionally, many retail businesses are asking for identification information at the point of sale. Companies collecting this information could exploit this loophole to send volumes of prerecorded telemarketing and answering machine spam.

EPIC and a coalition of privacy groups will file formal comments on the loophole, stressing that individuals can opt in to this form of telemarketing if they choose, but that a mere business relationship should not authorize companies to deliver prerecorded messages (Jan. 2005)

Resources

Telemarketing Companies


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Last Updated: May 15, 2006
Page URL: http://www.epic.org/privacy/telemarketing/default.html

Preemptive Attack