FTC Seeks Comment on Proposal to Limit the Use of Prerecorded Messages in Telemarketing

Commission Also Approves Federal Register Notice Responding to VMBC and DMA Telemarketing Petitions

For Your Information

Commission approval of Federal Register notice: The Commission has approved the publication of a Federal Register notice concerning two recent petitions asking the FTC to amend the call abandonment provisions of the Telemarketing Sales Rule (TSR). The first petition, from the Voice Mail Broadcasting Corporation (VMBC), urged the Commission to allow telemarketing calls that deliver pre-recorded messages to consumers with whom the seller has an established business relationship. The second petition, from the Direct Marketing Association (DMA), sought modification of the method of calculating the maximum allowable call abandonment rate under the TSR’s call abandonment safe harbor provision. As detailed in the notice, the Commission has denied the VMBC’s petition and is seeking public comment on an amendment to the TSR in response to the DMA petition. In addition, the Commission is seeking comment on a new proposal to prohibit the use of prerecorded messages in telemarketing calls answered in person by a consumer.

In 2003, the FTC amended the TSR to include a provision limiting the number of calls to consumers that telemarketers may “abandon” without risking FTC enforcement action. When a telemarketing call is “abandoned,” the consumer answers but finds no one on the line. Call abandonment is an inevitable side-effect of using “predictive dialers” – very efficient automatic dialing equipment that in some cases will get a consumer on the line but no sales representative becomes available quickly enough to handle the call. When this happens, the dialer either hangs up or holds the line open until a sales representative is available. To remedy these “dead air” and “hang-up” calls, the FTC amended the TSR to prohibit call abandonment, but included a “safe harbor” in the Rule. Under the safe harbor, a telemarketer may play a prerecorded message when a consumer answers, but only in a maximum of three percent of calls answered by consumers in person (rather than an answering machine).

VMBC petitioned the FTC to change the call abandonment provisions to allow telemarketers to place calls delivering a prerecorded message to consumers with whom the seller has an “established business relationship.” In response to the petition, the FTC published a notice of proposed rulemaking on November 17, 2004, seeking public comment on a proposal to amend the TSR as

VMBC requested. The Commission received about 13,600 comments in response to this proposed amendment of the TSR, with more than 13,000 opposing the amendment. The Federal Register notice announced today rejects the proposal to amend the TSR as VMBC had requested and cites widespread consumer opposition expressed in the comments as one reason for this action. Another cited reason for rejecting the proposal is that the comments showed that neither consumers nor industry support safeguards in the proposed amendment designed to ensure that consumers who receive calls delivering a recorded message could assert a company-specific do not call request as easily as they could when they receive calls from an in-person sales representative.

The notice also cites the Commission’s concern that if the proposal were approved, the use of low-cost pre-recorded message telemarketing coupled with the use of such technologies as Voice over Internet Protocol (VoIP) likely would spur an upsurge in prerecorded calls. The dramatically lower cost of telemarketing in this way could make it much more economically feasible for sellers to call consumers with whom they have an “established business relationship.” In such an event, consumers who have entered their phone numbers in the National Do Not Call Registry would likely experience many more “established business relationship” telemarketing calls than they currently receive. The TSR allows a seller or telemarketer to call a consumer with whom the seller has an “established business relationship” even if the consumer’s phone number is in the Registry. If a consumer asks not to receive a seller’s calls, however, the seller or telemarketer must honor that request, even if the seller has an “established business relationship”with the consumer.

Because the Commission has determined not to adopt the amendment VMBC requested, the notice also announces that the Commission will no longer forbear from initiating enforcement actions for violations of the TSR’s call abandonment provision against companies that use prerecorded messages. The November 2004 notice had announced that, pending resolution of the amendment then being proposed, no enforcement action would be initiated against any seller using prerecorded messages in accordance with the amendment then being proposed. The Commission is allowing sellers and telemarketers until January 2, 2007, to revise their practices to discontinue calls that deliver a prerecorded message to consumers with whom the seller has an established business relationship and that conform to the previously proposed, and now rejected, safe harbor.

Also, in the notice approved today, the Commission proposes a new TSR amendment that would make explicit that the TSR prevents sellers and telemarketers from delivering a prerecorded message when a person answers a telemarketing call, except in the very limited circumstances permitted in the call abandonment safe harbor, and when a consumer has consented, in writing, to receive such calls.

With respect to the DMA’s petition, the Commission also proposes a new TSR amendment that would change the method for measuring the maximum allowable call abandonment rate in the call abandonment safe harbor provision from “3% per day per calling campaign” to “3% per 30-day period per calling campaign.” The notice seeks comment on this proposal.

The Commission vote approving issuance of the Federal Register notice was 5-0. Copies are available now on the FTC’s Web site as a link to this press release, and the notice will be published in the Register soon. Public comments on the notice will be accepted until November 6, 2006. (FTC File No. R411001; the staff contact is Allen While, Bureau of Consumer Protection, 202-326-3122.)

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

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