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Analysis: Industry Split on Telemarketing Sales Rule Changes

August 25, 2008

The new Telemarketing Sales Rule (TSR) amendments, announced last week by the Federal Trade Commission (FTC), appears to have resolved one issue, split the telemarketing industry over another, and may have made regulatory compliance even more challenging.

The key features of these changes are:
*          Pre-recorded telemarketing sales messages will not be allowed unless marketers have previously obtained recipients’ signed written consent. Prior to this companies that had existing business relationships (EBRs) could use this method to telemarket to their customers
*          Predictive dialers cannot abandon more than three percent of calls over 30 days, from three percent per day
*          Pre-recorded calls must provide automated interactive opt-out beginning Dec.1, 2008 while the signed consent is required as of Sept. 1, 2009. The abandonment rate change becomes effective Oct. 1, 2008
The telemarketing industry strongly supported the dialer abandonment calculation change as it harmonizes this TSR provision with that in the Telephone Consumer Protection Act (TCPA), administered by the Federal Communications Commission (FCC). The FCC uses the 30 day period.
The TSR change will also make using high-productivity predictive dialers more feasible for smaller campaigns and programs, such as for test markets.
It will in addition simplify work for teleservices firms in setting up and managing outbound programs. These companies no longer have to find out which jurisdiction their customers fall under: FTC or FCC, and adjust and readjust their dialers accordingly.
“This [amendment] will be a plus for both consumers and marketers because it doesn't penalize marketers for using more targeted call lists,” says Jerry Cerasale, senior vice President, Government Affairs, Direct Marketing Association (DMA).
 “Measuring the abandonment rate utilizing a three percent rate over a 30-day period will lower cost structures and significantly lessen compliance obstacles for contact center management,” adds Tim Searcy, Chief Executive Officer, American Teleservices Association (ATA).
The DMA is disappointed with the FTC’s move on pre-recorded calls, which it says will lead to higher prices.
“[We] had hoped that the FTC would match the FCC’s position on this issue by enabling marketers to leave pre-recorded messages for consumers with whom they had a pre-established business relationship, “states Cerasale. “Instead, the FTC has essentially left their old rule intact, and in doing so will increase the administrative costs for marketers: a practice that will increase the price of goods for consumers.”
The ATA is, however, lukewarm to the pre-recorded issue. CEO Tim Searcy said that while the association has supported the EBR for pre-recorded messages, and that consumers should decide to receive such calls, it has never aggressive in pursuing this policy. One reason is that consumers were finding it increasingly difficult to judge the difference between legitimate EBR and fraudulent pre-recorded message calls.
“This was a non-starter for policy makers, and the ATA Board of Directors felt and feel that the EBR exemption would have continued a harmful image of the industry,” explains Searcy. 
Dean Garfinkel, CEO, of Call Compliance, Inc, which provides telemarketing compliance services, strongly supports the FTC move on pre-recorded dialers.
This rule change eliminates the ambiguity that existed with the EBR exemption on teleselling with this method. It is now clear that any dialer that delivers a pre-recorded message aimed at making a sale without the consumer's prior consent to receive such calls will be illegal.
He added that opting out of pre-recorded calls has proven difficult because of the nonexistence of either industry best practices or specific regulations for acknowledging the consumer wishes. In contrast to live calls where there is a reasonable expectation that when consumers tell an agent to put them on their do not call lists these wishes will be complied with.
"People are generally unnerved when they get calls from devices that they can’t engage in a human conversation with,” explains Garfinkel. “And when you annoy people they won’t listen to you let alone buy from you.”
Joseph Sanscrainte, a teleservices law expert and attorney with Bryan Cave LLP who drafted standards for the soon-to-be-unveiled ATA's Self-Regulatory project, does not see the pre-recording change per se harming telemarketers.
If anything the industry will benefit from it overall. By barring delivery of certain pre-recorded messages, rogue companies will move away from these much-derided tactics, allowing the industry to raise the standards for all calls.
“I don’t see that there will necessarily be an overall drop in telemarketing calls,” says Sanscrainte. “The companies that send pre-recorded calls to those consumers with whom they have EBRs will likely go to the next least expensive option, and that is to use live agents.”
The TSR pre-recorded message change does pose, and points to, compliance hazards for telemarketers, the attorney points out. The FTC's new regulation conflicts with the TCPA, which permits prerecorded telemarketing calls with EBR. Industries not under the FTC's jurisdiction, therefore, may decide to follow the TCPA’s more lenient standard.
Complicating matters further, the FCC rule, as with many other federal regulations, can be superseded by state regulations if they are stricter.  For example, Arizona does not provide an EBR exemption to its pre-recorded telemarketing prohibitions.  The same entities that benefit from the FTC's lack of jurisdiction over them would still have to avoid pre-recorded calls in Arizona, even with an EBR.
There are also details in the FTC regulations that can be confusing to implement. If a pre-recorded call "could be" answered by a consumer the message must contain an automated means to opt-out, says Sanscrainte. Yet if it "could be" picked up by an answering device then the message must have a telephone number for consumers to use to assert a do not call request.
The issue lies in that there is no way to be absolutely certain how pre-recorded calls are being handled at the other end. The FTC creates what appears to be, he says, an “either-or rule”, but in practice, he asks, how will telemarketer's know ahead of time who or what 'could be' picking up the phone?
“Prerecorded telemarketing rules present a regulatory minefield because of all the jurisdictions that are out there and the ongoing changes in legislation that occur,” explains Sanscrainte. “You have to tread very carefully in how you comply with them.”
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Brendan B. Read is ContactCenterSolutions’s Senior Contributing Editor. To read more of Brendan’s articles, please visit his columnist page.

Edited by Tim Gray