On September 1, 2009, the FTC’s amended restrictions on prerecorded calls, as implemented through the Telemarketing Sales Rule, go into effect. On that date, prerecorded marketing calls will only be permitted if the recipient has provided the caller express written consent authorizing the call. This article will briefly examine the new restrictions, exceptions to the rule, and the affect of the new regime on state law.
On September 1, 2009, the FTC’s amended restrictions on prerecorded calls, as implemented through the Telemarketing Sales Rule, go into effect. On that date, prerecorded marketing calls will only be permitted if the recipient has provided the caller express written consent authorizing the call.1 This article will briefly examine the new restrictions, exceptions to the rule, and the affect of the new regime on state law.
FTC Restrictions
The FTC’s interactive opt-out mechanism went into effect October 1, 2008. That restriction requires that calls made to induce the purchase of any good or service or to induce a charitable contribution comply with certain behavioral standards, including, but not limited to, an interactive voice or key press opt-out mechanism.2 The rule requires the opt-out be made promptly after only disclosure of the name of the caller and purpose of the call for messages received by a live person or an answering machine. There are other applicable restrictions in the Telemarketing Sales Rule to these calls so you should review them carefully prior to undertaking a campaign.
The new restriction limits calls to induce the purchase of any good or service to recipients who have provided the caller an express agreement, in writing, that clearly and conspicuously authorizes the seller to place prerecorded calls to the person, does not require the person to directly or indirectly purchase any good or service pursuant to the consent, shows the willingness of the recipient to receive such calls on behalf of a specific seller, and includes such person’s telephone number and signature.3 Calls to induce a charitable contribution are still permitted to previous donors, but the opt-out restriction applies as well.
FTC Exceptions
There are two types of exceptions to the new FTC restrictions.
First, there are exceptions based on the FTC’s limited jurisdiction. Banks, federal credit unions, federal savings and loans, common carriers, and nonprofit organizations are exempt from the FTC’s jurisdiction. (Complying with the Telemarketing Sale Rule, January 2004, p. 8) The FTC, however, will vigorously enforce the Telemarketing Sales Rule4 against a service bureau retained by one of these entities, (i.e. calls by these entities are exempt, but calls on behalf of these entities may not be). The FTC also has limitations on its jurisdiction with regard to the business of insurance and intrastate calls.
The second type of exemption is found in the text of the rule itself. It include calls which are not made to induce the purchase of any good or service or a charitable contribution, certain business-to-business calls, or other calls specifically exempted by the Telemarketing Sales Rule. Needless to say, if you intend to conduct a campaign which does not comply with the new Telemarketing Sales Rule restrictions, that you believe is exempt under one of the above provisions, you should obtain a specific legal opinion regarding that exemption.
Affect on State Law
Prior to this new restriction, prerecorded calls were allowed by the FTC if the caller had an established business relationship with the recipient. Because the Telemarketing Sale Rule does not preempt state law with regard to interstate calls5 , a caller was faced with a “patchwork quilt” of regulations. First, the caller had to determine whether the call was legal under federal law, and, if so, examine each state law to determine if it was more restrictive. The result usually was that a given campaign might be legal under federal law and not subject to the federal “do-not-call” list, but banned in 15 or more states and subject to a handful of state “do-not-call” lists.
Now, because federal law allows calls only with express written consent, the state analysis required for a campaign, while still present, is much less important. Generally, states allow prerecorded calls with express consent, and the result is that a campaign that is legal under federal law likely will be legal under most or all state laws and subject to minor behavioral or registration restrictions in those states. The analysis still needs to be done (i.e. review federal legality, then review state legality in each state where a call is received) but the result likely will be less of a “patchwork quilt”.
Conclusion
The FTC has implemented this vigorous and restrictive regime because it concluded that there were abuses in the area. I spoke with an FTC enforcement attorney regarding “what next?” Would the FTC make a test case soon after September 1, 2009 against one of the most abusive examples?
“No.” He laughed, “We expect full compliance.”
1 16 C.F.R. § 310.4(b)(1)(v).
2 16 C.F.R. § 310.4(b(1)(v)(B)(ii)
3 16 C.F.R. § 310.4(b)(1)(v)(A) E-sign and FTC guidance clarifies these restrictions which you should review with your counsel.
4 16 C.F.R. §310.6
5 16 C.F.R. §310.7(b) The issue of preemption by the Telephone Consumer Protection Act, on the other hand, is still unresolved although states generally vigorously oppose any preemption argument.