• New Developments in Telemarketing
  • February 24, 2004
  • Law Firm: Blank Rome LLP - Philadelphia Office
  • The year 2003 has been a rough year for the telemarketing industry. Since the implementation of the national do-not-call list on October 1, 2003, consumers have placed over 55 million telephone numbers on the registry. Other new telemarketing regulations, such as restrictions on the percentage of abandoned calls, also have hurt the telemarketing industry.

    Even though a constitutional challenge to the validity of the national do-not-call list is pending, the telemarketing industry remains subject to regulatory enforcement by the Federal Trade Commission, Federal Communications Commission and several states. In response to the growing volume of telephone numbers rendered unavailable by the national do-not-call list, some telemarketers are shifting focus from telemarketing to e-mail or direct mail solicitation. Marketing by e-mail, however, now faces added federal regulation.

    A new federal law, the CAN-SPAM Act, became effective on January 1, 2004. The CAN-SPAM Act forbids, among other things, the transmission of unsolicited bulk e-mail, commonly referred to as spam, which does not provide an "opt out" mechanism. The "opt out" mechanism would require senders to stop transmitting messages to consumers who express a desire to be taken off the spam mailing list. Critics note, however, that spammers are difficult to track and many may be outside the United States. In addition, the conventional wisdom for consumers is to avoid responding to spam because unscrupulous senders use supposed "opt out" mechanisms to confirm the validity of e-mail addresses. A consumer, therefore, can actually increase the amount of spam he or she receives by electing to opt out.

    In addition to the direct attacks, the telemarketing industry also faces challenges from collateral sources. On its face, the Wireless Local Number Portability Act provides consumers with the ability to keep their wireless telephone number if they switch service providers or switch the wireless number to a land line. The WLNPA, however, is a potential nightmare for telemarketers. The FCC's regulations currently forbid telemarketers from calling wireless telephones with predictive dialers. Now that the WLNPA allows consumers to change numbers freely from wireless to land line, there is no way for a telemarketer to know if a number is wireless or land line. Telemarketers may be forced into the Hobson's choice of either keeping the speed and efficiency of predictive dialers or complying with the FCC's regulations.

    Multiple Regulators and Multiple Regulations

    Identifying and complying with the various applicable regulatory agencies also presents a challenge for telemarketers. Both the FCC and FTC have promulgated their own separate telemarketing regulations. Telemarketers may be subject to either set of regulations or both. In addition, Congress specifically mandated that the FCC and FTC work together to implement the national do-not-call registry. The FCC and FTC, however, have yet to work out all the details for the administration and enforcement of the registry.

    In addition to the two separate federal regulatory schemes, telemarketers may be subject to additional state regulations in the various states in which they do business. The FTC's telemarketing rules specifically do not preempt state law, so states are free to enact their own telemarketing regulations. The FCC's telemarketing regulations, however, may preempt state regulations that are less restrictive than the FCC's rules. Telemarketers, therefore, may be subject to regulations enacted by two separate federal agencies and any number of states at the same time. To the extent these various regulations are conflicting or even contradictory compliance with every applicable regulation may be virtually impossible.

    One potential victim of these compliance difficulties is AT&T. The FCC recently proposed fining AT&T $780,000 for continuing to call customers that requested being placed on AT&T's internal do-not-call list. In its defense, AT&T cited the administrative difficulty inherent in complying with the various telemarketing regulations. AT&T claims that the calls for which it is being fined are the result of human error and inadvertent mistake. Although such mistakes may be inevitable for even the most scrupulous and diligent telemarketer, the imposition of fines also may be inevitable.

    State Compliance Issues

    State regulations may pose an even greater challenge for telemarketers. States may seek to "up the ante" of the federal regulations by creating more restrictive state regulations or by closing perceived loopholes in the federal regulations. For example, California recently enacted its own anti-spam legislation. Among other things, the California law targets not only the spammers themselves, but also creates liability for the companies whose products or services are being advertised. It would not be surprising to find this type of vicarious liability pop up in the telemarketing regulations of various states, or see the federal agencies also adopt this approach.

    What These Changes Mean to the Financial Services Industry

    The regulations governing telemarketing, e-mail solicitation and other direct marketing approaches continue to develop and change at both the federal and state level. Creditors who contact past, current or prospective clients directly should keep apprised of the developments in this area of the law. What isn't considered "telemarketing" today may become "telemarketing" as the regulations evolve. Creditors, therefore, should track telemarketing developments at the state and federal level to ensure their sales activities either fall outside the scope of telemarketing regulations or that their sales activities comply with the applicable laws and regulations.

    Creditors who hire telemarketers or other direct marketers also should track developments in telemarketing regulations. As the California anti-spam laws indicate, responsibility for telemarketer regulatory violations may be placed on the companies that hire them. Creditors hiring telemarketers, therefore, should keep informed as to this area of the law and monitor the procedures and policies their telemarketers follow.