Beyond the Looking-Glass: Telemarketing 2004

By Joseph Sanscrainte
March 2004

The year 2003 will long be remembered as the most tumultuous year ever for the teleservices industry.  The promulgation of new and more restrictive telephone solicitation rules by both the FTC and the FCC, including the creation of the "national" Do Not Call (DNC) registry, were enough to keep industry attorneys on their collective toes throughout the year.  In addition, the legislative and legal rollercoaster ride that accompanied the launch of the national DNC registry provided an unprecedented level of uncertainty and angst across the industry.  One day on, the next off, the next day on yet again, the teleservices industry experienced a collective case of DNC-induced whiplash.

The legal battle has continued into 2004.  The teleservices industry anxiously awaits the ruling of the 10^th Circuit Court of Appeals regarding the American Teleservices Association's constitutional challenge.  Despite the high level of uncertainty that this case (and the inevitable appeal to the Supreme Court) creates across the industry, teleservices professionals must avoid the allure of wishful thinking.  The fact remains that the FTC and the FCC, after a multi-year battle to create the national list, are now seeking to provide the enforcement punch to what they view as a long-overdue restriction on the industry.

Teleservices professionals accustomed to enforcement at the State level are painfully aware that they must now ratchet up their compliance and record-keeping practices.  A recent FCC fine against Fax.com for $5.4 million provides a cautionary note for the industry.  The stakes for DNC are higher, the motivation to find violators is greater, and the number of zeros tacked on to the fines levied will correspondingly increase as well.  As bad as 2003 was for the industry, it was merely prelude to the enforcement actions that will occur in 2004.

Consumer Complaints: The FTC/FCC's Entry Point Into Your Business: What exactly must the industry do at this point?  The first, and most obvious, answer is to employ whatever means are necessary to avoid DNC violations.  Although the FTC/FCC regulations together govern virtually every aspect of a call center's operations, the main entry point for an investigation has always been, and will continue to be, consumers complaining about DNC infractions.  This is the area of the new rules that garnered the most publicity.  It is also the easiest for consumers to understand and act upon.  Once on the national registry, consumers will expect (notwithstanding the three month deployment period or existing business relationships) that the calls will cease.  The FTC and FCC take the position that even one alleged DNC infraction opens the door to a complete investigation of all aspects of a telemarketer's business.

Beware the CID: Now that the FTC/FCC have begun the investigations that will provide the information necessary to start levying fines, the industry has a clearer picture of what to expect when these agencies come calling.  Case in point – a number of major telemarketing concerns have received a "Civil Investigative Demand" (or CID) from the FTC.  What is the purpose of this document?  To "determine whether there is, has been, or may be a violation of any laws administered by the Federal Trade Commission by conduct, activities or proposed action . . . ."  This language introduces a set of document demands and interrogatories designed to elicit information regarding every aspect of the telemarketer's business operations.  The wide-ranging scope of the demands extends the time frame for which the information is sought.  This is normally from the date the DNC list first became effective until the time the telemarketer complies with the CID.

The demands and interrogatories take up four pages.  It can roughly be divided up into the following categories: (1) background information; (2) DNC-related information; (2) abandoned call information; and (4) procedural information. 

Background Information: The background information request, although to be expected, is quite extensive.  In addition to standard corporate structure and governance information, the CID requires the production of all scripts used, all financial statements dating back to 2002, documents detailing the names, titles, and job responsibilities of all employees whose work relates to telemarketing, and detailed information regarding the relationship between the company and all sellers on whose behalf the company provides telemarketing services.

DNC-Related Information: In terms of eliciting DNC information, the CID requires (among other things):

• Identification of each telemarketing call placed by the company.  This includes the date and time the call was made, and the seller on whose behalf each call was placed.

• The phone numbers for all "in-house" DNC requests received by the company.

• Identification of all consumers with whom the seller (on whose behalf the call was made) has an established business relationship including the nature of the relationship and the dates the relationships were established.

• Identification of all phone numbers of consumers who provided express written consent to be called, along with copies of such consent.

• A detailed list, by campaign, of each telephone number to which a call was placed to any consumer after the consumer made an "in-house" DNC request, and the date and time of each such call.

• A detailed list of each call made to a number that appears on the national DNC registry and the date and time of each call.

• A detailed list of each number called where the seller did not have an established business relationship with the consumer contacted.

Abandoned Call Information: The abandoned call informational requests include:

• A list of each number to which a call was placed and then abandoned, including date and time of each call.

• A detailed description of the technology used to ensure a 3% abandonment rate.

• Copies of all recorded messages played where no sales representative is available to speak. 

Procedural Information: Finally, in terms of internal procedures, the CID requests:

• Information regarding maintenance of "in-house" DNC lists.

• Documents relating to the establishment of written procedures governing "in-house" and national DNC.

• Information regarding training of personnel on these procedures.

• Information regarding the process used to prevent calls to "in-house" and national DNC numbers.

• Information relating to the monitoring of all of the above requested procedures.

The Risk: Although the above summary does not include the entire set of interrogatories and document demands, it provides a sense of the scope of information that individual telemarketers are expected to produce.  What is the bottom line?  Any entity that finds itself on the regulatory radar screen due to DNC complaints by consumers will have to produce voluminous amounts of information, the purpose of which is to give the enforcing authority the information it needs to identify all the violations (if any) that have been made.  These can include the original DNC complaints registered by consumers, but also additional DNC violations identified in the course of the investigation; violations with regard to registering and paying for the national DNC list; as well as violations of the abandoned call, in-house DNC, disclosure and billing information rules.  At up to $11,000 per violation, these can (and will) quickly add up.

Conclusion: For those telemarketers seeking to decrease, to the extent possible, the risk of being the subject of an investigation like the one detailed above, there are of course no sure-fire guarantees.  The key is to avoid being the subject of complaints, specifically DNC complaints, in order to avoid appearing between the investigatory cross-hairs.  The key question is whether to rely on traditional "scrubbing" technology (which fails to meet the 100% level of compliance demanded under the rules), or adopt the newer, more efficient, and more effective "blocking" technologies.  Those telemarketers who opt for the latter will be in the best position to avoid an investigation, and most importantly, any fines that may result.

[For more information, see Mr. Sanscrainte's paper, Survival of the Fittest.]

Joseph Sanscrainte is Director of Regulatory Affairs and General Counsel with Call Compliance, Inc.  Call Compliance, Inc. provides a number of compliance services to the teleservices industry, including its patented TeleBlock® DNC blocking service and the industry's only online telemarketing Regulatory Guide.  For more information, please visit www.callcompliance.com. 

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