Telemarketing Regulations

A C o n c e r t o S o f t w a r e TM I n d u s t r y S o l u t i o n s P a p e r The Amended Telemarketing Sales Rule and Telephone Consumer Protection Act: An Introduction to the Key Regulations, Their Impact and Potential Benefits Executive Summary The Federal Trade Commission* (FTC) recently made several amendments to its Telemarketing Sales Rule, as did the Federal Communications Commission* (FCC) to the Telephone Consumer Protection Act, both of which govern interactions. It is important to understand that these regulations are somewhat fluid since issues of interpretation and conflicts between the various amendments are still pending. The numerous amendments within these regulations are often difficult to grasp, yet substantially change how telemarketing businesses can contact consumers. Indeed, the revisions to these two regulations are the single most significant event in the recent history of the contact center and telemarketing industries. Concerto Software Inc, a respected contact center technology provider with more than 20 years of experience working alongside the telemarketing industry, has noticed growing apprehension about the amended telemarketing rules among its customer base. This anxiety stems from fears that the regulations will considerably hinder companies’ abilities to legitimately contact consumers who may be interested in or benefit from their goods or services, making it difficult for them to compete in the marketplace. In response to customer concern and questions about the new FTC and FCC standards, Concerto SoftwareTM has developed the following paper as an introductory guide for contact center executives and telemarketers. The purpose of this paper is not to debate the merits or validity of the amended regulation, but to serve as a preliminary roadmap to businesses attempting to decipher the changes and determine how to adapt their organizations. Generally speaking, all companies conducting business within the U.S. are subject to the amended Telemarketing Sales Rule and Telephone Consumer Protection Act, including U.S.-based business, U.S.-based teleservices bureaus, U.S.-based companies that operate offshore contact centers, and international teleservices bureaus contacting American consumers. Please note that the FTC and FCC provide exemptions for a number of organizations, for some components of these regulations. For additional information on the FTC’s and FCC’s Amended Rules further, visit: American Teleservices Association: www.ataconnect.org Direct Marketing Association: www.the-dma.org Federal Trade Commission: www.ftc.gov Federal Communications Commission: www.fcc.gov Concerto Software cautions that nothing contained in this document is meant to provide legal advice, a guarantee of compliance laws or to create any warranties, expressed or implied, including any warranties of merchantability or fitness for a particular purpose. Ultimate compliance is the responsibility of the end user. We are simply illustrating standard features within our offerings, that when used properly, may assist with your compliance. c o n c e r t o s o f t w a r e 1 W h i t e Pa p e r Notable Changes to the Regulations In amending the Telemarketing Sales Rule and the Telephone Consumer Protection Act, the overall mission was to give consumers a choice about whether they want to receive most telemarketing calls. It is important to note that the FTC and FCC revisions only govern calls businesses make to consumers, and not those from one business to another. Several of the amendments to the rule cover fraud and telephone scams. As law-abiding businesses have little cause for concern from this piece of legislation, this paper will focus on regulations that will have a tangible impact on legitimate contact centers and telemarketing organizations. These include: 1. Creation of a National “Do Not Call” Registry The most publicized FTC revision is the mandate for a nationwide “Do Not Call” registry. This provision allows consumers to place their telephone numbers on a restricted list, stipulating they do not wish to receive telephone calls from telemarketers. The FCC has acknowledged the criticality of a national do not call database, and have stated that the FTC’s registry will be the database of record. With the National “Do Not Call” Registry, businesses will be required to review the list on a quarterly basis and remove all consumers included on the registry from their internal corporate lists. Where an “established business relationship” exists between a consumer and a business, the consumer is exempt from the “Do Not Call” list, and telemarketers are free to contact that individual. Failure to comply with this regulation could result in various fines. A separate provision of the amended rule also prohibits businesses from obstructing consumers’ attempts to be placed on the “Do Not Call” registry. The FTC has awarded the contract for managing the list to AT&T, who is currently in the process of developing the parameters for the list. Consumers will be able to add themselves to the registry beginning in July 2003 and can remain on the registry for five years, until they request to be deleted, or until their phone number changes. Corporations and telemarketing firms will have access to the list beginning in September 2003, and in October 2003 the FTC will begin enforcing the registry and doling out fines to violators. A call is not considered abandoned if a live agent answers it within two seconds from the end of the called party’s greeting. In addition, to guard against abandoned calls, the FTC and FCC dictate that telemarketers are required to give consumers ample time to answer the phone by allowing it to ring for 15 seconds or four rings. 3. Reduction of “Abandoned” Calls Both the FTC and the FCC’s revisions are strict when it comes to “abandoned” calls, or instances when a consumer answers the phone and finds dead air – the telemarketer has already disconnected or cannot provide an agent for the call. While theoretically the FTC and FCC now prohibit all abandoned calls, the agencies have established practical parameters for acceptable abandoned call rates. In response to this consumer concern, the FTC and FCC now specify that all telemarketers must transmit their telephone number and name to caller ID services when placing calls to consumers. These components go into effect January 29, 2004. Caller ID includes the number of the telemarketer, and when available through the telemarketer’s carrier, the name of the telemarketer. Telemarketers can use either the seller’s name and number or that of the service bureau. According to the DMA, telemarketers must make sure that “if the called party were to call back the number displayed that the greeting would match the name displayed on the caller ID.”1 This component, under the FCC Telephone Consumer Protection Act, does not apply to tax-exempt nonprofit organizations. 2. Transmission of Caller Identification Information Recent years have seen a proliferation of “caller ID” services that display identification information for inbound telephone calls. Many businesses have chosen to block their information from appearing on caller ID devices, which has led to consumer frustration over “unknown” or “unavailable” callers. Both the FTC and FCC are currently working with state governments in an attempt to harmonize the various state “Do-Not-Call” lists with the federal registry. c o n c e r t o s o f t w a r e 2 W h i t e Pa p e r The amended Telemarketing Sales Rule and the Telephone Consumer Protection Act now specify that when a person answers the telephone, businesses can abandon no more than 3% of calls. To police the abandonment rates, the FTC and FCC now require all businesses to keep detailed records on compliance with abandonment standards. Telemarketers who stay within the permissible abandoned call limits may be able to avoid liability. The FCC’s measurement of 3% is over a 30-day period. The FTC’s measurement of 3% is by campaign by day. According to the DMA, a campaign is “a marketing effort carried out by marketers to consumers, or by service agents on behalf of marketers, during a specific time period, and in which a list of prospective customers is used to sell the same products or services.”2 Within the FTC regulation, there is a safe harbor provision stating that if the call cannot be connected to an agent within two seconds from the end of the called party’s greeting, a message must be played stating the name and telephone number of the seller on whose behalf the call was made. According to the DMA, calls that are routed to an agent after two seconds, even if a recording is played, are still considered abandoned. The FCC states that for any abandoned call, the telemarketer must deliver a prerecorded message containing the name of the business, individual or other entity initiating the call, as well as the telephone number of such business, individual, or other entity. The message must also state that the call is for telemarketing purposes. Under the FCC regulation, it is stated that those calls routed to an agent after two seconds, even if a recording is played, are considered abandoned calls. Our recommendation is that contact centers configure systems for abandonment rates of 3% or less per campaign, per day. 4. Restriction of Unauthorized Billing The FTC’s amended rule places a greater emphasis on telemarketers receiving consumers’ permission when billing them. However, the revision only pertains to certain payment methods, especially those deemed “novel.” Novel payment methods include activities such as billing a consumer’s utility or mortgage account in return for a good or service. The revised regulations do not govern more traditional methods such as credit and debit card payment, which are subject to existing federal statutes, such as the Fair Credit Billing Act or the Electronic Funds Transfer Act. Specifically, the FTC dictates that telemarketers must receive “express verifiable authorization” from consumers prior to billing them for any products or services. Telemarketers can obtain this confirmation in written form or verbally, but in either instance they must present the customer with complete billing information and the date the proposed charge will occur in clear, intelligible language. Organizations that fail to receive consumers’ well-informed, direct consent will be viewed as engaging in abusive practices. The FTC also mandates more stringent requirements for telemarketers surrounding the use of pre-acquired account information. If a business already has access to a consumer’s billing information, the Telemarketing Sales Rule still asserts that it must receive the consumer’s consent before making a charge. This includes having the consumer repeat the billing information of the account number in question and recording the complete transaction. As with many government regulations, there are gray areas that businesses must scrutinize when reviewing the final version of the amended Telemarketing Sales Rule and Telephone Consumer Protection Act and should confer with their legal counsel to interpret the legislation. Examples of questions to consider include: How precisely does the FTC and FCC define an “existing business relationship?”and What constitutes “informed consent?” What Has Remained the Same In addition to the amendments to the Telemarketing Sales Rule and the Telephone Consumer Protection Act, several tenants of the original rules remain relevant. Telemarketers must still contact consumers exclusively between 8:00 a.m. and 9:00 p.m. (local time) at the called party’s location; immediately identify themselves to consumers and note they are engaged in a sales call, prior to pitching their product or service, divulge all pertinent information about the product or service they are selling and refrain from misrepresenting any aspect of the product or service. c o n c e r t o s o f t w a r e 3 W h i t e Pa p e r Complying at State and Federal Levels Individual states also have laws that dictate proper telemarketing conduct. It is important to note that the FTC revisions do not super-cede present telemarketing laws in states. However, the FCC rules preempt state laws and apply to any call made into the United States. According to the DMA, the FCC regulations set a floor for calls within states. States can create more restrictive laws that would apply to calls within the state.3 Therefore, the establishment of a federal “do not call” registry does not render similar lists that exist on the state level obsolete. Telemarketers are expected to comply with both the nationwide registry and “No Not Call” lists in states where they conduct business. Although efforts are under way to align state lists and the national registry, different lists currently exist and telemarketers must ensure that potential consumer contacts are not included on the national or a state list. Drivers of the FTC and FCC’s Regulatory Efforts The FTC and FCC agencies created these revisions for a reason, and telemarketers must understand the impetus for the changes to fully gauge their impacts. Comprehending the genesis and spirit of the new regulations can help businesses understand how the FTC and FCC will enforce them. The key catalyst for the FTC’s revisions was a mandatory review of telemarketing statutes. The original Telemarketing Sales Rule, ratified on August 15, 1995, and effective as of December 31, 1995, called for the FTC to review the regulations within five years. Accordingly, the Commission began the review process on November 24, 1999, with an eye to altering the original rule to better serve the public. As a matter of course, the FTC solicited comment from the public, including telemarketers and industry and legal experts. During this phase of the review, the FTC received a number of comments from consumers and consumer advocacy groups expressing concern about privacy and security infringements stemming from telemarketing calls. The scope and breadth of the amended Telemarketing Sales Rule was in response to these comments. The focus’ of both commission’s regulatory changes has been consumer frustration. Primarily, consumers were frustrated with the sheer number of telemarketing calls they were receiving. Many consumers found the overabundance of telemarketing calls invasive and viewed the interactions as an incursion on personal privacy. These feelings were exacerbated by telemarketers’ widespread use of pre-acquired consumer information, which led to perceived incidents of unauthorized billing. Consumers were particularly irritated by so-called abandoned or dropped calls. Many consumers had difficulty distinguishing between abandoned telemarketing calls and other types of hang-ups (such as wrong numbers), causing those who received numerous abandoned calls in the course of a single day to worry about security issues. Were their houses being cased for a robbery? Were they being stalked by a stranger? As many telemarketing firms did not transmit caller identification information, the volume of unknown callers compounded consumers’ security fears. In large part, the amended regulations are creating rules to allay these privacy and security fears by enacting the provisions enumerated above: creating a national “Do Not Call” registry; requiring telemarketers to transmit contact information to “caller ID” devices; mandating a reduction in abandoned calls; and imposing restrictions on unauthorized billing. The primary driver for the amendments to the FCC’s Telephone Consumer Protection Act was the marketplace change in the telemarketing industry. The number of telemarketing calls, along with the increased use of various technologies to contact consumers, has heightened public concern about unwanted telemarketing calls and control over the telephone network. The FCC believes that these changes have been so significant that they must evaluate making modifications to existing rules and adoption of new rules if consumers are to continue to receive the protections that Congress intended to provide when it enacted the Telephone Consumer Protection Act. c o n c e r t o s o f t w a r e 4 W h i t e Pa p e r Businesses Covered by FTC and FCC Telemarketing Regulations These rules impact many, but not all, businesses. Broadly speaking, the rules apply to any attempt to provide products or services to consumers at a charge via an interstate or intrastate phone call. These rules cover businesses in the U.S. as well as international businesses or service bureau’s contacting U.S. consumers. In addition, calls made within states are subject to individual state laws governing telemarketing phone calls. In effect, this means that all companies conducting business in the U.S. are subject to the amended rule, including U.S.-based business, U.S.-based teleservices bureaus, U.S.-based companies that operate offshore contact centers, and international teleservices bureaus contacting American consumers. In general business-to-business calls are exempt from the FCC and FTC rules with the exception of ‘calls to induce the retail sale of non-durable office or cleaning supplies.’ However, the FTC and FCC do provide exemptions to the regulations for certain types of businesses and organizations. For example, under the FTC ruling, many financial institutions, long-distance telephone providers, airlines and state-regulated insurance companies are not covered by the regulations. However, telemarketing organizations that solicit consumers on behalf of these types of businesses are still required to adhere to the FTC Commission’s regulations. In many instances, non-profit organizations seeking charitable donations are also exempt from the FTC and FCC regulations. As noted above, international telemarketing operations, whether on behalf of U.S. or foreign-based companies, are obligated to conform to the Telemarketing Sales Rule and Telephone Consumer Protection Act when contacting consumers in the U.S. Although it is more common and requires less effort for the FTC and FCC to penalize U.S.-based entities, the organization has pursued legal action against overseas telemarketers. In addition, U.S.-based companies contracting offshore telemarketers are responsible for any breach of the regulations their offshore outsourcers perpetrate. Impact on Telemarketing Bureaus and Contact Centers Concerto SoftwareTM foresees several processes with which businesses will have to adjust in order to comply with the amended regulations. Again, Concerto Software™ urges businesses to consult with their legal counsel when interpreting and complying with the Telemarketing Sales Rule and Telephone Consumer Protection Act. Above all, many businesses must modify their strategies in order to pave the way for compliance with the updated rule. From the top down, telemarketing organizations must be aware of the FTC and FCC’s revisions and work to create a culture that supports compliance. This will often start with agent training. Businesses must educate agents on how the regulations affect them and outline clear and concise guidelines for behavior. Companies must also realize the expanded importance of consumer information and change how this information is viewed within the scope of their strategies. Not only must organizations create greater safeguards for consumer information they have access to, they must also ensure that this information is not used in an abusive manner. Specifically, companies can update billing and customer relationship management (CRM) systems to more tightly integrate them with the remainder of the enterprise. This is integral to keeping better track of information regarding current customers and consumers who have recently contacted them. These groups are not always under the jurisdiction of the FCC and FTC and represent key targets for marketing via the telephone. In general, philosophies and processes, along with agent behavior and information use, must be molded into the cast of the FTC and FCC’s amended regulations to fit a company’s business strategy. Once companies have tweaked their business strategies to aid in complying with the amended regulations, they must bring their technology strategy into alignment. Many companies mistakenly believe that there is a technology silver bullet that will ensure compliance with the regulations. However, one of the most important lessons of recent years is that technology is only successful when it supports a clear, coherent business strategy. Telemarketers may want to consider the following changes to technology to support their business strategy and support compliance: c o n c e r t o s o f t w a r e 5 W h i t e Pa p e r • Predictive Dialer The key technology piece that enables telemarketing is the predictive dialer. Predictive dialers automate the dialing process and allow contact centers to make high volumes of outbound calls in shorter periods of time. Some predictive dialing systems also feature answering machine detection functionality, which distinguishes a live contact from an automated answering service. Predictive dialers allow contact centers to make numerous calls simultaneously, weeding out unanswered lines and answering machines, then connecting agents with live consumers. Unfortunately, many telemarketers use predictive dialing technology that is not built to help them comply with the current and emerging telemarketing regulations. Most predictive dialer systems cannot detect a live person on the line for four to five seconds – longer than the two-second time limit imposed by the FTC and FCC. However, leading-edge dialer technology can detect a live contact in less than one second, allowing telemarketers to connect a live agent to the call within FTC and FCC sanctioned limits. Therefore, to help aid compliance, it will be beneficial for many telemarketing-engaged contact centers to re-invest in more efficient predictive dialer technology. • Caller ID Systems Many predictive dialer systems currently in use were implemented prior to the widespread consumer use of caller ID systems. Hence, many systems are not capable of, or purposefully block the transmission of caller identification information. Obviously, this is not acceptable under the amended regulations. As companies consider investing in more efficient dialers, they must ensure that the system is capable of displaying caller identification information. • CRM and Customer Information Systems Businesses use varying level of technological sophistication to keep track of valuable customer information, ranging from glorified spreadsheets to advanced customer relationship management (CRM) systems. These customer information receptacles feed into the predictive dialer, providing the necessary contact information for telemarketing calls. CRM systems should integrate tightly with the predictive dialer and other customer interaction technology to reduce complexity and minimize confusion. With thousands of dollars in potential fines at stake for violations of the amended rule, companies want to ensure their customer information systems are up to the job. • Communications Hardware Telemarketing firms representing more than one organization may also have to contemplate changes to their communications hardware. Pursuant to the Telemarketing Sales Rule and Telephone Consumer Protection Act, telemarketers must transmit caller ID information. This includes the phone number of the seller, service bureau, or customer service number that will be answered during normal business hours. This means that some service bureaus must transmit the specific identification information for each organization that they are representing. For example, if a service bureau represents more than one organization and the callback is to the end organization, it must be able to display distinct information for each separate organization it is making calls on behalf of. The T1 lines currently used by many telemarketers only allow them to transmit one set of identification data. Those firms may need to upgrade to an Integrated Services Digital Network (ISDN), which will allow them to display contact information for multiple organizations. As well as altering business and technology processes, telemarketers must adapt their reporting processes to comply with the amended telemarketing rules. Primarily, the FTC and FCC demand that telemarketers be much more rigorous in their reporting habits and more diligent in response to consumer requests. The FTC and FCC have placed the onus for reporting abandoned call rates on individual companies who must now develop meticulous procedures for tracking dropped calls. In addition, businesses must diligently access the “Do Not Call” registry and cross-reference it with their own contact lists to ensure they do not violate the regulations. Here again, some reevaluation of and re-investment in contact center technology may be needed. Possible Benefits from the Amended Rule There is a great deal of trepidation surrounding these new revisions, particularly from the telemarketing industry. Undoubtedly, businesses will have to change how they market to consumers via the telephone; however, Concerto SoftwareTM anticipates several key benefits will stem from the revised regulations. The group that will most obviously benefit from the FTC and FCC’s revisions is consumers. The regulations appear to have been tailored specifically to address consumer concerns. In general, the amendment should create a greater respect for consumers’ privacy, c o n c e r t o s o f t w a r e 6 W h i t e Pa p e r and consumer information should be used more securely and fairly, with no unauthorized billing. Consumers who do not wish to receive telemarketing phone calls should witness a sharp reduction in unsolicited calls. Those who do not mind receiving calls but are annoyed by picking up a dead line should, theoretically, find that only about three in 100 calls are abandoned. Although many telemarketing operations fear they will be put out of business by the regulations, many businesses could stand to profit from the FTC and FCC’s amendments. The regulations that tighten abandoned call restrictions can help contact centers better forecast when they will need agents, thereby streamlining the workforce. In addition, with a better understanding of when and where agents will be needed for outbound calls, contact center managers will have a better sense of when they can switch agents over to manage incoming customer service inquiries. Businesses should also be able to seize greater opportunities from customer contacts. To begin with, the national registry will prune out consumers who have no interest in buying goods and services over the phone, so companies will have a more targeted pool of potential buyers for their outbound campaigns. In turn, with an optimized workforce, an agent should hypothetically be available to handle every live call, increasing the opportunity to make a sale, as compared to an environment where 5% of calls are dropped. Also, by adhering to the rules and respecting consumers’ wishes not to receive calls, businesses avoid irritating consumers and sustain their loyalty. Businesses must look outside the box for other ways to replace the telemarketing revenue. For example, companies should evaluate ways to maximize inbound contacts. When a customer has called in, they should use that opportunity to up-sell another product to them. This means that agents must be equipped with all of the relevant information in order to effectively up-sell or cross-sell to a customer. Another option is to replace cold calls with customer service types of calls, such as welcome or introductory calls to customers when there is an established business relationship. Finally, the telemarketing industry in general should benefit from the revised Telemarketing Sales Rule and Telephone Consumer Protection Act. These revamped rules mandate better business practices and will create higher ethical standards in the industry. This will be especially true as corrupt companies posing as legitimate telemarketers are prosecuted and forced out of business. As businesses increasingly heed the regulations, the reputation of the industry should improve, and consumers may be more receptive to telephone-based marketing. The amended Telemarketing Sales Rule and Telephone Consumer Protection Act are broad and important pieces of legislation. Understanding and complying with the often complex regulations now governing telemarketing calls will require a great deal of effort. Concerto SoftwareTM hopes that this introduction document has served as a useful tool that introduces you to many of the issues and complexities surrounding the FTC and FCC’s rules. Online “Do Not Call” Resources If you are interested in exploring the FTC’s amended Telemarketing Sales Rule or the FCC amended Telephone Consumer Protection Act further, below is a list of Web sites that include relevant information: American Teleservices Association: www.ataconnect.org Direct Marketing Association: www.the-dma.org Federal Trade Commission: www.ftc.gov Federal Communications Commission: http://www.fcc.gov/ * Whether the FTC’s and the FCC’s telemarketing regulations conflict with one another is a source of legal debate. 1 Direct Marketing Association, FCC/FTC Teleservices Update, August 2003. 2 Direct Marketing Association, FCC/FTC Teleservices Update, August 2003 3 Direct Marketing Association, FCC/FTC Teleservices Update, Follow Up Q&A’s © 2003 Concerto Software, Inc. All rights reserved. Concerto Software is a trademark of Concerto Software, Inc. Corporate Headquarters 6 Te c h n o l o g y Pa r k D r i v e We s t f o r d , M A 018 8 6 Te l 9 7 8 . 9 5 2 . 0 2 0 0 Fa x 9 7 8 . 9 5 2 . 0 2 01 email info@concerto.com www.concerto.com