Federal Register: January 30, 2002 (Volume 67, Number 20)
DOCID: FR Doc 02-1998
FEDERAL TRADE COMMISSION
Veterans Affairs Department
CFR Citation: 16 CFR Part 310
NOTICE: Part II
DOCUMENT ACTION: Notice of Proposed Rulemaking.
Telemarketing Sales Rule
DATES: Written comments will be accepted until March 29, 2002. Notification of interest in participating in the public forum also must be submitted on or before March 29, 2002. The public forum will be held at the Federal Trade Commission, 600 Pennsylvania Avenue, NW., Washington, DC 20580, on June 5, 6, and 7, 2002, from 9:00 a.m. until 5:00 p.m.
In this document, the Federal Trade Commission (the ``Commission'' or ``FTC'') issues a Notice of Proposed Rulemaking to amend the FTC's Telemarketing Sales Rule, and requests public comment on the proposed changes. The Telemarketing Sales Rule prohibits specific deceptive and abusive telemarketing acts or practices, requires disclosure of certain material information, requires express verifiable authorization for certain payment mechanisms, sets recordkeeping requirements, and specifies those transactions that are exempt from the Telemarketing Sales Rule.
This document invites written comments on all issues raised by the proposed changes and seeks answers to the specific questions set forth in Section IX of this document. This document also contains an invitation to participate in a public forum, to be held following the close of the comment period, to afford Commission staff and interested parties an opportunity to explore and discuss issues raised during the comment period.
Federal Trade Commission,
A. Telemarketing Consumer Fraud and Abuse Prevention Act
On August 16, 1994, President Clinton signed into law the
Telemarketing Consumer Fraud and Abuse Prevention Act (``Telemarketing
Act'' or ``the Act'').\1\ The Telemarketing Act was the culmination of
Congressional efforts during the early 1990's to protect consumers
against telemarketing fraud.\2\ The purpose of the Act was to combat
telemarketing fraud by providing law enforcement agencies with powerful
new tools, and to give consumers new protections. The Act directed the
Commission, within 365 days of enactment of the Act, to issue a rule
prohibiting deceptive and abusive telemarketing acts or practices. \1\ 15 U.S.C. 61016108.
\2\ Other statutes enacted by Congress to address telemarketing fraud during the early 1990's include the Telephone Consumer Protection Act of 1991 (``TCPA''), 47 U.S.C. 227 et seq., which restricts the use of automatic dialers, bans the sending of unsolicited commercial facsimile transmissions, and directs the Federal Communications Commission (``FCC'') to explore ways to protect residential telephone subscribers' privacy rights; and the Senior Citizens Against Marketing Scams Act of 1994, 18 U.S.C. 2325 et seq., which provides for enhanced prison sentences for certain telemarketingrelated crimes.
The Telemarketing Act specified, among other things, certain acts
or practices the FTC's rule must address. The Act also required the
Commission to include provisions relating to three specific ``abusive
telemarketing acts or practices:'' (1) A requirement that telemarketers
may not undertake a pattern of ``unsolicited telephone calls which the
reasonable consumer would consider coercive or abusive of such
consumer's right to privacy;'' (2) restrictions on the time of day
telemarketers may make unsolicited calls to consumers; and (3) a
requirement that telemarketers promptly and clearly disclose in all
sales calls to consumers that the purpose of the call is to sell goods
or services, and make other disclosures deemed appropriate by the
Commission, including the nature and price of the goods or services
sold.\3\ Section 6102(a) of the Act not only required the Commission to
define and prohibit deceptive telemarketing acts or practices, but also
authorized the FTC to define and prohibit acts or practices that
``assist or facilitate'' deceptive telemarketing.\4\ The Act further
directed the Commission to consider including recordkeeping
requirements in the rule.\5\ Finally, the Act authorized State
attorneys general, other appropriate State officials, and private
persons to bring civil actions in federal district court to enforce compliance with the FTC's rule.\6\
\3\ 15 U.S.C. 6102(a)(3)(A)(C).
\4\ Examples of practices that would ``assist or facilitate'' deceptive telemarketing under the Rule include credit card laundering and providing contact lists or promotional materials to fraudulent sellers or telemarketers. See, 60 FR 43843, 43853 (Aug. 23, 1995) (codified at 16 CFR part 310 (1995)).
\5\ 15 U.S.C. 6102(a)(3).
\6\ 15 U.S.C. 6103.
B. Telemarketing Sales Rule
Pursuant to the Telemarketing Act, the FTC adopted the
Telemarketing Sales Rule, 16 CFR part 310, (``Telemarketing Rule,''
``the Rule,'' ``TSR,'' or ``original Rule'') on August 16, 1995.\7\ The
Rule, which became effective on December 31, 1995, requires that
telemarketers promptly tell each consumer they call several key pieces
of information: (1) the identity of the seller; (2) the fact that the
purpose of the call is to sell goods or services; (3) the nature of the
goods or services being offered; and (4) in the case of prize
promotions, that no purchase or payment is necessary to win.\8\
Telemarketers must, in any telephone sales call, also disclose cost and
other material information before consumers pay.\9\ In addition,
telemarketers must have consumers' express verifiable authorization
before using a demand draft (or ``phone check'') to debit consumers''
bank accounts.\10\ The Rule prohibits telemarketers from calling before
8:00 a.m. or after 9:00 p.m. (in the time zone where the consumer is
located), and from calling consumers who have said they do not want to
be called by or on behalf of a particular seller.\11\ The Rule also
prohibits misrepresentations about the cost, quantity, and other
material aspects of the offered goods or services, and the terms and
conditions of the offer.\12\ Finally, the Rule bans telemarketers who
offer to arrange loans, provide credit repair services, or recover
money lost by a consumer in a prior telemarketing scam from seeking
payment before rendering the promised services,\13\ and prohibits
credit card laundering and other forms of assisting and facilitating deceptive telemarketers.\14\
\7\ 60 FR 43843.
\8\ 16 CFR 310.4(d).
\9\ 16 CFR 310.3(a)(1).
\10\ 16 CFR 310.3(a)(3).
\11\ 16 CFR 310.4(c), and 310.4(b)(1)(ii).
\12\ 16 CFR 310.3(a)(2).
\13\ 16 CFR 310.4(a)(2)(4).
\14\ 16 CFR 310.3(b) and (c).
The Rule expressly exempts from its coverage several types of
calls, including calls where the transaction is completed after a face
toface sales presentation, calls subject to regulation under other FTC
rules (e.g., the PayPerCall Rule, or the Franchise Rule),\15\ calls
that are not in response to any solicitation, calls initiated in
response to direct mail, provided certain disclosures are made, and
calls initiated in response to advertisements in general media, such as
newspapers or television.\16\ Lastly, catalog sales are exempt, as are
most businesstobusiness calls, except those involving the sale of office or cleaning supplies.\17\
\15\ 16 CFR 310.6(a)(c).
\16\ 16 CFR 310.6(d)(f).
\17\ 16 CFR 310.2(u) (pursuant to 15 U.S.C. 6106(4) (catalog sales)); 16 CFR 310.6(g) (businesstobusiness sales). In addition to these exemptions, certain entities including banks, credit unions, savings and loans, companies engaged in common carrier activity, nonprofit organizations, and companies engaged in the business of insurance are not covered by the Rule because they are specifically exempt from coverage under the FTC Act. 15 U.S.C. 45(a)(2); but see, discussion immediately following concerning the USA PATRIOT Act amendments to the Telemarketing Act. Finally, a number of entities and individuals associated with them that sell investments and are subject to the jurisdiction of the Securities and Exchange Commission or the Commodity Futures Trading Commission are exempt from the Rule. 15 U.S.C. 6102(d)(2)(A); 6102(e)(1). C. The USA PATRIOT Act of 2001
On Thursday, October 25, 2001, President Bush signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (``USA PATRIOT Act'') of 2001, Pub. L. 10756 (Oct. 25, 2001). This legislation contains provisions that have significant impact on the TSR. Specifically, section 1011 of that Act amends the Telemarketing Act to extend the coverage of the TSR to reach not just telemarketing to induce the purchase of goods or services, but also charitable fund raising conducted by forprofit telemarketers for or on behalf of charitable organizations. Because enactment of the USA PATRIOT Act took place after the comment period for the Rule review (described below) closed, the Commission did not address issues relating to charitable fundraising by telemarketers in the Rule review.
Section 1011(b)(3) of the USA PATRIOT Act amends the definition of ``telemarketing'' that appears in the Telemarketing Act, 15 U.S.C. 6106(4), expanding it to cover any ``plan, program, or campaign which is conducted to induce * * * a charitable contribution, donation, or gift of money or any other thing of value, by use of one or more telephones and which involves more than one interstate telephone call * * *''
In addition, section 1011(b)(2) adds a new section to the
Telemarketing Act directing the Commission to include new requirements
in the ``abusive telemarketing acts or practices'' provisions of the
TSR.\18\ Section 1011(b)(1) amends the ``deceptive telemarketing acts
or practices'' provision of the Telemarketing Act, 15 U.S.C.
6102(a)(2), by specifying that ``fraudulent charitable solicitation'' is to be included as a deceptive practice under the TSR.
\18\ Specifically, section 1011(b)(2)(d) mandates that the TSR include ``a requirement that any person engaged in telemarketing for the solicitation of charitable contributions, donations, or gifts of money or any other thing of value, shall promptly and clearly disclose to the person receiving the call that the purpose of the call is to solicit charitable contributions, donations, or gifts, and make such other disclosures as the Commission considers appropriate, including the name and mailing address of the charitable organization on behalf of which the solicitation is made.'' Pub. L. 10756 (Oct. 25, 2001).
The impact of the USA PATRIOT amendments to the Telemarketing Act is discussed more fully in the part of this notice that analyzes Sec. 310.1 of the Rule, which deals with the scope of the Rule's coverage. This notice sets forth a number of proposed changes throughout the text of the TSR to implement the USA PATRIOT amendments. Also, in section IX of this notice, the Commission specifically seeks comment and information about its proposals to conform the TSR to section 1011 of the USA PATRIOT Act.
D. Rule Review and Request for Comment
The Telemarketing Act required that the Commission initiate a Rule
review proceeding to evaluate the Rule's operation no later than five
years after its effective date of December 31, 1995, and report the
results of the review to Congress.\19\ Accordingly, on November 24,
1999, the Commission commenced the mandatory review with publication of
a Federal Register notice announcing that Commission staff would
conduct a forum on January 11, 2000, limited to examination of issues
relating to the ``donotcall'' provision of the Rule, and soliciting
applications to participate in the forum.\20\ Seventeen associations,
individual businesses, consumer organizations, and law enforcement
agencies, each with an affected interest and an ability to represent
others with similar interests, were selected to engage in the Forum's
roundtable discussion (``DoNotCall'' Forum), which was held on
January 11, 2000, at the FTC offices in Washington, DC.\21\ \19\ 15 U.S.C. 6108.
\20\ 64 FR 66124 (Nov. 24, 1999). Comments regarding the Rule's ``donotcall'' provision, Sec. 310.4(b)(1)(ii), as well as the other provisions of the Rule, were solicited in a later Federal Register notice on February 28, 2000. See 65 FR 10428 (Feb. 28, 2000).
\21\ The selected participants were: AARP, American Teleservices Association, Callcompliance.com, Consumer.net, Direct Marketing Association, Junkbusters, KTW Consulting Techniques, Magazine Publishers Association, National Association of Attonerys General, National Association of Consumer Agency Administrators, National Association of Regulatory Utility Commissioners, North American Securities Administrators Association, National Consumers League, National Federation of Nonprofits, National Retail Federation, Private Citizen, and Promotion Marketing Association. References to the ``DoNotCall'' Forum transcript are cited as ``DNC Tr.'' followed by the appropriate page designation.
On February 28, 2000, the Commission published a second notice in
the Federal Register, broadening the scope of the inquiry to encompass
the effectiveness of all the Rule's provisions. This notice invited
comments on the Rule as a whole and announced a second public forum to
discuss the provisions of the Rule other than the ``donotcall''
provision.\22\ In response to this notice, the Commission received 92
comments from representatives of industry, law enforcement, and
consumer groups, as well as from individual consumers.\23\ The
commenters uniformly praised the effectiveness of the TSR in combating
the fraudulent practices that had plagued the telemarketing industry
before the Rule was promulgated. They also strongly supported the
Rule's continuing role as the centerpiece of federal and State efforts
to protect consumers from interstate telemarketing fraud. However,
commenters were less sanguine about the effectiveness of the Rule's
provisions dealing with consumers' right to privacy, such as the ``do
notcall'' provision and the provision restricting calling times. They
also identified a number of areas of continuing or developing fraud and
abuse, as well as the emergence of new technologies that affect telemarketing for industry members and consumers alike.
\22\ 65 FR 10428 (Feb. 28, 2000). The Commission extended the comment period from April 27, 2000, to May 30, 2000. 65 FR 26161 (May 5, 2000).
\23\ A list of the commentes, and the acronyms used to identify each commenter in this Notice, is attached as Appendix A. References to comments are cited by the commenter's acronym followed by the appropriate page designation.
Specifically, commenters opined that the TSR has been successful in
reducing many of the abuses that led to the passage of the
Telemarketing Act,\24\ and that consumer confidence in the industry has
increased and complaints about telemarketing practices have decreased
dramatically since the Rule became effective.\25\ Commenters credited
the TSR with these positive developments.\26\ Commenters generally
agreed that the Rule has been effective in protecting consumers,
without unnecessarily burdening the legitimate telemarketing
industry.\27\ Commenters also agreed that the Rule has been an
effective tool for law enforcement, especially because it allows
individual States to obtain nationwide injunctive relief, or to
collectively file a common federal action against a single
telemarketer, thereby creating enforcement avenues not available under
State law.\28\ Commenters uniformly stressed that it is important to retain the Rule.\29\
\24\ For example, complaints about ``recovery'' schemes declined dramatically, from a number 3 ranking in 1995 to a number 25 ranking in 1999, while complaints about credit repair have remained at a relatively low level since 1995 (steadily ranking about number 23 or 24 in terms of number of complaints received by the National Fraud Information Center (``NFIC'')). NCL at 11. Unfortunately, complaints about advance fee loan schemes rose from a number 15 ranking in 1995 to the number 2 ranking in 1998, with about 80% of the advance fee loan companies reported to NFIC located in Canada. NCL at 12. \25\ ATA at 6 (consumers now have increased comfort with the telemarketing industry because of the TSR); ATA at 45 (according to NAAG, telemarketing complaints declined from the top consumer complaint in 1995 to number 10 in the first year that the Rule was in effect); KTW at 3 (TSR has added value, respect, and credibility to industry); MPA at 57 (complaints about magazine sales have decreased); NAA at 2; NCL at 23 (reports to NFIC of telemarketing fraud have decreased over the last five years from 15,738 in 1995 to 4,680 in 1999).
\26\ ATA at 45; MPA at 57; NAA at 2.
\27\ AARP at 2; ARDA at 2; ATA at 35; Bell Atlantic at 2; DMA at 2; ERA at 2, 6; Gardner at 1; ICFA at 1; KTW at 1; LSAP at 1; MPA at 46; NAA at 12; NASAA at 1; NACAA at 1; NCL at 2, 17 PLP at 1; Texas at 1; Verizon at 1.
\28\ AARP at 2; MPA at 4, 6; NAAG at 1; NACAA at 1; NASAA at 1; NCL at 2; Texas at 1.
\29\ AARP at 2; ARDA at 2; ATA at 35; Bell Atlantic at 2; DMA at 2; ERA at 2, 6; Gardner at 1; ICFA at 1; KTW at 1; LSAP at 1; MPA at 46; NAA at 12; NACAA at 1; NASAA at 1; NCL at 2, 17; PLP at 1; Texas at 1; Verizon at 1.
Commenters report that, despite the success of the Rule in correcting many of the abuses in the telemarketing industry, complaints about deceptive and abusive telemarketing practices continue to flow into the offices of consumer groups and law enforcement agencies.\30\ As will be discussed in greater detail below, many of these complaints suggest that some of the TSR's provisions need to be amended to better address recurring abuses and to reach emerging problem areas. \30\ See, e.g., LSAP at 2; NAAG at 4, 1011; NCL at 56, 10, 15 16.
Following the receipt of public comments, the Commission held a second forum on July 27 and 28, 2000 (``July Forum''), to discuss provisions of the Rule other than the ``donotcall'' provision. At this forum, which was held at the FTC offices in Washington, DC, sixteen participants representing associations, individual businesses, consumer organizations, and law enforcement agencies engaged in a roundtable discussion of the effectiveness of the Rule.\31\ \31\ The selected participants were: AARP, ATA, DMA, DSA, ERA, Junkbusters, MPA, NAAG, NACAA, NACHA, NCL, NRF, PLP, Private Citizen, Promotion Marketing Association, and Verizon. References to the July Forum are cited as ``Rule Tr.'' followed by the appropriate page designation.
At both the ``DoNotCall'' Forum and the July Forum, the
participants were encouraged to address each other's comments and
questions, and were asked to respond to questions from Commission
staff. The forums were open to the public, and time was reserved to
receive oral comments from members of the public in attendance. Several
members of the public spoke at each of the forums. Both proceedings
were transcribed and placed on the public record. The public record to
date, including the comments and the forum transcripts, has been placed
on the Commission's website on the Internet.\32\ Based on the record
developed during the Rule review proceeding, as well as the
Commission's law enforcement experience, the Commission has determined to retain the Rule, but proposes to amend it.
\32\ The electronic portions of the public record can be found at www.ftc.gov/bcp/rulemaking/tsr/tsrreview.htm. The full paper record is available in Room 130 at the FTC, 600 Pennsylvania Avenue, N.W., Washington, DC 20580, telephone number: 1877FTCHELP (1877 3824357).
D. Notice of Proposed Rulemaking
By this document, the Commission is proposing revisions to the TSR
in order to ensure that consumers receive the protections that the
Telemarketing Act, as amended, mandated. The proposed changes to the
Rule are made pursuant to the rule review requirements of the
Telemarketing Act,\33\ and pursuant to the rulemaking authority granted
to the Commission by that Act to protect consumers from deceptive and
abusive practices,\34\ including practices that may be coercive or
abusive of the consumer's interest in protecting his or her
privacy.\35\ As discussed in detail below, the Commission believes the
proposed modifications are necessary to ensure that the Rule fulfills
this statutory mandate. As noted, the Commission has proposed changes
throughout the Rule pursuant to section 1011 of the USA PATRIOT Act.
The Commission invites written comment on the questions in Section IX
to assist the Commission in determining whether the proposed
modifications strike the appropriate balance, maximizing consumer
protections while avoiding the imposition of unnecessary compliance burdens on the legitimate telemarketing industry.
\33\ 15 U.S.C. 6108.
\34\ 15 U.S.C. 6102(a)(1) and (a)(3).
\35\ 15 U.S.C. 6102(a)(3)(A).
A. Changes in the Marketplace
Since the Rule was promulgated, the marketplace for telemarketing has changed in significant ways that impact the effectiveness of the TSR. The proposed amendments to the TSR, therefore, attempt to respond to and reflect these changes in the marketplace.
One of the changes in the way telemarketing is conducted relates to
refinements in data collection and target marketing techniques that
allow sellers to pinpoint with greater precision which consumers are
most likely to be potential customers.\36\ These developments offer the
obvious benefit of making telemarketing more effective and efficient
for sellers. However, enhanced data collection and target marketing
also have led to increasing public concern about what is perceived to
be increasing encroachment on consumers' privacy. These privacy
concerns initially focused on the Internet. However, the privacy debate
has expanded to include all forms of direct marketing. Consumers have
demanded more power to determine who will have access to their time and
attention while they are in their homes.\37\ Indeed, a majority of the
comments received during the Rule review focused on issues relating to
consumer privacy and consumer sovereignty, rather than on fraudulent telemarketing practices.
\36\ See, e.g., DNC Tr. at 3536; Rule Tr. at 7081; ATA at 9 (industry goes to great lengths to identify only those consumers who are likely purchasers of their products). See also Robert O'Harrow, A Hidden Toll on Free Calls: Lost PrivacyNot even unlisted numbers protected from marketers. Washington Post, p. A1 (Dec. 19, 1999); Robert O'Harrow, Horning In On Privacy: As Databases Collect Personal Details Well Beyond Credit Card Numbers, It's Time to Guard Yourself, Washington Post, p. H1 (Jan. 2, 2002); Dialing for Dollars: How to be Rid of Telemarketers, Orlando Sentinel (Sept. 29, 1999), p. E2 (describing process of data mining and types of information gleaned by list brokers for sale to telemarketing firms): Carol Pickering, They're Watching You: DataMining firms are watching your every moveand predicting the next one, Business 2.0 (Feb. 2000), p. 135; and, Selling is Getting Personal, Consumer Reports, p. 16 (Nov. 2000).
\37\ See, e.g., Bennett at 1; Biagiotti at 1; Card at 1; Conway at 1; Gilchrist at 1; Gindin at 1; Heagy at 1; Holloway at 1; Kelly at 1; Lee at 1; Runnels at 1; Ver Steegt at 1; and DNC Tr. at 83 130. See also O'Harrow, ``A Hidden Toll'' at A1 and ``Horning In'' at H1; and Gene Gray, The Future of the Teleservices IndustryAre You Aware?, 17 Call Ctr. Solutions (Jan. 1999) p. 90.
One result of the call for greater consumer empowerment on issues of privacy has been a greater public and governmental focus on the ``donotcall'' issue.\38\ Related to the ``donotcall'' issue is the proliferation of technologies, such as caller identification service, that assist consumers in managing incoming calls to their homes.\39\ Similarly, privacy advocates have raised concerns about technologies used by telemarketers (such as predictive dialers and deliberate blocking of Caller ID information) that hinder consumers' attempts to screen calls or make requests to be placed on a ``donotcall'' list. \38\ See generally DNC Tr. See also George Raine, Drive to Ban Unsolicited Sales Calls; Consumer Activist's Initiative Would Bar Unwanted Email, Telemarketing, The San Francisco Examiner, p.B1 (Dec. 21, 1999). See also the discussion below of the proposed revision to the ``donotcall'' provision, Sec. 310.4(b)(1)(iii). \39\ See, e.g., DNC Tr. at 83130. See also, Donna Halvorsen, Home defense against telemarketing: Consumers reaching out to services that screen telemarketers, Star Tribune (Minneapolis), p. 1A (July 17, 1999); Stephanie N. Mehta, Playing HideandSeek by Telephone, Wall Street Journal, p. B1 (Dec. 13, 1999); Stanley A. Miller II, Privacy Manager Thwarts Telemarketers. Ameritech says 7 out of 10 ``junk'' calls do not get through to customers, Milwaukee Journal, p. 1 (Aug. 10, 1999); and Ed Russo, Phone Devices Put Chill on Cold Calls Screening, ID Altering Telemarketing, Omaha World Herald, p. 1a (Sept. 26, 1999).
A second change in the marketplace involves payment methods available to consumers and businesses. The growth of electronic commerce and payment systems technology has led, and likely will continue to lead, to new forms of payment and further changes in the way consumers pay for goods and services they purchase through telemarketing. Examples of emerging payment devices include stored value cards and a host of Internetbased payment systems.\40\ In addition, billing and collection systems of telephone companies, utilities, and mortgage lenders are becoming increasingly available to a wide variety of vendors of all types of goods and services.\41\ \40\ See NCL at 5. A more complete discussion of these new payment methods is included below in the section discussing express verifiable authorization, Sec. 310.3(a)(3).
\41\ Id.; NAAG at 10; Rule Tr. 111; 254257.
The type of payment device used by a consumer to pay for goods and
services purchased through telemarketing determines the level of
protection that a consumer has in contesting unauthorized charges and,
in some instances, the kinds of dispute resolution proceedings available to the consumer should the goods or services be
unsatisfactory. Of all the payment devices available to consumers to pay for telemarketing transactions, only credit cards afford limited liability for unauthorized charges and dispute resolution procedures pursuant to federal law.\42\ Therefore, because newly available payment methods in many instances are relatively untested, and may not provide protections for consumers from unauthorized charges, consumers may need additional protectionsand vendors heightened scrutinywhen using these new payment methods.
\42\ The Fair Credit Billing Act, 15 U.S.C. 1666 et seq. provides customers with dispute resolution rights when they believe a credit card charge is inaccurate. Debit cards are not similarly protected by federal law; however, Visa offers ```$0 liability' protection in cases of fraud, theft or unauthorized card usage if reported within two business days of discovery,'' capping liability at $50 after that. See www.visa.com/ct/debit/main.html. Similarly, Mastercard offers a zero liability policy when loss, theft, or unauthorized use is reported within 24 hours of discovery, and otherwise caps liability at $50 ``in most circumstances.'' See www.mastercard.com/general/zero__liability.html. In addition, the Commission's 900Number Rule specifies dispute resolution procedures for disputes involving paypercall transactions. 16 CFR 308.7.
Finally, over the past five years, the practice of preacquired
account telemarketingwhere a telemarketer acquires the customer's
billing information prior to initiating a telemarketing call or
transactionhas increasingly resulted in complaints from consumers
about unauthorized charges. Billing information can be preacquired in a
variety of ways, including from a consumer's financial institution or
utility company, from the consumer in a previous transaction, or from
another source.\43\ In many instances, the consumer is not involved in
the transfer of the billing information and is unaware that the seller possesses it during the telemarketing call.\44\
\43\ See NAAG at 10. The review of the TSR was completed before the implementation of the FTC's Privacy Rule, 16 CFR Part 313, mandated by the GrammLeachBliley Act. 15 USC 68016810. The Privacy Rule prohibits financial institutions from disclosing, other than to a consumer reporting agency, customer account numbers or similar forms of access to any nonaffiliated third party for use in direct marketing, including telemarketing. 16 CFR 313.12(a). \44\ Id.
The related practice of ``upselling'' has also become more
prevalent in telemarketing.\45\ Through this technique, customers are
offered additional items for purchase after the completion of an initial sale. In the majority of upselling scenarios, the
seller or telemarketer already has received the consumer's billing information, either from the consumer or from another source. When the consumer is unaware that the seller or telemarketer already has his or her billing information, or that this billing information will be used to process a charge for goods or services offered in an ``upsell,'' the most fundamental tool consumers have for controlling commercial transactionsi.e., withholding the information necessary to effect payment unless and until they have consented to buyis ceded, without the consumers' knowledge, to the seller before the sales pitch ever begins.
\45\ See generally Rule Tr. at 9599, 107111, 176177. For the purposes of this Notice, the Commission intends the term ``up selling'' to mean any instance when, after a company captures credit card, or other similar account, data to close a sale, it offers the customer a second product or service. For example, a consumer might initiate an inbound telemarketing call in response to a direct mail solicitation for a given product, and, after making a purchase, be asked if he or she would be interested in another product or service offered by the same or another seller. Sometimes the further solicitation is made by the same telemarketer, and sometimes the call is transferred to a different telemarketer. When the product or service is offered by the same seller, the practice is called internal upselling; when a second seller is involved, the practice is termed external upselling.
Cognizant of these changes to the marketplace, and their potentially deleterious effect on consumers, the Commission proposes to amend the TSR.
B. Summary of Proposed Changes to the Rule
The highlights of the Commission's proposal to amend the TSR are summarized below. In brief, the Commission proposes:
The proposed amendments to the Rule do not alter Sec. 310.7 (Actions by States and Private Persons), or Sec. 310.8 (Severability). A. Section 310.1Scope of Regulations in This Part
The amendment of the Telemarketing Act by section 1011 of the USA PATRIOT Act is reflected in this section of the TSR. Section 310.1 of the proposed Rule states that ``this part of the CFR implements the Telemarketing Act,\46\ as amended by the USA PATRIOT Act.'' \46\ 15 U.S.C. 61016108. The Telemarketing Act was amended by the USA PATRIOT Act on October 25, 2001. Pub. L. 10756 (Oct. 25, 2001).
During the comment period that occurred prior to enactment of the
USA PATRIOT Act, several commenters recommended that the Rule's reach
be expanded or clarified.\47\ The impact of the USA PATRIOT Act
amendments on the scope of coverage of the TSR, the commenters'
proposals, and the Commission's reasoning in accepting or rejecting the commenters' proposals, are discussed below.
\47\ See, e.g., DMA at 4; KTW at 4; LSAP at 1; NAAG at 19; NACAA at 2; NCL at 5, 7, 10; Telesource at 4.
Effect of the USA PATRIOT Act. As noted above, section 1011(b)(3) of the USA PATRIOT Act amends the definition of ``telemarketing'' that appears in the Telemarketing Act, 15 U.S.C. 6306(4), by inserting the underscored language:
The term ''telemarketing'' means a plan, program, or campaign
which is conducted to induce purchases of goods or services or a
charitable contribution, donation, or gift of money or any other
thing of value, by use of one or more telephones and which involves more than one interstate telephone call * *
In addition, Section 1011(b)(2) adds a new section to the Telemarketing Act requiring the Commission to include in the ``abusive telemarketing acts or practices'' provisions of the TSR:
a requirement that any person engaged in telemarketing for the solicitation of charitable contributions, donations, or gifts of money or any other thing of value, shall promptly and clearly disclose to the person receiving the call that the purpose of the call is to solicit charitable contributions, donations, or gifts, and make such other disclosures as the Commission considers appropriate, including the name and mailing address of the charitable organization on behalf of which the solicitation is made. Finally, section 1011(b)(1) amends the ``deceptive telemarketing acts or practices'' provision of the Telemarketing Act, 15 U.S.C. 6102(a)(2), by inserting the underscored language:
The Commission shall include in such rules respecting deceptive telemarketing acts or practices a definition of deceptive
telemarketing acts or practices which shall include fraudulent charitable solicitations and which may include acts or practices of entities or individuals that assist or facilitate deceptive telemarketing, including credit card laundering.
Notwithstanding its amendment of these provisions of the Telemarketing Act, neither the text of section 1011 nor its legislative history suggest that it amends Sections 6105(a) of the Telemarketing Actthe provision which incorporates the jurisdictional limitations of the FTC Act into the Telemarketing Act and, accordingly, the TSR. Section 6105(a) states:
Except as otherwise provided in sections 6102(d) (with respect
to the SEC), 6102(e) (Commodity Futures Trading Commission), 6103
(state attorney general actions), and 6104 (private consumer
actions) of this title, this chapter shall be enforced by the
Commission under the Federal Trade Commission Act (15 U.S.C. Sec. 41 et seq.).
Consequently, no activity which is outside of the jurisdiction of that Act shall be affected by this chapter. (Emphasis added.) \48\ \48\ Section 6105(b) reinforces the point made in Section 6105(a), as follows:
The Commission shall prevent any person from violating a rule of the Commission under section 6102 of this title in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq. were incorporated into and made a part of this chapter. Any person who violates such rule shall be subject to the penalties and entitled to the same privileges and immunities provided in the Federal Trade Commission Act in the same manner, by the same means, and with the same jurisdiction, power, and duties as though all applicable terms and provisions of the Federal Trade Commission Act were incorporated into and made a part of this chapter. (Emphasis added.)
One type of ``activity which is outside the jurisdiction'' of the
FTC Act, as interpreted by the Commission and federal court decisions,
is that of nonprofit entities. Sections 4 and 5 of the FTC Act, by
their terms, provide the Commission with jurisdiction only over
persons, partnerships or ``corporations organized to carry on business for their own profit or that of their members.'' \49\
\49\ Section 5(a)(2) of the FTC Act states: ``The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations * * * from using unfair or deceptive acts or practices in or affecting commerce.'' 15 U.S.C. 45(a)(2). Section 4 of the Act defines ``corporation'' to include: ``any company, trust, socalled Massachusetts trust, or association, incorporated or unincorporated, which is organized to carry on business for its own profit or that of its members * * * '' 15 U.S.C. 44 (emphasis added).
Reading the amendments to the Telemarketing Act effectuated by
section 1011 of the USA PATRIOT Act together with the unchanged
sections of the Telemarketing Act compels the conclusion that for
profit entities that solicit charitable donations now must comply with
the TSR, although the Rule's applicability to charitable organizations
themselves is unaffected.\50\ The USA PATRIOT Act brings the
Telemarketing Act's jurisdiction over charitable solicitations in line
with the jurisdiction of the Commission under the FTC Act, by expanding
the Rule's coverage to include not only the sale of goods or services
but also charitable solicitations by forprofit entities on behalf of nonprofit organizations.\51\
\50\ A fundamental tenet of statutory construction is that ``a statute should be read as a whole, * * * and that provisions introduced by the amendatory Act should be read together with the provisions of the original section that were * * * left unchanged * * * as if they had been originally enacted as one section.'' Sutherland Stat. Constr. Sec. 22.34, p. 297 (5th ed)., citing, inter alia, Brothers v. First Leasing, 724 F.2d 789 (9th Cir. 1984); Republic Steel Corp. v. Costle, 581 F.2d 1228 (6th Cir. 1978); American Airlines, Inc., v. Remis Indus., Inc., 494 F.2d 196 (2d Cir. 1974); Kirchner v. Kansas Turnpike Auth., 336 F.2d 222 (10th Cir. 1964); National Center for Preservation Law v. Landrieu, 496 F. Supp. 716 (D. SC. 1980); Conoco, Inc. v. Hodel, 626 F. Supp. 287 (D. Del. 1986); Palardy v. Horner, 711 F. Supp. 667 (D. Mass. 1989). Thus, in constructing a statute and its amendments, ``[e]ffect is to be given to each part, and they are to be interpreted so that they do not conflict.'' Id.
\51\ While First Amendment protection for charities extend to their forprofit solicitors, e.g., Riley v. Nat'l Fed. of the Blind, 487 U.S. 781 (1988), this narrowly tailored proposed rule furthers government interests that justify the regulation. One such interest is prevention of fraud. E.g., Sec. of State of Maryland v. Joseph H. Munson Co., 467 U.S. 947, 969 n.16 (1984); Telco Communications, Inc. v. Carbaugh, 885 F.2d 1231,1232 (4th Cir. 1989), cert. denied, 495 U.S. 904 (1990). Another is protection of home privacy. See, e.g., Frisby v. Schultz, 487 U.S. 474, 484 (1988) (targeted picketing around a home); Watchtower Bible and Tract Society of New York, Inc. v. Village of Stratton, Ohio, 240 F.3d 553 (6th Cir.), cert. granted on other grounds, __U.S.__ (2001) (upholding law, based on both privacy and fraud grounds, forbidding canvassing of residents who filed a No Solicitation Form with mayor's office).
Commenters' Proposals. A number of commenters urged the expansion
of the Rule's scope beyond its current boundaries. For example, LSAP
strongly suggested that the Commission amend the Rule to provide
additional protection for consumers in light of the convergence of the
banking, insurance, and securities industries, noting that this
phenomenon has resulted in increased sharing of information between
these entities, including customers' billing information.\52\
Similarly, NCL noted that distinctions between common carriers and
other vendors are becoming less relevant as deregulation, detariffing,
and mergers have led to increased competition among all types of
entities to provide similar products and services.\53\ NCL urged that
consumers receive the same protections in all commercial telemarketing, regardless of the type of entity involved.\54\
\52\ See LSAP at 1.
\53\ See NCL at 45, 7, 15.
\54\ Id. at 5, 15. NCL also raised concerns about ``cramming,'' which refers to the practice of placing unauthorized charges on a telephone subscriber's telephone bill. Id. at 7. This practice is being considered in connection with the review of the Commission's PayPerCall Rule, see, 63 FR 58524, (Oct. 30, 1998); thus, it need not be treated in the context of the TSR.
The jurisdictional reach of the Rule is set by statute, and the Commission has no authority to expand the Rule beyond those statutory limits. Thus, absent amendments to the FTC Act, the Commission is limited with regard to any additional protections it might provide in response to acts and practices resulting from the convergence of entities that are otherwise exempt from the Commission's jurisdiction.
In a similar vein, some commenters urged the Commission to clarify the Rule's applicability to nonprofit entities.\55\ As explained above, although section 1011 of the USA PATRIOT Act expanded the reach of the TSR by enlarging the definition of ``telemarketing'' to encompass not only calls made to induce purchases of goods or services, but also those to solicit charitable contributions, it did not change the fact that the Telemarketing Act and the TSR do not apply to activities excluded from the FTC's reach by the FTC Act.
\55\ NAAG at 19; NACAA at 2; NFN at 1.
It should be noted, however, that although the Commission's
jurisdiction is limited with respect to the entities exempted by the
FTC Act, the Commission has made clear that the Rule does apply to any
thirdparty telemarketers those entities might use to conduct
telemarketing activities on their behalf.\56\ As the Commission stated
when it promulgated the Rule, ``[t]he Final Rule does not include
special provisions regarding exemptions of parties acting on behalf of
exempt organizations; where such a company would be subject to the FTC Act, it would be subject to the Final Rule as well.'' \57\
\56\ For example, although the Rule does not apply to the activities of banks, savings and loan institutions, certain federal credit unions, or to the business of insurance to the extent that such business is regulated by State law, any nonexempt telemarketer calling on behalf of one of these entities would be covered by the Rule. See 60 FR at 43843; FTC/Direct Mktg. Ass'n., Complying with the Telemarketing Sales Rule (Apr. 1996), p. 12.
\57\ 60 FR at 43843. This discussion also addresses NACAA's request that the Commission clarify that it has jurisdiction over telemarketing activities involving the switching of consumers' long distance service. NACAA at 2. The TSR covers the telemarketing of longdistance service to the extent that the telemarketing is conducted by entities that are subject to the FTC Act.
NACAA suggested that the Commission clarify that the Rule applies to international calls made by telemarketers located outside the United States who call consumers within the United States. The Commission believes that its enforcement record leaves no doubt that sellers or telemarketers located outside the United States are subject to the Rule if they telemarket their goods or services to U.S. consumers.\58\ \58\ See, e.g., FTC v. Win USA, No. C981614Z (W.D. Wash. filed Nov. 13, 1998); FTC v. Pacific Rim Pools Int'l, No. C971748, (W.D. Wash. filed Nov. 7, 1997) (Order for Permanent Injunction and Final Judgment entered on Jan. 12, 1999); FTC v. The Tracker Corp. of America, No. 1:97CV2654JEC (N.D. Ga. filed Sept. 11, 1997); FTC v. 90130980 Quebec, Inc., No. 1:96 CV 1567 (N.D. Ohio filed July 18, 1996); and FTC v. Ideal Credit Referral Svcs., Ltd., No. C96 0874, (W.D. Wash. filed June 5, 1996).
NCL and KTW suggested that the complementary use of the Internet and telephone technologies necessitates
broadening the scope of the Rule to cover online solicitations.\59\ In the original rulemaking, the Commission stated that it lacked sufficient information to support coverage of online services under the Rule,\60\ but noted that such media were subject to the Commission's jurisdiction under the FTC Act. Indeed, since 1995, the Commission has brought more than 200 actions against entities who have used the Internet to defraud consumers.\61\
\59\ See KTW at 4; NCL at 7.
\60\ 60 FR at 30411.
\61\ Included among the FTC's enforcement actions against Internet fraud and deception are cases attacking unfair and deceptive use of ``dialer programs.'' NCL expressed concern about these programs, which are downloadable software programs that consumers access via the Internet. Once a dialer program is downloaded, it disconnects a consumer's computer modem from the consumer's usual Internet service provider, dials an international phone number in a country with a high perminute telephone rate, and reconnects the consumer's modem to the Internet from some overseas location, typically opening at an adult website. Line subscribers the consumers responsible for paying phone charges on the telephone linesthen begin incurring charges on their phone lines for the remote connection to the Internet, typically at the rate of about $4.00 per minute. The charges for the Internetbased adult
entertainment are represented on the consumer's phone bill as international telephone calls. Under its Section 5 authority, the Commission has brought cases against videotext providers who use these dialer programs in an unfair or deceptive manner. See, e.g., FTC v. Hillary Sheinkin, No. 200363618 (D.S.C. filed Nov. 18, 2000); FTC v.Ty Anderson, No. C001843P (W.D. Wash. filed Oct. 27, 2000); FTC v. Verity Int'l, Ltd., No. 7422 (S.D.N.Y. filed Oct. 2, 2000); FTC v. Audiotex Connection, Inc., No. 970726 (E.D.N.Y filed Feb. 13, 1997).
The Commission believes that the issue of whether there is a need
for standards for Internet or online advertising and marketing is
distinct from the issues relevant to telemarketing. Ecommerce issues
are best considered within the specific context of business practices
in the realm of electronic commerce. In fact, the Commission has begun
considering these issues by conducting an inquiry on how to apply its
rules and guides to online activities, and issuing a staff working
paper that provides guidelines for appropriate disclosures when
marketing online.\62\ The Commission believes that the body of case law
that has been developed on Internet fraud and deception, coupled with
its published business education materials \63\ for online advertising
disclosures, provide a developing source of guidance for promoting and marketing on the Internet.
\62\ 63 FR 24996 (May 6, 1998) (public comments and the workshop transcript for the proceeding are available at www.ftc.gov/bcp/ rulemaking/elecmedia/index.htm); FTC, Dot Com Disclosures: Information About Online Advertising (Staff Working Paper, May, 2000). See also, FTC, Advertising and Marketing on the Internet: Rules of the Road (September, 2000), a guide to comlying with FTC rules and guides when advertising and marketing on the Internet. \63\ See FTC, Dot Com Disclosures; FTC, Advertising and Marketing on the Internet.
B. Section 310.2Definitions
The Commission received comments on several of the Rule's definitions. Each suggested change and the Commission's reasoning in accepting or rejecting that change is discussed below.
The proposed Rule retains the following definitions from the original Rule unchanged, apart from renumbering: ``acquirer,'' ``attorney general,'' ``cardholder,'' ``Commission,'' ``credit,'' ``credit card,'' ``credit card sales draft,'' ``credit card system,'' ``customer,'' ``investment opportunity,'' ``person,'' ``prize,'' ``prize promotion,'' ``seller,'' and ``State.''
In addition, as discussed in detail below, the Commission proposes
modifying the definition of ``outbound telephone call,'' and also
proposes adding several new definitions: ``billing information,'' ``caller identification service,'' ``express verifiable
authorization,'' ``Internet services,'' and ``Web services.''
Further, in order to implement the amendments to the Telemarketing Act made by section 1011 of the USA PATRIOT Act, the Commission proposes adding certain definitions to the Rule, and modifying others. Section 1011(b)(3) of the USA PATRIOT Act amends the definition of ``telemarketing'' in the Telemarketing Act, 15 U.S.C. 6306(4), by inserting the underscored language:
The term ``telemarketing'' means a plan, program, or campaign which is conducted to induce purchases of goods or services or a charitable contribution, donation, or gift of money or any other thing of value, by use of one or more telephones and which involves more than one interstate telephone call * * * (emphasis added).
The proposed Rule's definition of ``telemarketing'' incorporates this change. To fully implement this definitional change, the proposed Rule adds definitions of the terms ``charitable contribution'' and ``donor,'' discussed below. In addition, the existing definition of ``telemarketer'' requires modification to reflect the expanded reach of the Rule to cover telephone solicitations of charitable contributions pursuant to the USA PATRIOT Act. Accordingly, the definition of ``telemarketer'' now includes the analogous phrase ``or donor'' following each appearance of the term ``customer'' or ``consumer.'' Similarly, in two of the new proposed definitions, ``billing information,'' and ``express verifiable authorization,'' the analogous phrase ``or donor'' has also been included following each appearance of the terms ``customer'' or ``consumer.''
Another proposed global change necessitated by the USA PATRIOT Act is the modification of several of the Rule's existing definitions to reflect the expansion of the Rule's coverage to include the solicitation via telemarketing of ``charitable contributions.'' The affected definitions, ``material,'' ``merchant,'' ``merchant agreement,'' and ``outbound telephone call,'' now include the analogous phrase ``or charitable contributions'' following each occurrence of the phrase ``goods or services.''
Section 310.2(c)``Billing information''
The Commission proposes adding a definition of ``billing information.'' This term comes into play in proposed Sec. 310.3(a)(3), which would add ``billing information'' to the items that must be recited in obtaining a consumer's express verifiable authorization. It is also implicated in proposed Sec. 310.4(a)(5), which would prohibit the abusive practices of receiving any consumer's billing information from any third party for use in telemarketing, or disclosing any consumer's billing information to any third party for use in telemarketing.
As explained further below, in the section discussing proposed changes to Sec. 310.3(a)(3), the Commission proposes to require that ``billing information'' be recited as part of the process of obtaining a consumer's or donor's express verifiable authorization. Under the original Rule, if the telemarketer opted to seek oral authorization for a demand draft, the Rule required that the telemarketer tape record the customer's oral authorization, as well as the provision of the following information: the number, date(s) and amount(s) of payments to be made, the date of authorization, and a telephone number for customer inquiry that is answered during normal business hours. The proposed Rule would expand the express verifiable authorization requirement to other payment methods, and would add to this list of disclosures ``billing information,'' i.e., the identification of the consumer's or donor's specific account and account number to be charged in the particular transaction, to ensure that consumers and donors know which of their accounts will be billed. A definition of ``billing information'' would clarify sellers' and telemarketers' obligations under this proposed revision.
As explained in the section discussing proposed Sec. 310.4(a)(5) which would prohibit receiving from any person other than the consumer or donor for use in telemarketing any consumer's or donor's ``billing information,'' or disclosing any such ``billing information'' to any person for use in telemarketingthe inclusion of this provision banning trafficking in ``billing information'' makes it necessary to provide in the Rule a definition of that term. The proposed Rule defines ``billing information'' as any data that provides access to a consumer's or donor's account, such as a credit card, checking, savings, share or similar account, utility bill, mortgage loan account, or debit card. The Commission intends this term to include information such as a credit or debit card number and expiration date, bank account number, utility account number, mortgage loan account number, customer's or donor's date of birth or mother's maiden name, and any other information used as proof of authorization to effect a charge against a person's account.
Section 310.2(d)``Caller Identification Service''
The Commission proposes adding a definition of ``caller
identification service.'' As described, below, in the discussion of
Sec. 310.4(a)(6), the Commission proposes specifying that it is an
abusive practice to block, circumvent, or alter the transmission of, or
direct another person to block, circumvent, or alter the transmission
of, the name and/or telephone number of the calling party for caller
identification service purposes, provided that it shall not be a
violation to substitute the actual name of the seller and the seller's
customer service number, which is answered during regular business
hours, for the phone number used in making the call. In order to
clarify what is prohibited under this proposed provision, the
Commission has defined ``caller identification service'' as ``a service
that allows a telephone subscriber to have the telephone number and, where available, name of the calling party transmitted
contemporaneously with the telephone call, and displayed on a device in or connected to the subscriber's telephone.'' The Commission intends the proposed definition of ``caller identification service'' to be sufficiently broad to encompass any existing or emerging technology that provides for the transmission of calling party information during the course of a telephone call.
Section 310.2(f)``Charitable Contribution''
The Commission proposes adding a definition of ``charitable contribution.'' Section 1011 of the USA PATRIOT Act amends the Telemarketing Act to specify as an abusive practice the failure of ``any person engaged in telemarketing for the solicitation of charitable contributions, donations, or gifts of money or any other thing of value'' to make certain prompt and clear disclosures. The Commission has determined that the single term ``charitable contribution,'' defined for the purposes of the Rule to mean ``any donation or gift of money or any other thing of value'' succinctly captures the meaning intended by Congress. Therefore, the Commission proposes to add this definition to the Rule.
The Commission has also determined that this definition should
explicitly clarify that the definition and, accordingly, the entire
Rule, is inapplicable to political contributions, including
contributions to political parties and candidates. Calls to solicit
such contributions are outside the scope of the Rule because they
involve neither purchases of goods or services nor solicitations of
charitable contributions, donations or gifts, and thus fall outside the
statutory definition of ``telemarketing.'' 15 U.S.C. 6106(4). Thus, the
Commission proposes to exclude from the definition of ``charitable
contribution'' any contributions to ``political clubs, committees, or
parties.'' \64\ Additionally, as a matter of policy, and following the
example of many state laws, the Commission also proposes to exclude
from the definition contributions to constituted religious
organizations or groups affiliated with and forming an integral part of
the organization where no part of the net income inures to the direct
benefit of any individual, and which has received a declaration of
current tax exempt status from the United States government.'' \65\ The
Commission believes that the risk of actual or perceived infringement
on a paramount societal valuefree and unfettered religious
discourselikely outweighs the benefits of protection from fraud and
abuse that might result from including contributions to such organizations within the scope of the definition.
\64\ Similarly, a number of state statutes regulating charitable solicitations exempt political organizations. E.g., Fla. Stat. ch. 496.403 (2000). Ill. Rev. Stat. ch. 23 para. 5103(2000).
\65\ See, e.g., Ga. Code Ann. Sec. 43172(2); Ill. Rev. Stat. ch. 14 para. 54 (2000).
As part of its implementation of section 1011 of the USA PATRIOT Act, the Commission proposes adding a definition of ``donor.'' This Act's expansion of the TSR's coverage to encompass charitable solicitations necessitates the inclusion of a term in the Rule to denote a person solicited to make a charitable contribution. Throughout the original Rule, the terms ``customer'' and ``consumer'' are used to refer to those subject to a solicitation to purchase goods or services by a seller or telemarketer. The meaning of these terms cannot reasonably be stretched to include persons being asked to make a charitable contribution. Therefore, the Commission proposes adding to the Rule an analogous term``donor''for use in the context of charitable solicitations. Under the proposed definition, a person need not actually make a donation or contribution to be a ``donor.'' He or she need only be solicited to make a charitable contribution. (In this respect, the definition tracks the definition of ``customer''``any person who is or may be required to pay for goods or services * * *.'') Section 310.2(n)``Express Verifiable Authorization''
The Commission proposes adding a definition of ``express verifiable
authorization'' because the proposed Rule expands the use of the term
beyond its meaning in the original Rule. The term ``express verifiable
authorization'' comes into play in the proposed Rule in two distinct
provisions: Sec. 310.3(a)(3), requiring the express verifiable
authorization of a customer or donor to a charge when certain payment
methods are used; and Sec. 310.4(b)(1)(iii)(b), which makes it a
violation of the Rule to call any consumer or donor who has placed
himself or herself on the national ``donotcall'' list absent that
consumer's or donor's express verifiable authorization. In order to
ensure clarity, the term ``express verifiable authorization'' has been
defined to mean ``the informed, explicit consent of a consumer or
donor, which is capable of substantiation.'' The specific means of
obtaining express verifiable authorization for a charge are listed in
Sec. 310.3(a)(3)(i)(ii) and the specific means of obtaining express
verifiable authorization to place a call to a consumer or donor who is on the national ``donotcall'' list is found in
Section 310.2(m)``Internet Services''
The Commission also proposes adding a definition of ``Internet services'' because of the proposed modification of the businessto business exemption, Sec. 310.6(g), to make the exemption unavailable to telemarketers of Internet services, a line of business that is increasingly pursued by fraudulent telemarketers. Thus, the Commission proposes that the term ``Internet services'' be defined as ``the provision, by an Internet Service Provider, or another, of access to the Internet.'' The Commission intends for this term to encompass the provision of whatever is necessary to gain access to the Internet, including software and telephone or cable connection, as well as other goods or services providing access to the Internet. Specifically, the term includes provision of access to the Internet, or any component thereof, such as electronic mail, the World Wide Web, websites, newsgroups, Internet Relay Chat or file transfers.
Section 310.2(r)``Outbound Telephone Call''
The Commission proposes modifying the Rule's definition of
``outbound telephone call''\66\ to clarify the Rule's coverage in two
situations: (1) When, in the course of a single call, a consumer or
donor is transferred from one telemarketer soliciting one purchase or
charitable contribution to a different telemarketer soliciting a
different purchase or contribution, such as in the case of ``up
selling;''\67\ and (2) when a single telemarketer solicits purchases or
contributions on behalf of two separate sellers or charitable
organizations (or some combination of the two). Under the proposed
definition, when a call, whether originally initiated by a consumer/
donor or by a telemarketer, is transferred to a separate telemarketer
or seller for the purpose of inducing a purchase or charitable
contribution, the transferred call shall be considered an ``outbound
telephone call'' under the Rule. Similarly, if a single telemarketer
solicits for two or more distinct sellers or charitable organizations
in a single call, the second (and any subsequent) solicitation shall be considered an ``outbound telephone call'' under the Rule.
\66\ The definition of ``outbound telephone call'' is in Sec. 310.2(n) of the original Rule.
\67\ See n.45 for an explanation of this term.
The Commission proposes this change in response to evidence in the Rule review record that the practice of ``upselling'' is becoming increasingly common.\68\ The Commission believes that in external up selling, when calls are transferred from one seller or telemarketer to another, or when a single telemarketer solicits on behalf of two distinct sellers, it is crucial that consumers or donors clearly understand that they are dealing with separate entities. In the original Rule, the Commission determined that a disclosure of the seller's identity was necessary in every outbound call to enable the customer to make a fullyinformed purchasing decision.\69\ In the case of a call transferred by one telemarketer to another to induce the purchase of goods or services, or one in which a single telemarketer offers the goods or services of two separate sellers, it is equally important that the consumer know the identity of the
FOR FURTHER INFORMATION CONTACT
Catherine Harrington-McBride, (202) 3262452 (email: firstname.lastname@example.org), Karen Leonard, (202) 3263597 (email: email@example.com), Michael Goodman, (202) 3263071 (email: firstname.lastname@example.org), or Carole Danielson, (202) 3263115 (email: email@example.com), Division of Marketing Practices, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, NW., Washington, DC 20580.