FCC Clarifies Telemarketing Rules

On February 18, 2005, the Federal Communications Commission released its Second Order on Reconsideration (Order) in its rulemaking proceeding implementing the Telephone Consumer Protection Act of 1991 (the TCPA). The Order denies nearly all of the dozens of requests that the FCC reconsider or modify the telemarketing rules adopted by the FCC in its 2003 Report and Order, and changes the rules only to correct a minor error.¹ The Order will become effective 30 days after publication in the Federal Register. A summary of the key aspects of the Order is below. If you have any questions regarding the FCC’s telemarketing rules and orders, please contact us.

In general, the Order addresses the more routine requests for reconsideration of the rules and leaves for a later date thornier issues. For example, the FCC declined to address petitions for reconsideration relating to the extent to which states may apply their do-not-call laws to interstate telemarketing, and petitions asking the FCC to preempt state telemarketing laws. The Order also does not address petitions for reconsideration of the FCC’s facsimile advertising rules. The FCC stated that it will address these matters in separate orders, but gave no indication of its timetable for doing so. In light of impending changes to the Commission, including the departure of Chairman Michael Powell (expected in March), we do not expect the FCC to revisit these issues until late this year.

In 2003, the FCC adopted a national do-not-call registry and prohibited telemarketers from contacting consumers who have registered their telephone numbers on the national list, unless the call does not meet the definition of a "telephone solicitation" or falls within a recognized exemption. The Order denies all petitions for reconsideration related to the national do-not-call registry, but does clarify certain aspects of the rules. Specifically, the FCC:

• declined to revise its rules to expressly exempt calls placed to business numbers. According to the FCC, it is clear that the existing rules apply only to calls to residential subscribers. The Order does clarify that calls to business telephone numbers that "have been inadvertently registered" on the national registry do not violate FCC rules.
• declined to exempt calls made to home-based businesses, stating that it will review such calls on a case-by-case basis to determine whether they were made to a residential subscriber.
• declined to amend the safe harbor provision, which shields a caller from liability for violating the national do-not-call rules if it can demonstrate that it has made a good faith effort to comply with the rules by meeting certain minimum standards.
• affirmed the constitutionality of the do-not-call rules, rejecting arguments by the State Newspaper Association that the rules violated the First Amendment’s protection of the right to distribute newspapers.
• refused to exempt real estate agents, insurance agents, and newspapers from compliance with the prohibition on telephone solicitations placed to numbers on the do-not-call registry.
• clarified that "telephone solicitation" includes calls by real estate agents to property owners for the purpose of offering their services to the owner, whether or not the property listing has lapsed; and clarified that calls by real estate agents who represent only the potential buyer to someone who has advertised a property for sale do not constitute telephone solicitations, provided the purpose of the calls is to discuss a potential sale of the property to the represented buyer.
• clarified that a recruiter calling to discuss potential employment or service in the military is not making a "telephone solicitation," provided the called party will not be asked during or after the call to purchase, rent, or invest in property, goods, or services.

In response to a request by Verizon, the FCC will allow common carriers to provide consumers notice of their rights regarding telephone solicitations through either a bill insert or a separate message on the bill itself, or on an Internet bill if the subscriber has opted to receive such a bill. Whatever the form of the notice, it must be clear and conspicuous and include, at a minimum, the Internet address and toll-free number that residential telephone subscribers may use to register or remove their numbers from the national do-not-call registry.

The FCC clarified that a do-not-call request made of a particular company must be honored for a period of five years from the date the request is made, whether it was made prior to the effective date of the amended rule or after the rule went into effect. Telemarketers may remove from their company-specific do-not-call lists numbers that have been on their lists for five years or longer. The FCC determined that having two different retention periods – one for requests made prior to the effective date of the amended rule and one for requests made after – would be too confusing for consumers and burdensome for telemarketers.

The FCC declined to amend either the 30-day period within which telemarketers must honor do-not-call requests, or the requirement that a telemarketer allow an individual to make a do-not-call request between the hours of 9:00 a.m. and 5:00 p.m., Monday through Friday.

The Order clarifies that financial agreements, including bank accounts, credit cards, loans, insurance policies, and mortgages, constitute ongoing relationships that permit a company to contact a consumer at any time during the period that the contract remains in force. The FCC noted that this interpretation is consistent with the federal Fair and Accurate Credit Transactions Act, enacted in 2003, which defines "pre-existing business relationship" to include a financial contract between a person and a consumer which is in force, and financial transactions (including holding an active account or a policy in force or having another continuing relationship). Once an account is closed or a contract has terminated, the bank, lender, or other entity has an additional 18 months from the last transaction to contact the consumer, including to offer new products and services, before the EBR is terminated.

The FCC stated that in light of this clarification, consumers should not be surprised to receive a call from a bank at which they have an account, even if they have not transacted any business on that account for more than 18 months; from insurance companies with whom they hold an insurance policy; from lenders with whom they have a mortgage; or from publications to which they subscribe.

The FCC reiterated that a consumer nonetheless may "terminate" the EBR for purposes of telemarketing calls, even during the period when the contract remains in force or the account is open, by making a company-specific do-not-call request.

The FCC also clarified that intermediaries, such as insurance agents and mortgage brokers, may call consumers with whom they have arranged an insurance policy or mortgage for a period of 18 months from the time the transaction is completed (i.e., from when the broker/agent arranged the mortgage or insurance deal), but not during the entire duration of the loan or term of the policy unless a consumer gave express written permission at the time of the transaction allowing calls beyond the 18-month period.

The FCC declined to change its prior conclusion that calls made by for-profit companies encouraging the purchase of goods or services, where some of the proceeds are donated to a tax-exempt nonprofit organization, nonetheless constitute telephone solicitations, and are distinguishable from calls initiated, directed, and controlled by a tax-exempt nonprofit organization for its own fundraising purposes.

The FCC declined to change its rules requiring telemarketers to ensure that any technology used to dial telephone numbers abandons no more than 3 percent of calls answered by a person, measured over a 30-day period, and requiring telemarketers to deliver a prerecorded message identifying the telemarketer’s name and telephone number and giving notice that the call is for telemarketing purposes. The FCC also strongly encouraged telemarketers to expressly use the words "telemarketing purposes" in such notices.

The FCC noted that it has sent to Congress a report describing inconsistencies between the FCC’s telemarketing rules and the Federal Trade Commission’s (FTC) telemarketing rules, including the difference between the agencies’ application of call abandonment restrictions, which under the FCC’s rules (but not the FTC’s) do not apply to calls to existing customers. (The FTC recently asked for public comment on whether to amend its rules to allow the use of prerecorded messages in telemarketing calls to consumers with whom the seller has an EBR, and whether to permit telemarketers to measure abandoned calls on a monthly basis.)

Debt Collection Calls. FCC rules require that all prerecorded messages identify, among other information, the name of the business, individual, or other entity responsible for initiating the call. Because such disclosure could trigger liability under the Fair Debt Collection Practices Act (FDCPA), which prohibits the existence of a debt to persons other than the debtor and prohibits debt collectors from communicating any information to third parties, even inadvertently, with respect to the existence of a debt, the Order clarifies that, if a call is made for the purpose of debt collection and not "for the purpose of encouraging the purchase or rental of, or investment in, property, goods or services," a debt collector is not required to identify its state-registered name in prerecorded messages if identification conflicts with federal or state laws, including the FDCPA. The FCC noted that this position is consistent with the FTC’s position that debt collection calls are not "telemarketing" calls under the FTC’s rules.

"Information-Only" Calls. Under FCC rules, prerecorded messages that contain a telephone solicitation or introduce an unsolicited advertisement are prohibited without the prior express consent of the called party. The Order clarifies the application of this rule to so-called "information only" calls. According to the FCC, "[m]essages that describe a new product, a vacation destination, or a company that will be ‘in your area’ to perform home repairs … are part of an effort to sell goods and services, even if a sale is not made during the call," and thus constitute a telephone solicitation or unsolicited advertisement. The Order also clarifies that the required prior consent may be oral (although telemarketers must be able to provide "clear and convincing evidence" that they received prior express consent from the called party).

Radio and TV Broadcast Messages. The FCC left unchanged its earlier conclusion that radio and television broadcast messages that merely invite a consumer to listen to or view a broadcast are not "unsolicited advertisements" under the restrictions on prerecorded messages (unless the programming is retransmitted broadcast programming for which a consumer must pay, such as cable or digital satellite).

The TCPA prohibits calls using an automatic telephone dialing system or an artificial or prerecorded message to any telephone number "assigned to" cellular and other wireless services. In response to a request from Verizon Wireless – which noted that for purposes of number portability, when a consumer "ports" its telephone number from a wireline carrier to a wireless service provider, that number remains assigned to the original carrier – the FCC clarified that for purposes of the TCPA a telephone number is assigned to a cellular service if the number is being used in connection with that service. In response to a request by the Direct Marketing Association, the FCC also clarified that a call placed to a wireline number that is then forwarded, at the subscriber’s sole discretion and request, to a wireless number or service, does not violate the FCC’s rules or subject telemarketers to liability under the TCPA.

The FCC declined the DMA’s request to reconsider the requirement that telemarketers transmit caller ID information that allows a consumer to identify the caller, and denied a request that telemarketers be required to include a toll-free telephone when transmitting caller ID.

The FCC declined to respond to requests that it clarify the scope of the private right of action which the TCPA grants to consumers "if otherwise permitted by the laws or rules of court of a State," stating that it is for Congress to clarify or limit this right of action.