New FTC Telemarketing Rule Could Affect More Than Just Telemarketers
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New FTC Telemarketing Rule Could Affect More Than Just Telemarketers

Brownstein Client Alert, June 7, 2022

The Federal Trade Commission (FTC) recently moved forward proposals that could add extensive record-keeping requirements and make other material changes for compliance for impacted businesses and financial services providers selling products and services. Specifically, in April, the FTC approved a Notice of Proposed Rulemaking (NPRM) and an Advanced Notice of Proposed Rulemaking (ANPRM) to change the Telemarketing Sales Rule (TSR).

 

Who May Be Impacted?

It is important to note that the scope of entities covered by the TSR is much broader than groups that traditionally think of themselves as “telemarketers.” It includes businesses that initiate or receive phone calls to or from consumers, or as “sellers,” they provide, offer to provide or arrange to provide goods or services to consumers in exchange for payment. As the FTC has noted, it does not matter whether a company makes or receives calls using low-tech equipment or the newest technology.

Thus, it is important that all entities engaging with consumers over the phone consider whether the proposed rule changes may affect them. Financial institutions selling certain products or services could be directly or indirectly affected by the proposed changes. For example, state-chartered credit unions are covered by the TSR, but federal credit unions are not because they are not covered under the FTC Act. However, if a federal credit union is using a vendor to make sales calls, their vendor will be covered by the proposed rule and the record-keeping requirements still may add new compliance burdens to third-party vendors and those working with them. This is likely the case for several other types of financial service providers and other companies utilizing third-party vendors.

 

What Are Some of the Proposed Record-Keeping Changes?

The proposed amendments would require telemarketers and sellers to maintain additional records of their telemarketing transactions, prohibit material misrepresentations and false or misleading statements in business-to-business (B2B) telemarketing transactions, and add a new definition for the term “previous donor” to charitable organizations. Under the proposal, only a person who actually made a donation to the charity during the previous two years would qualify as a “previous donor” to whom prerecorded messages seeking donations may be made.

The FTC argues that the “modified recordkeeping requirements are necessary to protect consumers from deceptive or abusive telemarketing practices and support the Commission’s law enforcement mandate to enforce the TSR.

Specifically, the proposed amendments in the NPRM require the retention of the following new categories for a period of five years:

(1) a copy of each unique prerecorded message;

(2) call detail records of each separate telemarketing campaign;

(3) records sufficient to show a seller has an established business relationship with a consumer; (4) records sufficient to show a consumer is a previous donor to a particular charitable organization;

(5) records of the service providers that a telemarketer uses to deliver outbound calls;

(6) records of the seller or charitable organization’s entity-specific do-not-call registries;

and

(7) records of the Federal Trade Commission’s DNC Registry that were used to ensure compliance with this rule.

 

The FTC Is Also Seeking Other Feedback in the ANPRM

The ANPRM also is reviewing the B2B telemarketing exemption and seeking comments on whether it should be removed. Currently, most B2B calls are exempt. However, B2B calls to induce the retail sale of nondurable office or cleaning supplies are not exempt and must comply with the TSR. Examples of nondurable office or cleaning supplies include paper, pencils, solvents, copying machine toner and ink—in short, anything that, when used, is depleted and must be replaced. Goods like software, copiers, computers, mops and buckets are considered durable because they can be used again.

In contemplating, removing the exemption, the FTC specifically mentions the newer trend of more people working from home as a reason to have heightened concerns about B2B telemarketing and asks a number of questions about changing the scope of the exemption. The FTC states, “Since the Commission last considered, and declined, to substantively amend the B2B exemption to exclude services providing access to the internet, the marketplace has substantially evolved.”

More broadly, the ANPRM is looking for feedback on the following topics, with numerous specific questions related to each:

  • Should the FTC more broadly repeal the TSR’s exemption for B2B telemarketing calls?
  • Should the TSR apply to calls consumers make to sellers or telemarketers selling tech support services? and
  • Are additional TSR provisions needed to protect consumers from deceptive negative option programs—for example, should the rule mandate specific notice requirements and a simple cancellation mechanism?

 

Outlook

Businesses will have until Aug. 2, 2022, to comment. The topics covered in the NPRM and ANPRM could impact a number of industries making sales calls, particularly the newly proposed broad categories for record-keeping requirements, which could add new compliance burdens and costs both directly and for those using vendors.

The FTC now has all five commissioner seats filled and is expected to be active in areas where there are perceived consumer harms. With that focus in mind, it will be critical for impacted industries to identity any harms overly burdensome regulations might cause for entities impacted and how those costs and burdens might be passed on in the marketplace. Brownstein’s team is well-equipped to help formulate comment letters and facilitate engagement with the FTC and Congress on these issues.

 


THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING NEW FTC TELEMARKETER RULES. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.

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