The FTC Rejects Pre-Recorded Messages For Existing Business Relationships

By Tracey E. Schelmetic

Editorial Director,
Customer Inter@ction Solutions magazine

 

The Federal Trade Commission recently issued a ruling on one of two petitions asking it to amend the call abandonment provisions of the Telemarketing Sales Rule (TSR (News - Alert)). The first petition, from Costa Mesa, California-based Voice Mail Broadcasting Corporation (VMBC), urged the FTC to give its blessing to telemarketing calls that deliver pre-recorded messages to consumers with whom the seller has “an established business relationship.” The second petition, from the Direct Marketing Association (DMA), sought modification of the method of calculating the maximum allowable call abandonment rate under the TSR’s call abandonment safe harbor provision.

The FTC has denied VMBC’s petition to allow pre-recorded messages to existing customers. With regards to the DMA’s request, the commission is currently seeking public comment. In addition, the FTC is seeking comment on a new proposal to prohibit the use of prerecorded messages in telemarketing calls answered in person by a consumer.

With the amendment of the Teleservices Sales Rule in 2003, the FTC included a provision that limited the amount of call abandons — the inevitable result of a fast-pasted predictive dialer coupled with the lack of availability of agent to take the call when the customer answers — a company may make. The TSR stated that companies shown to be in violation could be slapped with substantial federal fines. (From a consumer perspective, a call abandon is the reason why sometimes you might pick up the phone when it rings and hear nothing …there is no representative available to take the outbound call that was placed by the dialer). When this happens, the dialer either hangs up or holds the line open until a sales representative is available. A call is considered abandoned if more than two seconds elapses between the “hello?” of a telephone subscriber answering the phone and a greeting initiated by the agent. To limit abandoned calls, the FTC amended the TSR to prohibit call abandonment, but allowed teleservices companies to play a prerecorded message when a live telephone subscriber answers. There was a caveat, however: only three percent of live-answered calls could be met with a recorded message.


VMBC petitioned the FTC to change the call abandonment provisions to allow telemarketers to place calls delivering a prerecorded message to consumers with whom the seller had an “established business relationship.” In response to VMBC’s petition, the FTC published a notice of proposed rulemaking on Nov. 17, 2004, seeking public comment on VMBC request. The Commission received about 13,600 comments; more than 13,000 opposing the amendment. The Federal Register notice issued last week by the FTC rejected the proposal to allow exemptions for existing business relationships. The agency cited consumer opposition expressed in the comments as one reason for the action. Another cited reason for rejecting the proposal is that customers met with a prerecorded message as opposed to a live agent are unable to request to be put on a company’s in-house do-not-call list. (Companies are required to strike a customer's name from their calling lists if that customer asks not to be called again.)

The FTC also cited a concern that if the proposal to allow the use of low-cost pre-recorded messaging were approved, the widespread adoption of inexpensive voice over IP (VoIP) technologies would likely cause an excessive increase in the use of prerecorded calls, as the cost to the outbound company would be negligible. The FTC predicted that a confluence of these factors would mean that consumers who have entered their phone numbers in the National Do Not Call Registry would likely experience many more “established business relationship” telemarketing calls than they currently receive. The TSR allows a seller or telemarketer to call a consumer with whom the seller has an “established business relationship” even if the consumer has registered his or her phone number is in the National Do-Not-Call registry.

The FTC has set a date of January 2, 2007 as a cut-off of its “previously announced policy of forbearance from bringing enforcement actions against sellers and telemarketers who make prerecorded telemarketing calls to established customers.” In other words, beginning in 2007, the FTC plans to begin enforcing fines on outbound telemarketing companies that continue to deliver prerecorded message to existing customers.

Also, in the notice approved last week, the FTC proposed a new TSR amendment that would make explicit that the TSR prevents sellers and telemarketers from delivering a prerecorded message when a person answers a telemarketing call, except in the very limited circumstances permitted in the call abandonment safe harbor, and when a consumer has consented, in writing, to receive such calls.

With respect to the second petition, the DMA’s request for change in the way call abandoned rates are calculated, the FTC has proposed a new amendment to the TSR that would change the method for measuring the maximum allowable call abandonment rate in the call abandonment safe harbor provision from “three percent per day per calling campaign” to “three percent per 30-day period per calling campaign.” The FTC now plans to seek comment on this proposal; interested parties may submit comments until the period expires on November 6, 2006.

To comment, send a letter with the subject “TSR Prerecorded Call Prohibition and Call Abandonment Standard Modification, Project No. R411001” on both the paper letter and the envelope to:

Federal Trade Commission/Office of the Secretary
Room H–159 (Annex K)
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580

The FTC is requesting that letters in paper form be sent by courier or overnight service because of heightened security with government postal mail. Comments filed in electronic form should be submitted by visiting the Web site at https://secure.commentworks.com/ftc-tsr.

Interested parties may also visit www.regulations.gov to read this proposed rule, and may file an electronic comment through that Web site.