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January 2009 | Volume 27 / Number 8
Compliance Desk

2009 Legislation/Regulations Forecast

By Brendan B (News - Alert). Read
Senior Contributing Editor, Customer Interaction Solutions

The new Obama Administration and a stronger Democratic party control of Congress set in the midst of a struggling economy and foreign policy issues, has created an interesting environment for legislation and regulations affecting customer interactions both federally and at state levels.

While contact center-and-direct marketing-affecting issues such as offshoring, privacy, and telemarketing may haven been pushed offstage, they are not out of the hall. Ironically, economic pressures may shove them back into the spotlight as governments, especially states, seek ways to keep jobs and revenue sources, which contact centers provide.

Federal Legislation
Here is an examination of federal industry issues that lawmakers and regulators are and may be addressing in 2009:

• Offshoring

Federal lawmakers may reintroduce a bill similar to HR 1776, The Call Center Consumer’s Right to Know Act, which would require contact center agents to disclose the physical location of such employee at the beginning of inbound and outbound calls. Firms would also have to annually certify to the Federal Trade Commission (FTC (News - Alert)) their compliance with such requirement.

HR 1776 is an attempt to restrict offshoring by making customers aware that their calls may be going to or originating out of country. The bill’s supporters hope customers and negative publicity would pressure firms to bring such jobs back to the U.S.

The downsides are that such bills may significantly add to contact center costs in both onshoring and time spent location disclosing and in compliance, which would ultimately be paid for by consumers. In doing so bills like it that hike contact center expenses may also be self-defeating as they may result in fewer domestic jobs.

“The particular type of disclosure contemplated by HR 1776 is a burdensome additional disclosure without clear benefit to the consumer,” American Teleservices Association (ATA) CEO Tim Searcy told the House Energy and Commerce subcommittee Sept.11, 2008. “Each time additional disclosures or compliance requirements are added to the call, call lengths are increased, and the cost of doing business by phone increases and the quality of the interaction with the consumer declines. The rising costs of compliance and regulation are causing many firms to contemplate automation only, or offshore solutions to stay cost competitive.”

Jerry Cerasale, Senior Vice President, Government Affairs, Direct Marketing Association believes HR 1776 will be reintroduced as another bill but does not think it will pass.

“I have not heard or seen a lot of activity on that legislation, because the outcry may be diminishing” he says. “It appears from discussions with DMA members that the move to off-shore call centers may be reversing without government help.”

• Postage rate hikes

Looming is a planned postal rate hike on direct mail in mid-May that is expected to be between 4.5 and 5 percent; the exact rise will not be known until February when the US Postal Service (USPS) Board of Governor meets.

The USPS is projecting a $7 billion deficit in 2009-2010. The postal service must pay $7 billion to pre-fund retiree health benefits, which includes a prefund payment of unfunded 2006 liability of $5 billion and $2 billion for the current FY 2008 payment.

A large rate increase will directly impact contact centers because the higher mailing costs will lead marketers to reduce the volume of direct mail, which in turns lowers the amount of inbound calls in response to these offers and catalogs, explains Cerasale. This will also inconvenience customers by not informing them of new and valuable products and services and cost-saving special offers, which lead to less spending at a time when more is needed to boost the economy and to keep and hire employees.

In response the direct marketing and mailing groups and the USPS employees are working together to get the retiree pre-funding into the economic stimulus package.

“This proposal will minimize a damaging rate hike while protecting the benefits of former employees who have worked honorably for the USPS,” says Cerasale.

• Privacy

Privacy advocates will likely press their Congressional supporters to introduce bills likely to restrict behavioral targeting: chiefly the ability of marketers to track which sites buyers and prospects visit. Behavioral targeting, which the DMA’s Cerasale says the cornerstone of direct marketing by providing information that enables firms to deliver relevant, targeted, and successful offers to existing and potential customers.

The House and Senate committees and the FTC have both taken a look at behavioral targeting. While there apparently was no federal legislation introduced in the last session, Congress did hold hearing on the subject, reports Cerasale, who expects that Congress will again review behavioral marketing in 2009.Proposed laws may range from outright banning of behavioral targeting to requiring customer notification that they are being tracked on given websites and to customer opt-in if they are on these sites.

Privacy advocates have been arguing that behavioral targeting restricts individuals’ freedom to surf sites anonymously. The DMA and other similar organizations say that behavioral enables firms to cost-effectively inform customers and prospects about products and services that they are most likely to buy.

The DMA is working to create self-regulatory general principles on behavioral targeting in conjunction with other organizations such as the Electronic Retailers Association, to prevent restrictive legislation, reports Cerasale.

• Remote Selling

There will likely be renewed efforts by individual states and local governments that have sales taxes to get Congress to allow them to require marketers to collect taxes on contact center and Internet-made sales to their residents, businesses, and institutions, driven by budget pressures. 45 out of 50 states have sales taxes. There are also some 7,000 taxing jurisdictions.

The Supreme Court ruled in the Quill decision in 1992 that individual states lack the authority to force firms that do not have a presence in a state to collect taxes on sales made to their residents because this affects interstate commerce and that falls under federal jurisdiction.

“These moves would, if Congress goes along, lead to a dramatic increase in expenses to sellers because these laws will require them create tax departments that will add to their costs at a time when they do not need any more burdens,” says Cerasale. “Companies would be forced to become unpaid tax collectors for these jurisdictions.”

The DMA official acknowledges that states and local governments are in a tough financial bind and that they do have a legitimate right to those taxes. He would like to see some form of cost-reducing centralization or other simplification of tax collection.

“Until there is simplification Congress should not even consider allowing taxes on remote sellers,” says Cerasale.

• Telemarketing

Expect to see some legislation introduced removing exemptions in Telephone Consumer Protection Act (TCPA) granted to political parties in transmitting pre-recorded messages in the wake of bipartisan furore over incessant and annoying 'robocalling' during the 2008 election.

“Historically, campaign finance reform is a tough row to hoe to get legislation,” explains the DMA’s Cerasale. “There will discussion but it remains to be seen if there will be actual action.”

Going ahead is a Telemarketing Sales Rule (TSR (News - Alert)) amendment requiring written express consent from existing customers-including businesses to receive pre-recorded messages comes into effect Sept 1, 2009. The TSR until then and the TCPA allows pre-recorded messages to be delivered only to existing buyers.

The TSR change also includes requiring sellers and telemarketers to provide at the outset of all prerecorded messages, an automated keypress or voice-activated interactive opt-out mechanism that went into effect Dec.1, 2008.

The DMA is expecting that the FTC will shortly implement a cleanup of the national Do Not Call (DNC) list. The FTC has brought in an independent contractor to delete abandoned phone numbers, such as those of people who have moved. The agency has told the DMA that they will drop as many as five percent of the landlines on the list immediately followed a half a percent per month, which fits approximately with how often individuals relocate.

“That should make telemarketing lists more accurate and give marketers the ability to call new movers with targeted offers, such for items and services for their new homes more readily,” says Cerasale.

State Legislation
Expect the states to move on their own to hike and expand business taxes and fees to balance budgets and avoid raising general taxes or cutting popular programs. In addition to trying to collect remote taxes, the DMA Cerasale foresees state lawmakers increasing licensing taxes, restricting deductibility of advertising expenses, and taxing the value of advertising material, such as catalogs, sent into the states.

Even so, states have been and are expected in 2009 once again exercising their traditional role as close-to-the people legislation leaders on national issues; it was the creation of state do not call lists that led to the national DNC registry in 2003.

• DNC for B2B

Expect a return of attempts to establish business to business (B2B) DNC registries. The UK allows businesses to register on its DNC list; a similar provision was pulled from Canada’s DNC law before enactment in September 2008.

“The B2B DNC bills are usually filed at the request of very small businesses who are annoyed at getting telemarketing calls,” explains Cerasale. “Such bills do have major problems such as who is authorized to put which numbers on the list. Also, businesses rely on the phones for business. Restricting B2B telemarketing calls with DNC lists will hurt everyone as well as provide one more expensive headache that firms do not need and will not by and large benefit from.”

• IVR regulations

State lawmakers have been seeking to regulate IVRs, callbacks, and voicemail. Bills introduced in Florida, Missouri, New Jersey, New York, Oklahoma, Rhode Island include requirements for mandatory live agents, zero-outs for customers doing business with critical vertical markets. They include health insurers, cell phone companies, state agencies, telecommunication companies, and utility contact centers

• Offshoring

There may also be renewed attempts by states to limit offshoring. Bills introduced in Connecticut, Nevada, and Oklahoma would require agents to disclose their physical locations, with a couple going as far as disclosing their city, state, and country. Bills introduced in Minnesota would require calls handled offshore to be transferred to US contact centers. Some proposed state laws would prohibit personal information being sent overseas.

The ATA is understandably concerned with such state moves in what should be federal areas as they add to the cost and difficulties of doing business with marginal benefit to consumers. It is hoping that the Obama Administration will reassert federal jurisdiction in regulatory territory that should be its exclusive realm while encouraging industry self-regulation to crack down on poor corporate practices that annoy consumers and business that will together avoid needless legislation.

“For a number of years the state regulatory authorities have enjoyed the latitude to diverge or singularly increase regulatory mandates beyond Federal measures yet the abuses at the corporate level have been uninhibited,” says ATA CEO Tim Searcy. “Our goal, as has been evidenced in the past, is to return exclusive regulatory control to the Federal level. The upcoming year may spell such events if the impending administration stands behind its pledge to admonish questionable corporate behavior. We therefore, encourage the efforts to reinstitute a consistent scope of regulatory control based on Federal policies.”

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