FTC’s new telemarketing rule could affect more than telemarketers – Financial Services

The Federal Trade Commission (FTC) recently advanced proposals that could add expanded record-keeping requirements and other significant compliance changes for businesses and affected financial services providers that sell products and services. . Specifically, in April, the FTC approved a Notice of Proposed Rulemaking (NPRM) and an Advance Notice of Proposed Rulemaking (ANPRM) to amend the Telemarketing Sales Rule (TSR).

Who can be impacted?

It is important to note that the scope of entities covered by the TSR is much broader than the groups that traditionally consider themselves “telemarketers”. This includes businesses that initiate or receive telephone calls to or from consumers, or as “vendors” they provide, offer to provide, or arrange to provide goods or services to consumers in exchange for a payment. As the FTC noted, it doesn’t matter whether a business makes or receives calls using low-tech equipment or the latest technology.

Thus, it is important that all entities that interact with consumers over the phone consider whether the proposed changes to the rules may affect them. Financial institutions that sell 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 by the FTC Act. However, if a federal credit union uses a provider to make commercial calls, its provider will be covered by the proposed rule, and record-keeping requirements may still add new compliance burdens to third-party providers and those working with them. This is likely the case for several other types of financial service providers and other businesses using third-party vendors.

What are some of the proposed changes to record keeping?

The proposed amendments would require telemarketers and salespeople to keep 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 of “donor previous” to charities. Under the proposal, only someone who has actually donated to the charity in the previous two years would be considered a “previous donor” to whom pre-recorded messages soliciting donations can be sent.

The FTC argues that “the amended record-keeping 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 changes in the NPRM require the maintenance of the following new categories for a period of five years:

(1) a copy of each unique pre-recorded message;

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

(3) records sufficient to show that a seller has an established business relationship with a consumer; (4) sufficient records to show that a consumer is a past donor to a particular charity;

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

(6) records of the vendor’s or charity’s entity-specific do-not-call records;

and

(7) Federal Trade Commission DNC registry records that were used to ensure compliance with this rule.

The FTC is also looking for further comments in the ANPRM

ANPRM is also reviewing the B2B telemarketing exemption and seeking comments on whether to remove it. Currently, most B2B calls are exempt. However, B2B calls to induce the retail sale of non-durable office or cleaning supplies are not exempt and must comply with the TSR. Examples of non-durable office or cleaning supplies include paper, pencils, solvents, photocopier toner and ink, in short, anything that when used runs out and needs to be replaced . Goods like software, copiers, computers, mops and buckets are considered durable because they can be reused.

In considering removing the exemption, the FTC specifically cites the emerging trend of more people working from home as a reason for heightened concerns about B2B telemarketing and asks a number of questions about changing the scope of the exemption. The FTC says, “Since the Commission last considered and declined to significantly change the B2B exemption to exclude services providing Internet access, the market has evolved significantly.”

More broadly, the ANPRM is seeking feedback on the following topics, with many specific questions related to each:

  • Should the FTC repeal the TSR exemption for B2B telemarketing calls more broadly?

  • Should TSR apply to calls consumers make to salespeople or telemarketers selling technical support services? and

  • Are additional TSR provisions needed to protect consumers from misleading negative option programs? For example, should the rule impose specific notification requirements and a simple cancellation mechanism?

Outlook

Companies will have until August 2, 2022 to comment. Topics addressed in the NPRM and ANPRM could impact a number of industries making commercial calls, in particular the new general categories proposed for record keeping requirements, which could add new burdens and costs compliance both directly and for those who use suppliers.

The FTC now has all five commissioner seats filled and is expected to be active in areas where there are perceived consumer harms. In this spirit, it will be essential for the industries concerned to identify the damage that overly restrictive regulations could cause to the entities concerned and the way in which these costs and burdens could be passed on to the market. Brownstein’s team is well equipped to help craft comment letters and facilitate engagement with the FTC and Congress on these issues.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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