Telemarketing Sales Rule, 46732-46740 [2014-18505]
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Federal Register / Vol. 79, No. 154 / Monday, August 11, 2014 / Proposed Rules
responsibilities among the various
levels of government. As such, NCUA
has determined that this rule does not
constitute a policy that has federalism
implications for purposes of the
executive order.
Assessment of Federal Regulations and
Policies on Families
NCUA has determined that this rule
will not affect family well-being within
the meaning of Section 654 of the
Treasury and General Government
Appropriations Act of 1999.22
List of Subjects in 12 CFR Part 701
Credit unions, Reporting and
recordkeeping requirements.
By the National Credit Union
Administration Board, on July 31, 2014.
Gerard Poliquin,
Secretary of the Board.
For the reasons stated above, NCUA
proposes to amend 12 CFR part 701 as
follows:
PART 701—ORGANIZATION AND
OPERATIONS OF FEDERAL CREDIT
UNIONS
1. The authority citation for part 701
continues to read as follows:
■
Authority: 12 U.S.C. 1752(5), 1755, 1756,
1757, 1758, 1759, 1761a, 1761b, 1766, 1767,
1782, 1784, 1786, 1787, 1789. Section 701.6
is also authorized by 15 U.S.C. 3717. Section
701.31 is also authorized by 15 U.S.C. 1601
et seq.; 42 U.S.C. 1981 and 3601–3610.
Section 701.35 is also authorized by 42
U.S.C. 4311–4312.
2. In § 701.36, revise paragraphs (c)
and (d)(2) to read as follows:
■
§ 701.36 Federal credit union ownership of
fixed assets.
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(c) Limits on investment in fixed
assets. If a federal credit union has
$1,000,000 or more in assets, the
aggregate of all its investments in fixed
assets must not exceed five percent of
its shares and retained earnings, unless
it has implemented an effective fixed
assets management (FAM) program, and
the federal credit union’s board of
directors has analyzed and determined
that the investment in fixed assets in
excess of the five percent limit is
appropriate, safe and sound, and
supported by its FAM program. An
aggregate investment in fixed assets that
exceeds five percent of a federal credit
union’s shares and retained earnings is
generally considered unsafe and
unsound and requires a sufficiently
robust FAM program to mitigate
supervisory concerns. A federal credit
22 Public
Law 105–277, 112 Stat. 2681 (1998).
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union that does not meet the
requirements of this paragraph or fails
to comply with its FAM program may,
in the discretion of the Regional
Director, be subject to the full extent of
NCUA’s supervisory authority,
including prohibition of any additional
investments in fixed assets or
divestiture of fixed assets. A federal
credit union’s FAM program must be
annually reviewed by its board of
directors and include the following:
(1) Written board policy. The federal
credit union’s board of directors must
adopt a written FAM policy, which, at
a minimum, must:
(i) Establish a prudent limit on the
aggregate amount of the federal credit
union’s investments in fixed assets;
(ii) Demonstrate adequate
consideration for preserving the federal
credit union’s earnings and net worth;
and
(iii) Demonstrate consistency with the
federal credit union’s overall strategic
plan, risk tolerance, and financial
condition.
(2) Board oversight. Except for minor
acquisitions of equipment in the normal
course of business, the federal credit
union must obtain approval from its
board of directors prior to making an
investment in fixed assets that would
exceed, in the aggregate, five percent of
its shares and retained earnings. A
board resolution approving or
disapproving the investment, at a
minimum, must reflect:
(i) The board’s analysis of the purpose
for the investment;
(ii) The board’s analysis, supported by
reasonable growth assumptions, of the
federal credit union’s pro-forma balance
sheet and income statement projections;
and
(iii) For an investment in real
property, the board’s consideration of
the future marketability of the premises,
in the event the federal credit union
needs or wants to sell the premises in
the future.
(3) Internal controls. The federal
credit union must establish ongoing
internal controls to monitor and
measure its investments in fixed assets.
(d) * * *
(1) * * *
(2) If a federal credit union acquires
premises for future expansion,
including unimproved land or
unimproved real property, it must
partially occupy them within a
reasonable period, but no later than five
years after the date of acquisition.
NCUA may waive the partial occupation
requirements. To seek a waiver, a
federal credit union must submit a
written request to its Regional Office
and fully explain why it needs the
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waiver. The Regional Director will
provide the federal credit union a
written response, either approving or
disapproving the request. The Regional
Director’s decision will be based on
safety and soundness considerations.
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[FR Doc. 2014–18524 Filed 8–8–14; 8:45 am]
BILLING CODE 7535–01–P
FEDERAL TRADE COMMISSION
16 CFR Part 310
Telemarketing Sales Rule
Federal Trade Commission.
ACTION: Rule Review, Request for public
comments.
AGENCY:
The Commission requests
public comment on its Telemarketing
Sales Rule (‘‘TSR’’ or ‘‘Rule’’). The
Commission is soliciting comments as
part of the FTC’s systematic review of
all current Commission regulations and
guides.
DATES: Comments must be received on
or before October 14, 2014.
ADDRESSES: Interested parties may file a
comment online or on paper by
following the instructions in the
Request for Comment part of the
SUPPLEMENTARY INFORMATION section
below. Write ‘‘Telemarketing Sales Rule
Regulatory Review, 16 CFR Part 310,
Project No. R411001,’’ on your comment
and file your comment online at
https://ftcpublic.commentworks.com/
ftc/telemarketingsalesnprm by following
the instructions on the web-based form.
If you prefer to file your comment on
paper, mail your comment to the
following address: Federal Trade
Commission, Office of the Secretary,
600 Pennsylvania Avenue NW., Suite
CC–5610 (Annex B), Washington, DC
20580, or deliver your comment to the
following address: Federal Trade
Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW.,
5th Floor, Suite 5610 (Annex B),
Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT:
Karen S. Hobbs or Craig Tregillus,
Division of Marketing Practices, Bureau
of Consumer Protection, Federal Trade
Commission, 600 Pennsylvania Avenue
NW., Washington, DC 20580, (202) 326–
3587 or (202) 326–2970.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
Enacted in 1994, the Telemarketing
and Consumer Fraud and Abuse
Prevention Act (‘‘Telemarketing Act’’ or
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‘‘Act’’) 1 targets deceptive and abusive
telemarketing practices.2 The Act
specifically directed the Commission to
issue a rule defining and prohibiting
deceptive and abusive telemarketing
acts or practices.3 In addition, the Act
mandated that the rule address some
specified practices, which the Act
designated as ‘‘abusive.’’ 4 The Act also
authorized state attorneys general or
other appropriate state officials, as well
as private persons who meet its
jurisdictional requirements, to bring
civil actions in federal district court.5
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A. Telemarketing Sales Rule
Pursuant to the Act’s directive, the
Commission promulgated the original
TSR in 1995 and subsequently amended
it in 2003 and again in 2008 and 2010
to add, among other things, provisions
establishing the National Do Not Call
Registry and addressing debt relief
offers and prerecorded messages.6 The
TSR applies to ‘‘telemarketing,’’ defined
to mean ‘‘a plan, program, or campaign
which is conducted to induce the
purchase of goods or services or a
charitable contribution, by use of one or
more telephones and which involves
more than one interstate telephone
call.’’ 7 The Telemarketing Act,
however, in authorizing the issuance of
the TSR, limited the jurisdiction of the
Commission to its jurisdiction under
Section 5 of the Federal Trade
Commission Act (‘‘FTC Act’’). As a
result, some entities and activities fall
1 15 U.S.C. 6101–6108. Subsequently, the USA
PATRIOT Act, Public Law 107–56, 115 Stat. 272
(Oct. 26, 2001), expanded the Telemarketing Act’s
definition of ‘‘telemarketing’’ to encompass calls
soliciting charitable contributions, donations, or
gifts of money or any other thing of value.
2 Other statutes enacted by Congress to address
telemarketing fraud during the early 1990’s include
the Telephone Consumer Protection Act of 1991
(‘‘TCPA’’), 47 U.S.C. 227 et seq., which restricts the
use of automated dialers, bans the sending of
unsolicited commercial facsimile transmissions,
and directs the Federal Communications
Commission (‘‘FCC’’) to explore ways to protect
residential telephone subscribers’ privacy rights;
and the Senior Citizens Against Marketing Scams
Act of 1994, 18 U.S.C. 2325 et seq., which provides
for enhanced prison sentences for certain
telemarketing-related crimes.
3 15 U.S.C. 6102(a).
4 15 U.S.C. 6102(a)(3).
5 15 U.S.C. 6103, 6104.
6 TSR and Statement of Basis and Purpose and
Final Rule (‘‘TSR Final Rule’’), 60 FR 43842 (Aug.
23, 1995); Amended TSR and Statement of Basis
and Purpose (‘‘TSR Amended Rule’’), 68 FR 4580
(Jan. 29, 2003); Amended TSR and Statement of
Basis and Purpose (‘‘TSR Amended Rule 2008’’), 73
FR 51164 (Aug. 29, 2008); Amended TSR and
Statement of Basis and Purpose (‘‘TSR Amended
Rule 2010’’), 75 FR 48459 (Aug. 10, 2010).
7 16 CFR 310.2(dd) (adopting the definition used
by the Telemarketing Act, 15 U.S.C. 6106(4)). The
TSR excludes from the definition of telemarketing
the solicitation of catalog sales that make specified
disclosures in the catalog.
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outside the scope of the TSR.8 In
addition, the Rule wholly or partially
exempts several types of calls from its
coverage. For example, the Rule
generally exempts inbound calls placed
by consumers in response to direct mail
or general media advertising,9 businessto-business calls,10 and other
situations.11
The TSR is designed to protect
consumers in a number of ways. First,
the Rule requires telemarketers to make
certain disclosures and prohibits
material misrepresentations to
consumers.12 Second, the TSR sets forth
mechanisms to protect consumers from
unauthorized charges or debits to their
financial account, such as the
requirement that telemarketers obtain
the consumer’s ‘‘express informed
consent’’ for a charge to be billed to a
particular account before billing or
8 See 15 U.S.C. 44, 45(a)(2) (which excludes from
the Commission’s jurisdiction several types of
entities, including bona fide nonprofits, bank
entities (including, among others, banks, thrifts, and
federally chartered credit unions), and activities of
common carriers. In addition, activities related to
the business of insurance are outside the FTC’s
jurisdiction pursuant to the McCarran-Ferguson Act
of 1945. 15 U.S.C. 1011–1015. However, the FCC’s
rules, established pursuant to the TCPA, 47 U.S.C.
227, include similar ‘‘do not call’’ protections. 47
CFR 64.1200 et seq. The TCPA does not similarly
limit FCC jurisdiction, but expressly excludes taxexempt nonprofits from some requirements. 47
U.S.C. 227(a)(4)(C).
9 16 CFR 310.6(b)(5)–(6). The general exemption
does not apply to certain limited situations. For
example, the TSR covers calls initiated by a
customer in response to a general advertisement
relating to investment opportunities. See id.
10 16 CFR 310.6(b)(7) (exempting ‘‘[t]elephone
calls between a telemarketer and any business,
except calls to induce the retail sale of non-durable
office or cleaning supplies’’). The exemption,
however, is limited to instances in which a
telemarketer solicits a business regarding purchases
on behalf of the business. Telemarketers and sellers
are not exempted from the requirements of the TSR
when they solicit consumers at their place of
employment. FTC v. Publishers Bus. Servs., Inc.,
821 F. Supp. 2d 1205, 1220–21 (D. Nev.
2010)(granting summary judgment on FTC’s TSR
claims against defendant that placed telephone calls
to businesses to sell magazine subscriptions to
consumers employed at that business).
11 16 CFR 310.6 lists the exemptions from the
TSR.
12 The TSR requires that telemarketers soliciting
sales of goods or services promptly disclose several
key pieces of information in an outbound telephone
call or an internal or external upsell: (1) The
identity of the seller; (2) the fact that the purpose
of the call is to sell goods or services; (3) the nature
of the goods or services being offered; and (4) in the
case of prize promotions, that no purchase or
payment is necessary to win. 16 CFR 310.4(d); see
also 16 CFR 310.2(ee) (defining ‘‘upselling’’).
Telemarketers also must disclose in any telephone
sales call the cost of the goods or services and
certain other material information. 16 CFR
310.3(a)(1). In addition, the TSR prohibits
misrepresentations about, among other things, the
cost and quantity of the offered goods or services.
16 CFR 310.3(a)(2). It also prohibits making false or
misleading statements to induce any person to pay
for goods or services or to induce charitable
contributions. 16 CFR 310.3(a)(4).
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collecting payment.13 Third, the Rule
prohibits telemarketers and sellers from
requesting or receiving advance
payments for certain products and
services. In particular, telemarketers and
sellers may not charge advance fees for
credit repair services; 14 recovery
services; 15 loans or other extension of
credit; 16 or debt relief services.17
Fourth, the Rule prohibits credit card
laundering 18 and more broadly,
assisting and facilitating sellers or
telemarketers engaged in violating the
TSR.19 Fifth, the TSR, with narrow
exceptions, prohibits telemarketers from
calling consumers whose numbers are
on the National Do Not Call Registry or
who have specifically requested not to
receive calls from a particular entity.20
Finally, the TSR requires that
telemarketers transmit to consumers’
telephones accurate Caller ID
information21 and places restrictions on
calls made using predictive dialers 22
and those delivering prerecorded
messages.23
B. TSR Rule Review
The Commission routinely reviews all
of its rules and guides periodically to
examine their efficacy, costs, and
benefits, and to determine whether to
retain, modify, or rescind them. The
Commission does so in two ways. First,
since 1992, the FTC has conducted a
regular, systematic review of all its rules
and guides on a rotating basis. Last year,
the Commission announced its
intention to seek public comment on
13 16
CFR 310.4(a)(7); 16 CFR 310.3(a)(3).
CFR 310.4(a)(2).
15 16 CFR 310.4(a)(3). As the Commission has
previously explained,
[In] recovery room scams . . . a deceptive
telemarketer calls a consumer who has lost money,
or who has failed to win a promised prize, in a
previous scam. The recovery room telemarketer
falsely promises to recover the lost money, or obtain
the promised prize, in exchange for a fee paid in
advance. After the fee is paid, the promised services
are never provided. In fact, the consumer may never
hear from the telemarketer again.
TSR Final Rule, 60 FR at 43854.
16 16 CFR 310.4(a)(4) (focusing on loans that the
telemarketer or seller represents to be guaranteed or
highly likely to materialize); see also TSR Amended
Rule, 68 FR at 4614 (finding that credit repair
services, recovery services, and loans and other
extension of credit services were ‘‘fundamentally
bogus’’).
17 16 CFR 310.4(a)(5)(i); see also TSR Amended
Rule 2010, 75 FR at 48458 (adopting TSR
amendments to curb deceptive and abusive
practices in the telemarketing of debt relief
services).
18 16 CFR 310.3(c).
19 16 CFR 310.3(b).
20 16 CFR 310.4(b)(iii).
21 16 CFR 310.4(a)(8).
22 16 CFR 310.4(b)(1)(iv) (a call abandonment safe
harbor is found at 16 CFR 310.4(b)(4)).
23 16 CFR 310.4(b)(1)(v).
14 16
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several rules, including the TSR.24 This
notice commences the Commission’s
periodic review of the TSR.25
Second, the Commission may itself
identify changes in the marketplace and
other issues that warrant a proposal to
amend the Rule. For example, in 2008 26
and 2010,27 the Commission finalized
amendments related to prerecorded
calls and debt settlement services. In
2013, the Commission published a
Notice of Proposed Rulemaking (‘‘TSR
Anti-Fraud NPRM’’) seeking public
comment on proposed amendments
aimed at curbing the abuse of certain
payment methods in telemarketing and
clarifying provisions of the Rule.28 The
TSR Anti-Fraud NPRM is proceeding
concurrently with this rule review.
efficacy of the Rule and requests for
clarification about the Rule’s
application. In addition, the
Commission recognizes there may have
been changes in the marketplace and
legal landscape since the rule review
that culminated in the 2003
amendments and since the 2008 and
2010 amendments. Some of the
questions included in this notice,
therefore, address specific issues. By
including a summary of some of these
changes and related issues, the
Commission intends to facilitate
comment, and the inclusion or
exclusion of any issue is not an
indication of the Commission’s intent to
make any specific modifications to the
Rule.
1. General Areas of Interest for FTC
Review
As part of its review, the Commission
is seeking comment on a number of
general issues, as outlined in the
questions posed in Section II below,
including the continuing need for the
TSR and its economic impact, the effect
of the Rule on deception in
telemarketing, and the interaction of the
Rule with other regulations. The
Commission believes that this review is
important to determine whether the TSR
continues to serve a useful purpose, and
if so, how it could or should be
improved.
a. Preacquired Account Information
Preacquired account information is
any information that enables a seller or
telemarketer to cause a charge to be
placed against a consumer’s account
without obtaining the account number
directly from the consumer.29
Consumers who provide their financial
account information to a seller to
complete a purchase during a
telemarketing call can be surprised to
find that a different seller has charged
their account for additional purchases
arising from the same call or a
subsequent call.
Since the Commission amended the
TSR in 2003 to address the use of
preacquired account information in
telemarketing,30 significant changes in
the legal landscape have occurred,
namely, the passage of the Restore
Online Shoppers Confidence Act
(‘‘ROSCA’’), 15 U.S.C. 8401 (2010), and
the promulgation of certain credit card
operating rules as discussed below. In
2009, the Senate Committee on
Commerce, Science, and Transportation
(‘‘Senate Commerce Committee’’)
launched an investigation into the use
of ‘‘data pass,’’ an online marketing
practice involving preacquired account
information.31 Data pass usually
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2. Specific Areas of Interest for FTC
Review
The Commission occasionally
receives informal input regarding the
24 Notice of Intent To Request Public Comments,
78 FR 30798 (May 23, 2013).
25 As required by the Telemarketing Act, 15
U.S.C. 6108, the Commission initiated a review of
the Rule on November 24, 1999, which culminated
in the TSR amendments adopted in 2003 that
created the National Do Not Call Registry. See
generally TSR Amended Rule, 68 FR 4580; see also
Notice of Proposed Rulemaking (‘‘2002 NPRM’’), 67
FR 4492 (Jan. 30, 2002).
26 See generally 2008 TSR Amendments, 73 FR
51164 (addressing the use of prerecorded messages).
27 See generally 2010 TSR Amendments, 75 FR
48459 (prohibiting the collection of advanced fees
for debt relief services).
28 Notice of Proposed Rulemaking (‘‘TSR AntiFraud NPRM’’), 78 FR 41200 (July 9, 2013). The
proposed amendments would (1) bar sellers and
telemarketers from accepting remotely created
checks, remotely created payment orders, cash-tocash money transfers, and cash reload mechanisms
as payment in inbound or outbound telemarketing
transactions; (2) expand the scope of the advance
fee ban on ‘‘recovery’’ services, now limited to
recovery of losses in prior telemarketing
transactions, to include recovery of losses in any
previous transaction; and (3) clarify other TSR
provisions. The Commission has not yet completed
the rulemaking process or issued any further notice
regarding these proposed amendments. The public
comments are posted on the FTC’s Web site at
https://www.ftc.gov/os/comments/tsrantifraudnprm/
index.shtm.
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29 16
CFR 310.2(x).
other things, the 2003 amendments
added provisions to section 310.4(a) to protect
consumers from unauthorized charges resulting
from the use of preacquired account information.
Section 310.4(a)(6) makes it illegal to traffic in
unencrypted consumer account numbers. Section
310.4(a)(7)(i) requires telemarketers using
preacquired account information in combination
with so-called free trial offers to obtain additional
evidence of a consumer’s express informed consent
to be charged. This evidence includes an audio
recording of the entire telemarketing call and the
receipt (from the consumer) of the last four digits
of the account to be charged.
31 Aggressive Sales Tactics on the Internet and
Their Impact on American Consumers, Hearing
Before the S. Comm. on Commerce, Sci. & Transp.,
111th Cong. (2009), available at https://
30 Among
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involves a consumer shopping at a
familiar online Web site. At the
retailer’s checkout, after the consumer
already has entered his credit card
information, a third-party marketer
displays an offer for a discount or
reward that the consumer accepts. Many
consumers do not know the offer is from
a third-party seller or that there are any
fees or costs associated with the offer.
These consumers end up with
unexpected monthly membership fees
or other recurring charges because,
unbeknownst to the consumer, the first
retailer has passed the consumer’s credit
card information to the third-party
seller. Frequently, consumers do not
realize they have been charged until
unfamiliar transactions appear on a
monthly statement.
Ultimately, Congress found that ‘‘[t]he
use of a ‘data pass’ process defied
consumers’ expectations that they could
only be charged for a good or a service
if they submitted their billing
information, including their complete
credit or debit card numbers.’’ 32 To
curb the abusive use of preacquired
account information in the online
context, Congress enacted ROSCA,
which prohibits an ‘‘initial merchant’’
from disclosing a consumer’s billing
information to any ‘‘post-transaction
third-party seller’’ for the purpose of
charging the consumer’s account.33
Under ROSCA, a third-party seller must
obtain the consumer’s full account
information directly from the consumer.
The operating rules of the three major
credit card associations are consistent
with ROSCA. They prohibit the
disclosure, exchange, or use of
preacquired credit card account
information by and among their
merchants.34 Visa, MasterCard, and
www.gpo.gov/fdsys/pkg/CHRG-111shrg54917/pdf/
CHRG-111shrg54917.pdf; Office of Oversight &
Investigations Majority Staff, S. Comm. on
Commerce, Sci. & Transp., 111th Cong.,
Supplemental Report on Aggressive Sales Tactics
on the Internet, 17–18 (Comm. Print 2010),
available at https://www.commerce.senate.gov/
public/?a=Files.Serve&File_id=439184c5-09654bb9-aa98-4a114b00a42e; Office of Oversight &
Investigations Majority Staff, S. Comm. on
Commerce, Sci. & Transp., 111th Cong., Aggressive
Sales Tactics on the Internet and Their Impact on
American Consumers (Comm. Print 2009), available
at https://www.commerce.senate.gov/public/
?a=Files.Serve&File_id=c7b50606-8e74-4cbb-b60887ab8b949d9a.
32 15 U.S.C. 8401(7).
33 Id. The definition of ‘‘initial merchant’’
includes a subsidiary or corporate affiliate of the
initial merchant.
34 See, e.g., Visa International Operating
Regulations, Chapter 8: Risk Management—Account
and Transaction Information Security, Cardholder
and Transaction Information Disclosure
Prohibitions (Updated) p. 715 (Apr. 13, 2013),
available at https://usa.visa.com/download/
merchants/visa-international-operating-regulationsmain.pdf; MasterCard Rules, Rule 5.13 Sale or
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American Express operating rules forbid
merchants from disclosing cardholder
account information to third parties
other than to facilitate the processing of
sales transactions or as required by
law.35
In contrast, the existing TSR expressly
permits the use of preacquired account
information by and among third parties,
with certain restrictions.36 The
Commission invites public comment as
to what effect, if any, these industry and
regulatory changes should have on the
TSR.
b. Negative Option Marketing
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Negative option marketing refers to an
offer or agreement to sell goods or
services ‘‘under which the consumer’s
silence or failure to take an affirmative
action to reject the goods or services or
to cancel the agreement within a
specified period of time is interpreted
by the seller as acceptance of the
offer.’’ 37 In 2003, the Commission
amended the TSR to require
telemarketers and sellers to disclose the
specific terms and conditions of such
offers and to make truthful disclosures
of all aspects of a negative option
feature.38 In addition, section
310.4(a)(7)(i) was added to protect
consumers from unauthorized charges
resulting when telemarketers use
preacquired account information in
combination with free-trial offers.39
Exchange of Information, p. 5–19 (June 14, 2013),
available at https://www.mastercard.com/us/
merchant/pdf/BM-Entire_Manual_public.pdf; and
American Express Merchant Reference Guide—
U.S., Rule 3.4—Treatment of American Express
Cardmember Information, p. 18 (Oct. 2013),
available at https://www209.americanexpress.com/
merchant/singlevoice/singlevoiceflash/USEng/
pdffiles/MerchantPolicyPDFs/US_
%20RefGuide.pdf.
35 See, e.g., Visa Business News, Risk
Management Compliance, Merchants May Not
Share Cardholder Account Information with Third
Parties (Apr. 21, 2010) (‘‘These new rules clarify
that merchants forming marketing and/or referral
arrangements with other merchants may not
transfer cardholder information to their referral
partners to complete subsequent transactions with
the Visa cardholder. Alternatively, any subsequent
transactions related to these marketing
arrangements must be subjected to a separate and
distinct check out process. This separate check out
process must require the cardholder to provide an
account number so there is clear recognition that a
sales transaction will occur.’’).
36 See supra note 28.
37 16 CFR 310.2(u).
38 16 CFR 310.3(a)(1)(vii) and 310.3(a)(2)(ix).
39 2003 TSR Amendments, 68 FR at 4658. Section
310.4(a)(6)(i) (now 310.4(a)(7)(i)) provides that, in
telemarketing transactions involving a free-to-pay
conversion and preacquired account information,
evidence of a consumer’s express informed consent
to be charged must include an audio recording of
the entire telemarketing call and the telemarketer
must obtain from the consumer the last four digits
of the account to be charged.
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Since then, the marketplace and legal
landscape have evolved.
For example, at the time the
Commission adopted these protections
for consumers, staff found ‘‘no evidence
on the record indicating that these
[negative option] products or services
[were] telemarketed through general
media advertisements.’’ 40 Today,
telemarketers and sellers must abide by
section 310.4(b) of the TSR, which
generally prohibits outbound calls to
telephone numbers registered on the
national Do Not Call list,41 restricts
abandoned calls,42 and bans the use of
most prerecorded messages.43 In the
wake of these restrictions, telemarketers
now use a variety of general media to
solicit inbound calls from consumers to
purchase a variety of goods and
services,44 including those involving a
negative option or free-trial.45
40 2003 TSR Amendments, 68 FR at 4658. The
‘‘general media’’ exemption itself dates back to the
original Rule issued in 1995. The exceptions to the
general media exemption reflect the Commission’s
law enforcement experience with deceptive
telemarketers’ use of mass media to advertise
‘‘certain goods or services that have routinely been
touted by fraudulent sellers using general media
advertising to generate inbound calls.’’ Id. As a
result, inbound calls in response to general media
advertisements for investment or business
opportunities, advance fee loans, credit card
protection services, credit repair services, recovery
services and (since 2010) debt relief services are
subject to the Rule.
41 16 CFR 310.4(b)(1)(iii).
42 16 CFR 310.4(b)(1)(iv).
43 16 CFR 310.4(b)(1)(v).
44 Data from the Commission’s third Consumer
Fraud Survey (‘‘Third Fraud Survey’’) issued in
2013, a decade after the implementation of the Do
Not Call provisions of the TSR, suggest that more
than half of all frauds are now mass-marketed via
radio, television, newspapers, magazines, and
additional kinds of general media advertising other
than direct mail, including internet Web pages and
email. Keith B. Anderson, Consumer Fraud in the
United States: The Third FTC Survey (April 2013),
available at https://www.ftc.gov/reports/consumerfraud-united-states-2011-third-ftc-survey. For
example, the Third Fraud Survey showed that in
59.3 percent of fraud incidents, victims initially
learned about the fraudulent offer through such
general media advertising. Id. at 37–39.
45 See, e.g., FTC v. FTN Promotions, Inc., Civ. No.
8:07–1279 (M.D. Fla. Jan. 13, 2014) ($14.75 million
contempt judgment against defendants for violating
a 2008 stipulated judgment by telemarketing a
payday loan scam that provided only a negative
option membership service); FTC v. Ultralife
Fitness, Inc., Civ. No. 2:08–07655 (C.D. Cal. Dec. 1,
2008) (Stip. Perm. Inj.) (defendants advertised free
trial sale of weight loss dietary supplements via
general media outlets, allegedly took consumers’
credit or debit card information to cover shipping
and handling, and then charged consumers’
accounts for continuity programs without their
consent); FTC v. Hispanexo, Inc., Civ. No. 1:06–424
(E.D. Va. Apr. 18, 2006) (Stip. Perm. Inj.)
(defendants allegedly used Spanish-language radio
and television advertisements to lure consumers to
pay $9 shipping and handling charges for a 15-day
trial of at-home instructional courses without
disclosing that their credit card or bank accounts
automatically would be charged three additional
payments of $86.99 at the conclusion of the trial
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Furthermore, Congress, in enacting
ROSCA, also highlighted the risk of
deception when online merchants use
data pass in combination with offers
involving a ‘‘negative option feature.’’
ROSCA requires online marketers to
clearly and conspicuously disclose all
material terms of any offer involving a
negative option feature before obtaining
the consumer’s billing information;
obtain a consumer’s express informed
consent to be charged for such goods or
services; and provide a simple
mechanism for a consumer to stop
recurring charges resulting from the
transaction.46 ROSCA incorporates the
TSR’s definition of ‘‘negative option
feature’’ and generally mirrors the
Rule’s provisions requiring pre-sale
disclosures of material terms of a
negative option offer 47 and prohibiting
material misrepresentations of any
material aspect of a negative option
feature.48 The Commission invites
public comment as to what impact, if
any, these marketplace changes should
have on the TSR.
c. Recordkeeping
The recordkeeping requirements in
section 310.5 of the TSR do not include
a requirement that sellers and
telemarketers retain any record of the
telemarketing calls they have placed.
Neither the original TSR nor the 2003
amendments considered such a
requirement,49 evidently based on the
reasonable assumption that records of
telemarketing calls would be readily
available from a seller’s or
telemarketer’s telephone carrier.
However, this assumption has been
called into question.
Obtaining call records for a seller’s or
telemarketer’s sales calls to consumers
is necessary to enforce the prohibition
against calls to numbers on the National
Do Not Call Registry. That task has
turned out to be inefficient, difficult and
time-consuming because it often
requires multiple requests to different
telecommunications service providers
that do not always produce the most
useful records. Moreover, when a
telecommunications provider is located
outside the U.S., enforcement is even
more problematic.
The Commission recognizes that the
simple solution to these enforcement
obstacles—requiring sellers and
period); see also FTC v. Berkeley Premium
Nutraceuticals, Inc., Civ. No. 1:06–00051 (S.D. Ohio
July 22, 2009) (Stip. Perm. Inj.).
46 15 U.S.C. 8403.
47 16 CFR 310.3(a)(1)(vii).
48 16 CFR 310.3(2)(ix).
49 Statement of Basis & Purpose, 60 FR 43842,
43857 (Aug. 23, 1995); Statement of Basis &
Purpose, 68 FR 4580, 4653 (Jan. 29, 2003).
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telemarketers to retain their own call
records—would likely create
compliance costs and burdens, and
therefore requests comments detailing
the costs and burdens of such a
requirement, as well as suggestions for
feasible alternatives.
tkelley on DSK3SPTVN1PROD with PROPOSALS
II. Issues for Comment
Without limiting the scope of issues
on which it is seeking comment, the
Commission is particularly interested in
receiving comments on the questions
that follow. These questions are
intended only as examples of the issues
relevant to the Commission’s
examination. Interested parties are
invited to comment on any relevant
issue, regardless of whether it is
identified below. Where comments
advocate changes to the Rule, please be
specific in describing suggested changes
and describe any potential costs and/or
benefits such changes might have on
industry and consumers. The
Commission requests that responses to
its questions include a reference to the
question being answered, and cite to
empirical data or other evidence
wherever available and appropriate.
A. General Questions for Comment
1. Is there a continuing need for all
parts of the Rule? Why or why not?
a. Have changes in technology,
industry structure, or economic
conditions affected the need for or
effectiveness of any parts of the Rule?
b. Does the Rule include any
provision that imposes costs not
outweighed by benefits? If so, which
ones?
c. Does the Rule include any
provision that is no longer necessary? If
so, which ones?
d. Does the Rule include any
provision that fails to serve its intended
purpose? If so, which ones?
e. Does the Rule include any
provision imposing unnecessary costs
and burdens on businesses, including
small businesses?
f. What are the aggregate costs and
benefits of the Rule?
g. Have the costs or benefits of the
Rule dissipated over time?
2. What impact, if any, has the Rule
had on consumers?
a. What significant benefits has the
Rule provided to consumers? What
evidence supports the asserted benefits?
b. What economic or other costs or
burdens has the Rule imposed on
consumers? What evidence supports the
asserted costs or burdens?
c. What impact has the Rule had on
the flow of truthful information to
consumers? On the flow of deceptive
information to consumers?
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d. What impact has the Rule had on
consumer privacy?
e. What changes, if any, should be
made to the Rule to increase the benefits
to consumers? How would these
changes affect the compliance costs or
burdens the Rule imposes on
businesses, including small businesses?
3. What impact, if any, has the Rule
had on entities that must comply with
it?
a. What economic or other costs or
burdens has the Rule imposed on the
industry or individual sellers or
telemarketers? What evidence supports
the asserted costs or burdens?
b. How has the Rule benefitted the
industry or individual sellers or
telemarketers? What evidence supports
the asserted benefits?
c. What changes, if any, should be
made to the Rule to minimize any
burden or cost imposed on the industry
or individual businesses, including
small businesses? How would these
changes affect the benefits provided by
the Rule to consumers or the industry?
d. What evidence is available
concerning the degree of industry
compliance with the Rule? Does this
evidence indicate that the Rule should
be modified? If so, why, and how? If
not, why not?
4. What impact, if any, has the Rule
had on sellers or telemarketers that are
small businesses with respect to costs,
profitability, and competitiveness? Have
the costs or benefits of the Rule
dissipated over time with respect to
small business sellers or telemarketers?
5. Does the Rule overlap or conflict
with other federal, state, or local laws or
regulations? If so, how do they overlap
or conflict? What evidence supports any
such asserted overlap or conflict. If
overlaps or conflicts exist, how do
telemarketers address them? Should the
Rule be modified to address these
asserted overlaps or conflicts? If so,
why, and how? If not, why not?
a. To what extent have private parties
and state attorneys general brought
actions under the TSR? Under state
telemarketing statutes or regulations?
b. Are there any gaps where no
federal, state, or local government law
or regulation has addressed a particular
abuse?
6. Are there regulatory alternatives to
the Rule or any of its provisions that
might reduce any adverse economic
effect of the Rule, yet comply with the
mandate of the Telemarketing Act to
provide consumers with necessary
protection from telemarketing deception
and abuse?
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B. Questions on Specific Issues
Abusive Acts or Practices
7. Section 310.4(a)(6) prohibits sellers
and telemarketers from disclosing or
receiving unencrypted consumer
account numbers for use in
telemarketing except for the purpose of
processing a payment for goods or
services or a charitable contribution.
a. Has this Rule provision been
effective in preventing the use of
preacquired account information for
unauthorized billing of consumers’
accounts? If so, why? If not, why not,
and how has the prohibition been
inadequate?
b. What changes, if any, should be
made to this section? Explain. What are
the costs and benefits of the change for
consumers and for businesses, including
small businesses?
c. Have the provisions of this section
significantly increased the cost of doing
business? If so, how? What changes
could be made to the Rule to reduce the
cost of these provisions for businesses,
including small businesses, without
negatively impacting consumers?
d. Should the Rule prohibit all
transfers of account information from
one seller or telemarketer to another in
telemarketing transactions? Why or why
not?
i. In what situations do sellers or
telemarketers transfer encrypted
account information from one seller or
telemarketer to another? How would
transactions that use such transferred
data be affected if they were no longer
permitted to transfer encrypted account
information?
ii. Would there be benefits in
prohibiting such transfers and thereby
making the Rule more consistent with
the credit card associations’ rules
prohibiting the exchange, transfer, or
sale of cardholder account numbers?
iii. What would be the costs and
benefits of a total prohibition on the
transfer of account information for
consumers and businesses, including
small businesses?
e. Should sellers or telemarketers who
obtain consumers’ account information
during a telemarketing transaction and
wish to retain it for use in future
transactions be required to obtain the
consumer’s consent? Is there any
material difference between
telemarketing sales and Internet sales
that should prevent modification of the
Rule expressly to require sellers and
telemarketers to seek authorization to
retain a customer’s billing information
for use in future transactions? If so,
what is the difference and why should
it prevent such a modification?
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i. Do sellers and telemarketers
currently retain consumer account
information that they obtain in
telemarketing transactions? If so, do
sellers and telemarketers obtain
consumer permission before retaining
the account numbers, and how is this
permission obtained and in what
circumstances is it sought? If not, what
would be the costs of obtaining
permission?
ii. What would be the benefits of
requiring sellers and telemarketers to
obtain consumer consent before
retaining account information that they
receive as part of a telemarketing
transaction? What problems have arisen
where sellers and telemarketers have
retained consumers’ account
information without their permission?
iii. What evidence of the consumer’s
agreement, if any, should a seller or
telemarketer be required to retain?
iv. Should a consumer have the right
to change or revoke her permission for
a seller or telemarketer to retain her
billing information at any time?
v. Should any requirement for
consumer consent to retain her billing
information apply not only to outbound
telemarketing calls, but also to:
1. All inbound calls?
2. Only inbound calls in response to
general media or direct mail
advertisements soliciting inbound calls?
vi. What specific costs and burdens, if
any, would a requirement to obtain a
consumer’s consent to retain her billing
information for future transactions with
the same seller or telemarketer impose
on businesses, including small
businesses?
vii. Should any consent requirement
for retaining a consumer’s billing
information apply only prospectively
and ‘‘grandfather in’’ previously
obtained billing information?
8. Section 310.4(a)(7) generally
prohibits sellers and telemarketers from
submitting billing information for
payment in any transaction without first
obtaining the express informed consent
of the customer or donor to be charged
for the goods or services or charitable
donation and to be charged using an
identified account.
a. Has this Rule provision been
effective in preventing the use of
preacquired account information for
unauthorized billing of consumers’
accounts? If so, why? If not, why not,
and how has the prohibition been
inadequate?
b. What changes, if any, should be
made to this section? What would be the
costs and benefits of any such change
for consumers and businesses, including
small businesses. Explain.
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c. Should this section, permitting the
use of preacquired account information
by sellers and telemarketers who obtain
a consumer’s express informed consent,
be made more consistent with
(including more or less rigorous than)
the credit card associations’ rules
prohibiting the exchange, transfer, or
sale of cardholder account numbers?
Why or why not?
d. Should this section be made more
consistent with (including more or less
rigorous than) section 3(a)(2) of the
Restore Online Shoppers’ Confidence
Act? Why or why not?
e. Have the provisions of this section
significantly increased the cost of doing
business? If so, how? What changes
could be made to the Rule to reduce the
cost of these provisions? What would be
the costs and benefits of any such
change for consumers and businesses,
including small businesses? Explain.
f. What additional evidence, if any, of
a consumer’s express informed consent
to be charged should the Rule require
where a seller or telemarketer already
has the consumer’s account information
and:
i. The charge is for an internal upsell
by the seller or telemarketer who
obtained the account information
directly from the consumer in the same
telephone call?
ii. The charge is for an external upsell
by a seller or telemarketer who did not
obtain the account information directly
from the consumer?
iii. The charge is for a free trial offer
that will lead to continuing charges if
the consumer does not cancel?
iv. The charge is for an initial
payment for a negative option or
continuity sales plan?
v. The charge is for a subscription that
will renew automatically?
g. Are there benefits to the use of
preacquired account information in (i)
internal upsells, (ii) external upsells,
(iii) free trial offers, (iv) negative option
or continuity sales plans, and (v)
subscription renewals? If so, please
identify the benefits and quantify them
if possible. Do these benefits outweigh
the possible harm caused by the use of
preacquired account information in
these types of transactions? If so, please
identify the harm and quantify it if
possible.
9. Section 310.4(a)(7) specifically
requires in a transaction involving
preacquired account information and a
‘‘free to pay conversion feature’’ that a
seller or telemarketer evidence a
customer’s express informed consent by
obtaining from the consumer the last
four digits of the account number to be
charged and making and maintaining an
audio recording of the entire
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telemarketing transaction. (A ‘‘free to
pay conversion feature’’ is a free trial for
a specified period of time that requires
payment if the customer does not take
affirmative action to cancel the
transaction before the free trial ends.)
a. Has the requirement that the entire
telemarketing transaction be recorded
by sellers or telemarketers who use
preacquired account information to bill
consumers for offers with a free to pay
conversion feature been effective in
preventing or resolving billing disputes?
If so, why? If not, why not, and how has
the requirement been inadequate?
b. Has the requirement of obtaining
the last four digits of the customer’s
account number been sufficient to
inform consumers that the seller or
telemarketer has their account
information and can use that
information to place charges on their
account? If so, why? If not, why not, and
how has the prohibition been
inadequate?
c. What changes, if any, should be
made to this section? What would be the
costs and benefits of any such change
for consumers and businesses, including
small businesses? Explain.
d. Have the provisions of this section
significantly increased business costs,
including the costs for small businesses?
If so, how? What changes could be made
to the Rule to reduce the cost of these
provisions while minimizing any loss of
benefits for consumers?
e. Should this section, permitting the
use of preacquired account information
by telemarketers and sellers who obtain
additional evidence of consumers’
express informed consent, be made
more consistent with (including more or
less rigorous than) the credit card
associations’ rules prohibiting the
exchange, transfer, or sale of cardholder
account numbers? Why or why not?
f. Should this section be made more
consistent with (including more or less
rigorous than) section 3(a)(2) of the
Restore Online Shoppers’ Confidence
Act? Why or why not?
g. When a seller or telemarketer
already has a consumer’s billing
information, is the consumer more
likely to understand that she is
authorizing a charge if she must provide
the complete number of her account to
be charged, only the last four digits, or
is simply asked for her express
authorization to charge the transaction
to her account in the following
scenarios:
i. The charge is for an additional
purchase during the same telephone call
with a seller or telemarketer to whom
the consumer has already provided her
account number?
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ii. The charge is for a new purchase
during a telephone call subsequent to a
prior telemarketing call in which the
consumer had agreed to be charged for
a purchase by providing her billing
information?
iii. The charge is for an external
upsell purchase from a sales agent
different from the sales agent to whom,
during the same telephone call, the
consumer previously provided her
billing information for an initial
purchase?
To what extent, if any, do the answers
depend on whether the consumer has
previously given her account
information to the seller or telemarketer
and agreed to allow the seller or
telemarketer to retain that information
for use in future transactions?
h. Should the Commission consider a
prohibition on any use of preacquired
account information in external upsells?
If so, why? If not, why not, and what
costs and burdens would such a
requirement impose on businesses,
including small businesses, and on
consumers?
i. Is any harm caused by the use of
preacquired account information in
external upsells outweighed by
countervailing benefits to consumers or
competition? If so, please identify the
harm and the countervailing benefits,
and quantify the benefits if possible.
j. Should the Commission consider
applying the requirements of this
provision to transactions involving
preacquired account information and
offers with negative option features?
10. Have the existing recordkeeping
provisions imposed costs and burdens
on sellers and telemarketers? On the
ability of law enforcement authorities to
take action against sellers and
telemarketers that violate Rule
requirements? What changes, if any,
should be made to the recordkeeping
provisions? What are the costs and
benefits of any such change for
consumers and businesses, including
small businesses? Explain.
11. Should the recordkeeping
provisions be expanded to include a
requirement that sellers and/or
telemarketers retain records of the
telemarketing calls they have placed?
What specific costs and burdens would
such a requirement impose on
businesses, including small businesses?
What costs and burdens does the lack of
such a requirement impose on law
enforcement and on consumers? Are
there alternatives to such a requirement
that would reduce law enforcement
costs and burdens while minimizing the
costs and burdens on businesses?
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Exemptions
Industry Background
12. Section 310.6 lists acts or
practices that are exempt from the Rule,
including pay-per-call-services and the
sale of franchises and business
opportunities already subject to
Commission rules.
a. Have the exemptions been effective
at minimizing the burden on businesses,
including small businesses, while
affording consumers sufficient
protections under the Rule? If so, why?
If not, why not, and how should this
section be changed?
b. How should sales to home-based
businesses be treated under the Rule?
Should sales to home-based businesses
be considered business-to-business
sales? If so, how are telemarketers able
to differentiate between a residential
telephone number and a home-basedbusiness telephone number? If not, why
not?
c. Is the exemption for ‘‘general
media’’ advertising still appropriate? If
not, why not, and how should this
exemption be changed?
d. Should the Rule require that
consumers who place inbound calls to
a seller or telemarketer in response to a
general media advertisement for a
negative option product or service
receive the same disclosures required by
section 310.3(a)(1)(vii) for outbound
telemarketing calls ? Why or why not?
e. Should telemarketers and sellers
who receive inbound calls from
consumers in response to a general
media advertisement be subject to the
same prohibition against
misrepresenting any material aspect of a
negative option feature as provided in
section 310.3(a)(2)(ix) for outbound
telemarketing calls? Why or why not?
f. Are there additional business-tobusiness products or services that
should not be exempted from the TSR
(e.g., Web site creation or other Internetrelated services, business directories or
other advertising services)? Explain.
g. Are there additional exemptions
that would be appropriate? Explain.
13. What is the dollar volume of
goods and services that are sold through
telemarketing today? Through outbound
telemarketing? Through inbound
telemarketing? How many people are
employed in outbound telemarketing?
In inbound telemarketing?
14. How have these figures changed
since 2003?
15. How many U.S. firms sell their
products domestically, either in whole
or in part, through telemarketing? How
many sell via outbound telemarketing?
How many only receive calls placed by
consumers? How have these numbers
changed since 2003?
16. How many of these firms engage
in telemarketing on their own behalf?
How many employ others to engage in
telemarketing for them? How have these
numbers changed since 2003?
17. How many U.S. entities sell their
products, either in whole or in part,
internationally through telemarketing?
18. How many foreign entities sell
their products, either in whole or in
part, in the U.S. through telemarketing?
19. How has the market for selling
goods or services internationally by
telemarketing changed, if at all, over the
past ten years?
20. How many outbound calls are
made each year? How many inbound
calls are received each year? How have
these numbers changed over the past ten
years?
21. In addition to sellers and
telemarketers, as defined by the TSR,
what other third-parties currently serve
the industry? How have these parties
changed over the past ten years?
22. How do the costs and benefits of
selling through telemarketing—either
through outbound calls or inbound
calls—compare to the costs and benefits
of other methods of marketing, e.g.,
selling online or in a ‘‘brick-and mortar’’
face-to-face setting?
23. What percentage of small
businesses use telemarketing to make
sales? What percentage of businesses
providing telemarketing services are
small businesses?
C. Questions on the Past and Future of
the Telemarketing Industry
The Commission also is seeking
comment on the telemarketing industry
generally to develop an understanding
of the history of telemarketing over the
past ten years, as well as factors
currently shaping and likely to continue
to shape the industry. Without limiting
the scope of issues on which public
comment may be submitted, the
Commission is particularly interested in
receiving comments on the questions
that follow.
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Technology
24. What technological innovations
have been implemented by
telemarketers over the past ten years,
and what impact have these innovations
had on:
a. The growth of the telemarketing
industry?
b. The number of consumers a
telemarketer can contact in a given time
period?
c. The manner in which list brokers
and others develop call lists?
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d. The costs of selling through
telemarketing?
e. The response and general attitude
of consumers toward the industry?
25. What impact have these
technological innovations had on
consumers? How have consumers
benefitted? How have they been
harmed? Explain.
26. How have the following
technological developments impacted
telemarketing? How have they impacted
consumers?
a. The use of computer databases of
consumer information?
b. Predictive dialers?
c. The integration of telephone and
computer technology to permit, e.g.,
broadcasting of prerecorded calls?
d. The availability of VoIP?
27. What technology is available to
consumers to screen or deflect
unwanted calls from telemarketers (e.g.,
answering machines, Caller ID,
anonymous call rejection, privacy
managers, call filtering systems)? Are
interception technologies available and
affordable? What impact are such
innovations having on telemarketing or
telemarketers? How will these
technologies that intercept calls shape
the future of telemarketing? What
consumer habits or concerns (such as
the concern about security if an
unanswered call may make it appear
that the house is empty) may reduce the
willingness of consumers to rely on this
technology?
28. How has the growth of the Internet
as a marketing medium affected
traditional telemarketing? What trends
are likely over the next five to ten years?
tkelley on DSK3SPTVN1PROD with PROPOSALS
Self-Regulatory Efforts
29. What steps, if any, have industry
associations taken to self-regulate? What
perceived problems have these steps
sought to address? How effective have
industry efforts at self-regulation been?
Explain.
30. Are industry-sponsored ethical
codes effective? How many companies
engaged in telemarketing belong to
industry associations sponsoring selfregulatory efforts, as compared to the
total number of companies engaged in
telemarketing? Is compliance with these
codes measurable? If so, what do these
measurements show?
31. Has the industry undertaken
efforts to educate members and/or the
public about telemarketing fraud?
Describe any such efforts and discuss
how effective they have been.
Government Regulation
32. Excluding the TSR, what steps, if
any, have federal, state, and local
governments taken to regulate
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telemarketing? What perceived
problems have these steps sought to
address? How effective have these
regulatory efforts been? Explain.
33. What efforts have federal, state,
and local governments taken to educate
industry and/or the public about
telemarketing fraud? Describe any such
efforts and discuss how effective they
have been. What problems have been
encountered?
Consumer Issues
34. What are consumer perceptions of
telemarketing today? How have they
changed over the past ten years?
35. How much money do consumers
lose as a result of telemarketing fraud
each year? Has the amount of
telemarketing fraud increased or
decreased over the past ten years? How
much has it changed?
36. Are consumers more aware of
telemarketing fraud than in the past?
Are consumers less susceptible to
telemarketing fraud now than ten years
ago? What are the most effective ways
to educate the public about fraudulent
telemarketing practices?
37. Are there particular groups of
consumers that are especially
susceptible to telemarketing fraud and
has this changed over the past ten years?
38. How can consumers be given
greater control over contacts by
telemarketers? How are they exercising
control now and how has that evolved?
You can file a comment online or on
paper. For the Commission to consider
your comment, we must receive it on or
before October 14, 2014. Write
‘‘Telemarketing Sales Rule Regulatory
Review, 16 CFR Part 310, Project No.
R411001,’’ on your comment. Your
comment, including your name and
your state, will be placed on the public
record of this proceeding, including, to
the extent practicable, on the public
Commission Web site, at https://
www.ftc.gov/os/publiccomments.shtm.
As a matter of discretion, the
Commission tries to remove individuals’
home contact information from
comments before placing them on the
Commission Web site.
Because your comment will be made
public, you are solely responsible for
making sure that your comment does
not include any sensitive personal
information, such as anyone’s Social
Security number, date of birth, driver’s
license number or other state
identification number or foreign country
equivalent, passport number, financial
account number, or credit or debit card
number. You are also solely responsible
for making sure that your comment does
not include any sensitive health
information, such as medical records or
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Fmt 4702
Sfmt 4702
46739
other individually identifiable health
information. In addition, do not include
any ‘‘[t]rade secret or any commercial or
financial information which is . . .
privileged or confidential,’’ as discussed
in section 6(f) of the FTC Act, 15 U.S.C.
46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include
competitively sensitive information
such as costs, sales statistics,
inventories, formulas, patterns, devices,
manufacturing processes, or customer
names.
If you want the Commission to give
your comment confidential treatment,
you must file it in paper form, with a
request for confidential treatment, and
you have to follow the procedure
explained in FTC Rule 4.9(c), 16 CFR
4.9(c).50 Your comment will be kept
confidential only if the FTC General
Counsel, in his or her sole discretion,
grants your request in accordance with
the law and the public interest.
Postal mail addressed to the
Commission is subject to delay due to
heightened security screening. As a
result, we encourage you to submit your
comments online. To make sure that the
Commission considers your online
comment, you must file it at: https://
ftcpublic.commentworks.com/ftc/
telemarketingsalesnprm by following
the instructions on the web-based form.
If this Notice appears at https://
www.regulations.gov/#!home, you also
may file a comment through that Web
site.
If you file your comment on paper,
write ‘‘Telemarketing Sales Rule
Regulatory Review, 16 CFR Part 310,
Project No. R411001’’ on your comment
and on the envelope, and mail your
comment to: Federal Trade Commission,
Office of the Secretary, 600
Pennsylvania Avenue NW., Suite CC–
5610 (Annex B), Washington, DC 20580,
or deliver your comment to: Federal
Trade Commission, Office of the
Secretary, Constitution Center, 400 7th
Street SW., 5th Floor, Suite 5610
(Annex B), Washington, DC 20024. If
possible, submit your paper comment to
the Commission by courier or overnight
service.
Visit the Commission Web site at
https://www.ftc.gov to read this NPRM
and the news release describing it. The
FTC Act and other laws that the
Commission administers permit the
collection of public comments to
consider and use in this proceeding as
appropriate. The Commission will
50 In particular, the written request for
confidential treatment that accompanies the
comment must include the factual and legal basis
for the request, and must identify the specific
portions of the comment to be withheld from the
public record. See FTC Rule 4.9(c), 16 CFR 4.9(c).
E:\FR\FM\11AUP1.SGM
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Federal Register / Vol. 79, No. 154 / Monday, August 11, 2014 / Proposed Rules
consider all timely and responsive
public comments that it receives on or
before October 14, 2014. You can find
more information, including routine
uses permitted by the Privacy Act, in
the Commission’s privacy policy, at
https://www.ftc.gov/ftc/privacy.htm.
By direction of the Commission.
Donald S. Clark,
Secretary.
Table of Acronyms
[FR Doc. 2014–18505 Filed 8–8–14; 8:45 am]
CFR Code of Federal Regulations
DHS Department of Homeland Security
FR Federal Register
NPRM Notice of Proposed Rulemaking
§ Section Symbol
U.S.C. United States Code
BILLING CODE 6750–01–P
DEPARTMENT OF HOMELAND
SECURITY
A. Public Participation and Request for
Comments
We encourage you to participate in
this proposed rulemaking by submitting
comments and related materials. All
comments received will be posted,
without change to https://
www.regulations.gov and will include
any personal information you have
provided.
Coast Guard
33 CFR Part 117
[Docket No. USCG–2014–0436]
RIN 1625–AA09
Drawbridge Operation Regulations;
Gulf Intracoastal Waterway, St.
Petersburg Beach, FL
Coast Guard, DHS.
Notice of proposed rulemaking.
AGENCY:
ACTION:
The Coast Guard proposes to
change the operating schedule that
governs the Pinellas Bayway Structure
‘‘E’’ (SR 679) Bridge, Gulf Intracoastal
Waterway mile 113.0, St. Petersburg
Beach, FL. This proposal would extend
the time period when the bridge is
subject to periodic openings. During this
extended time period the bridge will not
open on demand.
DATES: Comments and related material
must reach the Coast Guard on or before
November 10, 2014.
ADDRESSES: You may submit comments
identified by docket number USCG–
2014–0436 using any one of the
following methods:
(1) Federal eRulemaking Portal:
https://www.regulations.gov.
(2) Fax: 202–493–2251.
(3) Mail or Delivery: Docket
Management Facility (M–30), U.S.
Department of Transportation, West
Building Ground Floor, Room W12–140,
1200 New Jersey Avenue SE.,
Washington, DC 20590–0001. Deliveries
accepted between 9 a.m. and 5 p.m.,
Monday through Friday, except federal
holidays. The telephone number is 202–
366–9329.
See the ‘‘Public Participation and
Request for Comments’’ portion of the
SUPPLEMENTARY INFORMATION section
below for instructions on submitting
comments. To avoid duplication, please
use only one of these four methods.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this proposed
tkelley on DSK3SPTVN1PROD with PROPOSALS
SUMMARY:
VerDate Mar<15>2010
16:58 Aug 08, 2014
Jkt 232001
rule, call or email Mr. Gene Stratton,
Seventh Coast Guard District, Bridge
Branch, 305–415–6944, email
allen.e.stratton@uscg.mil. If you have
questions on viewing or submitting
material to the docket, call Cheryl
Collins, Program Manager, Docket
Operations, telephone 202–366–9826.
SUPPLEMENTARY INFORMATION:
1. Submitting comments
If you submit a comment, please
include the docket number for this
proposed rulemaking (USCG–2014–
0436), indicate the specific section of
this document to which each comment
applies, and provide a reason for each
suggestion or recommendation. You
may submit your comments and
material online (https://
www.regulations.gov), or by fax, mail or
hand delivery, but please use only one
of these means. If you submit a
comment online via https://
www.regulations.gov, it will be
considered received by the Coast Guard
when you successfully transmit the
comment. If you fax, hand deliver, or
mail your comment, it will be
considered as having been received by
the Coast Guard when it is received at
the Docket Management Facility. We
recommend that you include your name
and a mailing address, an email address,
or a phone number in the body of your
document so that we can contact you if
we have questions regarding your
submission.
To submit your comment online, go to
https://www.regulations.gov, type the
docket number USCG–2014–0436 in the
‘‘SEARCH’’ box and click ‘‘SEARCH.’’
Click on ‘‘Submit a Comment’’ on the
line associated with this rulemaking. If
you submit your comments by mail or
hand delivery, submit them in an
unbound format, no larger than 81⁄2 by
11 inches, suitable for copying and
electronic filing. If you submit them by
mail and would like to know that they
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Fmt 4702
Sfmt 4702
reached the Facility, please enclose a
stamped, self-addressed postcard or
envelope. We will consider all
comments and material received during
the comment period and may change
the rule based on your comments.
2. Viewing comments and documents
To view comments, as well as
documents mentioned in this preamble
as being available in the docket, go to
https://www.regulations.gov, type the
docket number USCG–2014–0436 in the
‘‘SEARCH’’ box and click ‘‘SEARCH.’’
Click on Open Docket Folder on the line
associated with this rulemaking. You
may also visit the Docket Management
Facility in Room W12–140 on the
ground floor of the Department of
Transportation West Building, 1200
New Jersey Avenue SE., Washington,
DC, 20590, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal
holidays.
3. Privacy Act
Anyone can search the electronic
form of comments received into any of
our dockets by the name of the
individual submitting the comment (or
signing the comment, if submitted on
behalf of an association, business, labor
union, etc.). You may review a Privacy
Act notice regarding our public dockets
in the January 17, 2008, issue of the
Federal Register (73 FR 3316).
4. Public Meeting
We do not now plan to hold a public
meeting. But you may submit a request
for one using one of the three methods
specified under ADDRESSES. Please
explain why one would be beneficial. If
we determine that one would aid this
rulemaking, we will hold one at a time
and place announced by a later notice
in the Federal Register.
B. Basis and Purpose
The legal basis for the rule is the
Coast Guard’s authority to establish
drawbridge regulations:
33 U.S.C. 499. The proposed changes
would relieve traffic congestion in St.
Petersburg, FL by shortening the time
period when the Pinellas Bayway
Structure ‘‘E’’ (SR 679) is subject to on
demand openings and it will extend the
period when the Bridge is subject to
scheduled periodic openings. The Tierra
Verde Community Association, Inc.
(‘‘TVCA’’) has requested an amendment
to the Pinellas Bayway Structure ‘‘E’’
(SR 679) Bridge operating schedule to
reduce increased vehicular traffic
during peak hours. TVCA has indicated
that the existing operating schedule
severely impacts commute times for
residents, businesses, and those seeking
E:\FR\FM\11AUP1.SGM
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]]>Agencies
[Federal Register Volume 79, Number 154 (Monday, August 11, 2014)]
[Proposed Rules]
[Pages 46732-46740]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18505]
=======================================================================
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FEDERAL TRADE COMMISSION
16 CFR Part 310
Telemarketing Sales Rule
AGENCY: Federal Trade Commission.
ACTION: Rule Review, Request for public comments.
-----------------------------------------------------------------------
SUMMARY: The Commission requests public comment on its Telemarketing
Sales Rule (``TSR'' or ``Rule''). The Commission is soliciting comments
as part of the FTC's systematic review of all current Commission
regulations and guides.
DATES: Comments must be received on or before October 14, 2014.
ADDRESSES: Interested parties may file a comment online or on paper by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``Telemarketing Sales
Rule Regulatory Review, 16 CFR Part 310, Project No. R411001,'' on your
comment and file your comment online at https://ftcpublic.commentworks.com/ftc/telemarketingsalesnprm by following the
instructions on the web-based form. If you prefer to file your comment
on paper, mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite
CC-5610 (Annex B), Washington, DC 20580, or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex
B), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT: Karen S. Hobbs or Craig Tregillus,
Division of Marketing Practices, Bureau of Consumer Protection, Federal
Trade Commission, 600 Pennsylvania Avenue NW., Washington, DC 20580,
(202) 326-3587 or (202) 326-2970.
SUPPLEMENTARY INFORMATION:
I. Background
Enacted in 1994, the Telemarketing and Consumer Fraud and Abuse
Prevention Act (``Telemarketing Act'' or
[[Page 46733]]
``Act'') \1\ targets deceptive and abusive telemarketing practices.\2\
The Act specifically directed the Commission to issue a rule defining
and prohibiting deceptive and abusive telemarketing acts or
practices.\3\ In addition, the Act mandated that the rule address some
specified practices, which the Act designated as ``abusive.'' \4\ The
Act also authorized state attorneys general or other appropriate state
officials, as well as private persons who meet its jurisdictional
requirements, to bring civil actions in federal district court.\5\
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\1\ 15 U.S.C. 6101-6108. Subsequently, the USA PATRIOT Act,
Public Law 107-56, 115 Stat. 272 (Oct. 26, 2001), expanded the
Telemarketing Act's definition of ``telemarketing'' to encompass
calls soliciting charitable contributions, donations, or gifts of
money or any other thing of value.
\2\ Other statutes enacted by Congress to address telemarketing
fraud during the early 1990's include the Telephone Consumer
Protection Act of 1991 (``TCPA''), 47 U.S.C. 227 et seq., which
restricts the use of automated dialers, bans the sending of
unsolicited commercial facsimile transmissions, and directs the
Federal Communications Commission (``FCC'') to explore ways to
protect residential telephone subscribers' privacy rights; and the
Senior Citizens Against Marketing Scams Act of 1994, 18 U.S.C. 2325
et seq., which provides for enhanced prison sentences for certain
telemarketing-related crimes.
\3\ 15 U.S.C. 6102(a).
\4\ 15 U.S.C. 6102(a)(3).
\5\ 15 U.S.C. 6103, 6104.
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A. Telemarketing Sales Rule
Pursuant to the Act's directive, the Commission promulgated the
original TSR in 1995 and subsequently amended it in 2003 and again in
2008 and 2010 to add, among other things, provisions establishing the
National Do Not Call Registry and addressing debt relief offers and
prerecorded messages.\6\ The TSR applies to ``telemarketing,'' defined
to mean ``a plan, program, or campaign which is conducted to induce the
purchase of goods or services or a charitable contribution, by use of
one or more telephones and which involves more than one interstate
telephone call.'' \7\ The Telemarketing Act, however, in authorizing
the issuance of the TSR, limited the jurisdiction of the Commission to
its jurisdiction under Section 5 of the Federal Trade Commission Act
(``FTC Act''). As a result, some entities and activities fall outside
the scope of the TSR.\8\ In addition, the Rule wholly or partially
exempts several types of calls from its coverage. For example, the Rule
generally exempts inbound calls placed by consumers in response to
direct mail or general media advertising,\9\ business-to-business
calls,\10\ and other situations.\11\
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\6\ TSR and Statement of Basis and Purpose and Final Rule (``TSR
Final Rule''), 60 FR 43842 (Aug. 23, 1995); Amended TSR and
Statement of Basis and Purpose (``TSR Amended Rule''), 68 FR 4580
(Jan. 29, 2003); Amended TSR and Statement of Basis and Purpose
(``TSR Amended Rule 2008''), 73 FR 51164 (Aug. 29, 2008); Amended
TSR and Statement of Basis and Purpose (``TSR Amended Rule 2010''),
75 FR 48459 (Aug. 10, 2010).
\7\ 16 CFR 310.2(dd) (adopting the definition used by the
Telemarketing Act, 15 U.S.C. 6106(4)). The TSR excludes from the
definition of telemarketing the solicitation of catalog sales that
make specified disclosures in the catalog.
\8\ See 15 U.S.C. 44, 45(a)(2) (which excludes from the
Commission's jurisdiction several types of entities, including bona
fide nonprofits, bank entities (including, among others, banks,
thrifts, and federally chartered credit unions), and activities of
common carriers. In addition, activities related to the business of
insurance are outside the FTC's jurisdiction pursuant to the
McCarran-Ferguson Act of 1945. 15 U.S.C. 1011-1015. However, the
FCC's rules, established pursuant to the TCPA, 47 U.S.C. 227,
include similar ``do not call'' protections. 47 CFR 64.1200 et seq.
The TCPA does not similarly limit FCC jurisdiction, but expressly
excludes tax-exempt nonprofits from some requirements. 47 U.S.C.
227(a)(4)(C).
\9\ 16 CFR 310.6(b)(5)-(6). The general exemption does not apply
to certain limited situations. For example, the TSR covers calls
initiated by a customer in response to a general advertisement
relating to investment opportunities. See id.
\10\ 16 CFR 310.6(b)(7) (exempting ``[t]elephone calls between a
telemarketer and any business, except calls to induce the retail
sale of non-durable office or cleaning supplies''). The exemption,
however, is limited to instances in which a telemarketer solicits a
business regarding purchases on behalf of the business.
Telemarketers and sellers are not exempted from the requirements of
the TSR when they solicit consumers at their place of employment.
FTC v. Publishers Bus. Servs., Inc., 821 F. Supp. 2d 1205, 1220-21
(D. Nev. 2010)(granting summary judgment on FTC's TSR claims against
defendant that placed telephone calls to businesses to sell magazine
subscriptions to consumers employed at that business).
\11\ 16 CFR 310.6 lists the exemptions from the TSR.
---------------------------------------------------------------------------
The TSR is designed to protect consumers in a number of ways.
First, the Rule requires telemarketers to make certain disclosures and
prohibits material misrepresentations to consumers.\12\ Second, the TSR
sets forth mechanisms to protect consumers from unauthorized charges or
debits to their financial account, such as the requirement that
telemarketers obtain the consumer's ``express informed consent'' for a
charge to be billed to a particular account before billing or
collecting payment.\13\ Third, the Rule prohibits telemarketers and
sellers from requesting or receiving advance payments for certain
products and services. In particular, telemarketers and sellers may not
charge advance fees for credit repair services; \14\ recovery services;
\15\ loans or other extension of credit; \16\ or debt relief
services.\17\ Fourth, the Rule prohibits credit card laundering \18\
and more broadly, assisting and facilitating sellers or telemarketers
engaged in violating the TSR.\19\ Fifth, the TSR, with narrow
exceptions, prohibits telemarketers from calling consumers whose
numbers are on the National Do Not Call Registry or who have
specifically requested not to receive calls from a particular
entity.\20\ Finally, the TSR requires that telemarketers transmit to
consumers' telephones accurate Caller ID information\21\ and places
restrictions on calls made using predictive dialers \22\ and those
delivering prerecorded messages.\23\
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\12\ The TSR requires that telemarketers soliciting sales of
goods or services promptly disclose several key pieces of
information in an outbound telephone call or an internal or external
upsell: (1) The identity of the seller; (2) the fact that the
purpose of the call is to sell goods or services; (3) the nature of
the goods or services being offered; and (4) in the case of prize
promotions, that no purchase or payment is necessary to win. 16 CFR
310.4(d); see also 16 CFR 310.2(ee) (defining ``upselling'').
Telemarketers also must disclose in any telephone sales call the
cost of the goods or services and certain other material
information. 16 CFR 310.3(a)(1). In addition, the TSR prohibits
misrepresentations about, among other things, the cost and quantity
of the offered goods or services. 16 CFR 310.3(a)(2). It also
prohibits making false or misleading statements to induce any person
to pay for goods or services or to induce charitable contributions.
16 CFR 310.3(a)(4).
\13\ 16 CFR 310.4(a)(7); 16 CFR 310.3(a)(3).
\14\ 16 CFR 310.4(a)(2).
\15\ 16 CFR 310.4(a)(3). As the Commission has previously
explained,
[In] recovery room scams . . . a deceptive telemarketer calls a
consumer who has lost money, or who has failed to win a promised
prize, in a previous scam. The recovery room telemarketer falsely
promises to recover the lost money, or obtain the promised prize, in
exchange for a fee paid in advance. After the fee is paid, the
promised services are never provided. In fact, the consumer may
never hear from the telemarketer again.
TSR Final Rule, 60 FR at 43854.
\16\ 16 CFR 310.4(a)(4) (focusing on loans that the telemarketer
or seller represents to be guaranteed or highly likely to
materialize); see also TSR Amended Rule, 68 FR at 4614 (finding that
credit repair services, recovery services, and loans and other
extension of credit services were ``fundamentally bogus'').
\17\ 16 CFR 310.4(a)(5)(i); see also TSR Amended Rule 2010, 75
FR at 48458 (adopting TSR amendments to curb deceptive and abusive
practices in the telemarketing of debt relief services).
\18\ 16 CFR 310.3(c).
\19\ 16 CFR 310.3(b).
\20\ 16 CFR 310.4(b)(iii).
\21\ 16 CFR 310.4(a)(8).
\22\ 16 CFR 310.4(b)(1)(iv) (a call abandonment safe harbor is
found at 16 CFR 310.4(b)(4)).
\23\ 16 CFR 310.4(b)(1)(v).
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B. TSR Rule Review
The Commission routinely reviews all of its rules and guides
periodically to examine their efficacy, costs, and benefits, and to
determine whether to retain, modify, or rescind them. The Commission
does so in two ways. First, since 1992, the FTC has conducted a
regular, systematic review of all its rules and guides on a rotating
basis. Last year, the Commission announced its intention to seek public
comment on
[[Page 46734]]
several rules, including the TSR.\24\ This notice commences the
Commission's periodic review of the TSR.\25\
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\24\ Notice of Intent To Request Public Comments, 78 FR 30798
(May 23, 2013).
\25\ As required by the Telemarketing Act, 15 U.S.C. 6108, the
Commission initiated a review of the Rule on November 24, 1999,
which culminated in the TSR amendments adopted in 2003 that created
the National Do Not Call Registry. See generally TSR Amended Rule,
68 FR 4580; see also Notice of Proposed Rulemaking (``2002 NPRM''),
67 FR 4492 (Jan. 30, 2002).
---------------------------------------------------------------------------
Second, the Commission may itself identify changes in the
marketplace and other issues that warrant a proposal to amend the Rule.
For example, in 2008 \26\ and 2010,\27\ the Commission finalized
amendments related to prerecorded calls and debt settlement services.
In 2013, the Commission published a Notice of Proposed Rulemaking
(``TSR Anti-Fraud NPRM'') seeking public comment on proposed amendments
aimed at curbing the abuse of certain payment methods in telemarketing
and clarifying provisions of the Rule.\28\ The TSR Anti-Fraud NPRM is
proceeding concurrently with this rule review.
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\26\ See generally 2008 TSR Amendments, 73 FR 51164 (addressing
the use of prerecorded messages).
\27\ See generally 2010 TSR Amendments, 75 FR 48459 (prohibiting
the collection of advanced fees for debt relief services).
\28\ Notice of Proposed Rulemaking (``TSR Anti-Fraud NPRM''), 78
FR 41200 (July 9, 2013). The proposed amendments would (1) bar
sellers and telemarketers from accepting remotely created checks,
remotely created payment orders, cash-to-cash money transfers, and
cash reload mechanisms as payment in inbound or outbound
telemarketing transactions; (2) expand the scope of the advance fee
ban on ``recovery'' services, now limited to recovery of losses in
prior telemarketing transactions, to include recovery of losses in
any previous transaction; and (3) clarify other TSR provisions. The
Commission has not yet completed the rulemaking process or issued
any further notice regarding these proposed amendments. The public
comments are posted on the FTC's Web site at https://www.ftc.gov/os/comments/tsrantifraudnprm/index.shtm.
---------------------------------------------------------------------------
1. General Areas of Interest for FTC Review
As part of its review, the Commission is seeking comment on a
number of general issues, as outlined in the questions posed in Section
II below, including the continuing need for the TSR and its economic
impact, the effect of the Rule on deception in telemarketing, and the
interaction of the Rule with other regulations. The Commission believes
that this review is important to determine whether the TSR continues to
serve a useful purpose, and if so, how it could or should be improved.
2. Specific Areas of Interest for FTC Review
The Commission occasionally receives informal input regarding the
efficacy of the Rule and requests for clarification about the Rule's
application. In addition, the Commission recognizes there may have been
changes in the marketplace and legal landscape since the rule review
that culminated in the 2003 amendments and since the 2008 and 2010
amendments. Some of the questions included in this notice, therefore,
address specific issues. By including a summary of some of these
changes and related issues, the Commission intends to facilitate
comment, and the inclusion or exclusion of any issue is not an
indication of the Commission's intent to make any specific
modifications to the Rule.
a. Preacquired Account Information
Preacquired account information is any information that enables a
seller or telemarketer to cause a charge to be placed against a
consumer's account without obtaining the account number directly from
the consumer.\29\ Consumers who provide their financial account
information to a seller to complete a purchase during a telemarketing
call can be surprised to find that a different seller has charged their
account for additional purchases arising from the same call or a
subsequent call.
---------------------------------------------------------------------------
\29\ 16 CFR 310.2(x).
---------------------------------------------------------------------------
Since the Commission amended the TSR in 2003 to address the use of
preacquired account information in telemarketing,\30\ significant
changes in the legal landscape have occurred, namely, the passage of
the Restore Online Shoppers Confidence Act (``ROSCA''), 15 U.S.C. 8401
(2010), and the promulgation of certain credit card operating rules as
discussed below. In 2009, the Senate Committee on Commerce, Science,
and Transportation (``Senate Commerce Committee'') launched an
investigation into the use of ``data pass,'' an online marketing
practice involving preacquired account information.\31\ Data pass
usually involves a consumer shopping at a familiar online Web site. At
the retailer's checkout, after the consumer already has entered his
credit card information, a third-party marketer displays an offer for a
discount or reward that the consumer accepts. Many consumers do not
know the offer is from a third-party seller or that there are any fees
or costs associated with the offer. These consumers end up with
unexpected monthly membership fees or other recurring charges because,
unbeknownst to the consumer, the first retailer has passed the
consumer's credit card information to the third-party seller.
Frequently, consumers do not realize they have been charged until
unfamiliar transactions appear on a monthly statement.
---------------------------------------------------------------------------
\30\ Among other things, the 2003 amendments added provisions to
section 310.4(a) to protect consumers from unauthorized charges
resulting from the use of preacquired account information. Section
310.4(a)(6) makes it illegal to traffic in unencrypted consumer
account numbers. Section 310.4(a)(7)(i) requires telemarketers using
preacquired account information in combination with so-called free
trial offers to obtain additional evidence of a consumer's express
informed consent to be charged. This evidence includes an audio
recording of the entire telemarketing call and the receipt (from the
consumer) of the last four digits of the account to be charged.
\31\ Aggressive Sales Tactics on the Internet and Their Impact
on American Consumers, Hearing Before the S. Comm. on Commerce, Sci.
& Transp., 111th Cong. (2009), available at https://www.gpo.gov/fdsys/pkg/CHRG-111shrg54917/pdf/CHRG-111shrg54917.pdf; Office of
Oversight & Investigations Majority Staff, S. Comm. on Commerce,
Sci. & Transp., 111th Cong., Supplemental Report on Aggressive Sales
Tactics on the Internet, 17-18 (Comm. Print 2010), available at
https://www.commerce.senate.gov/public/?a=Files.Serve&File_id=439184c5-0965-4bb9-aa98-4a114b00a42e; Office of Oversight &
Investigations Majority Staff, S. Comm. on Commerce, Sci. & Transp.,
111th Cong., Aggressive Sales Tactics on the Internet and Their
Impact on American Consumers (Comm. Print 2009), available at https://www.commerce.senate.gov/public/?a=Files.Serve&File_id=c7b50606-8e74-4cbb-b608-87ab8b949d9a.
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Ultimately, Congress found that ``[t]he use of a `data pass'
process defied consumers' expectations that they could only be charged
for a good or a service if they submitted their billing information,
including their complete credit or debit card numbers.'' \32\ To curb
the abusive use of preacquired account information in the online
context, Congress enacted ROSCA, which prohibits an ``initial
merchant'' from disclosing a consumer's billing information to any
``post-transaction third-party seller'' for the purpose of charging the
consumer's account.\33\ Under ROSCA, a third-party seller must obtain
the consumer's full account information directly from the consumer.
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\32\ 15 U.S.C. 8401(7).
\33\ Id. The definition of ``initial merchant'' includes a
subsidiary or corporate affiliate of the initial merchant.
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The operating rules of the three major credit card associations are
consistent with ROSCA. They prohibit the disclosure, exchange, or use
of preacquired credit card account information by and among their
merchants.\34\ Visa, MasterCard, and
[[Page 46735]]
American Express operating rules forbid merchants from disclosing
cardholder account information to third parties other than to
facilitate the processing of sales transactions or as required by
law.\35\
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\34\ See, e.g., Visa International Operating Regulations,
Chapter 8: Risk Management--Account and Transaction Information
Security, Cardholder and Transaction Information Disclosure
Prohibitions (Updated) p. 715 (Apr. 13, 2013), available at https://usa.visa.com/download/merchants/visa-international-operating-regulations-main.pdf; MasterCard Rules, Rule 5.13 Sale or Exchange
of Information, p. 5-19 (June 14, 2013), available at https://www.mastercard.com/us/merchant/pdf/BM-Entire_Manual_public.pdf;
and American Express Merchant Reference Guide--U.S., Rule 3.4--
Treatment of American Express Cardmember Information, p. 18 (Oct.
2013), available at https://www209.americanexpress.com/merchant/singlevoice/singlevoiceflash/USEng/pdffiles/MerchantPolicyPDFs/US_%20RefGuide.pdf.
\35\ See, e.g., Visa Business News, Risk Management Compliance,
Merchants May Not Share Cardholder Account Information with Third
Parties (Apr. 21, 2010) (``These new rules clarify that merchants
forming marketing and/or referral arrangements with other merchants
may not transfer cardholder information to their referral partners
to complete subsequent transactions with the Visa cardholder.
Alternatively, any subsequent transactions related to these
marketing arrangements must be subjected to a separate and distinct
check out process. This separate check out process must require the
cardholder to provide an account number so there is clear
recognition that a sales transaction will occur.'').
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In contrast, the existing TSR expressly permits the use of
preacquired account information by and among third parties, with
certain restrictions.\36\ The Commission invites public comment as to
what effect, if any, these industry and regulatory changes should have
on the TSR.
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\36\ See supra note 28.
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b. Negative Option Marketing
Negative option marketing refers to an offer or agreement to sell
goods or services ``under which the consumer's silence or failure to
take an affirmative action to reject the goods or services or to cancel
the agreement within a specified period of time is interpreted by the
seller as acceptance of the offer.'' \37\ In 2003, the Commission
amended the TSR to require telemarketers and sellers to disclose the
specific terms and conditions of such offers and to make truthful
disclosures of all aspects of a negative option feature.\38\ In
addition, section 310.4(a)(7)(i) was added to protect consumers from
unauthorized charges resulting when telemarketers use preacquired
account information in combination with free-trial offers.\39\ Since
then, the marketplace and legal landscape have evolved.
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\37\ 16 CFR 310.2(u).
\38\ 16 CFR 310.3(a)(1)(vii) and 310.3(a)(2)(ix).
\39\ 2003 TSR Amendments, 68 FR at 4658. Section 310.4(a)(6)(i)
(now 310.4(a)(7)(i)) provides that, in telemarketing transactions
involving a free-to-pay conversion and preacquired account
information, evidence of a consumer's express informed consent to be
charged must include an audio recording of the entire telemarketing
call and the telemarketer must obtain from the consumer the last
four digits of the account to be charged.
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For example, at the time the Commission adopted these protections
for consumers, staff found ``no evidence on the record indicating that
these [negative option] products or services [were] telemarketed
through general media advertisements.'' \40\ Today, telemarketers and
sellers must abide by section 310.4(b) of the TSR, which generally
prohibits outbound calls to telephone numbers registered on the
national Do Not Call list,\41\ restricts abandoned calls,\42\ and bans
the use of most prerecorded messages.\43\ In the wake of these
restrictions, telemarketers now use a variety of general media to
solicit inbound calls from consumers to purchase a variety of goods and
services,\44\ including those involving a negative option or free-
trial.\45\
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\40\ 2003 TSR Amendments, 68 FR at 4658. The ``general media''
exemption itself dates back to the original Rule issued in 1995. The
exceptions to the general media exemption reflect the Commission's
law enforcement experience with deceptive telemarketers' use of mass
media to advertise ``certain goods or services that have routinely
been touted by fraudulent sellers using general media advertising to
generate inbound calls.'' Id. As a result, inbound calls in response
to general media advertisements for investment or business
opportunities, advance fee loans, credit card protection services,
credit repair services, recovery services and (since 2010) debt
relief services are subject to the Rule.
\41\ 16 CFR 310.4(b)(1)(iii).
\42\ 16 CFR 310.4(b)(1)(iv).
\43\ 16 CFR 310.4(b)(1)(v).
\44\ Data from the Commission's third Consumer Fraud Survey
(``Third Fraud Survey'') issued in 2013, a decade after the
implementation of the Do Not Call provisions of the TSR, suggest
that more than half of all frauds are now mass-marketed via radio,
television, newspapers, magazines, and additional kinds of general
media advertising other than direct mail, including internet Web
pages and email. Keith B. Anderson, Consumer Fraud in the United
States: The Third FTC Survey (April 2013), available at https://www.ftc.gov/reports/consumer-fraud-united-states-2011-third-ftc-survey. For example, the Third Fraud Survey showed that in 59.3
percent of fraud incidents, victims initially learned about the
fraudulent offer through such general media advertising. Id. at 37-
39.
\45\ See, e.g., FTC v. FTN Promotions, Inc., Civ. No. 8:07-1279
(M.D. Fla. Jan. 13, 2014) ($14.75 million contempt judgment against
defendants for violating a 2008 stipulated judgment by telemarketing
a payday loan scam that provided only a negative option membership
service); FTC v. Ultralife Fitness, Inc., Civ. No. 2:08-07655 (C.D.
Cal. Dec. 1, 2008) (Stip. Perm. Inj.) (defendants advertised free
trial sale of weight loss dietary supplements via general media
outlets, allegedly took consumers' credit or debit card information
to cover shipping and handling, and then charged consumers' accounts
for continuity programs without their consent); FTC v. Hispanexo,
Inc., Civ. No. 1:06-424 (E.D. Va. Apr. 18, 2006) (Stip. Perm. Inj.)
(defendants allegedly used Spanish-language radio and television
advertisements to lure consumers to pay $9 shipping and handling
charges for a 15-day trial of at-home instructional courses without
disclosing that their credit card or bank accounts automatically
would be charged three additional payments of $86.99 at the
conclusion of the trial period); see also FTC v. Berkeley Premium
Nutraceuticals, Inc., Civ. No. 1:06-00051 (S.D. Ohio July 22, 2009)
(Stip. Perm. Inj.).
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Furthermore, Congress, in enacting ROSCA, also highlighted the risk
of deception when online merchants use data pass in combination with
offers involving a ``negative option feature.'' ROSCA requires online
marketers to clearly and conspicuously disclose all material terms of
any offer involving a negative option feature before obtaining the
consumer's billing information; obtain a consumer's express informed
consent to be charged for such goods or services; and provide a simple
mechanism for a consumer to stop recurring charges resulting from the
transaction.\46\ ROSCA incorporates the TSR's definition of ``negative
option feature'' and generally mirrors the Rule's provisions requiring
pre-sale disclosures of material terms of a negative option offer \47\
and prohibiting material misrepresentations of any material aspect of a
negative option feature.\48\ The Commission invites public comment as
to what impact, if any, these marketplace changes should have on the
TSR.
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\46\ 15 U.S.C. 8403.
\47\ 16 CFR 310.3(a)(1)(vii).
\48\ 16 CFR 310.3(2)(ix).
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c. Recordkeeping
The recordkeeping requirements in section 310.5 of the TSR do not
include a requirement that sellers and telemarketers retain any record
of the telemarketing calls they have placed. Neither the original TSR
nor the 2003 amendments considered such a requirement,\49\ evidently
based on the reasonable assumption that records of telemarketing calls
would be readily available from a seller's or telemarketer's telephone
carrier. However, this assumption has been called into question.
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\49\ Statement of Basis & Purpose, 60 FR 43842, 43857 (Aug. 23,
1995); Statement of Basis & Purpose, 68 FR 4580, 4653 (Jan. 29,
2003).
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Obtaining call records for a seller's or telemarketer's sales calls
to consumers is necessary to enforce the prohibition against calls to
numbers on the National Do Not Call Registry. That task has turned out
to be inefficient, difficult and time-consuming because it often
requires multiple requests to different telecommunications service
providers that do not always produce the most useful records. Moreover,
when a telecommunications provider is located outside the U.S.,
enforcement is even more problematic.
The Commission recognizes that the simple solution to these
enforcement obstacles--requiring sellers and
[[Page 46736]]
telemarketers to retain their own call records--would likely create
compliance costs and burdens, and therefore requests comments detailing
the costs and burdens of such a requirement, as well as suggestions for
feasible alternatives.
II. Issues for Comment
Without limiting the scope of issues on which it is seeking
comment, the Commission is particularly interested in receiving
comments on the questions that follow. These questions are intended
only as examples of the issues relevant to the Commission's
examination. Interested parties are invited to comment on any relevant
issue, regardless of whether it is identified below. Where comments
advocate changes to the Rule, please be specific in describing
suggested changes and describe any potential costs and/or benefits such
changes might have on industry and consumers. The Commission requests
that responses to its questions include a reference to the question
being answered, and cite to empirical data or other evidence wherever
available and appropriate.
A. General Questions for Comment
1. Is there a continuing need for all parts of the Rule? Why or why
not?
a. Have changes in technology, industry structure, or economic
conditions affected the need for or effectiveness of any parts of the
Rule?
b. Does the Rule include any provision that imposes costs not
outweighed by benefits? If so, which ones?
c. Does the Rule include any provision that is no longer necessary?
If so, which ones?
d. Does the Rule include any provision that fails to serve its
intended purpose? If so, which ones?
e. Does the Rule include any provision imposing unnecessary costs
and burdens on businesses, including small businesses?
f. What are the aggregate costs and benefits of the Rule?
g. Have the costs or benefits of the Rule dissipated over time?
2. What impact, if any, has the Rule had on consumers?
a. What significant benefits has the Rule provided to consumers?
What evidence supports the asserted benefits?
b. What economic or other costs or burdens has the Rule imposed on
consumers? What evidence supports the asserted costs or burdens?
c. What impact has the Rule had on the flow of truthful information
to consumers? On the flow of deceptive information to consumers?
d. What impact has the Rule had on consumer privacy?
e. What changes, if any, should be made to the Rule to increase the
benefits to consumers? How would these changes affect the compliance
costs or burdens the Rule imposes on businesses, including small
businesses?
3. What impact, if any, has the Rule had on entities that must
comply with it?
a. What economic or other costs or burdens has the Rule imposed on
the industry or individual sellers or telemarketers? What evidence
supports the asserted costs or burdens?
b. How has the Rule benefitted the industry or individual sellers
or telemarketers? What evidence supports the asserted benefits?
c. What changes, if any, should be made to the Rule to minimize any
burden or cost imposed on the industry or individual businesses,
including small businesses? How would these changes affect the benefits
provided by the Rule to consumers or the industry?
d. What evidence is available concerning the degree of industry
compliance with the Rule? Does this evidence indicate that the Rule
should be modified? If so, why, and how? If not, why not?
4. What impact, if any, has the Rule had on sellers or
telemarketers that are small businesses with respect to costs,
profitability, and competitiveness? Have the costs or benefits of the
Rule dissipated over time with respect to small business sellers or
telemarketers?
5. Does the Rule overlap or conflict with other federal, state, or
local laws or regulations? If so, how do they overlap or conflict? What
evidence supports any such asserted overlap or conflict. If overlaps or
conflicts exist, how do telemarketers address them? Should the Rule be
modified to address these asserted overlaps or conflicts? If so, why,
and how? If not, why not?
a. To what extent have private parties and state attorneys general
brought actions under the TSR? Under state telemarketing statutes or
regulations?
b. Are there any gaps where no federal, state, or local government
law or regulation has addressed a particular abuse?
6. Are there regulatory alternatives to the Rule or any of its
provisions that might reduce any adverse economic effect of the Rule,
yet comply with the mandate of the Telemarketing Act to provide
consumers with necessary protection from telemarketing deception and
abuse?
B. Questions on Specific Issues
Abusive Acts or Practices
7. Section 310.4(a)(6) prohibits sellers and telemarketers from
disclosing or receiving unencrypted consumer account numbers for use in
telemarketing except for the purpose of processing a payment for goods
or services or a charitable contribution.
a. Has this Rule provision been effective in preventing the use of
preacquired account information for unauthorized billing of consumers'
accounts? If so, why? If not, why not, and how has the prohibition been
inadequate?
b. What changes, if any, should be made to this section? Explain.
What are the costs and benefits of the change for consumers and for
businesses, including small businesses?
c. Have the provisions of this section significantly increased the
cost of doing business? If so, how? What changes could be made to the
Rule to reduce the cost of these provisions for businesses, including
small businesses, without negatively impacting consumers?
d. Should the Rule prohibit all transfers of account information
from one seller or telemarketer to another in telemarketing
transactions? Why or why not?
i. In what situations do sellers or telemarketers transfer
encrypted account information from one seller or telemarketer to
another? How would transactions that use such transferred data be
affected if they were no longer permitted to transfer encrypted account
information?
ii. Would there be benefits in prohibiting such transfers and
thereby making the Rule more consistent with the credit card
associations' rules prohibiting the exchange, transfer, or sale of
cardholder account numbers?
iii. What would be the costs and benefits of a total prohibition on
the transfer of account information for consumers and businesses,
including small businesses?
e. Should sellers or telemarketers who obtain consumers' account
information during a telemarketing transaction and wish to retain it
for use in future transactions be required to obtain the consumer's
consent? Is there any material difference between telemarketing sales
and Internet sales that should prevent modification of the Rule
expressly to require sellers and telemarketers to seek authorization to
retain a customer's billing information for use in future transactions?
If so, what is the difference and why should it prevent such a
modification?
[[Page 46737]]
i. Do sellers and telemarketers currently retain consumer account
information that they obtain in telemarketing transactions? If so, do
sellers and telemarketers obtain consumer permission before retaining
the account numbers, and how is this permission obtained and in what
circumstances is it sought? If not, what would be the costs of
obtaining permission?
ii. What would be the benefits of requiring sellers and
telemarketers to obtain consumer consent before retaining account
information that they receive as part of a telemarketing transaction?
What problems have arisen where sellers and telemarketers have retained
consumers' account information without their permission?
iii. What evidence of the consumer's agreement, if any, should a
seller or telemarketer be required to retain?
iv. Should a consumer have the right to change or revoke her
permission for a seller or telemarketer to retain her billing
information at any time?
v. Should any requirement for consumer consent to retain her
billing information apply not only to outbound telemarketing calls, but
also to:
1. All inbound calls?
2. Only inbound calls in response to general media or direct mail
advertisements soliciting inbound calls?
vi. What specific costs and burdens, if any, would a requirement to
obtain a consumer's consent to retain her billing information for
future transactions with the same seller or telemarketer impose on
businesses, including small businesses?
vii. Should any consent requirement for retaining a consumer's
billing information apply only prospectively and ``grandfather in''
previously obtained billing information?
8. Section 310.4(a)(7) generally prohibits sellers and
telemarketers from submitting billing information for payment in any
transaction without first obtaining the express informed consent of the
customer or donor to be charged for the goods or services or charitable
donation and to be charged using an identified account.
a. Has this Rule provision been effective in preventing the use of
preacquired account information for unauthorized billing of consumers'
accounts? If so, why? If not, why not, and how has the prohibition been
inadequate?
b. What changes, if any, should be made to this section? What would
be the costs and benefits of any such change for consumers and
businesses, including small businesses. Explain.
c. Should this section, permitting the use of preacquired account
information by sellers and telemarketers who obtain a consumer's
express informed consent, be made more consistent with (including more
or less rigorous than) the credit card associations' rules prohibiting
the exchange, transfer, or sale of cardholder account numbers? Why or
why not?
d. Should this section be made more consistent with (including more
or less rigorous than) section 3(a)(2) of the Restore Online Shoppers'
Confidence Act? Why or why not?
e. Have the provisions of this section significantly increased the
cost of doing business? If so, how? What changes could be made to the
Rule to reduce the cost of these provisions? What would be the costs
and benefits of any such change for consumers and businesses, including
small businesses? Explain.
f. What additional evidence, if any, of a consumer's express
informed consent to be charged should the Rule require where a seller
or telemarketer already has the consumer's account information and:
i. The charge is for an internal upsell by the seller or
telemarketer who obtained the account information directly from the
consumer in the same telephone call?
ii. The charge is for an external upsell by a seller or
telemarketer who did not obtain the account information directly from
the consumer?
iii. The charge is for a free trial offer that will lead to
continuing charges if the consumer does not cancel?
iv. The charge is for an initial payment for a negative option or
continuity sales plan?
v. The charge is for a subscription that will renew automatically?
g. Are there benefits to the use of preacquired account information
in (i) internal upsells, (ii) external upsells, (iii) free trial
offers, (iv) negative option or continuity sales plans, and (v)
subscription renewals? If so, please identify the benefits and quantify
them if possible. Do these benefits outweigh the possible harm caused
by the use of preacquired account information in these types of
transactions? If so, please identify the harm and quantify it if
possible.
9. Section 310.4(a)(7) specifically requires in a transaction
involving preacquired account information and a ``free to pay
conversion feature'' that a seller or telemarketer evidence a
customer's express informed consent by obtaining from the consumer the
last four digits of the account number to be charged and making and
maintaining an audio recording of the entire telemarketing transaction.
(A ``free to pay conversion feature'' is a free trial for a specified
period of time that requires payment if the customer does not take
affirmative action to cancel the transaction before the free trial
ends.)
a. Has the requirement that the entire telemarketing transaction be
recorded by sellers or telemarketers who use preacquired account
information to bill consumers for offers with a free to pay conversion
feature been effective in preventing or resolving billing disputes? If
so, why? If not, why not, and how has the requirement been inadequate?
b. Has the requirement of obtaining the last four digits of the
customer's account number been sufficient to inform consumers that the
seller or telemarketer has their account information and can use that
information to place charges on their account? If so, why? If not, why
not, and how has the prohibition been inadequate?
c. What changes, if any, should be made to this section? What would
be the costs and benefits of any such change for consumers and
businesses, including small businesses? Explain.
d. Have the provisions of this section significantly increased
business costs, including the costs for small businesses? If so, how?
What changes could be made to the Rule to reduce the cost of these
provisions while minimizing any loss of benefits for consumers?
e. Should this section, permitting the use of preacquired account
information by telemarketers and sellers who obtain additional evidence
of consumers' express informed consent, be made more consistent with
(including more or less rigorous than) the credit card associations'
rules prohibiting the exchange, transfer, or sale of cardholder account
numbers? Why or why not?
f. Should this section be made more consistent with (including more
or less rigorous than) section 3(a)(2) of the Restore Online Shoppers'
Confidence Act? Why or why not?
g. When a seller or telemarketer already has a consumer's billing
information, is the consumer more likely to understand that she is
authorizing a charge if she must provide the complete number of her
account to be charged, only the last four digits, or is simply asked
for her express authorization to charge the transaction to her account
in the following scenarios:
i. The charge is for an additional purchase during the same
telephone call with a seller or telemarketer to whom the consumer has
already provided her account number?
[[Page 46738]]
ii. The charge is for a new purchase during a telephone call
subsequent to a prior telemarketing call in which the consumer had
agreed to be charged for a purchase by providing her billing
information?
iii. The charge is for an external upsell purchase from a sales
agent different from the sales agent to whom, during the same telephone
call, the consumer previously provided her billing information for an
initial purchase?
To what extent, if any, do the answers depend on whether the
consumer has previously given her account information to the seller or
telemarketer and agreed to allow the seller or telemarketer to retain
that information for use in future transactions?
h. Should the Commission consider a prohibition on any use of
preacquired account information in external upsells? If so, why? If
not, why not, and what costs and burdens would such a requirement
impose on businesses, including small businesses, and on consumers?
i. Is any harm caused by the use of preacquired account information
in external upsells outweighed by countervailing benefits to consumers
or competition? If so, please identify the harm and the countervailing
benefits, and quantify the benefits if possible.
j. Should the Commission consider applying the requirements of this
provision to transactions involving preacquired account information and
offers with negative option features?
10. Have the existing recordkeeping provisions imposed costs and
burdens on sellers and telemarketers? On the ability of law enforcement
authorities to take action against sellers and telemarketers that
violate Rule requirements? What changes, if any, should be made to the
recordkeeping provisions? What are the costs and benefits of any such
change for consumers and businesses, including small businesses?
Explain.
11. Should the recordkeeping provisions be expanded to include a
requirement that sellers and/or telemarketers retain records of the
telemarketing calls they have placed? What specific costs and burdens
would such a requirement impose on businesses, including small
businesses? What costs and burdens does the lack of such a requirement
impose on law enforcement and on consumers? Are there alternatives to
such a requirement that would reduce law enforcement costs and burdens
while minimizing the costs and burdens on businesses?
Exemptions
12. Section 310.6 lists acts or practices that are exempt from the
Rule, including pay-per-call-services and the sale of franchises and
business opportunities already subject to Commission rules.
a. Have the exemptions been effective at minimizing the burden on
businesses, including small businesses, while affording consumers
sufficient protections under the Rule? If so, why? If not, why not, and
how should this section be changed?
b. How should sales to home-based businesses be treated under the
Rule? Should sales to home-based businesses be considered business-to-
business sales? If so, how are telemarketers able to differentiate
between a residential telephone number and a home-based-business
telephone number? If not, why not?
c. Is the exemption for ``general media'' advertising still
appropriate? If not, why not, and how should this exemption be changed?
d. Should the Rule require that consumers who place inbound calls
to a seller or telemarketer in response to a general media
advertisement for a negative option product or service receive the same
disclosures required by section 310.3(a)(1)(vii) for outbound
telemarketing calls ? Why or why not?
e. Should telemarketers and sellers who receive inbound calls from
consumers in response to a general media advertisement be subject to
the same prohibition against misrepresenting any material aspect of a
negative option feature as provided in section 310.3(a)(2)(ix) for
outbound telemarketing calls? Why or why not?
f. Are there additional business-to-business products or services
that should not be exempted from the TSR (e.g., Web site creation or
other Internet-related services, business directories or other
advertising services)? Explain.
g. Are there additional exemptions that would be appropriate?
Explain.
C. Questions on the Past and Future of the Telemarketing Industry
The Commission also is seeking comment on the telemarketing
industry generally to develop an understanding of the history of
telemarketing over the past ten years, as well as factors currently
shaping and likely to continue to shape the industry. Without limiting
the scope of issues on which public comment may be submitted, the
Commission is particularly interested in receiving comments on the
questions that follow.
Industry Background
13. What is the dollar volume of goods and services that are sold
through telemarketing today? Through outbound telemarketing? Through
inbound telemarketing? How many people are employed in outbound
telemarketing? In inbound telemarketing?
14. How have these figures changed since 2003?
15. How many U.S. firms sell their products domestically, either in
whole or in part, through telemarketing? How many sell via outbound
telemarketing? How many only receive calls placed by consumers? How
have these numbers changed since 2003?
16. How many of these firms engage in telemarketing on their own
behalf? How many employ others to engage in telemarketing for them? How
have these numbers changed since 2003?
17. How many U.S. entities sell their products, either in whole or
in part, internationally through telemarketing?
18. How many foreign entities sell their products, either in whole
or in part, in the U.S. through telemarketing?
19. How has the market for selling goods or services
internationally by telemarketing changed, if at all, over the past ten
years?
20. How many outbound calls are made each year? How many inbound
calls are received each year? How have these numbers changed over the
past ten years?
21. In addition to sellers and telemarketers, as defined by the
TSR, what other third-parties currently serve the industry? How have
these parties changed over the past ten years?
22. How do the costs and benefits of selling through
telemarketing--either through outbound calls or inbound calls--compare
to the costs and benefits of other methods of marketing, e.g., selling
online or in a ``brick-and mortar'' face-to-face setting?
23. What percentage of small businesses use telemarketing to make
sales? What percentage of businesses providing telemarketing services
are small businesses?
Technology
24. What technological innovations have been implemented by
telemarketers over the past ten years, and what impact have these
innovations had on:
a. The growth of the telemarketing industry?
b. The number of consumers a telemarketer can contact in a given
time period?
c. The manner in which list brokers and others develop call lists?
[[Page 46739]]
d. The costs of selling through telemarketing?
e. The response and general attitude of consumers toward the
industry?
25. What impact have these technological innovations had on
consumers? How have consumers benefitted? How have they been harmed?
Explain.
26. How have the following technological developments impacted
telemarketing? How have they impacted consumers?
a. The use of computer databases of consumer information?
b. Predictive dialers?
c. The integration of telephone and computer technology to permit,
e.g., broadcasting of prerecorded calls?
d. The availability of VoIP?
27. What technology is available to consumers to screen or deflect
unwanted calls from telemarketers (e.g., answering machines, Caller ID,
anonymous call rejection, privacy managers, call filtering systems)?
Are interception technologies available and affordable? What impact are
such innovations having on telemarketing or telemarketers? How will
these technologies that intercept calls shape the future of
telemarketing? What consumer habits or concerns (such as the concern
about security if an unanswered call may make it appear that the house
is empty) may reduce the willingness of consumers to rely on this
technology?
28. How has the growth of the Internet as a marketing medium
affected traditional telemarketing? What trends are likely over the
next five to ten years?
Self-Regulatory Efforts
29. What steps, if any, have industry associations taken to self-
regulate? What perceived problems have these steps sought to address?
How effective have industry efforts at self-regulation been? Explain.
30. Are industry-sponsored ethical codes effective? How many
companies engaged in telemarketing belong to industry associations
sponsoring self-regulatory efforts, as compared to the total number of
companies engaged in telemarketing? Is compliance with these codes
measurable? If so, what do these measurements show?
31. Has the industry undertaken efforts to educate members and/or
the public about telemarketing fraud? Describe any such efforts and
discuss how effective they have been.
Government Regulation
32. Excluding the TSR, what steps, if any, have federal, state, and
local governments taken to regulate telemarketing? What perceived
problems have these steps sought to address? How effective have these
regulatory efforts been? Explain.
33. What efforts have federal, state, and local governments taken
to educate industry and/or the public about telemarketing fraud?
Describe any such efforts and discuss how effective they have been.
What problems have been encountered?
Consumer Issues
34. What are consumer perceptions of telemarketing today? How have
they changed over the past ten years?
35. How much money do consumers lose as a result of telemarketing
fraud each year? Has the amount of telemarketing fraud increased or
decreased over the past ten years? How much has it changed?
36. Are consumers more aware of telemarketing fraud than in the
past? Are consumers less susceptible to telemarketing fraud now than
ten years ago? What are the most effective ways to educate the public
about fraudulent telemarketing practices?
37. Are there particular groups of consumers that are especially
susceptible to telemarketing fraud and has this changed over the past
ten years?
38. How can consumers be given greater control over contacts by
telemarketers? How are they exercising control now and how has that
evolved?
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before October 14,
2014. Write ``Telemarketing Sales Rule Regulatory Review, 16 CFR Part
310, Project No. R411001,'' on your comment. Your comment, including
your name and your state, will be placed on the public record of this
proceeding, including, to the extent practicable, on the public
Commission Web site, at https://www.ftc.gov/os/publiccomments.shtm. As a
matter of discretion, the Commission tries to remove individuals' home
contact information from comments before placing them on the Commission
Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, such as anyone's Social Security
number, date of birth, driver's license number or other state
identification number or foreign country equivalent, passport number,
financial account number, or credit or debit card number. You are also
solely responsible for making sure that your comment does not include
any sensitive health information, such as medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which is . . . privileged or confidential,'' as discussed in section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\50\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\50\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at: https://ftcpublic.commentworks.com/ftc/telemarketingsalesnprm by following the
instructions on the web-based form. If this Notice appears at https://www.regulations.gov/#!home, you also may file a comment through that
Web site.
If you file your comment on paper, write ``Telemarketing Sales Rule
Regulatory Review, 16 CFR Part 310, Project No. R411001'' on your
comment and on the envelope, and mail your comment to: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite
CC-5610 (Annex B), Washington, DC 20580, or deliver your comment to:
Federal Trade Commission, Office of the Secretary, Constitution Center,
400 7th Street SW., 5th Floor, Suite 5610 (Annex B), Washington, DC
20024. If possible, submit your paper comment to the Commission by
courier or overnight service.
Visit the Commission Web site at https://www.ftc.gov to read this
NPRM and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will
[[Page 46740]]
consider all timely and responsive public comments that it receives on
or before October 14, 2014. You can find more information, including
routine uses permitted by the Privacy Act, in the Commission's privacy
policy, at https://www.ftc.gov/ftc/privacy.htm.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2014-18505 Filed 8-8-14; 8:45 am]
BILLING CODE 6750-01-P
