Most of the discussion about the Federal Trade Commission’s (FTC) recent announcement that it wants to amend several key provisions of its Telemarketing Sales Rule (TSR) has focused on a proposal to create a centralized, national "Do Not Call" registry. The proposal would make it illegal for telemarketers to call consumers who placed their telephone numbers on that registry by making one call to the FTC.
But the FTC has proposed other changes to the TSR that may be viewed with fear and loathing by direct-response marketers — including a ban on what the FTC calls "preacquired account telemarketing."
Tighter Billing Information Restrictions
A telemarketer sometimes possesses information necessary to bill charges to a consumer at the time a telemarketing call is made. Typically, this billing information is a credit card number (and related information) acquired from a third party.
The FTC believes the use of preacquired billing information is inherently abusive and deceptive, and the likelihood of abuse and deception is greater when the information is used with free-trial club membership offers. When a seller doesn’t need to ask the consumer to demonstrate consent by divulging billing information, the usual sales dynamic is turned inside out. In the typical telemarketing transaction, the consumer must provide a credit card number to the telemarketer.
In the FTC’s view, many consumers who consent to a free-trial club membership incorrectly assume that, since they have not provided their billing information, they cannot be charged unless they affirmatively take some action to accept the offer. Many consumers have complained about bills from club membership programs and say they were not told that they would be charged, nor that the telemarketer already has access to their information. According to the FTC, "When they find they have been charged, many consumers are shocked and mystified, wondering how the telemarketer obtained their billing information."
New ‘Outbound Call’ Definitions
The FTC also wants to amend the TSR so that a call initiated by a consumer is defined as an "outbound" telephone call if: (1) the consumer is transferred to a separate telemarketer who pitches an upsell product or service; or (2) a single telemarketer solicits orders for two or more different sellers in a single call. In other words, if a consumer who calls to order an advertised item is read a sales script for an upsell item sold by a different company, the second half of the call would be considered an outbound call, which is generally subject to more restrictions than an inbound call.
Currently, the TSR does not apply to inbound telephone calls placed by a consumer in response to general media advertising (television or radio), as opposed to inbound calls placed in response to direct-mail pieces or other targeted solicitations. It is not clear whether the proposal to subject the upsell portion of certain inbound calls to the same restrictions that currently govern outbound calls will apply to calls initiated in response to general direct-response advertising. It seems likely that the exemption for calls in response to general media advertising will not be repealed, which is good news for DRTV marketers. But state officials and consumer groups may persuade the FTC to narrow this exemption.
It’s too early to tell whether the FTC will ultimately follow through on its TSR proposals. But the fact that these changes have even been proposed by the FTC — now headed by a Republican appointee who has often argued that the free market does a better job of protecting consumers than government regulations — indicates there is a good chance that many or all of them will be approved. The abuses attributed to the telemarketing of free-trial club memberships may not end up killing the "golden goose" of upselling, but the proposed changes to the TSR may prevent that goose from laying as many golden eggs as it once did for direct-response marketers.