Telemarketing Guidelines

QUESTION 

We just acquired a telemarketing company. First of all, we do not know anything about telemarketing. And, in my opinion, the telemarketing company doesn’t know anything about telemarketing laws. 

My company is a mortgage lender, and I am on its Board. I was against this purchase, but I was outvoted. Not only do the telemarketing people not know about telemarketing laws, but our own compliance department knows nothing about these laws. Now, they’re scrambling to understand our compliance risk exposure. 

I was told recently that Lenders Compliance Group is a highly respected compliance firm with a broad knowledge of mortgage banking. So, I’m writing you for assistance. I will ask senior management to get in touch with you, too. We will need help getting our compliance department a checklist, policies, procedures, and other guidance to monitor the telemarketing activities. My regret is that I did not contact you sooner. 

I would like you to publish my question in your FAQ newsletter because I want others to know some of the basics of telemarketing laws, in particular, a list of guidelines. 

What are some compliance guidelines for telemarketing? 

ANSWER 

Thank you for contacting us. Ask your senior management to postpone launching the new telemarketing activities until you have ratified and implemented compliance procedures. We’ll work directly with your compliance personnel to provide the appropriate policies and procedures. If you or anyone else wants to contact me to discuss this area of compliance, please get in touch with me here. 

The foundational requirements for telemarketing is the Telemarketing Sales Rule (TSR, hereinafter “Rule”).[i] The Federal Trade Commission (FTC) and state attorneys general have enforcement tools to combat telemarketing fraud. 

A quick outline of the Rule’s purview[ii] would 

·     require disclosures of specific information, 

·     prohibit misrepresentations, 

·     limit when telemarketers may call consumers, 

·     mandate transmission of Caller ID information, 

·     prohibit abandoned outbound calls, subject to a safe harbor, 

·     prohibit unauthorized billing, 

·     apply to all upsells, even in unsolicited calls from a consumer, 

·     set payment restrictions for the sale of certain goods and services, 

·     require that specific business records be kept for two years, 

·     address the use of prerecorded messages, 

·     prohibit deceptive and abusive practices associated with debt relief services, and 

·     prohibit using remotely created payment orders and checks, cash-to-money transfers, and cash reload mechanisms in outbound and inbound telemarketing. 

If your telemarketing campaigns involve any calls across state lines, like many mortgage-related originations and servicing – and whether you make outbound calls or receive calls in response to advertising – you’re likely subject to the Rule’s provisions. 

The Federal Communications Commission (FCC) enforces telephonic communications pursuant to the Telephone Consumer Protection Act (TCPA), which also regulates telemarketing. 

The very act of contact with the public by means of telemarketing sets in motion a vast range of regulatory compliance requirements and multiple regulatory frameworks. Just considering a generic description of telemarketing should give you an idea of the risk exposure. The Rule describes telemarketing as “a plan, program, or campaign . . . to induce the purchase of goods or services or a charitable contribution” involving more than one interstate telephone call.[iii] With some important exceptions, any businesses or individuals participating in “telemarketing” must comply with the Rule. 

This is true whether, as “telemarketers,” they initiate or receive phone calls to or from consumers, or as “sellers,” they provide, offer to provide or arrange to provide goods or services to consumers in exchange for payment. Whether a company makes or receives calls using low-tech equipment or the newest technology makes no difference. Those making the calls, unless otherwise exempt,[iv] must comply with the Rule’s provisions. If the calls are made to induce the purchase of goods, services, or a charitable contribution, the company is engaging in “telemarketing.” 

Indeed, certain sections of the Rule apply to individuals or companies other than “sellers” or “telemarketers” if these individuals or companies provide substantial assistance or support to sellers or telemarketers. The Rule also applies to individuals or companies that help telemarketers gain unauthorized access to the credit card system by using another merchant’s account to charge consumers, a practice known as credit card laundering. 

There is considerable litigation in telemarketing violations. The FTC, states, and private citizens may bring civil actions in federal district courts to enforce the Rule. State attorneys general or any other officer authorized by the state to bring actions on behalf of its residents may bring actions by the states. Private citizens may bring an action to enforce the Rule if they have suffered $50,000 or more in actual damages. 

Furthermore, anyone who violates the Rule is subject to civil penalties of up to $50,120 for each violation. In addition, violators may be subject to nationwide injunctions prohibiting certain conduct and may be required to pay redress to injured consumers. 

Certain guidelines should be part of every telemarketing program. Telemarketing platforms and programs should be tested and monitored continuously, with reports provided monthly to the Senior Management and the Board. Here’s a brief list of policy statements that must be elaborated on procedurally. The list is not comprehensive; however, it may help you develop a sensitivity to the overall demands of telemarketing compliance.[v] Each item on the list should have a procedural element subject to testing and monitoring. 

Partial List of Telemarketing Procedural Requirements 

Permissible hours 

Procedure: Do not make telephone calls to consumers before 8 A.M. or after 9 P.M. local time at the call’s destination unless the person being called has specifically agreed to a call at another time. 

Do-Not-Call Lists 

Procedure: Maintain a list of consumers who ask not to receive telemarketing solicitations and those whose names appear on the national do-not-call list.

• Honor the requests of consumers who ask not to receive telemarketing solicitations.
• Maintain a process to prevent telephone solicitations to any telephone number on the do-not-call list or the national do-not-call list.
• Maintain appropriate procedures and written policies to comply with the national do-not-call rules.
• Regularly conduct employee compliance training.
• Implement a version of the national do-not-call registry obtained from the administrator of the registry no more than three months prior to the date any call is made and maintain records documenting this process.
• Use a process to not sell, rent, lease, purchase, or use the national do-not-call database or any part of it for any purpose except compliance with the rules and to prevent telephone solicitations to telephone numbers registered on the national database. 

Oral Disclosures for Outbound Telephone Calls 

Procedure: Disclose the following information truthfully, promptly, clearly, and conspicuously in any outbound telephone call to a potential new customer:

• Institution’s identity.
• The purpose of the call is to sell loans.
• That the caller makes mortgage loans. 

Artificial or Prerecorded Voice Calls 

Procedure:

• Do not use an artificial or prerecorded voice call to a consumer’s home unless there is an existing business relationship with the person being called (in which case, identify as such).
• Any artificial or prerecorded voice message releases the line of the person being called within five seconds of notice that the called party has hung up.
• The beginning of any prerecorded message clearly states the caller's identity.
• During or after any prerecorded message, state the caller’s telephone number. 

Call Abandonment

Procedure:

• Do not abandon more than 3 percent of calls answered by a person.
• Deliver a prerecorded identification message when abandoning a call. 

Caller Identification 

Procedure:

• Transmit caller identification (caller ID) information when available, and do not block this information. 

Facsimile Machines 

Procedures:

• Do not send unsolicited advertisements to facsimile machines.
• On any fax, identify the sender. 

Disclosures for Telephone and Direct Mail Solicitations 

Procedures: Disclose the following information, orally or in writing, before a customer pays for any services offered in a telephone or direct mail solicitation:

• The total costs to receive the services offered.
• All conditions that must be satisfied to receive the services being offered.
• If there is a policy of not making refunds, state the policy.
• If there is mention of a refund policy, state the key terms and conditions of the policy. 

Misrepresentations 

Procedure: Do not misrepresent, directly or by implication, the following information:

• The total costs to receive any services offered.
• All conditions that must be satisfied to receive the services being offered.
• Any features of the offered services.
• Any aspect of the refund policies
• Affiliation with, or endorsement by, any government or other organization. 

Verifiable Authorization 

Procedure: Obtain express verifiable authorization before submitting a check, draft, or other form of payment from a person’s account as the result of telemarketing efforts in one of three ways:

• In writing.
• By tape-recording an oral authorization that contains references to the date of the draft or other form of payment, its amount, the caller’s name and entity, the telephone number for consumer inquiries, and the date of the authorization.
• By providing written confirmation of the transaction, including the date of the draft or other form of payment, its amount, the caller’s name and entity, the telephone number for consumer inquiries, and the date of the customer’s oral authorization. 

False or Misleading Statements 

Procedure: Do not make false or misleading statements. 

Assisting in Violations 

Procedure: Do not assist anyone else in deceptive or abusive telemarketing acts or practices when it is known or should be known that the other person is violating the FTC or FCC rules. 

Abusive Acts or Practices 

Procedure: Do not engage in the following behavior:

• Threats, intimidation, or the use of profane or obscene language.
• Requesting or receiving payment of any fee before a loan is made if there has been a guarantee or representation of a high likelihood of success in obtaining the loan.
• Initiating a telephone call, other than a call for emergency purposes or with the prior express consent of the called party, using an automatic dialing system or an artificial or recorded voice, to emergency lines, health care facilities, radio common carriers, or any number for which the called party is charged for the call.
• Using an automatic dialing system to make calls that simultaneously engage two or more lines of a multi-line business.
• Disconnecting an unanswered telemarketing call prior to at least 15 seconds or four rings.
• Implement a policy of making guarantees or assuring customers regarding the likelihood of loan approval.
• Causing any telephone to ring or engaging any person in telephone conversation repeatedly or continuously with the intent to annoy, abuse, or harass.
• Initiating an outbound telephone call to a person when that person previously has stated they do not wish to receive an outbound telephone call. 

Recordkeeping for 24 Months: 

Procedure: Keep the following records for at least 24 months:

• All substantially different advertising materials.
• The name and last known address of each customer, the loan made, the date the loan was closed, and the amount paid by the customer in connection with the loan.
• The name, any fictitious name used, the last known home address and telephone number, and the job title(s) for all current and former employees directly involved in telephone sales. If employees are permitted to use fictitious names, the procedures must be able to trace each fictitious name to only one employee.
• All verifiable authorizations required to be provided pursuant to the applicable statute or rule. 

Recordkeeping for 5 Years 

Procedure: Keep the following records for at least 5 years: 

• Record of requests not to receive solicitations (i.e., Do-Not-Call requests). 

As you can see from the foregoing brief outline, there are many “moving parts” to telemarketing compliance. I have only skimmed the surface of the legal and regulatory challenges associated with telemarketing. Tread carefully! Be sure that you have rigorous and regular training. Monitor and test continually. Conduct risk assessments. 

And, contact me if you need compliance support.

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director 

Lenders Compliance Group

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[i] The Federal Trade Commission (FTC) amended the Telemarketing Sales Rule (TSR) in 2003, 2008, 2010 and 2015. Like the original TSR issued in 1995, the amended Rule gives effect to the Telemarketing and Consumer Fraud and Abuse Prevention Act (TCFPA).

[ii] See Title 16, Chapter I, Subchapter C, Part 310: Telemarketing Sales Rule

[iii] The FCC regulates both intrastate and interstate calling.

[iv] For the purpose of this article, I am concentrating solely on persons that are not exempt, partially or fully, from the TSR.

[v] For instance, excluded from this list is the telemarketing involving prize promotions.