New Telemarketing Restrictions

The Federal Trade Commission has issued a proposal to amend its Telemarketing Sales Rule (TSR) which is bound to cause heartburn for the direct marketing operations in all consumer-oriented businesses, but especially so for financial services firms. The FTC's proposal would create a national "Do Not Call" registry, limit the transfer of customer billing information for use in telemarketing, prohibit the blocking or suppression of a telemarketer's name and phone number from caller ID services, and prohibit the denial of or interference with a customer's right to be placed on the national "Do Not Call" registry.

Under the existing FTC TSR, each company engaged in telemarketing operations must maintain its own "Do Not Call" list. The proposed change would create a national list maintained by the FTC. Companies would be prohibited from making sales calls to any customer on the list, regardless of whether they were prospects or existing customers. An existing customer who places his name on the national list could not be contacted for sales purposes unless that customer specifically opts-in to receiving calls from the company.

The proposed amendments would also require a telemarketer to obtain a consumer's "express, verifiable authorization" before charging a payment to the customer's account. However, the Gramm-Leach-Bliley Act prohibits a bank or financial institution from providing a telemarketer with account numbers for marketing purposes. Consequently, under the FTC's proposed rules, a telemarketer would have to ask a customer to provide his or her account number over the phone in order to process the transaction. Of course, this would directly contradict long-standing advice to consumers to avoid giving account numbers and other sensitive financial information over the phone in order to prevent fraud and ID theft.

Scope of coverage under the proposed FTC rule is not clear. Banks would not be subject to the proposed rule, but bank holding company affiliates might be covered. The proposed rule may also cover telemarketers under contract with a bank, as well as third parties whose products are telemarketed by a bank. Comments on the rule were due to the FTC by March 29, 2002.