Wednesday, January 29, 2003 Part III Federal Trade Commission 16 CFR Part 310 Telemarketing Sales Rule; Final Rule VerDate Dec<13>2002 18:14 Jan 28, 2003 Jkt 200001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\29JAR2.SGM 29JAR2 4580 Federal Register / Vol. 68, No. 19 / Wednesday, January 29, 2003 / Rules and Regulations FEDERAL TRADE COMMISSION defines ‘‘upselling’’ to clarify the The culmination of Congressional amended Rule’s application to these efforts to protect consumers against 16 CFR Part 310 transactions, requires specific telemarketing fraud occurred in 1994 disclosures for upsell transactions, and with the passage of the Telemarketing Telemarketing Sales Rule expressly excludes upselling Act, which was signed into law on AGENCY: Federal Trade Commission. transactions from certain exemptions in August 16, 1994.3 The purpose of the ACTION: Final Amended Rule. the amended Rule; (4) requires that Act was to combat telemarketing fraud sellers and telemarketers accepting by providing law enforcement agencies SUMMARY: In this document, the Federal payment by methods other than credit with new tools and to give consumers Trade Commission (‘‘FTC’’ or and debit cards subject to certain new protections. ‘‘Commission’’) issues its Statement of protections obtain express verifiable Basis and Purpose (‘‘SBP’’) and final authorization from their customers; (5) The Telemarketing Act directed the amended Telemarketing Sales Rule retains the exemptions for pay-per-call, Commission to issue a rule prohibiting (‘‘amended Rule’’). The amended Rule franchise, and face-to-face transactions, deceptive and abusive telemarketing sets forth the FTC’s amendments to the but makes these transactions subject to acts or practices, and specified, among Telemarketing Sales Rule (‘‘original the national ‘‘do-not-call’’ registry and other things, certain acts or practices the Rule’’ or ‘‘TSR’’). The amended Rule is certain other provisions in the abusive FTC’s rule must address. The Act also issued pursuant to the Commission’s practices section of the Rule; (6) required the Commission to include Rule Review, the Telemarketing and specifies requirements for the use of provisions relating to three specific Consumer Fraud and Abuse Prevention predictive dialers; (7) requires ‘‘abusive telemarketing acts or Act (‘‘Telemarketing Act’’ or ‘‘Act’’) and disclosures and prohibits practices:’’ (1) a requirement that the Uniting and Strengthening America misrepresentations in connection with telemarketers may not undertake a by Providing Appropriate Tools the sale of credit card loss protection pattern of unsolicited telephone calls Required to Intercept and Obstruct plans; (8) requires an additional which the consumer would consider Terrorism Act (‘‘USA PATRIOT Act’’). disclosure in connection with prize coercive or abusive of his or her right to EFFECTIVE DATES: The amended Rule promotions; (9) requires disclosures and privacy; (2) restrictions on the time of will become effective March 31, 2003. prohibits misrepresentations in day telemarketers may make unsolicited Full compliance with § 310.4(a)(7), the connection with offers that include a calls to consumers; and (3) a caller identification transmission negative option feature; (10) eliminates requirement that telemarketers promptly provision, is required by January 29, the general media and direct mail and clearly disclose in all sales calls to 2004. The Commission will announce at exemptions for the telemarketing of consumers that the purpose of the call a future time the date by which full credit card loss protection plans and is to sell goods or services, and make compliance with § 310.4(b)(1)(iii)(B), the business opportunities other than other disclosures deemed appropriate ‘‘do-not-call’’ registry provision, will be business arrangements covered by the by the Commission, including the required. The Commission anticipates Franchise Rule1; (11) requires nature and price of the goods or services that full compliance with the ‘‘do-not- telemarketers to transmit caller sold.4 Section 6102(a) of the Act not call’’ provision will be required identification information; (12) only required the Commission to define approximately seven months from the eliminates the use of post-transaction and prohibit deceptive telemarketing date a contract is awarded to create the written confirmation as a means of acts or practices, but also authorized the national registry. obtaining a customer’s express verifiable FTC to define and prohibit acts or ADDRESSES: Requests for copies of the authorization when the goods or practices that ‘‘assist or facilitate’’ amended Rule and this SBP should be services are offered on a ‘‘free-to-pay deceptive telemarketing.5 The Act sent to: Public Reference Branch, Room conversion’’ basis; (13) prohibits the further directed the Commission to 130, Federal Trade Commission, 600 disclosure or receipt of the customer’s consider including recordkeeping Pennsylvania Avenue, N.W., or donor’s unencrypted billing requirements in the rule.6 Finally, the Washington, DC 20580. The complete information for consideration, except in Act authorized state Attorneys General, record of this proceeding is also limited circumstances; and (14) requires other appropriate state officials, and available at that address. Relevant that the seller or telemarketer obtain the private persons to bring civil actions in portions of the proceeding, including customer’s express informed consent to federal district court to enforce the amended Rule and SBP, are all transactions, with specific compliance with the FTC’s rule.7 available at http://www.ftc.gov. requirements for transactions involving FOR FURTHER INFORMATION CONTACT: ‘‘free-to-pay conversions’’ and (‘‘TCPA’’), 47 U.S.C. 227 et seq., which restricts the Catherine Harrington-McBride, (202) preacquired account information. use of automatic dialers, bans the sending of 326–2452, Karen Leonard, (202) 326– Statement of Basis and Purpose unsolicited commercial facsimile transmissions, 3597, Michael Goodman, (202) 326– and directs the Federal Communications 3071, or Carole Danielson, (202) 326– Commission (‘‘FCC’’) to explore ways to protect I. Background residential telephone subscribers’ privacy rights; 3115, Division of Marketing Practices, and the Senior Citizens Against Marketing Scams Bureau of Consumer Protection, Federal A. Telemarketing and Consumer Fraud Act of 1994, 18 U.S.C. 2325 et seq., which provides Trade Commission, 600 Pennsylvania and Abuse Prevention Act. for enhanced prison sentences for certain Avenue, N.W., Washington, DC 20580. telemarketing-related crimes. The early 1990s saw heightened 3 15 U.S.C. 6101–6108. SUPPLEMENTARY INFORMATION: The Congressional attention to burgeoning 4 15 U.S.C. 6102(a)(3)(A)-(C). 2 amended Rule: (1) retains most of the problems with telemarketing fraud. 5 Examples of practices that would ‘‘assist or original Rule’s requirements concerning facilitate’’ deceptive telemarketing under the Rule deceptive and abusive telemarketing 1 Disclosure Requirements and Prohibitions include credit card laundering and providing acts or practices without major Concerning Franchising and Business Opportunity contact lists or promotional materials to fraudulent Ventures (‘‘Franchise Rule’’), 16 CFR Part 436. sellers or telemarketers. See 60 FR 43842, 43853 substantive changes; (2) establishes a 2 Statutes enacted by Congress to address (Aug. 23, 1995). national ‘‘do-not-call’’ registry telemarketing fraud during the early 1990s include 6 15 U.S.C. 6102(a)(3). maintained by the Commission; (3) the Telephone Consumer Protection Act of 1991 7 15 U.S.C. 6103, 6104. VerDate Dec<13>2002 18:14 Jan 28, 2003 Jkt 200001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\29JAR2.SGM 29JAR2 Federal Register / Vol. 68, No. 19 / Wednesday, January 29, 2003 / Rules and Regulations 4581 B. Original Rule. as newspapers or television.18 Lastly, enforcement, and consumer groups, as 23 The FTC adopted the original Rule on catalog sales are exempt, as are most well as from individual consumers. August 16, 1995.8 The Rule, which business-to-business calls, except those The commenters generally praised the became effective on December 31, 1995, involving the sale of non-durable office effectiveness of the TSR in combating requires that telemarketers promptly tell or cleaning supplies.19 the fraudulent practices that had each consumer they call several key plagued the telemarketing industry C. Rule Review and Request for before the Rule was promulgated. They pieces of information: (1) the identity of Comment. the seller; (2) the fact that the purpose also strongly supported the Rule’s of the call is to sell goods or services; The Telemarketing Act required that continuing role as the centerpiece of (3) the nature of the goods or services the Commission initiate a Rule Review federal and state efforts to protect being offered; and (4) in the case of proceeding to evaluate the Rule’s consumers from interstate telemarketing prize promotions, that no purchase or operation no later than five years after fraud. Commenters consistently stressed payment is necessary to win.9 its effective date of December 31, 1995, that it is important to retain the Rule. Telemarketers must, in any telephone and report the results of the review to However, commenters were less sales call, also disclose cost and other Congress.20 Accordingly, on November sanguine about the effectiveness of the material information before consumers 24, 1999, the Commission commenced Rule’s provisions