[Federal Register Volume 65, Number 39 (Monday, February 28, 2000)]
[Proposed Rules]
[Pages 10428-10434]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-4430]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 65, No. 39 / Monday, February 28, 2000 / 
Proposed Rules  

[[Page 10428]]



FEDERAL TRADE COMMISSION

16 CFR Part 310


Telemarketing Sales Rule

AGENCY: Federal Trade Commission.

ACTION: Rule review, request for public comments, and announcement of 
public forums.

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SUMMARY: The Federal Trade Commission (``the Commission'' or ``FTC'') 
is requesting public comment on the Commission's Telemarketing Sales 
Rule (``TSR'' or ``the Rule''). The Telemarketing and Consumer Fraud 
and Abuse Prevention Act (``the Telemarketing Act'' or ``the Act'') 
directed the Commission to promulgate rules to protect consumers from 
deceptive telemarketing practices and other abusive telemarketing 
activities. In response to this directive, the Commission adopted the 
TSR, which requires telemarketers to make specific disclosures of 
material information; prohibits misrepresentations; sets limits on the 
times telemarketers may call consumers; prohibits calls to a consumer 
who has asked not to be called again; and sets payment restrictions for 
the sale of certain goods and services.
    The Act requires that no later than five years after its effective 
date of December 31, 1995, the Commission initiate a rule review to 
evaluate the Rule's operation and report the results of that review to 
Congress. Pursuant to this mandatory rule review requirement, the 
Commission now hereby seeks comment about the overall costs and 
benefits of the TSR, and its overall regulatory and economic impact 
since its adoption in 1995.
    In addition to reviewing the Rule and its effect on deceptive and 
abusive telemarketing practices, the Commission intends to use this 
rule review to examine telemarketing generally over the past two 
decades, and to determine its impact on consumers. This broader review 
will result in a report addressing issues such as changes in 
technology, composition of the industry, telemarketers' efforts at 
self-regulation, the effectiveness of law enforcement and legislation, 
trends in telemarketing, and current consumer issues related to 
telemarketing. In order to initiate discussion of these and other 
issues, the Request for Comment invites written responses to the series 
of questions in Sections F and G, infra, which set forth with more 
specificity the type of information the Commission particularly desires 
related to the Rule and about telemarketing generally.
    In addition, this document contains an invitation to participate in 
a series of public forums to be held in the future to afford the 
Commission staff and interested parties an opportunity to explore and 
discuss the issues underlying the list of questions and any other 
topics that emerge from the comments we receive in response to this 
notice.

DATES: Papers and written comments responding to the Request for 
Comment will be accepted until April 27, 2000. A public forum to 
discuss provisions of the TSR, other than the ``do-not-call'' 
provision, will be held on July 27-28, 2000, in Washington, DC, from 
8:30 a.m. until 5:30 p.m.\1\ Notification of interest in participating 
in this forum must be submitted in writing on or before June 16, 2000. 
The exact dates, location, and information about participation in 
future FTC forums held in connection with the TSR review will be 
announced later by Federal Register notice.
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    \1\ An initial public forum to discuss issues relating to the 
``do-not-call'' provisions of the TSR was held on January 11, 2000. 
Information about that forum appeared in a separate Federal Register 
notice on November 24, 1999. 64 FR 66124 (November 24, 1999).

ADDRESSES: Six paper copies of each paper and/or written comment should 
be submitted to the Office of the Secretary, Federal Trade Commission, 
Room 159, 600 Pennsylvania Avenue, NW, Washington, DC 20580. 
Alternatively, the Commission will accept papers and comments submitted 
to the following email address: [email protected], provided the content of 
any papers or comments submitted by email is organized in sequentially 
numbered paragraphs. All submissions should be identified as 
``Telemarketing Review--Comment. FTC File No. P994414.'' Notification 
of interest in participating in the public forum should be submitted in 
writing to Carole I. Danielson, Division of Marketing Practices, 
Federal Trade Commission, 600 Pennsylvania Avenue, NW, Room 238, 
Washington, DC 20580. The public forum will be held at the Federal 
Trade Commission, 600 Pennsylvania Avenue, NW, Room 432, Washington, DC 
20580.
    Papers and written comments will be available for public inspection 
in accordance with the Freedom of Information Act, 5 U.S.C. 552, and 
Commission regulations, 16 CFR Part 4.9, on normal business days 
between the hours of 8:30 a.m. and 5:00 p.m. in Room 130, Federal Trade 
Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580. The 
Commission will make this notice and, to the extent possible, all 
papers or comments received in response to this notice available to the 
public through the Internet at the following address: www.ftc.gov.

FOR FURTHER INFORMATION CONTACT: Catherine Harrington-McBride (202) 
326-2452, email [email protected]; Karen Leonard (202) 326-3597, email 
[email protected]; or Carole Danielson (202) 326-3115, email 
[email protected], Division of Marketing Practices, Bureau of Consumer 
Protection, Federal Trade Commission, 600 Pennsylvania Avenue, NW, 
Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

Section A. Background

1. Telemarketing Consumer Fraud and Abuse Act

    On August 16, 1994, President Clinton signed into law the 
Telemarketing Consumer Fraud and Abuse Prevention Act (``Telemarketing 
Act'' or ``the Act'').\2\ The Telemarketing Act was the culmination of 
Congressional efforts during the early 1990's to protect consumers 
against telemarketing fraud.\3\ The purpose of the Act was to combat 
telemarketing fraud

[[Page 10429]]

by providing law enforcement agencies with powerful new tools, and to 
give consumers new protections. The Act directed the Commission, within 
365 days of enactment of the Act, to issue a rule prohibiting deceptive 
and abusive telemarketing acts or practices.\4\
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    \2\ 15 U.S.C. 6101 et seq.
    \3\ 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. 64.1200 et seq., which 
restricts the use of automatic dialers, bans the sending of 
unsolicited commercial facsimiles, and directs the Federal 
Communications Commission 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.
    \4\ 15 U.S.C. 6102(a) and (b).
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    Among other things, the Telemarketing Act specifies certain acts or 
practices the FTC's rule must address.\5\ The Act also required the 
Commission to include provisions relating to three specific ``abusive 
telemarketing acts or practices:'' (1) A requirement that telemarketers 
may not undertake a pattern of unsolicited telephone calls which a 
reasonable consumer would consider coercive or abusive of such 
consumer's right to privacy; (2) A restriction on the time of day and 
night telemarketers may make unsolicited calls to consumers; and (3) A 
requirement that telemarketers promptly and clearly disclose in all 
sales calls to consumers that the purpose of the call is to sell goods 
or services, and to make other disclosures the Commission deems 
appropriate, including the nature and price of the goods or services 
sold.\6\ Section 6102(a) of the Act not only required the Commission to 
define and prohibit deceptive telemarketing acts or practices, but it 
also authorized the FTC to define and prohibit acts or practices that 
``assist or facilitate'' deceptive telemarketing.\7\ The Act further 
required the Commission to consider and include recordkeeping 
requirements in the rule.\8\ Finally, the Act authorizes state 
attorneys general, other appropriate state officials, and private 
persons to bring civil actions in federal district court to enforce 
compliance with the FTC's rule.\9\
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    \5\ 15 U.S.C. 6102(a).
    \6\ 15 U.S.C. 6102(a)(3)(A)-(C).
    \7\ 15 U.S.C. 6102(a)(2). Examples of practices that would 
``assist or facilitate'' fraudulent telemarketing under the Rule 
include: credit card laundering, providing contact lists to sellers 
or telemarketers, and providing promotional materials to sellers or 
telemarketers. See Telemarketing Sales Rule, Statement of Basis and 
Purpose, 60 FR 43853 (August 23, 1995).
    \8\ 15 U.S.C. 6102(a)(3).
    \9\ 15 U.S.C. 6103.
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2. Telemarketing Sales Rule

    Pursuant to the Telemarketing Act, the FTC adopted the TSR, 16 CFR 
Part 310, on August 16, 1995.\10\ The Rule, which became effective on 
December 31, 1995, contains the following key requirements and 
prohibitions. Under the Rule, telemarketers must promptly tell each 
consumer they call several key pieces of information: (1) The fact that 
the purpose of the call is to sell goods or services, (2) The nature of 
the goods or services being offered, and (3) In the case of prize 
promotions, that no purchase is necessary to win.\11\ Telemarketers 
must also disclose cost and other material information before consumers 
pay. In addition, telemarketers must have consumers' express, 
verifiable authorization before debiting their checking accounts.\12\ 
The Rule prohibits telemarketers from calling before 8 a.m. or after 9 
p.m. (in the time zone where the consumer is located), and from calling 
consumers who have said they do not want to be called.\13\ The Rule 
also prohibits misrepresentations about the cost, quantity, and other 
material aspects of the offered goods or services.\14\ Finally, the 
Rule bans telemarketers who offer to arrange loans, provide credit 
repair services, or recover money consumers lost in a prior 
telemarketing scam from seeking payment before rendering the promised 
services,\15\ and prohibits credit card laundering and other forms of 
knowing assistance to deceptive telemarketers.\16\
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    \10\ 60 FR 43843 (August 23, 1995).
    \11\ 16 CFR Sec. 310.4(d)(4).
    \12\ 16 CFR Sec. 310.3(a)(3).
    \13\ 16 CFR Secs. 310.4(c), and 310.4(b)(1)(ii).
    \14\ 16 CFR Sec. 310.3(a)(2).
    \15\ 16 CFR Secs. 310.4(a)(3) and (4).
    \16\ 16 CFR Secs. 310.3(b) and (c).
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    The Rule provides a number of exemptions, including calls where the 
transaction is completed after a face-to-face sales presentation, calls 
subject to extensive requirements under other FTC rules (e.g., the 900-
Number Rule, or the Franchise Rule),\17\ and calls initiated in 
response to advertisements in general media such as newspapers or 
television.\18\ Lastly, catalog sales are exempt, as are most business-
to-business calls, except those involving the sale of office or 
cleaning supplies.\19\
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    \17\ 16 CFR Secs. 310.6(a)-(c).
    \18\ 16 CFR Sec. 310.6(e).
    \19\ 16 CFR Sec. 310.2(u) (catalog sales); 16 CFR Sec. 310.6(g) 
(business-to-business). Also, the Telemarketing Act specifically 
exempts catalog sales from its definition of ``telemarketing.'' 15 
U.S.C. 6106(4).
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3. Telemarketing and Changes in the Marketplace.

    In the years since the Rule was promulgated, the marketplace for 
telemarketing has changed in significant ways. Technologies which were 
new or non-existent at the time the Rule was adopted now have become 
standard equipment for many telemarketing firms. Similarly, refinements 
in market research allow sellers to pinpoint with greater precision 
which consumers are most likely to be potential customers. The 
increased use of ``frequent customer cards,'' which enable sellers to 
collect purchasing data electronically when consumers buy goods such as 
groceries and gasoline, allows more extensive and more accurate 
customer targeting. ``Cookie'' technology \20\ enables marketers to 
learn the specific habits and preferences of online consumers, 
including information about consumers and their computers, the kinds of 
Web sites they visit, and the frequency with which they purchase 
online. These enhancements in data collection have obvious uses to make 
telemarketing more sophisticated.
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    \20\ In Internet terminology, a ``cookie'' is a piece of 
information about a computer, its user, or something the user 
``clicked'' on, that is stored on the computer user's hard drive. 
See www.netlingo.com. That information can be accessed by a Web 
server when the user connects to a Web page. ``Cookies'' also can be 
``mined'' by marketers looking to learn more about the online 
shopping behavior of consumers who have accessed their Web sites.
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    Finally, another significant change in the marketplace is that 
telemarketing is facing competition from new marketing and sales 
methodologies, especially the Internet. More and more sellers are 
turning to the Internet as a means not only to market their products 
and services to consumers, but to finalize sales.\21\ Additionally, 
some companies link their call centers to the Internet. Thus, consumers 
not only can receive email replies to questions, but can place a call 
to a customer service representative either through the Internet or on 
a separate phone line without leaving the company's Web site. 
Technology now is available that allows a consumer to view the same Web 
page as the customer service representative with whom they are talking, 
and have the representative ``push'' Web pages with other information 
to the consumer. The potential impact of increased use of interactive 
sales media on telemarketing is unknown, but the question merits 
examination in light of the projected growth of such interactive 
electronic media.
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    \21\ In 1998, nearly 37,000 people were employed in Internet 
direct marketing advertising, more than double the figure for the 
previous year. Growth rates for employment in Internet marketing are 
expected to be in excess of 50% annually through 2003. See Direct 
Marketing Association, Direct Marketing Association's Statistical 
Fact Book '99, 299 (1999).
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    Another change that has occurred since the Rule was promulgated is 
the increase in cross-border telemarketing. The incidence of 
telemarketers operating outside the U.S., but selling to U.S. citizens, 
is rising. Some of this cross-border activity is fraudulent. The 
experience of the FTC and other law enforcement agencies over the past 
five

[[Page 10430]]

years confirms that telemarketing fraud is becoming increasingly global 
in scope. Fraudulent telemarketers operating from other countries often 
do so to seek the advantages of less stringent telemarketing laws; they 
also benefit from the complex jurisdictional issues implicated in 
cross-border sales.
    Because of these and other significant, rapid changes in the 
marketplace, the Commission has determined to combine its review of the 
TSR with a study of telemarketing generally: what the nature of 
telemarketing has been historically, what it is now, and how it is 
changing to meet the future. The goal of this study is to document the 
historical trends that have shaped the practice of telemarketing, and 
to better understand and document factors likely to shape its future, 
including technological innovations, shifting markets, consumer 
attitudes about choice, regulatory and law enforcement efforts at the 
state and federal levels, and telemarketers' self-regulatory efforts. 
To facilitate its rule review and the completion of the study, the 
Commission will invite the comments of all interested parties and will 
hold a series of public forums to discuss relevant issues.

Section B. Request for Comment

    Interested parties, including, but not limited to, academics, 
telemarketers, consumer advocates, and government representatives, are 
requested to submit academic papers or written comments on any issue of 
fact, law, or policy that may inform the Commission's examination of 
the TSR and/or the practice of telemarketing generally, its history as 
well as current practice and emerging trends. Sections F and G, infra, 
set forth questions about which the Commission particularly desires 
input. Because telemarketing often occurs across international 
boundaries, comments need not be limited to examinations of domestic 
laws or policies. Please provide copies of any studies, surveys, 
research, or other empirical data referenced in submissions.
    Form of Comments: To encourage prompt and efficient review and 
dissemination of the comments to the public, all papers and comments 
should also be submitted, if possible, on either a 5\1/4\ or a 3\1/2\ 
inch computer disk, with a label on the disk stating the name of the 
commenting party and the name and version of the word processing 
program used to create the document, as well as the identification 
``Telemarketing Review--Comment. FTC File No. P994414.'' (Programs 
based on DOS are preferred. Files from other operating systems must be 
submitted in ASCII text format to be accepted.) Individual members of 
the public filing comments need not submit multiple copies or comments 
in electronic form.

Section C. Public Forums

    The FTC staff will conduct public forums to discuss issues raised 
by the questions in this Federal Register notice. One series of forums 
will focus on issues relating to the implementation and effectiveness 
of the TSR. These forums are not intended to achieve consensus among 
participants or between participants and FTC staff with respect to any 
issue raised. Commission staff will consider the views and suggestions 
made during the forums, in conjunction with the papers and written 
comments, in formulating its final recommendation to the Commission 
concerning amendments to the current structure and content of the TSR 
and in preparing its report on telemarketing. A second series of forums 
will involve members of the telemarketing industry, consumer groups, 
and law enforcement agencies in a discussion of the evolution of 
telemarketing over the past two decades and its impact on consumers. 
The FTC invites members of the public, telemarketers, and other 
interested parties to participate in both sets of forums.
    The initial forum, part of the first series dedicated to evaluation 
of the TSR, was held on January 11, 2000. This forum focused on the 
efficacy of the do-not-call provision of the Rule and other similar 
initiatives, such as the do-not-call provision of the TCPA, 
telemarketer-implemented do-not-call plans, and state legislation 
creating centralized do-not-call lists. Information on that forum was 
published in a separate Federal Register notice on November 24, 
1999.\22\ A public forum to discuss other provisions of the TSR will be 
held on July 27-28, 2000, in Washington, DC. The exact dates, location, 
and information about participation in future FTC forums will be 
announced later by Federal Register notice.
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    \22\ 64 FR 66124 (November 24, 1999).
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Section D. Request to Participate

    The FTC invites members of the public, industry, and other 
interested parties to participate in the public forum scheduled for 
July 27-28, 2000. To be eligible to participate, you must file a 
request to participate on or before June 16, 2000. If the number of 
parties who request to participate in the forum is so large that 
including all requesters would inhibit effective discussion among 
participants, FTC staff will select as participants a limited number of 
parties to represent the relevant interests. Selection will be based on 
the following criteria:
    1. The party submitted a request to participate by June 16, 2000.
    2. The party's participation would promote the representation of a 
balance of interests at the forum.
    3. The party's participation would promote the consideration and 
discussion of the issues to be presented in the forum.
    4. The party has expertise in issues to be raised in the forum.
    5. The party adequately reflects the views of the affected 
interest(s) which it purports to represent.

If it is necessary to limit the number of participants, those who 
requested to participate but were not selected will be afforded an 
opportunity, if at all possible, to present statements during a limited 
time period at the end of the session. The time allotted for these 
statements will be based on the amount of time necessary for discussion 
of the issues by the selected parties, and on the number of persons who 
wish to make statements.
    Requesters will be notified as soon as possible after June 16, 
2000, whether they have been selected to participate.

Section E. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \23\ provides for an 
initial and final regulatory analysis of the potential impact on small 
businesses of rules proposed by federal agencies.\24\ The Commission 
conducted such an analysis when the TSR was promulgated in 1995. In 
publishing the proposed regulations, the Commission certified, subject 
to public comment, that the proposed regulations would not have a 
significant economic impact on a substantial number of small entities 
and, therefore, that the provisions of the RFA requiring the initial 
regulatory analysis did not apply.\25\ The Commission noted that any 
economic costs imposed on small business entities were, in many 
instances, specifically imposed by statute. Where they were not, 
efforts had been made to minimize any unforeseen burdens on small 
business entities by making the Rule's requirements flexible and by 
limiting the scope of the regulations through a number of exemptions. 
In publishing the final Rule, the Commission noted in the Rule's 
Statement of Basis and Purpose that public comments and information 
that had been received during the

[[Page 10431]]

rulemaking did not alter that conclusion.\26\
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    \23\ 5 U.S.C. Sec. 603 et seq.
    \24\ 5 U.S.C. Sec. 605(b).
    \25\ 60 FR 8313, 8322 (February 14, 1995).
    \26\ See 60 FR 43863 (August 23, 1995).
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    No analysis is required in connection with this notice because no 
new rule or amendment is being proposed. Nonetheless, the Commission 
wishes to ensure that no substantial economic impact is being 
overlooked that would warrant an initial and final regulatory 
flexibility analysis. Therefore, this notice also requests public 
comment regarding the effect of the Rule on the profitability and 
competitiveness of, and employment in, small entities. The Commission 
will revisit this issue in connection with any Notice of Proposed 
Rulemaking that may result from this notice.

Section F. Questions and Issues for Comment Pursuant to Regulatory 
Review of the Rule

    The Commission is seeking comment on various aspects of the TSR in 
conjunction with its review of the Rule. 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. With respect to suggested changes to the 
Rule, please describe any potential costs and/or benefits such changes 
might have on industry and consumers.

I. General Questions for Comment

    1. Is there a continuing need for the TSR?
    (a) Since the Rule was issued, have changes in technology, industry 
structure, or economic conditions affected the need for or 
effectiveness of the Rule?
    (b) Does the Rule include provisions that are unnecessary? If so, 
which ones?
    (c) What are the aggregate costs and benefits of the Rule?
    (d) Have the costs or benefits of the Rule dissipated over time?
    (e) Does the Rule contain provisions that have imposed costs not 
outweighed by benefits?
    2. What effect, if any, has the Rule had on consumers?
    (a) What economic or other costs has the Rule imposed on consumers?
    (b) How has the Rule benefitted consumers?
    (c) What changes, if any, should be made to the Rule to increase 
the benefits to consumers? How would these changes affect the 
compliance costs the Rule imposes on industry?
    (d) Is the incidence of telemarketing fraud greater today than five 
years ago? Less than five years ago? Has consumer awareness of 
telemarketing fraud increased since the adoption of the Rule? If so, 
what are the sources of information on this issue for consumers? What 
effect, if any, has increased consumer awareness had on law 
enforcement? On telemarketers?
    3. What impact, if any, has the Rule had on entities that must 
comply with it?
    (a) What economic or other costs has the Rule imposed on industry 
or individual firms?
    (b) How has the Rule benefitted industry or individual firms?
    (c) What changes, if any, should be made to the Rule to minimize 
any burden or cost imposed on industry or individual firms? How would 
these changes affect the benefits provided by the Rule to consumers or 
industry?
    (d) Are there regulatory alternatives to the Rule 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?
    4. How has this Rule affected 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 government laws or regulations?
    (a) What is the impact on the industry of state-by-state regulation 
of telemarketing?
    (b) Are there any conflicting laws or regulations governing 
telemarketers, and if so, what are they? If conflicts exist, how do 
telemarketers address them?
    (c) To what extent have private parties and state attorneys general 
brought actions under the TSR? Under other statutes/regulations?
    (d) Are there any unnecessary regulatory burdens created by 
overlapping jurisdiction? What can be done to ease these burdens?
    (e) Are there any gaps where no federal, state, or local government 
law or regulation has addressed a particular abuse?
    6. Has the mingling of Internet and telemarketing technology had an 
impact on the effectiveness of the TSR? If so, how? Should the TSR be 
amended to address this issue, and if so, how?

II. Definitions

    7. Are the definitions set forth in Section 310.2 of the Rule 
effective to accomplish the goal of curbing deceptive and abusive 
telemarketing practices?
    8. Are they clear, meaningful, comprehensive, and appropriate? If 
not, how have the definitions been inadequate? How can they be 
improved?
    9. Are there additional definitions that should be added to the 
Rule? Explain.

III. Deceptive Telemarketing Acts or Practices

    10. Section 310.3(a)(1) requires sellers and telemarketers to 
disclose certain information before the customer pays for goods or 
services offered.
    (a) Has this section been effective in curbing deceptive 
telemarketing practices? If so, why? If not, what changes, if any, 
should be made to the required disclosures? Explain.
    (b) Are there additional disclosures that should be required? 
Explain.
    (c) What changes, if any, should be made to the disclosure 
requirements to increase consumer protections or to minimize industry 
costs? Explain.
    (d) Has the disclosure requirement of Section 310.3(a)(1)(iii) 
regarding refund/cancellation policies been effective from the 
perspective of consumers and law enforcement authorities?
    (e) Are disclosures being made in a timely fashion? Is there 
sufficient understanding of what is meant by ``before the consumer 
pays''?
    (f) What burdens, if any, have disclosure requirements placed on 
sellers and telemarketers? If they exist, do these burdens outweigh the 
benefits to consumers? Explain.
    11. Section 310.3(a)(2) prohibits misrepresentations of material 
information.
    (a) Has this section been effective in accomplishing the goal of 
curbing deceptive and abusive telemarketing practices? If so, why? If 
not, why not, and how should the section be changed?
    (b) Are there additional specific misrepresentations that should be 
prohibited?
    (c) What changes, if any, should be made to the prohibitions to 
increase consumer protections or to minimize industry costs? Explain.
    12. Section 310.3(a)(3) requires sellers and telemarketers to 
obtain the consumer's express verifiable authorization before 
submitting a check, draft, or other form of negotiable paper drawn on a 
person's checking, savings, share, or similar account.

[[Page 10432]]

    (a) Has this section been effective in curbing unauthorized draft 
debits? If so, why? If not, why not, and how should the section be 
changed? Explain.
    (b) Is there any potential conflict between the TSR and the 
Electronic Funds Transfer Act (``EFTA'')? Are there any gaps in these 
two laws that affect the protections afforded by the TSR?
    (c) What burdens, if any, have authorization requirements placed on 
sellers and telemarketers? If they exist, do these burdens outweigh the 
benefits to consumers? Explain.
    (d) Have there been changes in consumer awareness about the 
practice of using unsigned drafts drawn on a consumer's checking 
account since the Rule was enacted? If so, are changes in the Rule 
warranted by any such changes in consumer awareness? Explain.
    (e) Since the TSR was enacted in 1995, have industry or regulatory 
authorities developed new alternative methods of ensuring that 
consumers understand and approve of any debits being made to their 
checking accounts? If so, what are these procedures? If such new 
procedures exist, do they necessitate changes in the Rule? Explain.
    13. Section 310.3(a)(4) prohibits any false or misleading statement 
to induce a person to pay for goods or services regardless of the type 
of payment system used.
    (a) Has this section been effective in curbing deceptive 
telemarketing practices? If so, why? If not, why not, and how should 
the section be changed? Explain.
    (b) Have payment systems evolved significantly enough since the 
Rule was promulgated to warrant changes in the Rule? If so, how should 
it be changed? Explain.
    14. Section 310.3(b) specifies that it is a deceptive telemarketing 
act or practice for any person to provide substantial assistance or 
support to any seller or telemarketer when that person knows or 
consciously avoids knowing that the seller or telemarketer is engaging 
in deceptive or abusive acts or practices in violation of the Rule.
    (a) Has this section been effective in curbing deceptive 
telemarketing practices? If so, why? If not, how has the section been 
inadequate?
    (b) What changes, if any, should be made to this section? Explain.
    (c) How has Section 310.3(b), prohibiting assisting or facilitating 
conduct that violates the Rule, worked from a law enforcement 
standpoint? Against whom have cases been brought?
    (d) Has the potential liability faced by industry as a result of 
this section of the Rule caused firms to make changes in the way they 
do business? If so, how? Have these changes, if they have occurred, 
increased the cost of doing business? Are there ways in which this Rule 
provision could be changed to reduce the burden placed on business 
without negatively impacting consumers?
    (e) How has the ``conscious avoidance'' standard worked from a law 
enforcement standpoint? Is this standard too difficult for law 
enforcement authorities to meet in proving their cases? If so, how 
should the standard be changed? How has the standard worked from an 
industry standpoint? Have industry practices changed in response to 
this potential liability?
    15. Section 310.3(c) prohibits merchants from laundering credit 
card charges.
    (a) Have the provisions in Section 310.3(c) been effective in 
curbing the incidence of credit card laundering in fraudulent 
telemarketing transactions? If so, why? If not, how has the section 
been inadequate?
    (b) What changes, if any, should be made to this section? Explain.
    (c) Have the provisions of this section significantly increased the 
cost of doing business? If so, how? What changes could be to the Rule 
to reduce the cost of these provisions without negatively impacting 
consumers.

IV. Abusive Acts or Practice

    16. Section 310.4(a) specifies that four listed activities (i.e., 
threats, intimidation or profane or obscene language, and requesting or 
receiving payment for credit repair, advance fee loan, or recovery room 
services before the consumer has received the services) are abusive 
telemarketing acts or practices, in violation of the Rule.
    (a) Have these Rule provisions been effective weapons in combating 
credit repair, advance fee loan, and recovery room scams? If so, why? 
If not, why not, and how should they be changed? Explain.
    (b) Should this section be extended to cover other specific types 
of practices? If so, which ones?
    (c) Have these provisions increased the cost of doing business in 
areas other than credit repair, the granting of advance fee loans, or 
the operation of recovery rooms? Explain. What changes in the Rule 
provisions would eliminate or reduce these effects?
    (d) Has the prohibition on threats, intimidation, and use of 
profane and obscene language been effective in curbing abusive 
telemarketing practices? If so, why? If not, why not, and how should 
the provision be changed?
    17. Section 310.4(b)(1)(i) prohibits telemarketers or sellers from 
causing the telephone to ring, or engaging a person in telephone 
conversation, repeatedly with intent to annoy, abuse, or harass.
    (a) Has this provision been effective? If so, why? If not, why not, 
and how should it be changed?
    (b) Does the use of technology create new means for abuse under 
this provision?
    18. Section 310.4(b)(1)(ii) prohibits calls to a person who has 
stated that he or she does not wish to receive calls made by or on 
behalf of the seller.
    (a) Has this provision been effective in limiting the number of 
unwanted telemarketing calls that consumers receive? If so, why? If 
not, why not, and how should it be changed?
    (b) Have law enforcement authorities used this provision to take 
action against telemarketers that place unwanted telemarketing calls? 
If not, why not, and how should the provision be changed to make it 
more useful as an enforcement tool? Explain.
    (c) What effect, if any, has the use of computerized telemarketing 
messages, or other technology, had on consumers' ability to invoke 
their rights under the TSR's ``do-not-call'' provisions?
    19. Section 310.4(b)(2) limits the liability of the seller or 
telemarketer for violating the ``do-not-call'' provision in the Rule as 
long as the seller or telemarketer has instituted certain procedures 
designed to prevent calls to consumers who have asked not to be called.
    (a) What have been the advantages and disadvantages of this 
provision to industry? to law enforcement?
    (b) What changes, if any should be made to this provision? Explain.
    (c) Has this limitation of liability been too lenient? If so, what 
changes should be made to strengthen the provision? How would those 
proposed changes affect industry costs?
    20. Section 310.4(c) prohibits telemarketers from calling consumers 
at any time except between 8 a.m. and 9 p.m. Has this provision been 
effective in preventing telemarketing calls outside the permitted time 
frame? If not, why not, and how should it be changed.
    21. Section 310.4(d) requires telemarketers to make certain oral 
disclosures--i.e., identity of the seller, that the purpose of the call 
is to sell goods or services, the nature of the goods and services, 
and, in the case of a prize promotion, that no purchase or payment is 
necessary.
    (a) Has this section been effective in curbing abusive 
telemarketing practices? If not, why not, and how should it be changed?

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    (b) Are the required disclosures being made ``promptly'' and in ``a 
clear and conspicuous manner?''
    (c) Are there additional oral disclosures that should be required?

V. Recordkeeping

    22. Have the recordkeeping provisions for telemarketers been 
burdensome to sellers and telemarketers? On the ability of law 
enforcement authorities to take action against telemarketers and 
sellers that violate substantive provisions of the Rule? What changes, 
if any should be made to the recordkeeping provisions? Explain.
    23. What have been the costs and benefits to industry of the 
recordkeeping provisions?

VI. Exemptions

    24. Section 310.6 lists acts or practices that are exempt from the 
Rule, including pay-per-call-services and the sale of franchises 
already subject to Commission Rules.
    (a) Have the exemptions been effective at minimizing the burden to 
industry 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 ``face-to-face'' transactions still 
appropriate? If not, why not, and how should this exemption be changed?
    (d) Is the exemption for ``general media'' advertising still 
appropriate? If not, why not? If the exemption continues to be 
appropriate, how should the Rule treat solicitations such as classified 
advertisement, ``spam'' faxes, and email ``spam''?
    (e) Are there additional business-to-business products or services 
that should not be exempted from the TSR (e.g., Internet-related 
services, professional directories, advertising specialties)? Explain.
    (f) Are there additional exemptions that would be appropriate? 
Explain.

Section G. Questions and Comments Regarding 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 twenty years and, in particular, over the 
past five years, as well as factors currently shaping and likely to 
continue to shape the industry. Without limiting the scope of issues it 
is seeking comment on, the Commission is particularly interested in 
receiving comments on the questions that follow. The questions set 
forth below are intended only as examples of the issues relevant to the 
Commission's examination. The public is invited to comment on any 
relevant issue, regardless of whether it is identified below.

I. Industry Background

    1. What is the dollar volume of goods and services that are sold 
through telemarketing today?
    2. How has that volume changed over the last twenty years? Over the 
past five years?
    3. How many U.S. firms sell their products domestically, either in 
whole or in part, through telemarketing? How has that number changed 
over the past twenty years? Over the past five years?
    4. 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 over time?
    5. How many U.S. entities sell their products, either in whole or 
in part, internationally through telemarketing?
    6. How many foreign entities sell their products, either in whole 
or in part, internationally through telemarketing?
    7. How has the market for selling goods or services internationally 
by telemarketing changed, if at all, over the past twenty years? Over 
the past five years?
    8. How many outbound calls are made each year? How many inbound 
calls are received each year? How have these numbers changed over the 
past twenty years? Over the past five years?
    9. 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 twenty years? Over the past five years?
    10. How do the costs of selling through telemarketing compare to 
those of other methods of marketing, e.g., selling online or in a 
``brick-and-mortar'' face-to-face setting?

II. Technology

    11. What technological innovations have been implemented by 
telemarketers over the past twenty 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 call lists are developed by list brokers 
and others?
    (d) The costs of selling through telemarketing?
    (e) The response/general attitude of consumers toward the industry?
    What technological changes have occurred over the past five years?
    12. What impact have these technological innovations had on 
consumers? How have consumers benefitted? How have they been harmed? 
Explain.
    13. 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?
    14. What technology is available to consumers to screen or deflect 
unwanted calls from telemarketers (e.g., answering machines, caller 
i.d., anonymous call rejection, privacy managers). Are interception 
technologies available and affordable? What impact are such innovations 
having on telemarketing/ers? 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?
    15. 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?

III. Self-Regulatory Efforts

    16. 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.
    17. 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?
    18. Have industry-sponsored do-not-call lists benefitted consumers? 
How many consumers have requested to be placed on such lists? Have 
these lists been effective in stopping unwanted

[[Page 10434]]

calls to consumers? Have they benefitted industry?
    19. 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.

IV. Government Regulation

    20. 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.
    21. Have state-sponsored do-not-call lists benefitted consumers? 
How many consumers have requested to be placed on such lists? Have 
these lists been effective in stopping unwanted calls to consumers? 
What have been the costs and benefits to regulators? What have been the 
costs or benefits to industry?
    22. 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 have they have 
been. What problems have been encountered?

V. Consumer Issues

    23. What are consumer perceptions of telemarketing today? How have 
they changed over the past twenty years?
    24. How much money do consumers lose as a result of telemarketing 
fraud each year? Has the amount of telemarketing fraud increased or 
decreased in the last five years? In the past two decades? How much has 
it changed?
    25. Are consumers more aware of telemarketing fraud than in the 
past? Are consumers less susceptible to telemarketing fraud now than in 
times past? What are the most effective ways to educate the public 
about fraudulent telemarketing practices?
    26. Are there particular groups of consumers that are especially 
susceptible to telemarketing and has this changed over the past two 
decades?
    27. How can consumers be given greater control over contacts by 
telemarketers? How are they exercising control now and how has that 
evolved?

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 00-4430 Filed 2-25-00; 8:45 am]
BILLING CODE 6750-01-P