Mortgage Banking Commentary
Telemarketing: The FTC’s Nationwide Do-Not-Call Registry
by Melanie Brody
On January 29, 2003, the Federal Trade Commission1 published an extensive set of amendments2 to its
Telemarketing Sales Rule.3 The linchpin of the amendments is a new, nationwide do-not-call registry that
will enable consumers to register their phone numbers in a national database of telephone numbers that most
telemarketers will be prohibited from calling.
On April 3, 2003, the FTC announced that the do-not-call registry requirements will become effective on
October 1, 2003.4 Accordingly, all covered parties will need to access the registry for the first time between
September 1 and September 30, 2003. A summary of the do-not-call registry requirements follows. 5
I. BACKGROUND INFORMATION
Congress enacted the Telemarketing and Consumer Fraud and Abuse Prevention Act6 in 1994, primarily as a
mechanism to protect consumers against telemarketing fraud. The Telemarketing Act directed the FTC to
issue regulations generally prohibiting deceptive and abusive telemarketing acts and practices, and
specifically (1) prohibiting certain patterns of unsolicited phone calls, (2) establishing time of day restrictions
on unsolicited calls to consumers, and (3) requiring certain disclosures in consumer sales calls.
The Commission finalized its original TSR in August 1995. The original Rule became effective on December
31, 1995, and, among other matters, prohibited telemarketers from calling consumers who had indicated that
they did not wish to receive calls from the company whose goods or services were being offered.
The Telemarketing Act directed the FTC to review the TSRs effect on deceptive telemarketing acts and
practices five years after the Rule became effective. In accordance with this directive, in 2000, the
Commission conducted public forums one focused on the Rules do-not-call provision and another
considering its other provisions to examine the effectiveness of the Rule. As a result of these proceedings,
the Commission decided to amend the TSR to address recurring abuses and emerging problem areas in
telemarketing. In January 2002, the Commission proposed a number of revisions to the TSR,7 including the
creation of a national do-not-call registry.
After reviewing the comments received on its proposal and conducting another forum to discuss the issues
raised by the comments, in December 2002, the Commission issued its final amendments to the TSR. With a
few exceptions, the final amendments are substantially similar to the Commissions proposal.
II. COVERAGE OF THE TSR
The TSR applies to telemarketers, i.e., any person who, in connection with telemarketing, initiates or
receives calls from a customer or donor.8 Thus, the Rule applies to most companies that engage in
telemarketing, including most residential mortgage lenders and servicers.
Kirkpatrick & Lockhart LLP
There are, however, certain exceptions. First, intrastate calls are not subject to the TSR. The TSR defines
the term telemarketing as a plan, program or campaign which is conducted to induce the purchase of
goods or services or a charitable contribution, by use of one or more telephones and which involves more
than one interstate call. 9
Second, certain entities, including banks, credit unions and savings and loans, are not covered by the TSR,
because they are specifically exempt from the Telemarketing Act.10 Note, however, that subsidiaries and
affiliates of exempt entities, and non-exempt companies that provide services to exempt entities, are subject
to the Rule.11 In other words, although a national bank is not subject to the Rule, its mortgage company
subsidiary would be subject to it, as would any third party service provider that the bank hired to perform
telemarketing services on the banks behalf.
Third, we note that the TSR generally does not apply to telephone calls in which the sale of goods or services
or charitable solicitation is not completed, and payment or authorization of payment is not required, until after
a face-to-face sales or donation presentation by the seller or charitable organization.12 Because most
residential mortgage loan transactions are not completed prior to at least one face-to-face meeting, this
exception appears to apply to the telemarketing of residential mortgage loans. Unfortunately, the exception
for face-to-face transactions is expressly inapplicable to certain provisions of the TSR, including the
provision establishing the do-not-call registry. Accordingly, residential mortgage loan telemarketing remains
subject to the registry requirements (unless otherwise exempt).
Finally, we note that the Rule does not apply to calls made to businesses (except for sellers or telemarketers
of nondurable office or cleaning supplies).13 Accordingly, calls made to mortgage brokers, for example, are
not subject to the Rule.
III. SUMMARY OF THE TSR’S DO-NOT-CALL REQUIREMENTS
The amended TSR contains two main do-not-call provisions: (i) the company-specific do-not-call
requirements carried over from the original TSR, and (ii) the new, nationwide do-not-call registry.
A. Company-Specific Do-Not-Call Requirements
Both the original and the amended TSR provide that it is an abusive telemarketing practice and a violation of
the Rule to initiate an outbound telephone call to a person when that person has stated that he/she does not
wish to receive an outbound telephone call made by or on behalf of the seller whose goods or services are
being offered.14 This prohibition is commonly referred to as the company-specific do-not-call requirement.
B. The Nationwide Do-Not-Call Registry
1. General Rule
The amended TSR adds an additional, more comprehensive do-not-call prohibition to the existing, company-
specific provision. Under the amended TSR, it is an abusive telemarketing practice and a violation of the
Rule to initiate an outbound telephone call to a person when that persons telephone number is on the FTCs
do-not-call registry (the Registry) of persons who do not wish to receive outbound telephone calls to induce
the purchase of goods or services.15
The amended Rule sets forth two exceptions to the foregoing prohibition. First, a telemarketer may initiate an
outbound call to a person whose telephone number is on the Registry if the seller of the goods and services in
question has obtained the express agreement, in writing, of such person to place calls to him/her. Such
written agreement must: (1) clearly evidence the persons authorization that calls made by or on behalf of a
specific party may be placed to him/her, (2) include the telephone number to which the calls may be placed,
and (3) set forth the signature of the person (for purposes of this provision, a signature includes an
Kirkpatrick & Lockhart LLP 2
electronic or digital signature to the extent that such form of signature is recognized as a valid signature under
applicable federal law or state contract law).16 The preamble to the amended TSR notes that because the
consumers signature is required, it will be more difficult for sellers and telemarketers to bury the consent in
the fine print of a document, where the consumer might not notice it.17 The preamble also states that the
express agreement is effective only as long as the consumer has not asked to be placed on the sellers
company-specific do-not-call list. 18
Second, a telemarketer may initiate an outbound call to a person whose telephone number is on the Registry
if: (1) the seller of the goods and services in question has an established business relationship with such
person, and (2) such person has not asked to be included on the sellers company-specific do-not-call list.19
(If such person asks to be placed on the sellers company-specific do-not-call list, the seller may not call the
consumer again, regardless of whether the consumer continues to do business with the seller.) For purposes
of this exception, an established business relationship means a relationship between a seller and a consumer
based on the consumers:
(1) purchase, rental or lease of a sellers goods or services or a financial transaction
between the consumer and seller within the 18 months immediately preceding the date
of the telemarketing call; or
(2) inquiry or application regarding a product or service offered by the seller within three
months immediately preceding the date of the telemarketing call.20
The preamble to the amended TSR provides additional guidance regarding the exception for established
business relationships. First, for purposes of the 18 month limitation, the preamble clarifies that the 18
months time limit runs from the last payment or transaction, not from the first payment.21
Furthermore, the preamble indicates that the established business relationship exception does not encompass
all affiliates of a seller. Rather, in determining whether affiliates or subsidiaries should be encompassed in the
established business relationship, the Commission will look to consumer expectations.
The Commission intends that the affiliates that fall within the exemption will be only those that the consumer
would reasonably expect to be included given the nature and type of goods or services offered and the
identity of the affiliate. The consumers expectations of receiving the call are the measure against which the
breadth of the exemption must be judged.22
As an illustration to this point, the preamble indicates that if a consumer purchased aluminum siding from
Company As subsidiary, the consumer would likely not be surprised to receive a call from a kitchen
remodeling service also owned by, and operating under the name of, Company A. 23
3. Interfering with a Person’s Right to be Placed on a Registry
The amended TSR provides that it is an abusive telemarketing act or practice in violation of the Rule to deny
or interfere in any way, directly or indirectly, with a persons right to be placed on a company-specific do-not-
call list or the nationwide Registry.24
4. Safe Harbor
The amended TSR provides a safe harbor for compliance with its do-not-call requirements. In particular,
under the TSR, a seller or telemarketer will not be held liable for violating TSR Sections 310.4(b)(1)(ii) and
(iii) (i.e., the prohibitions on interfering with a persons right to be placed on a do-not-call list or registry,
calling a telephone number on a company-specific do-not-call list or calling a telephone number on the
Registry) if it can demonstrate that, as part of its routine business practice:
(1) it has established and implemented written procedures to comply with such prohibitions,
(2) it has trained its personnel, and any entity assisting in its compliance, in such procedures,
Kirkpatrick & Lockhart LLP 3
(3) the seller, or a telemarketer or other person acting on behalf of the seller, has maintained and
recorded a list of telephone numbers the seller may not contact in accordance with the
company-specific do-not-call requirements,
(4) the seller or a telemarketer uses a process to prevent telemarketing to any telephone number on
the applicable company-specific do-not-call list or the Registry, using a version of the Registry
obtained from the Commission no more than three months prior to making the call, and
maintains records documenting this process,
(5) the seller or a telemarketer or another person acting on behalf of the seller monitors and
enforces compliance with the procedures, and
(6) any subsequent call otherwise violating Section 310.4(b)(1)(ii) or (iii) is the result of error.25
The Commission has indicated that consumers will be able to add their telephone numbers to the Registry
through a toll-free telephone call or over the Internet. Consumer registrations will remain valid for five years,
and the Registry will be periodically purged of all numbers that have been disconnected or reassigned.26
Telemarketers and sellers will need to access the telephone numbers in the Registry and scrub their call lists
to eliminate the numbers of consumers who do not want to receive calls. The FTC plans to develop a fully
automated, secure website that will provide this information. The first time a telemarketer or seller accesses
the list, it will need to provide certain limited identifying information. If a telemarketer is accessing the
Registry on behalf of a client, it will need to identify the client. 27
The telephone numbers in the Registry will be sorted by area code. Telemarketers and sellers will be able to
access as many area codes as desired by, for example, selecting all of the area codes in a particular state.
They also will be able to select the entire Registry, if they desire. When a seller or telemarketer first accesses
the Registry, it will be required to pay an annual fee (via credit card or electronic funds transfer) for that
access, based on the number of area codes selected. Once the annual fee is paid, the telemarketer or seller
will be able to access the Registry as often as they desire (as discussed above, they must access the Registry
at least every three months).28
On April 3, 2003, the FTC published a revised notice of proposed rulemaking addressing the fees to be
imposed for accessing the Registry.29 Under the Revised Proposal, to access the Registry, sellers would be
required to pay an annual fee of $29 per area code, with a maximum annual fee of $7,250. The Revised
Proposal would allow access to up to five area codes for free.
According to the Revised Proposal, once a seller pays the required fee, the FTC will provide it with a unique
account number that can be used to access the Registry. The seller can provide the account number to any
telemarketer with which it does business (telemarketers that solely engage in telemarketing for others and are
not also sellers would not be required to pay a separate fee to access the Registry). The only consumer
information that companies will receive from the Registry is each registrants telephone number. The FTC
emphasizes that the Registry may be used only to comply with the do-not-call requirements. Comments on the
Revised Proposal are due on May 1, 2003.
IV. INTERACTION WITH OTHER DO-NOT-CALL REQUIREMENTS
More than half of the states have enacted do-not-call legislation, and the amended TSR does not preempt
these laws.30 This means that telemarketers will need to comply with both the national Registry and all
applicable state do-not-call laws.
The Commission intends, however, to work with the states and the Federal Communications Commission
(which itself is considering the establishment of a national do-not-call registry) to establish a single
Kirkpatrick & Lockhart LLP 4
harmonized do-not-call registry and a single set of compliance obligations. 31 The Commission anticipates
that some states will be able to transfer their do-not-call registry information to the national Registry (and will
cease requiring telemarketers to access their registry) by the time the national Registry is operational. Other
states could take up to three years to become part of the national system. 32
V. OTHER REVISIONS TO THE TSR
In addition to establishing the national Registry, the amended TSR also:
§ Sets forth a definition of the term upselling, requires disclosures in upsell transactions and excludes
upselling transactions from certain exemptions;
§ requires sellers and telemarketers that accept payment by methods other than credit and debit cards to
obtain their customers express verifiable authorization;
§ imposes requirements on the use of predictive dialers;
§ requires disclosures and prohibits misrepresentations in the sale of credit card loss protection plans;
§ requires an additional disclosure for prize promotions;
§ requires disclosures and prohibits misrepresentations in connection with offers involving negative
§ removes the general media and direct mail exemptions for telemarketing credit card loss protection
plans and certain business opportunities;
§ requires telemarketers to transmit caller identification information;
§ removes post-transaction written confirmation as a means of obtaining a customers express verifiable
authorization in transactions involving free-to-pay conversion;
§ prohibits the disclosure or receipt of a customers unencrypted billing information for consideration
(subject to certain exceptions); and
§ requires that the seller or telemarketer obtain the customers express informed consent to all
transactions, and imposes specific requirements for transactions involving free-to-pay conversions
and preacquired account information.
VI. COMPLIANCE DEADLINE
Full compliance with the amended TSR is required on:
§ October 1, 2003, for the provisions relating to the do-not-call Registry, prohibition on abandoned calls,
safe harbor for abandoned calls, and recordkeeping requirements related to the safe harbor;
§ January 29, 2004, for the caller identification provisions; and
§ March 31, 2003, for all other provisions.33
* * * * *
If you have any questions about the amended TSR, please give us a call.
Kirkpatrick & Lockhart LLP 5
1. Herein, the FTC or the Commission.
2. 68 Fed. Reg. 4580 (Jan. 29, 2003).
3. 16 C.F.R. Part 310 (the TSR or the Rule).
4. 68 Fed. Reg. 16,238 (April 4, 2003).
5. This summary is limited to a discussion of the national registry and certain other requirements. Please note,
however, that the TSR amendments address a wide variety of issues.
6. 15 U.S.C. §§ 6101-6108 (the Telemarketing Act or the Act).
7. 67 Fed. Reg. 4492 (Jan. 30, 2002).
8. 16 C.F.R. §3 10.2(bb).
9. 16 C.F.R. § 310.2(cc) (emphasis added). See also 15 U.S.C. § 6106(4).
10. 15 U.S.C. § 45(a)(2).
11. 68 Fed. Reg. 4586 (Jan. 29, 2003).
12. 16 C.F.R. § 310.6(b)(3).
13. 16 C.F.R. § 310.6(b)(3).
14. 16 C.F.R. § 310.4(b)(1)(iii)(A).
15. 16 C.F.R. § 310.4(b)(1)(iii)(B).
16. 16 C.F.R. § 310.4(b)(1)(iii)(B)(i).
17. 68 Fed. Reg. 4634 (Jan. 29, 2003).
18. 68 Fed. Reg. 4634 (Jan. 29, 2003).
19. 16 C.F.R. § 310.4(b)(1)(iii)(B)(ii).
20. 16 C.F.R. § 310.2(n).
21. 68 Fed. Reg. 4593 (Jan. 29, 2003).
22. 68 Fed. Reg. 4594 (Jan. 29, 2003).
23. 68 Fed. Reg. 4594 (Jan. 29, 2003).
24. 16 C.F.R. § 310.4(b)(1)(ii).
25. 16 C.F.R. § 310.4(b)(3).
26. 68 Fed. Reg. 4,639-4,640 (Jan. 29, 2003).
27. 68 Fed. Reg. 4,640 (Jan. 29, 2003).
28. 68 Fed. Reg. 4,640-4,641 (Jan. 29, 2003).
29. 68 Fed. Reg. 16,238 (April 4, 2003) (the Revised Proposal).
30. 68 Fed. Reg. 4,638 (Jan. 29, 2003).
31. 68 Fed. Reg. 4,638 (Jan. 29, 2003).
32. 68 Fed. Reg. 4,641 (Jan. 29, 2003).
33. 68 Fed. Reg. 16,415 (April 4, 2003).
Kirkpatrick & Lockhart LLP 6