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Loss Prevention Bulletins

Complying with the telemarketing sales rule

The federal regulations governing telemarketing can have a negative impact on your business if they are violated. This bulletin is intended to provide you with a general overview of the telemarketing regulations. You should consult with your qualified legal counsel to determine how these may affect your company.

Background

In December 1991, Congress enacted the Telephone Consumer Protection Act (TCPA). Among other provisions, the act required the FCC and FTC to adopt rules designed to protect residential telephone subscribers’ privacy rights and consider methods to accommodate those subscribers not wanting to receive unsolicited advertisements, including telephone calls.

These commissions began adopting rules to implement TCPA in 1992, including the requirement that individual companies institute procedures to maintain do-not-call lists.

In March 2003, the Do-Not-Call act was passed allowing the creation of the National Do-Not-Call list. The Do-Not-Call regulations take affect October 1, 2003.

Do-Not-Call Act

This act includes many regulations pertaining to business-to-consumer and business-to-business solicitations. Therefore, your company may be directly affected by it. The full text of this act can be found at http://www.ftc.gov/bcp/edu/pubs/business/telemarketing/bus27.shtm. Once on this site, click on the link entitled Telemarketing Sales Rule, Part 310.

There are a few exceptions to the limitations placed on telephone solicitations under this act. For example, it does not apply to businesses not under the FTC’s jurisdiction

such as common carriers, banks, insurance companies and airlines. It also does not apply to calls made on behalf of charitable institutions. However, most notable is the exception for calls to consumers with whom the seller has an “established business relationship”. The FTC has also retained the provision that allows sellers to obtain an express written and signed consent from consumers who wish to receive calls from them.

You may be able to avoid liability or minimize your exposure for violating the National Do-Not-Call rules if you can demonstrate that, as part of your routine business practice:

1. you have established and implemented written procedures to comply with the Do-Not-Call rules;

2. you have trained your personnel, and any entity assisting in your compliance, in the procedures established pursuant to the Do-Not-Call rules;

3. you, or a telemarketer acting on your behalf, have maintained and recorded a list of telephone numbers you may not contact;

4. you, or a telemarketer use a process to prevent telemarketing to any telephone number on any list established pursuant to the Do-Not-Call rules employing a version of the 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 maintains records documenting this process; and

5. any subsequent call otherwise violating the Do-Not-Call rules is the result of error.

You, or a telemarketer acting on your behalf, may call a consumer with whom you have an established business relationship, provided the consumer has not asked to be on your entity-specific Do Not Call list. The rule states that there are two kinds of establishedbusiness relationships:

1. One is based on the consumer’s purchase, rental, or lease of your goods or services, or a financial transaction between the consumer and you, within 18 months preceding a telemarketing call. The 18-month period runs from the date of the last payment, transaction, or shipment between the consumer and you.

2. The other is based on a consumer’s inquiry or application regarding your goods or services, and exists for three (3) months starting from the date the consumer makes the inquiry or application. This enables you to return calls to interested prospects even if their telephone numbers are on the National Registry.

It is important to note that this established business relationship might apply between you and the consumer, but not between the consumer to one of your subsidiaries or affiliates. The act contains provisions to determine if this relationship extends to your subsidiaries or affiliates.

Private right of action
The TCPA is a unique statute in that it provides consumers with two private rights of action for violations of the TCPA rules. One provision permits a consumer to file suit immediately in state court if a caller violates the TCPA’s prohibitions on the use of automatic dialing systems, artificial or prerecorded voice messages and unsolicited facsimile advertisements. A separate private right of action permits a consumer to file suit in state court if he or she has received more than one telephone call within any 12-month period by or on behalf of the same company in violation of the guidelines for making telephone solicitations.

If you have any questions or comments, contact your Zurich account executive or the Loss Prevention Department at 800-821-7803.

This bulletin in pdf format:

LC-125G 1-08 Š2008 Zurich American Insurance Company

This Loss Prevention Bulletin is provided for informational purposes only. Please consult with qualified legal counsel to address your particular circumstances and needs. Zurich is not providing legal advice and assumes no liability concerning the information set forth above.

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