NEW REGULATIONS LIMIT DEALERSHIP CONTACT WITH EXISTING
AND POTENTIAL CUSTOMERS
By: Keith E. Whann, Esq.
March, 2004
Motor vehicle dealers have traditionally advertised their products and
services in newspapers and mailers, on the radio and television, on store
and car windows and, now more than ever, by telephone and fax machines.
Technological developments over the last 10 years allow telemarketers
to better target potential customers and make mass marketing campaigns
more cost-effective. Telephone solicitations have become so common that
consumers have begun complaining that they are infringing on their privacy
and becoming an unbearable nuisance. A growing number of states have
recognized the validity of consumer complaints and have passed, or are
considering, legislation to establish statewide do-not-call lists. As
of July, 2003, 36 States had passed Do-Not-Call Statutes and 13 other
States and the District of Columbia had legislation pending. In an effort
to develop uniform National standards and reduce the potential for consumer
confusion and overly burdensome regulations for businesses, the Federal
Trade Commission (FTC) and Federal Communications Commission (FCC) have
substantially revised Federal regulations governing telemarketing sales
practices.
Congress passed the Telephone Consumer Protection Act (TCPA) in 1991
and, three years later, passed the Telephone Consumer Fraud and Abuse
Prevention Act (TCFAPA) in response to consumer complaints of widespread
fraudulent and abusive telemarketing practices. The FCC has regulatory
authority over implementing and enforcing the TCPA, while the FTC is
responsible for implementing and enforcing the TCFAPA. The Acts and implementing
Regulations are similar in that they impose restrictions on telemarketers
and sellers who solicit consumers via the telephone to provide, offer
or arrange to provide goods or services in exchange for payment, but
the FCC’s jurisdiction over telemarketing is significantly broader than
the FTC’s. The FTC does not have authority over telemarketing calls made
by in-house employees of common carriers, banks, credit unions, savings
and loans, insurance companies, and airlines. In addition, the FTC’s
Telemarketing Rules pertain only to “interstate” transmissions, or calls
made from a business located in one state to consumers located in another
state. In contrast, the FCC’s Telemarketing Rules apply without exception
to any entity engaged in any telemarketing activities covered by the
TCPA and the FCC’s related Rules, including both interstate and intrastate
activities.
For over a year the FTC and FCC have sought comments from consumers
and industry groups regarding their respective Telemarketing Rules and
how to best balance the types of protections that consumers were seeking
with the burdens that would be imposed on telemarketers and sellers.
Probably the most publicized development is the creation of a National
Do-Not-Call Registry. The FTC obtained approval from Congress to fund
the development and maintenance of a National database of consumer telephone
numbers earlier this year. As of early August, consumers nationwide had
registered approximately 30 million telephone numbers. New registrants
can add their telephone number via the FTC’s website or by calling a
designated toll free number and they can be processed virtually instantaneously.
The database has also been designed to allow individual States to download
into the National Registry the telephone numbers of consumers that have
registered with State Do-Not-Call lists during an 18-month transition
period.
Under both the FTC’s and FCC’s Rules, telemarketers and sellers will
be required to search the National Do-Not-Call Registry at least quarterly
and drop from their call lists the telephone numbers of consumers who
have registered. The only information contained on the Registry will
be the registrant’s telephone numbers and they will be sorted and made
available by area code. When the system is accessed for the first time,
a company will have to provide identifying information, such its name
and address, the name of a contact person, and the contact person’s telephone
number and e-mail address. On subsequent visits to the website, they
will be able to download either a complete updated list of telephone
numbers from their selected area codes or a more limited list that shows
additions or deletions since the last download. Telephone numbers will
remain on the Registry for five years unless the consumer asks for the
number to be removed or the consumer changes telephone numbers. Each
company will be required to pay an annual fee based on the number of
area codes it accesses, but up to five area codes may be obtained at
no charge. Keep in mind that State and Federal Regulators will be capable
of verifying when a company last accessed the list.
As with many other Federal and State Laws, there are exceptions to the
general rules. For example, calls may be made to any consumer who gives
a company express permission to do so notwithstanding the fact that his
or her telephone number is registered on a Do-Not-Call list. Under the
amended Federal Rules, a consumer’s express permission must be evidenced
by a signed “written” agreement and the seller and the consumer must
provide a telephone number to which such calls may be placed. While this
particular exemption is recognized universally, of the exemptions in
general compose the main area of differences between the Federal and
State Do-Not-Call programs. Some State Regulations are less restrictive,
but where differences exist, in most cases States have enacted laws that
are more restrictive than the Federal Regulations.
Perhaps the most important exception for motor vehicle dealers is the
“established business relationship” rule. The FTC and FCC recognized
that the ability of sellers to contact existing customers is an important
aspect of their business and often provides consumers with valuable information
regarding products and services that they have purchased. The amended
Federal Telemarketing Rules provide that an established business relationship
exists when a consumer has purchased, leased, rented or entered into
a transaction with the seller within the 18 months immediately preceding
the date of a telemarketing call. If the transaction involves multiple
payments or transactions, the 18-month time limit begins to run from
the date of the last payment or transaction. An established business
relationship also applies when a consumer makes an inquiry or submits
an application regarding a product or service offered by the seller,
in which case a seller is permitted to call the consumer for a period
of 3 months from the date of the inquiry or application.
The FCC has clarified that not just any communication amounts to an
established business relationship. The nature of the inquiry must be
such as to create an expectation on the part of the consumer that a particular
company will call them. For example, an inquiry about business hours
or location would not establish the necessary relationship. By making
an inquiry or submitting an application regarding a company’s products
or services, however, a consumer might reasonably expect a prompt follow-up
telephone call. Affiliates of the company may likewise fall within the
established business relationship exemption, but only if the consumer
would reasonably expect the affiliate to call given the nature and type
of goods or services offered. Dealers who intend to rely upon the established
business relationship exception must take steps to ensure that they monitor
and record the dates and times of transactions with consumers to demonstrate
that the relationship does in fact exist and must track subsequent communications.
Another Federally recognized exemption that can be beneficial to motor
vehicle dealers is the “personal relationship” exemption. A telemarketer
or seller may call an individual with whom there is a personal relationship,
i.e. a friend, family member or acquaintance of the caller. Before making
such calls, however, the caller must be able to provide clear and convincing
evidence of the existence of such a relationship and the exception does
not extend to referrals that have been provided by family members, friends
or acquaintances. In determining whether there is a personal relationship
with the consumer, the FCC will look at whether a reasonable consumer
would expect calls from the person because they have a close or firsthand
relationship.
Another important caveat applies to both the established business relationship
and personal relationship exemptions. The FCC’s company-specific Do-Not-Call
Rule provisions mandate that companies maintain a separate list of any
consumers who specifically request that the company not call them. Any
such requests must be honored within 30 days from the date the request
is made and the request applies to all telemarketing campaigns of the
seller and any affiliated entities that the consumer reasonably would
expect to be included given the product being advertised. In some instances,
a consumer may grant explicit consent to be called during the course
of a subsequent purchase or transaction.
Although the FCC has recognized the established business relationship
exemption for purposes of calling consumers, it revised its earlier determination
that an established business relationship constitutes an express invitation
or permission to send an unsolicited fax. Before sending a fax, a company
must obtain an express written invitation or permission from the intended
recipient and the individual or business’s fax number to which such faxes
may be sent. Consent may be obtained through direct mail, a website and
face-to-face interaction, but obtaining consent via a “negative option”
is prohibited. For example a dealer may not fax an advertisement containing
a telephone number and instruction to call if the recipient no longer
wishes to receive such faxes. The FCC’s Rule further requires that any
message sent via a facsimile machine identify the sender using the name
under which the company is officially registered to do business and contain
the date the item is sent and the telephone number of the sending machine
or of such business, entity or individual. Use of a d/b/a or other more
widely recognized name is permissible provided that the official identification
of the business is used as well.
This article provides a summary of some, but not all, of the Federal
Regulatory requirement pertaining to telemarketing. For instance, telemarketers
and sellers still may only call consumers between 8 a.m. and 9p.m.; must
promptly identify themselves as a seller and explain that they are making
a sales call; and must disclose all material information about the goods
or services they are offering and the terms of the sale. The Federal
Rules also include new provisions on call abandonment, automated telephone
dialing equipment, and the use of prerecorded or artificial voice messages,
prohibit telemarketing to wireless numbers and impose specific identification
requirements. Other special rules and exemptions may apply depending
upon the dealer’s individual telemarketing practices and applicable State
Laws. In addition, special rules apply to non-profit and charitable organizations.
The Federal Telemarketing Rules will govern in any State that does not
have State-specific rules and supersede less restrictive State Laws,
but States will not be prohibited from adopting more restrictive provisions
for intrastate calls. The revised Federal Rules become effective between
now and January 29, 2004.
Dealers may only have a short time to become familiar with the overlapping
Federal and State Regulations on telephone solicitations and bring their
practices into compliance, but not taking prompt action could be costly.
Anyone who violates the Federal Telemarketing Rules could be subject
to regulatory enforcement actions, monetary penalties of up to $11,000
per violation, and, if they cannot qualify under the “safe harbor” provisions,
payment to harmed consumers of actual damages or $500 per violation,
treble damages and attorneys’ fees. A dealer who has made a good faith
effort to provide consumers with an opportunity to exercise their do-not-call
rights may not be liable for violations that result from an error if
the seller can demonstrate that, as part of the dealership’s routine
business practice: (i) it has established and implemented written procedures
to comply with the do-not-call rules; (ii) it has trained its personnel,
and any entity assisting in its compliance, in the procedures established
pursuant to the Do-Not-Call Rules; (iii) it has maintained and recorded
a company-specific list of telephone numbers that may not be contacted;
(iv) it has a process to prevent telemarketing to any telephone number
on any list established pursuant to the Do-Not-Call Rules, it obtains
updated information from the Registry no more than three months prior
to the date any call is made, and it maintains records documenting this
process; and (v) it can demonstrate that any subsequent call otherwise
violating the Do-Not-Call Rules is the result of an error.
The information contained herein has been provided by OADA outside counsel
Keith E. Whann and Deanna L. Stockamp of the Law Firm Whann & Associates,
LLC, and is for general information purposes only. You should contact
legal counsel for specific application.
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