Rule2024-07180
Telemarketing Sales Rule
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 16, 2024
Effective
May 16, 2024
Issuing agencies
Federal Trade Commission
Abstract
The Federal Trade Commission ("FTC" or "Commission") adopts amendments to the Telemarketing Sales Rule ("TSR") that, among other things, require telemarketers and sellers to maintain additional records of their telemarketing transactions, prohibit material misrepresentations and false or misleading statements in business to business ("B2B") telemarketing calls, and add a new definition for the term "previous donor." These amendments are necessary to address technological advances and to continue protecting consumers, including small businesses, from deceptive or abusive telemarketing practices.
Full Text
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<title>Federal Register, Volume 89 Issue 74 (Tuesday, April 16, 2024)</title>
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[Federal Register Volume 89, Number 74 (Tuesday, April 16, 2024)]
[Rules and Regulations]
[Pages 26760-26786]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-07180]
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FEDERAL TRADE COMMISSION
16 CFR Part 310
RIN 3084-AB19
Telemarketing Sales Rule
AGENCY: Federal Trade Commission.
ACTION: Final rule.
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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'')
adopts amendments to the Telemarketing Sales Rule (``TSR'') that, among
other things, require telemarketers and sellers to maintain additional
records of their telemarketing transactions, prohibit material
misrepresentations and false or misleading statements in business to
business (``B2B'') telemarketing calls, and add a new definition for
the term ``previous donor.'' These amendments are necessary to address
technological advances and to continue protecting consumers, including
small businesses, from deceptive or abusive telemarketing practices.
DATES: The amendments are effective May 16, 2024. However, compliance
with 16 CFR 310.5(a)(2) is not required until October 15, 2024. The
incorporation by reference of certain material listed in the rule is
approved by the Director of the Federal Register as of May 16, 2024.
ADDRESSES: Relevant portions of the record of this proceeding,
including this document, are available at <a href="https://www.ftc.gov">https://www.ftc.gov</a>.
FOR FURTHER INFORMATION CONTACT: Patricia Hsue, (202) 326-3132,
<a href="/cdn-cgi/l/email-protection#b1c1d9c2c4d4f1d7c5d29fd6dec7"><span class="__cf_email__" data-cfemail="2f5f475c5a4a6f495b4c01484059">[email protected]</span></a>, or Benjamin R. Davidson, (202) 326-3055,
<a href="/cdn-cgi/l/email-protection#583a3c392e313c2b3736183e2c3b763f372e"><span class="__cf_email__" data-cfemail="1b797f7a6d727f6874755b7d6f78357c746d">[email protected]</span></a>, Division of Marketing Practices, Bureau of Consumer
Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, Mail
Stop CC-6316, Washington, DC 20580.
SUPPLEMENTARY INFORMATION: This document states the basis and purpose
for the Commission's decision to adopt amendments to the TSR that were
proposed and published for public comment in the Federal Register on
June 3, 2022 in a Notice of Proposed Rulemaking (``2022 NPRM'').\1\
After careful review and consideration of the entire record on the
issues presented in this rulemaking proceeding, including 26 public
comments submitted by a variety of interested parties, the Commission
has decided to adopt, with several modifications, the proposed
amendments to the TSR intended to curb deceptive or abusive practices
in telemarketing and improve the effectiveness of the TSR.
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\1\ Notice of Proposed Rulemaking (``2022 NPRM''), 87 FR 33677
(June 3, 2022).
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I. Background
Congress enacted the Telemarketing and Consumer Fraud and Abuse
Prevention Act (``Telemarketing Act'' or ``Act'') in 1994 to curb
abusive telemarketing practices and provide key anti-fraud and privacy
protections to consumers.\2\ The Act directed the Commission to adopt a
rule prohibiting deceptive or abusive telemarketing practices.\3\ The
Act also directed the Commission to include, among other provisions,
disclosure requirements and to consider recordkeeping requirements in
its rulemaking.\4\ Pursuant to the Act, the Commission promulgated the
TSR on August 23, 1995.\5\
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\2\ Public Law 103-297, 108 Stat. 1545 (1997) (codified as
amended at 15 U.S.C. 6101 through 6108).
\3\ 15 U.S.C. 6102(a)(1).
\4\ 15 U.S.C. 6102(a)(3).
\5\ See Statement of Basis and Purpose and Final Rule
(``Original TSR''), 60 FR 43842 (Aug. 23, 1995).
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The Rule prohibits deceptive or abusive telemarketing practices,
such as misrepresenting several categories of material information or
making false or misleading statements to induce a person to pay for a
good or service.\6\ The Rule also requires sellers and telemarketers to
make specific disclosures and keep certain records of their
telemarketing activities.\7\ The Commission determined that
recordkeeping requirements were necessary to ``ascertain whether
sellers and telemarketers are complying with the [. . .TSR], identify
persons who are involved in any challenged practices, and [ ] identify
customers who may have been injured.'' \8\
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\6\ See, e.g., 16 CFR 310.3(a); see also Original TSR, 60 FR at
43848-51.
\7\ See, e.g., 16 CFR 310.3(a)(1), 310.5; see also Original TSR,
60 FR at 43846-48, 43851, 43857.
\8\ Original TSR, 60 FR at 43857.
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Since 1995, the Commission has amended the Rule on four occasions:
(1) in 2003 to create the National Do Not Call (``DNC'') Registry and
extend the Rule to telemarketing calls soliciting charitable
contributions (``charity calls''); \9\ (2) in 2008 to prohibit
prerecorded messages (``robocalls'') in sales calls and charity calls;
\10\ (3) in 2010 to ban the telemarketing of debt relief services
requiring an advance fee; \11\ and (4) in 2015 to bar the use in
telemarketing of certain payment mechanisms widely used in fraudulent
transactions.\12\
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\9\ See Statement of Basis and Purpose and Final Amended Rule
(``2003 TSR Amendments''), 68 FR 4580 (Jan. 29, 2003) (adding Do Not
Call Registry, charitable solicitations, and other provisions). The
Telemarketing Act was amended in 2001 to extend its coverage to
telemarketing calls seeking charitable contributions. See Uniting
and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act (``USA PATRIOT Act''), Public
Law 107-56, 115 Stat. 272 (Oct. 26, 2001) (adding charitable
contribution to the definition of telemarketing and amending the Act
to require certain disclosures in calls seeking charitable
contributions).
\10\ See Statement of Basis and Purpose and Final Rule
Amendments (``2008 TSR Amendments''), 73 FR 51164 (Aug. 29, 2008)
(addressing the use of robocalls).
\11\ See Statement of Basis and Purpose and Final Rule
Amendments (``2010 TSR Amendments''), 75 FR 48458 (Aug. 10, 2010)
(adding debt relief provisions including a prohibition on
misrepresenting material aspects of debt relief services in Section
310.3(a)(2)(x)). The Commission subsequently published technical
corrections to Section 310.4 of the TSR. 76 FR 58716 (Sept. 22,
2011).
\12\ See Statement of Basis and Purpose and Final Rule
Amendments (``2015 TSR Amendments''), 80 FR 77520 (Dec. 14, 2015)
(prohibiting the use of remotely created checks and payment orders,
cash-to-cash money transfers, and cash reload mechanisms).
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Despite making significant amendments to the Rule, the Commission
has not updated the recordkeeping provisions since the Rule's inception
in 1995.\13\ Evolutions in technology and the marketplace have made it
more difficult for regulators to enforce the TSR, particularly
provisions relating to the DNC Registry.\14\ As a result, the
Commission solicited comment during its regulatory review process on
whether it should update the recordkeeping provisions, and subsequently
proposed amending them in the 2022 NPRM.\15\
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\13\ When the Commission decided in 2003 and 2010 to make
substantive amendments to the TSR, it declined to modify the Rule's
recordkeeping provisions. See 2003 TSR Amendments, 68 FR at 4645,
4653-54 (declining to implement any of the suggested recordkeeping
revisions that were raised in the public comments); 2010 TSR
Amendments, 75 FR at 48502.
\14\ 2022 NPRM, 87 FR at 33679-81.
\15\ The Commission issued the 2022 NPRM after it had embarked
on a regulatory review of the TSR in 2014. In that review, it sought
feedback on a number of issues, including the existing recordkeeping
requirements. See 2014 TSR Rule Review, 79 FR 46732, 46735 (Aug. 11,
2014).
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The 2022 NPRM also proposed applying the TSR's prohibitions on
deceptive telemarketing to B2B calls.\16\ The original TSR generally
excluded
[[Page 26761]]
B2B calls, except those selling office and cleaning supplies, because
in the Commission's experience at the time, those calls were ``by far
the most significant business-to-business problem area.'' \17\ In 2003,
the Commission considered extending the TSR's protections to B2B calls
selling internet or web services, but decided against doing so for fear
of chilling technological innovation.\18\ It did, however, note it
would ``continue to monitor closely'' B2B telemarketing practices in
this area and ``may revisit the issue in subsequent Rule Reviews should
circumstances warrant.'' \19\ Since then, the Commission has continued
to see small businesses harmed by deceptive B2B telemarketing, and the
2022 NPRM proposed extending Section 310.3(a)(2)'s prohibition on
misrepresentations \20\ and Section 310.3(a)(4)'s prohibition on false
or misleading statements \21\ to B2B calls.\22\
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\16\ 2022 NPRM, 87 FR at 33682-83.
\17\ Original TSR, 60 FR at 43867, 43861.
\18\ 2003 TSR Amendments, 68 FR at 4663; 2022 NPRM, 87 FR at
33682-83.
\19\ 2003 TSR Amendments, 68 FR at 4663; 2022 NPRM, 87 FR at
33682-83.
\20\ Section 310.3(a)(2) prohibits, among other things,
misrepresenting: the total cost to purchase a good or service,
material restrictions on the use of the good or service, material
aspects of the central characteristics of the good or service,
material aspects of the seller's refund policy, the seller's
affiliation with or endorsement by any person or government agency,
or material aspects of a negative option feature or debt relief
service. See 16 CFR 310.3(a)(2)(i)-(x).
\21\ Section 310.3(a)(4) prohibits making false or misleading
statements to induce any person to pay for goods or services or
induce a charitable contribution. See 16 CFR 310.3(a)(4).
\22\ 2022 NPRM, 87 FR at 33682-83. When the Commission issued
the 2022 NPRM, it also issued an Advance Notice of Proposed
Rulemaking (``2022 ANPR'') in which it sought public comment on
whether to extend all of the TSR's protections to B2B calls. 2022
ANPR, 87 FR 33662 (June 3, 2022). The Commission addresses the
public comments submitted in response to the 2022 ANPR in a Notice
of Proposed Rulemaking that the Commission is issuing simultaneously
with this Final Rule.
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Finally, the 2022 NPRM proposed adding a definition for ``previous
donor.'' In 2008 the Commission amended the TSR to prohibit robocalls,
but allowed charity robocalls if the recipient is a ``member of, or
previous donor to, a non-profit charitable organization on whose behalf
the call is made.'' \23\ The Commission intended this narrow exemption
to apply only to consumers who had previously donated to the soliciting
organization,\24\ but the Commission did not define ``previous donor.''
\25\ The new definition will clarify that telemarketers are prohibited
from making charity robocalls unless the call recipient donated to the
soliciting non-profit charitable organization (``charity'') within the
last two years.\26\
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\23\ See 2008 TSR Amendments, 73 FR at 51185. To qualify for
this narrow exemption, sellers and telemarketers must also comply
with the provisions of Section 310.4(b)(1)(v)(B).
\24\ Id.
\25\ Pursuant to the USA PATRIOT Act, the Commission amended the
TSR in 2003 to extend its coverage to charity calls. 2003 TSR
Amendments, 68 FR at 4582. As part of that amendment, the Commission
defined ``donor'' as ``any person solicited to make a charitable
contribution.'' Id. at 4590.
\26\ 2022 NPRM, 87 FR at 33679.
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II. Overview of the Proposed Amendments to the TSR
A. Recordkeeping
The TSR's recordkeeping provisions, which have remained unchanged
since the Rule was promulgated in 1995, generally require telemarketers
and sellers to keep for a 24-month period records of: (1) any
substantially different advertisement, including telemarketing scripts;
(2) lists of prize recipients, customers, and telemarketing employees
directly involved in sales or solicitations; and (3) all verifiable
authorizations or records of express informed consent or express
agreement.\27\ They may keep the records in any form and in the same
manner and format as they would keep such records in the ordinary
course of business, and they may allocate responsibilities of complying
with the Rule's recordkeeping requirements between the seller and
telemarketer.\28\
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\27\ 16 CFR 310.5(a).
\28\ 16 CFR 310.5(b) & (c).
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The telemarketing landscape has changed drastically since 1995.
Technological advancements have made it easier and cheaper for
unscrupulous telemarketers to engage in illegal telemarketing,
resulting in a greater proliferation of unwanted calls.\29\ Bad actors
hide their identities by using technology to ``spoof'' or fake a
calling number, making it more difficult for the Commission to identify
the responsible parties or obtain records of their illegal
telemarketing activities.\30\ Technology also allows these bad actors
to operate from anywhere in the world, posing additional challenges to
the Commission's law enforcement efforts.\31\
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\29\ See, e.g., Prepared Statement of the Federal Trade
Commission Before the United States Senate Committee on Commerce,
Science and Transportation: Abusive Robocalls and How We Can Stop
Them (Apr. 18, 2018), available at <a href="https://www.ftc.gov/system/files/documents/public_statements/1366628/p034412_commission_testimony_re_abusive_robocalls_senate_04182018.pdf">https://www.ftc.gov/system/files/documents/public_statements/1366628/p034412_commission_testimony_re_abusive_robocalls_senate_04182018.pdf</a>
(last visited Dec. 11, 2023); see also Prepared Statement of the
Federal Trade Commission: Oversight of the Federal Trade Commission
Before the United States Senate Committee on Commerce, Science, and
Transportation (Aug. 5, 2020), available at <a href="https://www.ftc.gov/system/files/documents/public_statements/1578963/p180101testimonyftcoversight20200805.pdf">https://www.ftc.gov/system/files/documents/public_statements/1578963/p180101testimonyftcoversight20200805.pdf</a> (last visited Dec. 21,
2023).
From 2019 to 2023, the Commission received on average nearly 4
million Do Not Call complaints per year, and the DNC Registry
currently has over 249 million active telephone numbers. FTC, Do Not
Call Data Book 2023 (``2023 DNC Databook''), at 6 (Nov. 2023),
available at <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/Do-Not-Call-Data-Book-2023.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/Do-Not-Call-Data-Book-2023.pdf</a> (last visited Dec. 11, 2023). By comparison,
within one year of its launch, the DNC Registry had over 62 million
active telephone numbers registered, and the Commission received
over 500,000 Do Not Call complaints. See Annual Report to Congress
for FY 2003 and 2004 Pursuant to the Do Not Call Implementation Act
on Implementation of the National Do Not Call Registry, at 3 (Sept.
2005), available at <a href="https://www.ftc.gov/sites/default/files/documents/reports/national-do-not-call-registry-annual-report-congress-fy-2003-and-fy-2004-pursuant-do-not-call/051004dncfy0304.pdf">https://www.ftc.gov/sites/default/files/documents/reports/national-do-not-call-registry-annual-report-congress-fy-2003-and-fy-2004-pursuant-do-not-call/051004dncfy0304.pdf</a> (last visited Dec. 11, 2023); National Do Not
Call Registry Data Book for Fiscal Year 2009, at 4 (Nov. 2009),
available at <a href="https://www.ftc.gov/sites/default/files/documents/reports_annual/fiscal-year-2009/091208dncadatabook.pdf">https://www.ftc.gov/sites/default/files/documents/reports_annual/fiscal-year-2009/091208dncadatabook.pdf</a> (last visited
Dec. 11, 2023). Conversely, technological advancements have also
reduced the burden and costs of recordkeeping. 2022 NPRM, 87 FR at
33685 n.95 and 33690-91.
\30\ See supra note 29. On June 25, 2019, the FTC announced
``Operation Call it Quits,'' which included 94 actions against
illegal robocallers, many of which used spoofing technology. See
Press Release, FTC, Law Enforcement Partners Announce New Crackdown
on Illegal Robocalls (June 25, 2019), available at <a href="https://www.ftc.gov/news-events/press-releases/2019/06/ftc-law-enforcement-partners-announce-new-crackdown-illegal">https://www.ftc.gov/news-events/press-releases/2019/06/ftc-law-enforcement-partners-announce-new-crackdown-illegal</a> (last visited Dec. 11,
2023).
\31\ See supra note 29.
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The primary hurdles in enforcing the TSR in the current
telemarketing landscape are in: (1) identifying the telemarketer and
seller responsible for the telemarketing campaign; (2) obtaining call
detail records; and (3) linking the content of the telemarketing calls
with the call detail records to determine which TSR provisions might
apply to the telemarketing activity.
As explained in more detail in the 2022 NPRM, to identify the
responsible parties and obtain evidence of their telemarketing
activities, the Commission often must issue civil investigative demands
to multiple voice service providers to trace a call from the consumer
to the telemarketer's voice provider.\32\ In some instances, by the
time the Commission has identified the relevant voice provider, the
voice provider may not have retained records of the telemarketing calls
such as the date, time, call duration, and disposition of each call, or
the phone number(s) that placed and received each call (i.e. ``call
detail records'').\33\ As a result, the call detail records either no
longer exist or are not available for law
[[Page 26762]]
enforcement purposes, and the Commission cannot identify the bad actor
responsible for the spoofed or otherwise illegal calls.\34\
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\32\ 2022 NPRM, 87 FR at 33680-81.
\33\ Id. at 33680. In other instances, voice providers assert it
is cost prohibitive to retrieve because they only maintain records
in an easily retrievable format for several months before archiving
them in the ordinary course of business.
\34\ Id.
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Call detail records are also necessary to ascertain compliance with
certain provisions of the TSR such as the DNC Registry.\35\ And as
detailed in the 2022 NPRM, even when the Commission and other law
enforcers are successful in obtaining call detail records, the records
alone do not contain sufficient information about the content of the
calls for regulators to determine whether the telemarketer or seller
has violated the TSR.\36\
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\35\ Id. at 33681.
\36\ Id. at 33680-82.
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The proposed amendments to the recordkeeping requirements addressed
the challenges identified above. They included new recordkeeping
requirements of telemarketing activity that telemarketers or sellers
are in the best position to provide.\37\ Specifically, the proposed
amendments required the retention of the following new categories of
information: (1) a copy of each unique prerecorded message, including
each call a telemarketer makes using soundboard technology; \38\ (2)
call detail records of telemarketing campaigns; \39\ (3) records
sufficient to show a seller has an established business relationship
(``EBR'') with a consumer; \40\ (4) records sufficient to show a
consumer is a previous donor to a particular charity; \41\ (5) records
of the service providers that a telemarketer uses to deliver outbound
calls; \42\ (6) records of a seller or charitable organization's
entity-specific do-not-call registries; \43\ and (7) records of the
Commission's DNC Registry that were used to ensure compliance with this
Rule.\44\
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\37\ Id.
\38\ Soundboard technology is technology that allows a live
agent to communicate with a call recipient by playing recorded audio
snippets instead of using his or her own live voice. See FTC Staff
Opinion Letter on Soundboard Technology, at 1 (Nov. 10, 2016),
available at <a href="https://www.ftc.gov/system/files/documents/advisory_opinions/letter-lois-greisman-associate-director-division-marketing-practices-michael-bills/161110staffopsoundboarding.pdf">https://www.ftc.gov/system/files/documents/advisory_opinions/letter-lois-greisman-associate-director-division-marketing-practices-michael-bills/161110staffopsoundboarding.pdf</a>
(last visited Dec. 11, 2023).
\39\ The proposed amendments stated the call detail records
include for each call a telemarketer places or receives, the calling
number; called number; time, date, and duration of the call; and the
disposition of the call, such as whether the call was answered,
dropped, transferred, or connected. If the call was transferred, the
record should also include the phone number or IP address that the
call was transferred to as well as the company name, if the call was
transferred to a company different from the seller or telemarketer
that placed the call. 2022 NPRM, 87 FR at 33684.
\40\ For each consumer with whom a seller asserts it has an
established business relationship, the proposed amendments stated a
seller must keep a record of the name and last known phone number of
that consumer, the date the consumer submitted an inquiry or
application regarding that seller's goods or services, and the goods
or services inquired about. A seller may also show it has an
established business relationship with a consumer if that consumer
purchased, rented, or leased the seller's goods or services or had a
financial transaction with the seller during the 18 months before
the date of the telemarketing call. Another proposed amendment
modifies the existing recordkeeping provisions to state that records
of existing customers should also include the date of the financial
transaction to establish EBR under these circumstances. Id. at
33685.
\41\ If a telemarketer intends to assert that a consumer is a
previous donor to a particular charity, the Commission proposed that
for each such consumer the telemarketer must keep a record of that
consumer's name and last known phone number, and the last date that
consumer donated to the particular charity. The proposed amendments
also included a new definition of ``previous donor.'' Id. at 33685.
\42\ The proposed amendments stated that service providers
include, but are not limited to, voice providers, autodialers, sub-
contracting telemarketers, or soundboard technology platforms. The
Commission did not intend for this provision to include every voice
provider involved in delivering the outbound call and limited this
provision to the service providers with which the seller or
telemarketer has a business relationship. For each such entity, the
seller or telemarketer must keep records of any applicable
contracts, the date the contract was signed, and the time period the
contract is in effect. The proposed amendments also stated that the
records should be retained for five years after the contract expires
or five years from the date the telemarketing activity covered by
the contract ceases, whichever is shorter. Id. at 33685-86.
\43\ For the entity-specific do-not-call registry, the
Commission proposed requiring telemarketers and sellers to retain
records of: (1) the consumer's name, (2) the phone number(s)
associated with the DNC request, (3) the seller or charitable
organization from which the consumer does not wish to receive calls,
(4) the telemarketer that made the call; (5) the date the DNC
request was made; and (6) the good or service being offered for sale
or the charitable purpose for which contributions are being
solicited. Id. at 33686.
\44\ The Commission proposed requiring telemarketers or sellers
to keep records of every version of the FTC's DNC Registry the
telemarketer or seller downloaded to ensure compliance with the TSR.
Id. at 33686.
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The proposed amendments also required the retention of other new
records that help identify the nature and purpose of each call
including: (1) the identity of the telemarketer who placed or received
each call; (2) the seller or charitable organization for which the
telemarketing call is placed or received; (3) the good, service, or
charitable purpose that is the subject of the call; (4) whether the
call is to a consumer or business, utilizes robocalls, or is an
outbound call; and (5) the telemarketing script(s) and the robocall
recording (if applicable) that was used in the call.\45\ The proposed
amendments also required the retention of records regarding the caller
ID transmitted if the call was an outbound call, including the name and
phone number that was transmitted, and records of the telemarketer's
authorization to use the phone number and name that was
transmitted.\46\
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\45\ Id. at 33684.
\46\ Id.
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The proposed amendments also modified or clarified existing
recordkeeping requirements to delineate more clearly the information
telemarketers or sellers must keep to comply with those provisions, and
specified what information is required to assert an exemption or
affirmative defense to the TSR.\47\ Specifically, the proposed
amendments modified the recordkeeping provisions to require retention
of a customer or prize recipient's last known telephone number and last
known physical or email address, and the date a customer bought a good
or service.\48\ It modified the time period to keep records from two
years to five years from the date the record is made, except for
advertising materials under Section 310.5(a)(1) and service contracts
under Section 310.5(a)(9), which require retention of records for five
years from the date the records under those sections are no longer in
use.\49\
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\47\ Id. at 33680-82.
\48\ Id. at 33686.
\49\ Id.
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The proposed amendments clarified that records of verifiable
authorizations, express informed consent or express agreement
(collectively, ``consent'') include a consumer's name and phone number,
a copy of the consent requested in the same manner and format that it
was presented to that consumer, a copy of the consent provided, the
date the consumer provided consent, and the purpose for which consent
was given and received.\50\ The NPRM also proposed that if the
telemarketer or seller requested consent verbally, the copy of consent
requested did not require a recording of the conversation. A copy of
the telemarketing script would suffice as a complete record of the
consent requested. But the NPRM made clear that this proposal only
applies to telemarketing calls where no other provision of the TSR
requires a recording of consent.\51\
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\50\ Id. at 33686-87. The proposed amendment also stated that
for a copy of the consent provided under Sections 310.3(a)(3),
310.4(a)(7), 310.4(b)(1)(iii)(B)(1), or 310.4(b)(1)(v)(A), a
complete record must include all of the requirements outlined in
those respective sections.
\51\ 2022 NPRM, 87 FR at 33686-87.
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The proposed amendments also included new format requirements for
records containing a phone number, time or call duration; \52\
clarified that a
[[Page 26763]]
failure to keep each record required under Section 310.5 in a complete
and accurate manner constitutes a violation of the TSR; and created a
safe harbor for incomplete or inaccurate call detail records where the
omission was temporary and inadvertent.\53\ Finally, the Commission
proposed modifying the compliance obligations in Section 310.5(e) to
obligate both telemarketers and sellers to keep records if they fail to
allocate recordkeeping obligations between themselves.\54\
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\52\ The proposed amendments required records containing
international phone numbers to comport with International
Telecommunications Union's Recommendation E.164 format and domestic
numbers to comport with the North American Numbering plan. The
Commission proposed that records containing time and call duration
be kept to the closest whole second, and time must be recorded in
Coordinated Universal Time (UTC). Id. at 33687.
\53\ The Commission proposed a safe harbor for temporary and
inadvertent errors in keeping call detail records if the
telemarketer or seller can demonstrate that: (1) it has established
and implemented procedures to ensure completeness and accuracy of
its records under Section 310.5(a)(2); (2) it trained its personnel
in the procedures; (3) it monitors compliance and enforces the
procedures, and documents its monitoring and enforcement activities;
and (4) any failure to keep accurate or complete records under
Section 310.5(a)(2) was temporary and inadvertent. Id. at 33687.
\54\ Id. at 33687.
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B. B2B Telemarketing
The Original TSR exempted B2B calls other than those selling office
and cleaning supplies, which the Commission considered the ``most
significant business-to-business problem area'' at the time.\55\ The
Commission stated, however, it would reconsider the B2B exemption if
``additional [B2B] telemarking activities become problems.'' \56\ In
2003, the Commission reconsidered the scope of the B2B exemption and
proposed requiring B2B calls selling internet or web services to comply
with the TSR because they had become an emerging area for fraud.\57\
The Commission ultimately decided not to modify the B2B exemption
because the Commission wanted to ``move cautiously so as not to chill
innovation in the development of cost-efficient methods for small
businesses to join in the internet marketing revolution.'' \58\ But the
Commission again noted it would ``continue to monitor closely'' the B2B
telemarketing practices in this area and ``may revisit the issue in
subsequent Rule Reviews should circumstances warrant.'' \59\
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\55\ Original TSR, 60 FR at 43861.
\56\ Id.; see also 2002 Notice of Proposed Rulemaking (``2002
NPRM''), 67 FR 4492, 4500 (Jan. 30, 2002); 2014 TSR Rule Review, 79
FR at 46738.
\57\ 2002 NPRM, 67 FR at 4500, 4531. ``internet Services'' meant
any service that allowed a business to access the internet,
including internet service providers, providers of software and
telephone or cable connections, as well as services that provide
access to email, file transfers, websites, and newsgroups. Id. ``Web
services'' was defined as ``designing, building, creating,
publishing, maintaining, providing, or hosting a website on the
internet.'' Id. The Commission intended for the term internet
services to encompass any and all services related to accessing the
internet and the term web services to encompass any and all services
related to operating a website. Id.
\58\ 2003 TSR Amendments, 68 FR at 4663.
\59\ Id.
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Since 2003, the Commission has continued to see small business
harmed by numerous types of deceptive B2B telemarketing schemes,\60\
including those selling business directory listings,\61\ web hosting or
design services,\62\ search engine optimization services,\63\ market-
specific advertising opportunities,\64\ payment processing
services,\65\ and schemes that impersonate the government.\66\ For
example, some of these schemes were the subject of a coordinated FTC-
led crackdown on scams targeting small businesses, called ``Operation
Main Street,'' announced in June 2018.\67\
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\60\ A 2018 survey conducted by the Better Business Bureau
revealed that the same scams that harm consumers, such as tech
support scams and imposter scams, also harm small businesses, and
that 57% of scams that impact small businesses are perpetrated
through telemarketing. Better Business Bureau, Scams and Your Small
Business Research Report, at 9-10 (June 2018), available at <a href="https://www.bbb.org/SmallBizScams">https://www.bbb.org/SmallBizScams</a> (last visited Dec. 11, 2023).
\61\ See, e.g., FTC v. Your Yellow Book Inc., No. 14-cv-786-D
(W.D. Ok. July 24, 2014), available at <a href="https://www.ftc.gov/system/files/documents/cases/140807youryellowbookcmpt.pdf">https://www.ftc.gov/system/files/documents/cases/140807youryellowbookcmpt.pdf</a> (last visited
Dec. 11, 2023); FTC v. <a href="http://OnlineYellowPagesToday.com">OnlineYellowPagesToday.com</a>, Inc., No. 14-cv-
0838 RAJ (W.D. Wash. June 9, 2014), available at <a href="https://www.ftc.gov/system/files/documents/cases/140717onlineyellowpagescmpt.pdf">https://www.ftc.gov/system/files/documents/cases/140717onlineyellowpagescmpt.pdf</a> (last visited Dec. 11, 2023); FTC v.
Modern Tech. Inc., et al., No. 13-cv-8257 (Nov. 18, 2013) available
at <a href="https://www.ftc.gov/sites/default/files/documents/cases/131119yellowpagescmpt.pdf">https://www.ftc.gov/sites/default/files/documents/cases/131119yellowpagescmpt.pdf</a> (last visited Dec. 11, 2023); FTC v.
6555381 Canada Inc. d/b/a Reed Publishing, No. 09-cv-3158 (N.D. Ill.
May 27, 2009) available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602reedcmpt.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602reedcmpt.pdf</a> (last visited Dec. 11,
2023); FTC v. 6654916 Canada Inc. d/b/a Nat'l. Yellow Pages Online,
Inc., No. 09-cv-3159 (N.D. Ill. May 27, 2009), available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602nypocmpt.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602nypocmpt.pdf</a> (last visited Dec. 11, 2023); FTC v. Integration
Media, Inc., No. 09-cv-3160 (N.D. Ill. May 27, 2009), available at
<a href="https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602goamcmpt.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602goamcmpt.pdf</a> (last visited Dec. 11, 2023); FTC v. Datacom
Mktg. Inc., et al., No. 06-cv-2574 (N.D. Ill. May 9, 2006),
available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2006/05/060509datacomcomplaint.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2006/05/060509datacomcomplaint.pdf</a> (last visited Dec. 11,
2023); FTC v. Datatech Commc'ns, Inc., No. 03-cv-6249 (N.D. Ill.
Aug. 3, 2005) (filing amended complaint), available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2005/08/050825compdatatech.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2005/08/050825compdatatech.pdf</a> (last visited Dec. 11, 2023); FTC v. Ambus
Registry, Inc., No. 03-cv-1294 RBL (W.D. Wash. June 16, 2003),
available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2003/07/ambuscomp.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2003/07/ambuscomp.pdf</a> (last visited Dec. 11, 2023).
\62\ See FTC v. Epixtar Corp., et al., No. 03-cv-8511(DAB)
(S.D.N.Y. Nov. 3, 2003), available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2003/11/031103comp0323124.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2003/11/031103comp0323124.pdf</a> (last
visited Dec. 11, 2023); FTC v. Mercury Mktg. of Del., Inc., No. 00-
cv-3281 (E.D. Pa. Aug. 12, 2003) (filing for an Order to Show Cause
Why Defendants Should Not be Held in Contempt), available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2003/08/030812contempmercurymarketing.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2003/08/030812contempmercurymarketing.pdf</a> (last visited Dec. 11, 2023).
\63\ See, e.g., FTC v. Pointbreak Media, LLC, No. 18-cv-61017-
CMA (S.D. Fla. May 7, 2018), available at <a href="https://www.ftc.gov/system/files/documents/cases/matter_1723182_pointbreak_complaint.pdf">https://www.ftc.gov/system/files/documents/cases/matter_1723182_pointbreak_complaint.pdf</a>
(last visited Dec. 11, 2023); FTC v. 7051620 Canada, Inc. No. 14-cv-
22132 (S.D. Fla. June 9, 2014), available at <a href="https://www.ftc.gov/system/files/documents/cases/140717nationalbusadcmpt.pdf">https://www.ftc.gov/system/files/documents/cases/140717nationalbusadcmpt.pdf</a> (last
visited Dec. 11, 2023).
\64\ See, e.g., FTC v. Prod. Media Co., No. 20-cv-00143-BR (D.
Or. Jan. 23, 2020), available at <a href="https://www.ftc.gov/system/files/documents/cases/production_media_complaint.pdf">https://www.ftc.gov/system/files/documents/cases/production_media_complaint.pdf</a> (last visited Dec.
11, 2023).
\65\ See, e.g., FTC v. First Am. Payment Sys., LP, et al., No.
4:22-cv-00654 (E.D. Tex. July 29, 2022), available at <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/Complaint%20%28file%20stamped%29_0.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/Complaint%20%28file%20stamped%29_0.pdf</a> (last visited Dec. 11, 2023).
\66\ See, e.g., FTC v. <a href="http://DOTAuthority.com">DOTAuthority.com</a>, No. 16-cv-62186 (S.D.
Fla. Sept. 13, 2016) available at <a href="https://www.ftc.gov/system/files/documents/cases/162017dotauthoriity-cmpt.pdf">https://www.ftc.gov/system/files/documents/cases/162017dotauthoriity-cmpt.pdf</a> (last visited Dec. 11,
2023); FTC v. D & S Mktg. Sols. LLC, No. 16-cv-01435-MSS-AAS (M.D.
Fla. June 6, 2016), available at <a href="https://www.ftc.gov/system/files/documents/cases/160621dsmarketingcmpt.pdf">https://www.ftc.gov/system/files/documents/cases/160621dsmarketingcmpt.pdf</a> (last visited Dec. 11,
2023).
\67\ See Press Release, FTC, BBB, and Law Enforcement Partners
Announce Results of Operation Main Street: Stopping Small Business
Scams Law Enforcement and Education Initiative (June 18, 2018),
available at <a href="https://www.ftc.gov/news-events/press-releases/2018/06/ftc-bbb-law-enforcement-partners-announce-results-operation-main">https://www.ftc.gov/news-events/press-releases/2018/06/ftc-bbb-law-enforcement-partners-announce-results-operation-main</a>
(last visited Dec. 11, 2023).
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To address these scams, the 2022 NPRM proposed applying the TSR's
prohibitions against misrepresentations, as articulated in Sections
310.3(a)(2) and 310.3(a)(4), to B2B telemarketing. Specifically,
sellers and telemarketers would be prohibited from making: (1) several
types of material misrepresentations in the sale of goods or services;
and (2) false or misleading statements to induce a person to pay for
goods or services or to induce a charitable contribution (collectively,
``misrepresentations'').\68\ The 2022 NPRM did not propose applying any
other provisions of the TSR to B2B calls, such as recordkeeping, DNC
Registry, or DNC fee access requirements.\69\
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\68\ 2022 NPRM, 87 FR at 33682-84.
\69\ Id.; see also 16 CFR 310.5 (recordkeeping requirements);
310.8 (fee for access to the Do Not Call Registry).
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C. New Definition for ``Previous Donor''
The 2022 NPRM proposed adding a new definition for the term
``previous donor'' to clarify that telemarketers are prohibited from
making charity robocalls unless the consumer donated to the soliciting
charity within the last two years. When the Commission amended the TSR
to prohibit robocalls
[[Page 26764]]
in 2008,\70\ it included a narrow exemption allowing charity robocalls
to prior donors, recognizing a charity's strong interest in reaching
consumers with ``whom the charity has an existing relationship--i.e.
members of, or previous donors to[,] the non-profit organization on
whose behalf the calls are made.'' \71\ The Commission meant to limit
the exemption to consumers with actual relationships to the soliciting
organization, because allowing ``telefunders to make impersonal
prerecorded cold calls on behalf of charities that have no prior
relationship with the call recipients . . . would defeat the
amendment's purpose of protecting consumers' privacy.'' \72\ But in
creating the exemption, the Commission did not update the definition of
``donor'' or include a definition of ``previous donor.'' Because
``donor'' is defined as ``any person solicited to make a charitable
contribution,'' \73\ the Commission's 2008 Amendment could be
misinterpreted as allowing a telemarketer to send robocalls to any
consumer it had previously solicited for a donation on behalf of a
charity, regardless of whether the consumer donated to or has an
existing relationship with that charity.
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\70\ 2008 TSR Amendments, 73 FR at 51164.
\71\ Id. at 51193.
\72\ Id. at 51194.
\73\ 16 CFR 310.2(p). The Commission declined to limit the
definition of donor to those who have ``an established business
relationship with the non-profit charitable organization'' because
it wanted the term ``[to] encompass not only those who have agreed
to make a charitable contribution but also any person who is
solicited to do so, to be consistent with [the Rule's] use of the
term `customer.' '' 2003 TSR Amendments 68 FR at 4590.
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Adding a definition for ``previous donor'' makes clear a seller or
telemarketer may only make charity robocalls to a donor who has
previously provided a charitable contribution to that particular
charity within the last two years.\74\
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\74\ The Commission proposed that the definition of ``previous
donor'' be limited to those who donated to a charity within the past
two years so that consumers will not receive robocalls in perpetuity
from organizations to which they have donated. The Commission chose
two years to account for the possibility that consumers who donate
annually may not necessarily donate exactly one year apart. 2022
NPRM, 87 FR at 33688.
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D. Overview of Public Comments Received in Response to the 2022 NPRM
In response to the 2022 NPRM,\75\ the Commission received 26
comments \76\ representing the views of State governments,\77\ consumer
groups,\78\ consumers,\79\ industry trade associations,\80\ and
businesses.\81\ The vast majority of the comments focused on the
proposed recordkeeping amendments. Commenters on behalf of government,
individual consumers, and consumer advocacy groups generally supported
amending the recordkeeping requirements but also submitted suggestions
for additional amendments.\82\ Industry groups and businesses had mixed
comments. Some commenters did not support any recordkeeping amendments,
citing the burden they would impose, while others were generally
supportive or supportive of specific proposed amendments.\83\
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\75\ The Commission also received 114 unique comments in
response to the 2014 Rule Review reflecting the opinions of State
and Federal agencies, consumer advocacy groups, consumers,
academics, and industry. 2022 ANPR, 87 FR at 33664. The comments
addressing whether the Commission should amend the TSR's
recordkeeping provisions are summarized in the 2022 NPRM. 2022 NPRM,
87 FR at 33682.
\76\ Many commenters filed one comment in response to the 2022
ANPR or 2022 NPRM that addressed issues raised by both documents.
Comments regarding the proposals in the 2022 NPRM will be addressed
in this Final Rule. Comments regarding the proposals in the 2022
ANPR will be addressed in the Notice of Proposed Rulemaking that the
Commission is issuing concurrently with this Final Rule (``2024
NPRM''). We cite public comments by name of the commenting
organization or individual, the rulemaking (ANPR comments were
assigned ``33'' and the NPRM comments were assigned ``34''), and the
comment number. All comments submitted can be found at
<a href="http://www.regulations.gov">www.regulations.gov</a>.
\77\ National Association of Attorneys General on behalf of 43
State Attorneys General (``NAAG'') 34-20.
\78\ World Privacy Forum (``WPF'') 34-21; Electronic Privacy and
Information Center, National Consumer Law Center (on behalf of its
low-income clients), Center for Digital Democracy, Consumer Action,
Consumer Federation of America, FoolProof, Mountain State Justice,
New Jersey Citizen Action, Patient Privacy Rights, Public Good Law
Center, Public Knowledge, South Carolina Appleseed Legal Justice
Center, and Cathy Lesser Mansfield (Senior Instructor in Law at Case
Western Reserve University School of Law) (``EPIC'') 34-23.
\79\ Bradley 34-15; Cassady 34-2; Chen 34-9; Kreutzmann 34-5,
Yang 34-12, and 4 Anonymous submitters at 34-3, 34-4, 34-7, and 34-
11. Four commenters submitted consumer complaints or were not
relevant to the proceeding. See Anonymous 34-6, 34-8, and 34-16; and
Grener 34-10.
\80\ Enterprise Communications Advocacy Coalition (``ECAC'') 34-
22; National Federation of Independent Business 33-4 (``NFIB'');
Ohio Credit Union League (``OCUL'') 34-19; Professional Association
for Customer Engagement 33-15 (``PACE''); Revenue Based Finance
Coalition(``RBFC'') 34-13; Third Party Payment Processors
Association (``TPPPA'') 34-14; US Chamber of Commerce (``Chamber'')
34-24; and USTelecom--The Broadband Association (``USTelecom'') 33-
14.
\81\ Rapid Financial Services, LLC and Small Business Financial
Solutions, LLC (``Rapid Finance'') 34-17; Sirius XM Radio
(``Sirius'') 34-18.
\82\ Many of the consumer comments generally stated that they
supported the recordkeeping amendments because they would help
protect consumers from deceptive telemarketing and with enforcing
the TSR. See, e.g., Cassady 34-3; Chen 34-9; and Anonymous 34-11 and
34-3. One commenter generally urged more enforcement and larger
penalties. Kowalski 33-7.
\83\ One anonymous commenter did not support any recordkeeping
because it required collection of too much data, which the commenter
believed infringed on a consumer's privacy. Anonymous 34-4.
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Similarly, industry groups and businesses did not support applying
the TSR's prohibitions against deceptive telemarketing to B2B calls;
while government, individual consumers, and consumer organizations were
supportive. Only three comments touched on the proposed amendment to
add a new definition of ``previous donor.'' The comments and the basis
for the Commission's adoption or rejection of the commenters' suggested
modifications to the proposed amendments are analyzed in Section III
below.
III. Final Amended Rule
The Commission has carefully reviewed and analyzed the record
developed in this proceeding.\84\ The record, which includes the
Commission's law enforcement experience and that of its State and
Federal counterparts, support the Commission's view the proposed
amendments in the 2022 NPRM are necessary and appropriate to protect
consumers, including small businesses, from deceptive or abusive
telemarketing practices and ensure the Commission and other regulators
can effectively and efficiently enforce the TSR.\85\
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\84\ The record includes the 2014 Rule Review, the 2022 NPRM,
2022 ANPR, and the law enforcement cases and experience referenced
therein, which are hereby incorporated by reference.
\85\ The Commission's decision to amend the Rule is made
pursuant to the rulemaking authority granted by the Telemarketing
Act to protect consumers, including small businesses, from deceptive
or abusive practices. 15 U.S.C. 6102(a).
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The Final Rule requires sellers and telemarketers to keep
additional records of their telemarketing activities, prohibits
misrepresentations in B2B telemarketing, and adds a new definition for
previous donor. The Final Rule also implements several other clerical
modifications as originally proposed in the 2022 NPRM.\86\
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\86\ 2022 NPRM, 87 FR at 33688.
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In some instances, the Commission has clarified or made
modifications to its original proposal in response to the public
comments submitted. The
[[Page 26765]]
Commission otherwise adopts the amendments proposed in the 2022 NPRM as
set forth in Section VII--Congressional Review Act (``Final Rule'')
below. The primary modifications and clarifications between the
proposed rule published in the 2022 NPRM and the Final Rule are:
<bullet> The term ``prerecorded message'' includes telemarketing
calls made using ``digital soundboard'' rather than ``soundboard
technology'' to make clear the term includes any digital or sound
technologies that sellers or telemarketers use to convey a verbal
message to a consumer in telemarketing;
<bullet> Telemarketers and sellers will have one hundred and eighty
days after the Final Rule is published to implement any new systems,
software, or procedures necessary to comply with the new requirement
that they keep call detail records under Section 310.5(a)(2);
<bullet> Sellers and telemarketers need not retain records of the
calling number, called number, date, time, duration, and disposition of
telemarketing calls under Sections 310.5(a)(2)(vii) and (x) for any
calls made by an individual telemarketer who manually enters a single
telephone number to initiate a call to that telephone number. Such
sellers and telemarketers, however, must still comply with the other
requirements under Section 310.5(a)(2);
<bullet> Modified Section 310.4(b)(2) to state it is also an
abusive telemarketing act or practice and a violation of the TSR for
any person to sell, rent, lease, purchase, or use any list established
to comply with the TSR's recordkeeping requirements under Section
310.5. This modification makes clear telemarketers and sellers cannot
use any consumer lists created for recordkeeping purposes for any other
purpose;
<bullet> In obtaining written consent to contact a consumer using
robocalls on behalf of a ``specific seller,'' the written agreement
must identify the ``specific seller'' by its legal entity name to make
clear that any agreement to receive robocalls is limited to that legal
entity. The seller or telemarketer obtaining consent from the consumer
must ensure the consumer understands which legal entity they have
authorized to send robocalls;
<bullet> Where no provision of the TSR requires a recording of the
call, the Final Rule modifies what was proposed in the NPRM and now
states a complete record of consent that is verbally requested must
include a recording of the consent requested as well as the consent
provided, and that recording must make clear the purpose for which
consent was provided;
<bullet> Service providers referenced under Section 310.5(a)(9)
include any entity that provides ``digital soundboard'' technology
rather than ``soundboard technology platforms'' to make clear sellers
and telemarketers must retain records of any entity that provides any
digital or sound technologies sellers or telemarketers use to convey a
verbal message to a consumer in telemarketing;
<bullet> Sellers and telemarketers must retain records of their
service providers under Section 310.5(a)(9) for five years from the
date the contract expires;
<bullet> For records of the entity-specific DNC list under Section
310.5(a)(10), sellers and telemarketers must retain a record of the
telemarketing entity that made the call and not the individual
telemarketer;
<bullet> Under Section 310.5(a)(11), sellers and telemarketers need
only retain records of which version of the FTC DNC Registry they used
to comply with the TSR rather than the version itself. A record of
which version used includes: (1) the name of the entity which accessed
the registry; (2) the date the DNC Registry was accessed; (3) the
subscription account number that was used to access the registry; and
(4) the telemarketing campaign(s) for which it was accessed;
<bullet> The new formatting requirements under Section 310.5(b)
apply to new records created after the Final Rule goes into effect;
<bullet> The safe harbor to retain call detail records under
Section 310.5(a)(2) will grant sellers and telemarketers thirty days to
correct any inadvertent errors from the date of discovery, if the
seller or telemarketer who made the error otherwise complies with the
other provisions of the safe harbor; and
<bullet> Under Section 310.5(e), sellers who delegate recordkeeping
responsibilities to a telemarketer must also retain access rights to
those records so the seller can produce responsive records in the event
it has hired a telemarketer overseas.
A. Recordkeeping Requirements
The Final Rule requires sellers and telemarketers to maintain
additional records that, in the Commission's law enforcement
experience, are difficult for the Commission to obtain but are
necessary to ensure compliance with the TSR.\87\ The Final Rule also
clearly defines the information telemarketers or sellers must retain to
comply with existing provisions and specifies the records needed to
assert an exemption or affirmative defense to the TSR. In this section,
the Commission details the public comments it received in response to
each proposed amendment to the recordkeeping requirements, and the
Commission's response.
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\87\ The Telemarketing Act authorizes the Commission to include
recordkeeping requirements in the Rule. 15 U.S.C. 6102(a)(3).
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1. Section 310.5(a)(1)--Substantially Different Advertising Materials
and Each Unique Prerecorded Message
Section 310.5(a)(1) currently requires sellers and telemarketers to
keep records of ``all substantially different advertising, brochures,
telemarketing scripts, and promotional materials.'' The 2022 NPRM
proposed modifying Section 310.5(a)(1) to require retention of a copy
of each unique robocall, including each call a telemarketer makes using
soundboard technology.\88\
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\88\ The 2022 NPRM also proposed changing the records retention
period under this provision from two years to five years from the
date that the records are no longer in use. See infra Section
III.A.10 (Time Period to Keep Records).
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The Commission received five public comments addressing this
proposal. The Enterprise Communications Advocacy Coalition (``ECAC'')
and Sirius XM Radio (``Sirius'') object to this proposed amendment,
stating it would be overly burdensome. Sirius states requiring the
retention of each unique robocall would ``generate massive amounts of
data that then needs to be searched, analyzed, secured, and retained,
and will be extremely burdensome.'' \89\ ECAC claims robocalls are
``typically stored as .wav files that are significantly larger than
text files. While storage costs may have decreased over time, the
expense associated with the storage of these large .wav files will be a
significant burden on lawful telemarketers.'' \90\
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\89\ Sirius 34-18 at 8.
\90\ ECAC 34-22 at 2.
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The National Association of Attorneys General (on behalf of 43
State Attorneys General) (``NAAG''), Professional Association for
Customer Engagement (``PACE''), and World Privacy Forum (``WPF'') all
state they generally support this amendment.\91\ PACE further states
their members ``often keep copies of [each unique robocall] despite the
TSR currently not requiring businesses to do so. Retaining these
records will protect American consumers, who receive countless
prerecorded messages, and protect companies, who will be able to prove
compliance with the TSR.'' \92\
---------------------------------------------------------------------------
\91\ NAAG 34-20 at 3-4; PACE 33-15 at 2; WPF 34-21 at 2.
\92\ PACE 33-15 at 2.
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The Commission is not persuaded by ECAC's and Sirius' arguments. In
the Commission's experience, robocalls are typically of short duration
and the file sizes are minimal. As ECAC notes, the cost of storage may
be decreasing every
[[Page 26766]]
year. Moreover, the Commission proposed requiring a copy of each unique
robocall, not every robocall used. Finally, as some commenters have
stated,\93\ businesses typically keep these records in the ordinary
course of business. In the FTC's law enforcement experience, records of
each unique prerecorded message are necessary for the Commission to
ensure compliance with the TSR, and requiring retention of each unique
robocall should not impose an undue burden.
---------------------------------------------------------------------------
\93\ See, e.g., PACE 33-15 at 2.
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With respect to calls utilizing soundboard technology, the
Commission sought comment on the burden that may be imposed by
requiring sellers or telemarketers to keep each unique prerecorded
message involving the use of soundboard technology, including how many
telemarketers employ soundboard technology in telemarketing, how many
calls they make using soundboard technology, the average duration of
each call, and whether the telemarketer typically keeps recordings of
such calls in the ordinary course of business.\94\ The FTC's law
enforcement experience demonstrates the use of soundboard technology is
ongoing. The Commission did not receive any public comments regarding
this issue. WPF did note, however, the Commission should be mindful of
using technological language that is broad enough to encompass a
variety of digital and other sound technologies and recommended the use
of the term ``digital soundboard'' in lieu of ``soundboard
technology.'' \95\ In light of this recommendation, the Commission
states that the term ``prerecorded message'' includes telemarketing
calls made using ``digital soundboard'' rather than ``soundboard
technology'' to make clear the term includes any digital or sound
technologies that sellers or telemarketers use to convey a verbal
message to a consumer in telemarketing. Some digital soundboard
technologies allow a seller or telemarketer to mimic or clone the voice
of a specific individual and calls using this technology would be
subject to this provision of the TSR to the extent that the mimic or
cloning creates a prerecorded message that is used in telemarketing.
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\94\ 2022 NPRM, 87 FR at 33689.
\95\ WPF 34-21 at 2.
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WPF also ``encourage[s] the FTC to require telemarketers to keep a
copy of the full range of materials involved in the advertising
campaign, including transcripts.'' \96\ The Commission notes the TSR's
recordkeeping provisions already require telemarketers and sellers to
retain a copy of each substantially different advertising, brochure,
telemarketing script, and promotional material.\97\ The 2022 NPRM
simply clarified telemarketing scripts include robocall and upsell
scripts, and the failure to keep one substantially different version of
each record under Section 310.5(a)(1) is a violation of the TSR.\98\
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\96\ Id.
\97\ 16 CFR 310.5(a)(1).
\98\ 2022 NPRM, 87 FR at 33684.
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2. Section 310.5(a)(2)--Call Detail Records
The 2022 NPRM proposed adding Section 310.5(a)(2) to require
retention of call detail records, including, for each call a
telemarketer places or receives: the calling number; called number;
time, date, and duration of the call; and the disposition of the call,
such as whether the call was answered, dropped, transferred, or
connected. For transfers, the record included the phone number or IP
address the call was transferred to and the company name, if
transferred to a company different from the seller or telemarketer that
placed the call. The 2022 NPRM also required the retention of other
records regarding the nature and purpose of each call including: (1)
the telemarketer who placed or received each call; (2) the seller or
charity for which the telemarketing call is placed or received; (3) the
good, service, or charitable purpose that is the subject of the call;
(4) whether the call is to a consumer or business, utilizes robocalls,
or is an outbound call; and (5) the telemarketing script(s) and
robocall (if applicable) that was used in the call. Finally, the 2022
NPRM required retention of records regarding the caller ID transmitted
for outbound calls, including the name and phone number transmitted,
and records of the telemarketer's authorization to use that phone
number and name.
The Commission received eight comments regarding this proposal.
ECAC,\99\ the National Federation of Independent Businesses
(``NFIB''),\100\ and Sirius \101\ objected, stating that compliance
with this provision would impose enormous expense on businesses engaged
in lawful telemarketing.\102\ ECAC states its members ``make hundreds
of millions of calls each year'' and ``[f]actoring in the size of a CDR
file'' multiplied by the number of calls its members make each year,
``the expense associated with this retention . . . would be massive.''
\103\ ECAC also argues that, while its members likely keep information
regarding the nature and purpose of the calls in the ordinary course of
business, associating particular scripts with a particular call is
unworkable because ``well-trained telemarketers are able to deviate
from scripts or not use them at all'' and ``scripts are constantly
changing and evolving to reflect consumer questions and concerns.''
\104\
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\99\ ECAC 34-22 at 3.
\100\ NFIB 33-4 at 4-5.
\101\ Sirius 34-18 at 7.
\102\ OCUL also generally objects to the proposed recordkeeping
requirements as overly burdensome, stating it would require a
significant investment to collect and retain new data points in a
constricted time frame. OCUL 34-19 at 2.
Other commenters generally objected to the recordkeeping
amendments, arguing that they require telemarketers and sellers to
retain more information than they would in the ordinary course of
business and are ``contrary to data minimization principles''
articulated by the Commission elsewhere. See, e.g., Sirius 34-18 at
2, 4-6; NFIB 33-4 at 3-4. The Commission interprets these arguments
to refer to the new requirement that sellers and telemarketers
retain call detail records. NFIB lists other categories in their
comment as examples of burden, such as records of established
business relationships, customer lists, consent, and entity-specific
DNCs or versions of the FTC's DNC Registry. NFIB 33-4 at 3-4. None
of these categories, however, is new, and the TSR has always
required telemarketers and sellers to keep these records. See, e.g.,
16 CFR 310.5(a)(3) and (5) (requiring records of consent and
customer lists); 310.4(b)(3)(iii) and (iv) (requiring records of an
entity-specific DNC or a version of the FTC's DNC Registry that a
seller or telemarketer used to qualify for the safe harbor
provisions); see also 2015 TSR Amendments, 80 FR at 77554 (stating
the seller or telemarketer bears the burden of demonstrating the
seller has an existing relationship with a customer whose number is
on the DNC).
The Commission notes that the call detail records primarily
reflect sellers' and telemarketers' business practices rather than
implicate any consumer information. The only new items of consumer
information that sellers and telemarketers are required to retain
under the new recordkeeping amendments are a consumer's phone number
and the option to retain the consumer's last known email address
rather than a physical address. See proposed amendments under
Sections 310.5(a)(2) (call detail records); (a)(3) (prize
recipients); (a)(4) (customer records); and (a)(6) (previous donor).
As explained in the 2022 NPRM, the Commission believes that
telemarketers and sellers likely retain this information in the
ordinary course of business. 2022 NPRM, 87 FR at 33684-85.
Furthermore, they must already retain consumers' phone numbers to
comply with the entity-specific DNC requirements. As discussed in
additional detail in Section III.A.3--Prize Recipients and Customer
Records, the Commission will prohibit use of any records created to
comply with the TSR's recordkeeping requirements for any other
purpose.
\103\ ECAC 34-22 at 3.
\104\ Id. at 4. The Commission does not find ECAC's argument
persuasive. Even if a telemarketer deviates from a script, fails to
use the script, or the company constantly updates the scripts, there
is still a script associated with a particular call and in the
Commission's law enforcement experience, telemarketers typically
retain that information in the ordinary course of business.
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Sirius argues the Commission's ``overly prescriptive'' approach
would impair a business's ability to adapt to
[[Page 26767]]
changing market conditions and a company's ability to innovate. It
would also impose ``significant administrative burdens'' and
``substantial transactional costs'' on sellers and telemarketers to
establish contracts and systems to capture the information
requested.\105\ And NFIB argues sellers and telemarketers would ``incur
substantial costs to: (1) establish in-house, or purchase from others,
systems designed and built to accomplish the newly-mandated,
extraordinarily-detailed recordkeeping, and (2) employ personnel to
maintain and operate the systems.'' \106\ At minimum, Sirius requests
the Commission allow a ``phase-in'' period of a few years to allow
companies sufficient time to adjust agreements, implement new systems,
and build compliance plans.\107\
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\105\ Sirius 34-18 at 7-8.
\106\ NFIB 33-4 at 5.
\107\ Sirius 34-18 at 8.
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The Electronic Privacy and Information Center (on behalf of 13
advocacy groups) (``EPIC''), NAAG, WPF, and an individual consumer, all
support the proposed amendments.\108\ NAAG echoed the Commission's law
enforcement experience and agreed the amendments are necessary to
ensure compliance with the TSR and should not be overly burdensome to
create and maintain these records.\109\ EPIC stated they ``strongly
support'' the amendment which rectifies ``a major weakness in the
existing rule'' of requiring retention of only ``prizes awarded and
sales'' which are of ``little use in identifying violations of the do-
not-call rule'' without accompanying records of calls.\110\ EPIC
particularly applauded the amendment requiring retention of any caller
ID information transmitted and the telemarketer's authorization to use
that caller ID because spoofing has undermined consumers' faith in the
U.S. telecommunication system, making it harder for emergency calls to
reach consumers.\111\ WPF and NAAG also commented that requiring
records of call transfers and the identity of the recipient of those
transfers is particularly important because it is ``otherwise
impossible to trace fraudulent activity'' when transfers typically
appear as a separate inbound call to the recipient in the voice
provider's call records.\112\ The individual consumer stated retaining
call detail records was necessary to enforce the TSR and ``a fair
compromise'' in comparison to requiring recordings of all telemarketing
transactions which would be overly burdensome to small businesses.\113\
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\108\ Cassady 34-2; EPIC 34-23 at 4; NAAG 34-20 at 5; WPF 34-21
at 2.
\109\ NAAG 34-20 at 5.
\110\ EPIC 34-23 at 4.
\111\ Id.
\112\ WPF 34-21 at 2; NAAG 34-20 at 6.
\113\ Cassady 34-2.
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PACE notes some of its members are able to maintain the requested
records and already do so in the ordinary course of business, but the
proposed amendments may not be technically feasible for all members,
particularly those who do not use software to engage in telemarketing
but use employees in retail locations.\114\ PACE members raised
particular concerns about the technical capacity to record ``the
duration of the call, disposition of the call, and to whom the call was
transferred.'' \115\
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\114\ PACE 33-15 at 2.
\115\ Id.
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As explained in the 2022 NPRM, the proposed addition of Section
310.5(a)(2) is necessary for the Commission to determine whether the
TSR applies and which sections of the TSR the seller and telemarketer
must comply with for a telemarketing campaign.\116\ The Commission is
cognizant this amendment will require some administrative costs in
establishing a new recordkeeping system. In the 2022 NPRM, the
Commission provided an estimate of those costs and invited comment
about those estimates,\117\ but did not receive any public comment
specifically disputing its estimates. Nevertheless, in determining
whether to implement the proposed amendments, the Commission considers
whether the proposed amendments strike an appropriate balance between
the goal of protecting consumers from deceptive or abusive
telemarketing and the harm from imposing compliance burdens.
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\116\ 2022 NPRM, 87 FR at 33680-82, 33684.
\117\ 2022 NPRM, 87 FR at 33690-91.
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To address the concerns raised by the public comments, the
Commission will provide a grace period of one hundred and eighty days
from the date Section 310.5(a)(2) is published in the Federal Register
for sellers and telemarketers to implement any new systems, software,
or procedures necessary to comply with this new provision. Furthermore,
the Commission will modify this amendment and provide an exemption for
calls made by an individual telemarketer who manually enters a single
telephone number to initiate a call. For such calls, the seller or
telemarketer need not retain records of the calling number, called
number, date, time, duration, and disposition of the telemarketing call
under Sections 310.5(a)(2)(vii) and (x) but must otherwise comply with
the other requirements under Section 310.5(a)(2). Making this
modification should alleviate the general concerns commenters have
raised regarding the feasibility and burden of creating and retaining
call detail records. The Commission is not persuaded that requiring
sellers and telemarketers to retain call detail records of their
telemarketing campaigns would impose an undue burden if the seller or
telemarketer can use automated mechanisms to conduct their campaigns
instead of placing calls manually. In those situations, as PACE notes,
the seller or telemarketer already maintains similar call detail
records in the ordinary course of business.\118\
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\118\ PACE 33-15 at 2.
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Nor is the Commission persuaded by Sirius' arguments that the
proposed amendments are overly prescriptive and requiring retention of
these records would stifle innovation. The proposed amendments merely
identify the information sellers and telemarketers must retain. It does
not dictate the form or ``look and feel'' of business records as
Sirius' suggests. As discussed in more detail in Section III.A.11--
Format of Records, the Commission believes the amendment to Section
310.5(a)(2) strikes the appropriate balance between providing
specificity about the information sellers and telemarketers are
required to keep without prescribing how it must do so.
EPIC and WPF's comments also suggested additional modifications to
Section 310.5(a)(2). WPF requested the Commission consider requiring
sellers and telemarketers to retain records of their use of voice
biometrics in call centers, including whether voice biometrics
recognition or voice emotion analysis software was used, whether a
consumer's records were marked with any inferences from any voice
biometric analysis, and whether that analysis was shared with any other
parties.\119\ The FTC's Policy Statement on Biometric Information notes
significant privacy concerns regarding the collection and use of
biometric information and the possibility such practices may be
considered an ``unfair'' practice under Section 5 of the FTC Act.\120\
Furthermore, the collection and use of such information might be
considered abusive and violative of a consumer's right to privacy,
which Congress gave the Commission the power to regulate
[[Page 26768]]
with respect to telemarketing.\121\ Although the Commission does not
believe it has the evidence now either to require the retention of
voice biometric recognition data in telemarketing or place restrictions
on its use, it will continue to monitor voice biometric use in
telemarketing.
---------------------------------------------------------------------------
\119\ WPF 34-21 at 2.
\120\ FTC, Policy Statement of the Federal Trade Commission on
Biometric Information and Section 5 of the Federal Trade Commission
Act (May 18, 2023), available at <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/p225402biometricpolicystatement.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/p225402biometricpolicystatement.pdf</a> (last visited Jan
24, 2024).
\121\ 15 U.S.C. 6102(a)(1).
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EPIC requested the Commission consider requiring telemarketers and
sellers to also retain records of campaign IDs for each call, arguing
it is necessary to tie the call detail records to a particular
campaign.\122\ The Commission recognizes the concern EPIC has raised
and addressed it by requiring sellers and telemarketers to retain
records that identify, for each call, the nature and purpose of that
call, such as the seller or soliciting charity for whom the
telemarketing call was placed, the good or service sold or the
charitable purpose of the call, and the telemarketing script or the
robocall recording that was used. This information is at least as
comprehensive as a campaign ID. The Commission believes specifying the
substantive information sellers and telemarketers are required to
retain, rather than identifying a particular data category such as
campaign ID that may be subject to change over time, will more
effectively enable the Commission and other regulators to enforce the
TSR.
---------------------------------------------------------------------------
\122\ EPIC 34-23 at 5.
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Finally, EPIC requested the Commission consider requiring sellers
and telemarketers to keep records of the originating or gateway
telecommunications provider for each campaign, rather than any service
provider the telemarketer is in a business relationship with, as the
NPRM proposes.\123\ The Commission believes requiring retention of the
call detail records and records of the seller or telemarketer's service
providers strikes an appropriate balance between the Commission's
interest in having sufficient information to enforce the TSR and
industry's concerns regarding burden.
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\123\ Id.
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3. Sections 310.5(a)(3) and (4)--Prize Recipients and Customer Records
The TSR currently requires telemarketers and sellers to retain the
``name and last known address'' of each prize recipient.\124\ The 2022
NPRM proposed requiring sellers and telemarketers to also retain the
last known telephone number and physical or email address for each
prize recipient. The Commission received three comments regarding this
proposal, and all were supportive of the amendment. PACE states it
believes this was a ``prudent measure, and many telemarketers and
sellers that reward prizes likely already comply with this proposal.''
\125\ NAAG agrees, stating the requirement ``reflects current business
practices'' and telemarketers and sellers ``likely keep such
information in the regular course of their business.'' \126\ WPF
concurs, but also suggests the Commission consider requiring sellers
and telemarketers to retain this data in an encrypted state.\127\
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\124\ 16 CFR 310.5(a)(2).
\125\ PACE 33-15 at 4.
\126\ NAAG 34-20 at 9.
\127\ WPF 34-21 at 3.
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With respect to ``Customer Records'' under Section 310.5(a)(4), the
TSR requires sellers or telemarketers to retain the ``name and last
known address of each customer, the goods or services purchased, the
date such goods or services were shipped or provided, and the amount
paid by the customer for the goods or services.'' \128\ Similarly, the
Commission proposed modifying this provision to account for current
business practices and require the retention of the customer's last
known telephone number and the customer's last known physical address
or email address. The Commission also proposed adding the date the
consumer purchased the good or service to account for the new
requirement that telemarketers and sellers keep records of each
consumer with whom a seller intends to assert it has an EBR.\129\
---------------------------------------------------------------------------
\128\ 16 CFR 310.5(a)(3).
\129\ 2022 NPRM, 87 FR at 33686.
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The Commission received four comments regarding this amendment.
NAAG and PACE support this proposal, and agree it is necessary to
establish EBR and likely that telemarketers and sellers already retain
this information in the ordinary course of business.\130\ EPIC and WPF,
however, do not support this amendment unless the Commission
concurrently passes commensurate privacy protections.\131\
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\130\ NAAG 34-20 at 9; PACE 33-15 at 5.
\131\ EPIC 34-23 at 15; WPF 34-21 at 3. When consumer data is
transferred as part of the sale, assignment, or change in ownership,
dissolution, or termination of the business, EPIC also urges the
Commission to require a successor to acknowledge liability for any
TSR violations regarding the calls that those records document. EPIC
34-23 at 15-16. EPIC argues that this will deter a fraudulent seller
or telemarketer from shutting their businesses and selling their
assets, including customer lists, to a sham successor as a means of
evading liability. The Commission does not believe such an amendment
is necessary at this time.
---------------------------------------------------------------------------
The Commission notes that, as it recognized in the 2022 NPRM,
requiring sellers and telemarketers to retain additional personal
identifying information (such as consumers' names, phone numbers, and
either their physical or email address, in combination with goods or
services they purchased) may raise privacy concerns.\132\ The
Commission emphasizes once more that sellers and telemarketers have an
obligation under Section 5 of the FTC Act to adhere to the commitments
they make about their information practices and take reasonable
measures to secure consumers' data.\133\
---------------------------------------------------------------------------
\132\ 2022 NPRM, 87 FR at 33686.
\133\ See generally Federal Trade Commission 2020 Privacy and
Data Security Update, available at <a href="https://www.ftc.gov/system/files/documents/reports/federal-trade-commission-2020-privacy-data-security-update/20210524_privacy_and_data_security_annual_update.pdf">https://www.ftc.gov/system/files/documents/reports/federal-trade-commission-2020-privacy-data-security-update/20210524_privacy_and_data_security_annual_update.pdf</a>
(last visited Dec. 11, 2023).
---------------------------------------------------------------------------
But the Commission also recognizes the concerns raised by the
comments. It agrees additional protections, similar to those it
incorporated into the TSR when it prohibited the sale or use of any
lists established or maintained to comply with the TSR's DNC Registry
or entity-specific DNC,\134\ should also apply to any lists of
consumers that sellers or telemarketers create or maintain in order to
comply with the amended recordkeeping provisions.
---------------------------------------------------------------------------
\134\ 2003 TSR Amendments, 68 FR at 4645.
---------------------------------------------------------------------------
Thus, the Commission will amend Section 310.4(b)(2) to state it is
also an abusive telemarketing act or practice and a violation of the
TSR for any person to sell, rent, lease, purchase, or use any list
established to comply with Section 310.5. Amending the TSR to specify
that the sale or use of a list created to comply with the recordkeeping
provisions is consistent with the Telemarketing Act's emphasis on
privacy protection. The Act authorizes the Commission to regulate
``calls which the reasonable consumer would consider coercive or
abusive of such consumer's right to privacy.'' \135\ The Commission
agrees with commenters that consumers would consider it coercive and an
abuse of their right to privacy if telemarketers or sellers are allowed
to use any consumer information they collect and maintain under the
TSR's recordkeeping provisions for any other purpose.
---------------------------------------------------------------------------
\135\ 15 U.S.C. 6102(a)(3)(A); see also 2002 NPRM, 67 FR at
4510-11.
---------------------------------------------------------------------------
4. Section 310.5(a)(5)--Established Business Relationship
The 2022 NPRM proposed adding Section 310.5(a)(5) to further
clarify what records a seller must keep to ``demonstrate that the
seller has an established business relationship'' with a consumer.
Specifically, for each consumer with whom a seller asserts it
[[Page 26769]]
has an established business relationship, the seller must keep a record
of the name and last known phone number of that consumer, the date the
consumer submitted an inquiry or application regarding that seller's
goods or services, and the goods or services inquired about.\136\
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\136\ A seller may also show it has an established business
relationship with a consumer if that consumer purchased, rented, or
leased the seller's goods or services or had a financial transaction
with the seller during the 18 months before the date of the
telemarketing call. The Commission is modifying the existing
recordkeeping provisions to state that records of existing customers
should also include the date of the financial transaction to support
the existence of an EBR under these circumstances. See Section
III.A.3 (Prize Recipients and Customer Records).
---------------------------------------------------------------------------
The Commission received five comments addressing this proposed
amendment. EPIC,\137\ NAAG, and PACE all support this amendment,
agreeing it is necessary for a seller to establish a business
relationship with a consumer and it is likely businesses already retain
such records.\138\ The Ohio Credit Union League (``OCUL'') made a
general objection stating it was unclear when a credit union member's
business relationship begins or ends, while Sirius objected on the
grounds ``it was unnecessary'' since ``sellers and telemarketers must
already collect information sufficient to demonstrate an established
business relationship to use as an affirmative defense.'' \139\
---------------------------------------------------------------------------
\137\ EPIC also urged the Commission to modify the EBR
requirements to include consumers who purchased a good or service
from the seller. EPIC 34-23 at 14. The Commission does not believe
this is necessary since sellers and telemarketers must already keep
records of customers, which includes consumers who purchased a good
or service from the seller. 16 CFR 310.5(a)(3). Furthermore, as
discussed in Section III.A.3--Prize Recipients and Customer Records
above, the Commission is amending the customer records provision to
include the date the consumer purchased the good or service to
account for the new EBR recordkeeping requirements.
EPIC also urges the Commission to consider clarifying that EBR
may only be asserted as an affirmative defense if the seller or
telemarketer intentionally called the consumer because it has an
established business relationship with the consumer. EPIC 34-23 at
15. The TSR does not currently contemplate the use of EBR in this
manner but rather allows telemarketers and sellers to call a
consumer if the seller can demonstrate it has an EBR with that
consumer and otherwise meets other requirements under the TSR.
Making any modifications to this framework would require additional
consideration.
\138\ EPIC 34-23 at 15; NAAG 34-20 at 7; and PACE 33-15 at 2-3.
\139\ OCUL 34-19 at 2; Sirius 34-18 at 5.
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The Commission is not persuaded by either OCUL's or Sirius's
objections. As the Commission noted in its 2022 NPRM, this requirement
only applies if a seller intends to assert it has an established
business relationship with a consumer.\140\ As Sirius notes, sellers
must already collect this information in the ordinary course of
business and thus the amendment should not impose an additional burden.
---------------------------------------------------------------------------
\140\ 2022 NPRM, 87 FR at 33685.
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5. Section 310.5(a)(6)--Previous Donor
Similar to the EBR requirements described above, the Commission
also proposed adding Section 310.5(a)(6) to clarify that, if a
telemarketer intends to assert that a consumer is a previous donor to a
particular charity,\141\ the telemarketer must keep a record, for each
such consumer, of the name and last known phone number of that
consumer, and the last date the consumer donated to the particular
charity. The Commission received two comments on this proposed
amendment. NAAG agreed with this proposed amendment, stating it was
akin to the proposed amendment for EBR and should not ``impose any
undue burden.'' \142\ WPF concurred stating the new recordkeeping
provision will ``serve to clarify the exemption for charitable
donations.'' \143\
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\141\ The Commission also proposed adding a new definition of
``previous donor.'' See supra Section II.C.
\142\ NAAG 34-20 at 7.
\143\ WPF 34-21 at 1.
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6. Section 310.5(a)(8)--Records of Consent
Section 310.5(a)(5) of the TSR requires sellers or telemarketers to
keep records of ``[a]ll verifiable authorizations or records of express
informed consent or express agreement required to be provided or
received under this Rule.'' The Commission proposed modifying this
provision to clarify what constitutes a complete record of consent
sufficient for a telemarketer or seller to assert an affirmative
defense.\144\ It wanted to make clear that common practices previously
employed by telemarketers or sellers, such as maintaining a list of IP
addresses and timestamps as proof of consent, are insufficient to
demonstrate that a consumer has, in fact, provided consent to receive
robocalls or receive telemarketing calls when the consumer has
registered her phone number on the DNC Registry.\145\
---------------------------------------------------------------------------
\144\ 2022 NPRM, 87 FR 33686-87.
\145\ Id. at 33681.
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Specifically, the 2022 NPRM proposed that for each consumer from
whom a seller or telemarketer states it has obtained consent, sellers
or telemarketers must maintain records of that consumer's name and
phone number, a copy of the consent requested in the same manner and
format it was presented to that consumer, a copy of the consent
provided, the date the consumer provided consent, and the purpose for
which consent was given and received.\146\ For a copy of the consent
provided under Sections 310.3(a)(3), 310.4(a)(7),
310.4(b)(1)(iii)(B)(1), or 310.4(b)(1)(v)(A), a complete record must
also include all of the requirements outlined in those respective
sections.\147\ The 2022 NPRM also stated if consent were requested
verbally, a copy of the telemarketing script of the request would
suffice as a copy of the consent requested, and a recording of the
conversation was not necessary unless another provision of this Rule
required it.\148\
---------------------------------------------------------------------------
\146\ Id. at 33686-87.
\147\ Id. For example, a copy of the consent provided to receive
prerecorded sales messages under Section 310.4(b)(1)(v)(A) must
evidence, in writing: (1) the consumer's name, telephone number, and
signature; (2) that the consumer stated she is willing to receive
prerecorded messages from or on behalf of a specific seller; (3)
that the seller obtained consent only after clearly and
conspicuously disclosing that the purpose of the written agreement
is to authorize that seller to place prerecorded messages to that
consumer; and (4) that the seller did not condition the sale of the
relevant good or service on the consumer providing consent to
receive prerecorded messages. The TSR also states that a seller must
obtain consent from the consumer, and the Commission reiterates that
this means a seller must obtain consent directly from the consumer
and not through a ``consent farm.''
\148\ 2022 NPRM, 98 FR at 33686-87.
---------------------------------------------------------------------------
The Commission received four comments regarding this proposed
amendment. EPIC, NAAG, PACE, and WPF all generally support the proposed
amendment.\149\ PACE states it ``welcomes these provisions in order to
better ascertain what records are necessary to assert an affirmative
defense'' and the proposed records ``flow logically from the TSR.''
\150\
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\149\ See EPIC 34-23 at 10-11; NAAG 34-20 at 10; PACE 33-15 at
5; and WPF 34-21 at 3.
\150\ PACE 33-15 at 5.
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But EPIC, NAAG, and WPF also submitted suggestions on additional
amendments, arguing the Commission should implement more stringent
requirements. WPF suggests the Commission consider updating how a
consumer ``may withdraw or revoke consent, and create responsibilities
for telemarketers to provide a clear opportunity to revoke or consent
in each communication.'' \151\ EPIC asks the Commission to specify that
in identifying the ``specific seller'' from whom a consumer has
provided written express agreement to receive robocalls, the
telemarketer or seller must retain records of the ``legal name of the
seller whose goods [or] services are being promoted.'' \152\ EPIC
believes this will
[[Page 26770]]
``reduce obfuscation'' on the ``scope of the consumer's consent'' and
identify the proper defendant if ``legal action is necessary.'' \153\
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\151\ WPF 34-21 at 3.
\152\ EPIC 34-23 at 10-13.
\153\ Id.
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The Commission believes WPF's recommendation is primarily
applicable to transactions involving a negative option feature \154\
where a consumer may wish to cancel a subscription plan and revoke
billing authorization. The Commission published a Notice of Proposed
Rulemaking regarding the Negative Option Rule (``Negative Option
NPRM'') on April 24, 2023, which also addresses telemarketing
transactions.\155\ Because the proposed Negative Option Rule would
apply a more comprehensive and consistent framework for negative option
transactions regardless of the sales medium, the Commission declines to
make any further amendments to the TSR to address WPF's comment at this
time.
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\154\ A negative option feature is defined as ``an offer or
agreement to sell or provide any goods or services, a provision
under which a customer's silence or failure to take an affirmative
action to reject goods or services or to cancel the agreement is
interpreted by the seller as acceptance of the offer.'' 16 CFR
310.2(w).
\155\ 88 FR 24716 (Apr. 24, 2023).
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With respect to EPIC's request regarding the identification of a
``specific seller,'' the Commission stated in the Statement of Basis
and Purpose finalizing the TSR amendments prohibiting robocalls that it
used the term ``specific seller'' to ``make it clear that prerecorded
calls may be placed only by or on behalf of the specific seller
identified in the agreement.'' \156\ The Commission wanted to ensure
any agreement to receive robocalls would be limited to the seller
identified in the agreement and could not be transferrable to any other
party.\157\ Requiring companies to use the legal entity name to
identify the specific seller in the written agreement is a natural
extension of the Commission's intention in using the term ``specific
seller.'' Thus, the Commission states now that in identifying the
specific seller in any written agreement, the seller should use its
legal entity name to make clear any agreement to receive robocalls is
limited to that specific legal entity. The Commission also states the
burden will be on the seller or telemarketer to ensure and prove a
consumer understands which specific legal entity would be permitted to
send the consumer robocalls. In circumstances where the legal entity's
name may not be recognizable to consumers, perhaps because the
consumers would recognize a brand or product name but not the legal
entity name, the seller or telemarketer may need to take extra steps to
ensure the consumer has knowingly agreed to receive robocalls from the
specific seller.
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\156\ 2008 TSR Amendments 73 FR at 51186; see also supra note
147.
\157\ 2008 TSR Amendments 73 FR at 51186.
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EPIC also requests the Commission require sellers and telemarketers
to ``retain records regarding the owner of the website where consent
was purportedly obtained'' and a record of ``the relevant webform
completion, or of some other admissible evidence of the specific
consumer providing consent via a specific web page on a specific date/
time.'' \158\ For telemarketers or sellers who obtain consumer consent
via a website, the Commission believes the new recordkeeping provision
requiring records of ``a copy of the request for consent in the same
manner and format in which was presented to that consumer'' would
require a telemarketer or seller to keep a copy of the web page or web
pages that were used to request consent from the consumer. The copy of
the web page could be maintained as screenshots so long as the
screenshot accurately reflects what a consumer viewed in providing
consent. Sellers and telemarketers who obtain consent via website will
also need to keep ``a copy of the consent provided'' under the new
recordkeeping provisions. The Commission believes a screenshot of the
web page a consumer completed to provide consent could satisfy this
requirement if the screenshot also accurately reflects what a consumer
submitted in providing consent. The Commission declines to specify the
format a company must use to keep a copy of consent requested or
provided to allow businesses the flexibility of retaining records as
they would in the ordinary course of business. Rather, it believes
specifying the categories of information required to adequately reflect
consent will provide sufficient guidance. The Commission cautions,
however, an IP address with a timestamp is not sufficient as a record
of consent. The Commission does not believe any additional amendments
are necessary at this time.\159\
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\158\ EPIC 34-23 at 12.
\159\ EPIC also requested that the Commission clarify that the
TSR's language regarding consent is similar to the TCPA's language
regarding consent or that the consent requirements do not ``lower
the bar below the current requirements of the TCPA.'' EPIC 34-23 at
13. The new amendments to the TSR do not alter substantive
requirements for consent under the TSR. They merely clarify what
records are necessary to maintain proof of consent.
---------------------------------------------------------------------------
EPIC and NAAG also raised concerns regarding the Commission's
statement regarding the records for verbal consent. In the 2022 NPRM,
the Commission stated if a seller or telemarketer requests consent
verbally, a telemarketing script would suffice as a record of the
consent requested as long as no other provision of the TSR required a
recording.\160\ EPIC requests the Commission make clear the reference
to verbal consent only applies to billing authorization under Section
310.4(a)(7), and any authorization required to receive robocalls or to
receive telemarketing calls to phone numbers on the DNC Registry must
be provided in writing. EPIC also raised concerns over whether the
Commission's statement meant that a script is an ``acceptable record of
the language the caller used to request consent'' or if ``the
Commission is also suggesting that [a script] is an acceptable record
of the consumer's grant of consent.'' \161\ If the former, EPIC argues
using a telemarketing script as a record of the request for consent is
insufficient when telemarketers often fail to follow the scripts.\162\
If the latter, EPIC argues it would ``eviscerate the recordkeeping
requirement'' when the new consent requirements include `` `a copy of
the request provided.' '' \163\ EPIC also argues allowing a recording
of only the consent provided without the actual request for consent
would allow the telemarketer or seller to record a series of the ``word
`yes,' which would be meaningless without any context.'' \164\ NAAG
takes it a step further and urges the Commission to require recordings
of the entire telemarketing transaction whenever consent is requested
verbally.\165\
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\160\ 2022 NPRM, 87 FR at 33687.
\161\ EPIC 34-23 at 11.
\162\ Id.
\163\ Id.
\164\ Id.
\165\ NAAG 34-20 at 10. NAAG has also urged the Commission to
require a recording whenever a telemarketing call includes a
negative option offer. NAAG 34-20 at 6. It also requests that the
Commission require a full refund if a consumer complains of
unauthorized charges and the seller is unable to provide a recording
of the transaction as proof of consent. Id. Since the Commission has
issued the Negative Option NPRM, the Commission will not address
this comment here.
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The 2022 NPRM specifies that, with respect to requests for verbal
consent where no provision of the TSR requires a recording, a
telemarketing script would be sufficient for a copy of the request for
consent. It did not propose that a telemarketing script would be
sufficient as a record of the consent provided. But the Commission
recognizes the concerns raised by NAAG and EPIC, that without a
recording of the consent requested, a recording of the request provided
would
[[Page 26771]]
be meaningless. Given that industry has stated scripts are not ``set in
stone'' and ``[w]ell-trained telemarketers are able to deviate from
scripts or not use them at all,'' \166\ the Commission states that, for
a complete record of consent that is requested verbally and where no
provision of the TSR requires a recording, a telemarketer or seller
must retain a recording of the consent requested as well as the consent
provided to comply with proposed Section 310.5(a)(8). In addition, the
recording must make clear the purpose for which consent was provided.
The Commission does not believe requiring a recording of both the
consent requested and provided would result in additional burden to
businesses since it believes most businesses would have made a
recording of both to comply with the recordkeeping provisions in the
ordinary course of business.
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\166\ ECAC 34-22 at 4.
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In further response to NAAG and EPIC's concern, the Commission does
not believe a recording of the entire telemarketing transaction is
necessary if it is not otherwise required by another provision of the
TSR. To require a recording of the entire transaction whenever consent
is requested would effectively require a recording of all telemarketing
transactions that are subject to the TSR.\167\
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\167\ The TSR states it is an abusive practice to ``cause
billing information to be submitted for payment, directly or
indirectly, without the express informed consent of the customer or
donor.'' 16 CFR 310.4(a)(7). This prohibition applies to all
telemarketing transactions subject to the TSR. Thus, requiring a
recording of every telemarketing call whenever consent is requested
would essentially mean that all telemarketing calls subject to the
TSR would need to be recorded.
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The Commission reiterates that sellers and telemarketers remain
obligated to comply with all requirements outlined in other consent
provisions in the TSR.\168\ For transactions involving preacquired
account information, telemarketers and sellers must fulfill the
requirements of Section 310.4(a)(7)(i) and (ii), which include
recording the entire telemarketing transaction if there is a free-to-
pay conversion feature. For consent to receive robocalls or calls to
phone numbers on the DNC Registry, telemarketers and sellers must abide
by the requirements of Sections 310.4(b)(1)(iii)(B)(1) and
(b)(1)(v)(A), respectively, which include obtaining a consumer's
written consent.\169\ And for telemarketing transactions using certain
payment methods, telemarketers and sellers must comply with Section
310.3(a)(3), which includes obtaining a consumer's authorization to be
billed in writing or, if verbal consent is requested, a recording of
the transaction that evidences a consumer has received specific
information. The Commission reiterates this rule amendment does not
modify the requirements for consent outlined in the TSR; rather it
clarifies what records must be kept to demonstrate compliance with the
existing requirements.
---------------------------------------------------------------------------
\168\ See 16 CFR 310.3(a)(3), 310.4(a)(7),
310.4(b)(1)(iii)(B)(1), and 310.4(b)(1)(v)(A).
\169\ The Commission reiterates that a seller or telemarketer
may not use an oral recording of consent for any provision of the
TSR that requires consent to be provided in writing.
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7. Section 310.5(a)(9)--Other Service Providers
The Commission proposed requiring sellers and telemarketers to keep
records of all service providers the telemarketer uses to deliver an
outbound call in their telemarketing campaigns, such as voice
providers, autodialers, sub-contracting telemarketers, or soundboard
technology platforms. The provision would only apply to the service
providers with which the seller or telemarketer has a business
relationship, and not to every service provider involved in delivering
an outbound call. For each service provider, the seller or telemarketer
would keep records of any applicable contracts, the date the contract
was signed, and the time period the contract is in effect. The seller
or telemarketer would keep such records for five years from the date
the contract expires or five years from the date the telemarketing
activity covered by the contract ceases, whichever is shorter.
The Commission received four comments on this proposal. EPIC, NAAG,
PACE, and WPF all support the proposed amendment, but also suggested
some modifications.\170\ WPF repeated its request the Commission use
broader terminology than ``soundboard technology platforms'' in
defining service providers.\171\ EPIC repeated its request the
Commission require sellers and telemarketers to also keep records of
which service provider they used for each telemarketing campaign to
ensure those service providers are also complying with the TSR.\172\
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\170\ EPIC 34-23 at 7-8; NAAG 34-20 at 7-8; PACE 33-15 at 3; WPF
34-21 at 2.
\171\ WPF 34-21 at 2; see also Section III.A.2 (Call Detail
Records).
\172\ EPIC 34-23 at 8.
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The Commission clarifies that service providers referenced under
this provision include any entity that provides ``digital soundboard''
technology rather than ``soundboard technology platforms,'' to make
clear that sellers and telemarketers must retain records of any entity
that provides any digital or sound technologies that sellers or
telemarketers use to convey a verbal message to a consumer in
telemarketing. This includes, for example, service providers that
telemarketers or sellers use to mimic or clone the voice of an
individual to deliver live and prerecorded outbound telemarketing
calls. With respect to EPIC's concerns of ensuring service providers
are also complying with the TSR, as discussed above in Section
III.A.2--Call Detail Records, the Commission believes it is not
necessary to require records of the service provider used per
telemarketing campaign. Requiring retention of all call detail records
and records of the service providers used in making outbound
telemarketing calls would be sufficient for the Commission and other
law enforcement agencies to enforce the TSR and strikes an appropriate
balance against industry's concerns regarding burden.
PACE requests the Commission limit this provision to the service
providers with which sellers and telemarketers have a direct
contractual relationship rather than a ``business relationship.'' \173\
PACE argues it would be unreasonable to expect a seller to maintain
records of its telemarketers' voice providers when the contractual
relationship is between the telemarketer and voice provider.\174\ PACE
also asks the Commission limit the five year retention time period from
the date the contract expires rather than when the telemarketing
activity covered by the contract ceases.\175\ PACE expressed concerned
one party to the contract might cease the telemarketing activity
without informing the other party and it would be difficult to identify
when the retention period is triggered.\176\
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\173\ PACE 33-15 at 3.
\174\ Id.
\175\ Id.
\176\ Id.
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The Commission recognizes the potential for uncertainty in the
scenario PACE raises and will modify the recordkeeping requirements
accordingly to require retention of any records under this provision
for five years from the date the contract expires.\177\ With respect to
PACE's request to limit the recordkeeping requirements to those service
providers with whom sellers or telemarketers have a direct contractual
relationship, the Commission is not persuaded that requiring records of
service providers with which they have a business relationship would
cause
[[Page 26772]]
additional burden. As explained in more detail in Section III.A.14--
Compliance Obligation, the Commission will allow sellers and
telemarketers to allocate recordkeeping responsibilities between
themselves. In the scenario that PACE raises, a seller can simply
require their telemarketer to retain records of all the service
providers it uses to make outbound telemarketing calls on the seller's
behalf.
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\177\ If, after the end of a fixed term contract, a service
provider continues to provide services and the telemarketer or
seller continues to pay for those services, the Commission will
consider the contract extended until performance ceases.
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8. Sections 310.5(a)(10)--Entity-Specific DNC List
The 2022 NPRM also proposed requiring telemarketers and sellers to
maintain for five years records related to the entity-specific DNC list
and its corresponding safe harbor provision under Section
310.4(b)(3)(iii).\178\ Specifically, the Commission proposed requiring
telemarketers and sellers to retain records of: (1) the consumer's
name, (2) the phone number(s) associated with the DNC request, (3) the
seller or charitable organization from which the consumer does not wish
to receive calls, (4) the telemarketer that made the call; (5) the date
the DNC request was made; and (6) the good or service being offered for
sale or the charitable purpose for which contributions are being
solicited.
---------------------------------------------------------------------------
\178\ 2022 NPRM, 87 FR at 33686.
---------------------------------------------------------------------------
The Commission received four comments on this proposal. NAAG, PACE,
and WPF, generally support the provision, noting that businesses likely
retain this information in the ordinary course of business, while ECAC
raised concerns.\179\ ECAC agrees that businesses likely keep most of
the data listed in the proposed provision, but stated the requirements
should not include retention of consumer phone numbers or records of
the purpose of the call (e.g., the good or service offered for sale or
the charitable purpose of contributions solicited) because both are
burdensome to retain and irrelevant to the entity-specific TSR
provisions.\180\ Instead, ECAC argues the Commission should modify the
entity-specific DNC requirements so it prohibits calls to specific
numbers rather than specific people, similar to how the DNC Registry is
applied.\181\ PACE also requested the Commission clarify that the new
entity-specific DNC recordkeeping provision requires retention of the
telemarketing entity that made the call rather than the individual
telemarketer.\182\
---------------------------------------------------------------------------
\179\ ECAC 34-22 at 4; NAAG 34-20 at 8; PACE 33-15 at 3-4; WPF
34-21 at 3.
\180\ ECAC 34-22 at 4.
\181\ Id.
\182\ PACE 33-15 at 4.
---------------------------------------------------------------------------
The Commission clarifies that the new recordkeeping provision
requires retention of the identity of the telemarketing company that
made the call and not the individual telemarketer. This requirement is
particularly important for sellers or charitable organizations who
engage multiple telemarketing entities to sell their good or service or
seek a charitable contribution through telemarketing. Sellers or
charities already should know which telemarketing entity logged the
consumer's request to cease receiving calls on their behalf and ensure
all their telemarketers abide by that request.
Similarly, when a telemarketer engages in telemarketing on behalf
of multiple sellers or charitable organizations, it is important to
require the retention of records of the purpose of the call any time a
consumer asks a telemarketer to add them to the entity-specific DNC
list. Since the entity-specific DNC prohibition is seller or charitable
organization specific, telemarketers already should retain this
information in the ordinary course of business because telemarketers
must keep track of which seller on whose behalf they cannot contact
specific consumers.
With respect to ECAC's concerns that retaining consumer phone
numbers is irrelevant and overly burdensome, the Commission notes the
safe harbor provision for the entity-specific DNC list is phone-number
based and not based on a consumer's name. Section 310.4(b)(3) states
that a seller or telemarketer shall not be liable for violating the
entity-specific DNC provisions if, among other things, they maintain
and record a ``list of telephone numbers the seller or charitable
organization may not contact, in compliance with [the entity-specific
DNC provision.]'' \183\ Telemarketers must already retain a consumer's
phone number in the ordinary course of business to comply with the TSR;
including it in the new recordkeeping provision would not impose
additional burden on businesses.
---------------------------------------------------------------------------
\183\ 16 CFR 310.4(b)(3)(iii).
---------------------------------------------------------------------------
9. Section 310.5(a)(11)--DNC Registry
The 2022 NPRM also proposed requiring telemarketers and sellers to
maintain, for five years, records of every version of the FTC's DNC
Registry the telemarketer or seller downloaded in implementing the
process referenced in the safe harbor provision of Section
310.4(b)(3)(iv).\184\
---------------------------------------------------------------------------
\184\ 2022 NPRM, 87 FR at 33686.
---------------------------------------------------------------------------
The Commission received four comments on this provision. NAAG,
PACE, and WPF generally support the proposed provision, but also
request some clarifications or modifications, while ECAC generally
objects to the requirement.\185\ WPF notes it ``strongly support[s]''
the proposed changes, noting they would ensure the ``integrity of the
Do Not Call Registry.'' \186\ ECAC argues the Commission should not
require records of every version of the DNC Registry used because it
``imposes significant costs and burdens'' that ``greatly exceed any
marginal benefit'' to the Commission, particularly when many of its
members outsource scrubbing responsibilities to third parties and may
never download the DNC Registry in the first place.\187\
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\185\ ECAC 34-22 at 4; NAAG 34-20 at 8; PACE 33-15 at 3-4; WPF
34-21 at 3.
\186\ WPF 34-21 at 3.
\187\ ECAC 34-22 at 4.
---------------------------------------------------------------------------
WPF requests the Commission require telemarketers to keep records
of how many times they accessed the DNC Registry or parts of the DNC
Registry.\188\ PACE requests the Commission clarify how it believes
sellers and telemarketers would comply with the proposal that they
retain records of ``every version of the registry they have
downloaded.'' \189\ PACE states it would be ``redundant'' if the
Commission is requiring businesses to ``maintain separate versions of
the registry apart from the up-to-date one'' since most businesses only
``scrub against the current version'' of the registry in the ordinary
course of business.\190\ PACE would support requiring them to
``document the version of the registry they used'' since doing so would
reduce ``redundancy and data storage costs associated with keeping
expired registries.'' \191\
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\188\ WPF 34-21 at 3.
\189\ PACE 33-15 at 4.
\190\ Id.
\191\ Id.
---------------------------------------------------------------------------
Given the objections raised, the Commission will modify this
provision to clarify that sellers and telemarketers need not keep every
version of the DNC Registry they accessed to comply with the TSR's safe
harbor rules. Instead, sellers and telemarketers must retain records of
which version they used by keeping records of: (1) the name of the
entity which accessed the registry; (2) the date the DNC Registry was
accessed; (3) the subscription account number that was used to access
the registry; and (4) the telemarketing campaign(s) for which it was
accessed. Amending this provision to retain this information will
address ECAC's concerns that the seller or telemarketer may use a
third-party service to access the DNC Registry, and PACE's concern that
retaining the actual version of the DNC Registry would be
[[Page 26773]]
redundant and burdensome. It would also address WPF's request that
sellers and telemarketers should keep records of the number of times
they access the DNC Registry. Presumably, sellers and telemarketers
only access the DNC Registry to ensure compliance with the TSR's DNC
prohibitions since accessing the DNC Registry for any other purpose
would be a violation of the TSR.\192\
---------------------------------------------------------------------------
\192\ 16 CFR 310.4(b)(2).
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10. Time Period To Keep Records
The Commission proposed changing the time period that telemarketers
and sellers must keep records from two years to five years from the
date the record is made, except for Sections 310.5(a)(1) and
(a)(9),\193\ where the Commission proposed requiring retention for five
years from the date that records covered by those sections are no
longer in use. The Commission received nine comments on this
proposal.\194\ EPIC, NAAG, and WPF support the proposal, citing as
rationales for their support the amount of time necessary to complete
an investigation of TSR violations and that telemarketers fail to
comply with litigation holds that are issued while investigations are
pending.\195\ ECAC, NFIB, OCUL, PACE, Sirius, and the US Chamber of
Commerce (``Chamber'') all object, raising burden concerns.\196\ PACE
stated the Commission cannot assume its proposal would not be unduly
burdensome based on the fact that data storage costs have decreased
since 2014.\197\ This is particularly true for small businesses,
according to PACE, when the Commission is simultaneously expanding the
number of records that must be retained and the length of time those
records must be retained.\198\ Sirius and OCUL also argue the FTC
should not require retention of records ``beyond the agency's statute
of limitations.'' \199\ Sirius argues the appropriate statute of
limitations is three years,\200\ and OCUL argues that while the TSR
does not ``specify a statute of limitations,'' courts will ``apply the
statute of limitations of the state where the case is filed,'' which is
two years in Ohio.\201\
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\193\ The records covered by these two sections include
advertising materials and a list of the service providers who
assisted in outbound telemarketing. See supra Sections III.A.1
(Substantially Different Advertising Materials) and III.A.7 (Other
Service Providers).
\194\ 2022 NPRM, 87 FR at 33686.
\195\ EPIC 34-23 at 4-5; NAAG 34-20 at 8-9; WPF 34-21 at 3.
\196\ ECAC 34-22 at 6; NFIB 33-4 at 5; OCUL 34-19 at 2-3; PACE
33-15 at 4; Sirius 34-18 at 3; Chamber 34-24 at 1.
\197\ PACE 33-15 at 4.
\198\ Id.
\199\ Sirius 34-18 at 3.
\200\ Id.
\201\ OCUL 34-19 at 2-3.
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The Commission is not persuaded by the general burden concerns
commenters have raised. None of the commenters provided any information
on what the burden would be and why small businesses would not be able
to comply with the new recordkeeping amendments. As mentioned in
Section III.A.2--Call Detail Records, the Commission provided an
estimate of the additional cost of complying with the new recordkeeping
amendments but did not receive any comment or data on why its estimate
is inaccurate.
Additionally, the Commission notes the statute of limitations for
the FTC to seek civil penalties under the TSR is five years and not two
or three years, as some commenters argued. Although the statute of
limitations to seek consumer redress for TSR violations is three years
under Section 19 of the FTC Act,\202\ the applicable statute of
limitations for civil penalties is five years under Section 5 of the
FTC Act.\203\ As such, the Commission believes it is appropriate and
necessary to require the retention of records for five years. This
requirement is particularly important when, as EPIC has noted, not all
companies will comply with a litigation hold request while an
investigation is pending, potentially leaving law enforcement agencies
with no recourse in enforcing the TSR.\204\
---------------------------------------------------------------------------
\202\ 15 U.S.C. 57b(d).
\203\ 15 U.S.C. 45(m); 28 U.S.C. 2462; see also United States v.
<a href="http://MyLife.com">MyLife.com</a>, Inc., 567 F. Supp. 3d 1152, 1166 (C.D. Cal. Oct. 19,
2021) (holding the statute of limitations for civil penalties under
the FTC Act is five years); United States v. Dish Network, LLC, 75
F. Supp. 3d 942, 1004-05 (C.D. Ill. 2014) (holding the three-year
statute of limitations in 15 U.S.C. 57b does not apply to claims for
civil penalties under Section 5(m) of the FTC Act, and since Section
5(m) is silent, the applicable statute of limitations is five years
under 28 U.S.C. 2462). The statute of limitations for a private
right of action under the Telemarketing Act is three years. 15
U.S.C. 6104(a).
\204\ EPIC 34-23 at 4-5.
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11. Section 310.5(b)--Format of Records
The 2022 NPRM proposed modifying the formatting requirements to
require records that include phone numbers comport with the
International Telecommunications Union's Recommendation E.164 format
for international phone numbers and North American Numbering plan for
domestic phone numbers.\205\ For records that include time and call
duration, the 2022 NPRM proposed industry keep these records to the
closest whole second, and record times in Coordinated Universal Time
(UTC). The Commission received two comments on this proposal. Both
commenters support the amendments, but also requested clarifications or
modifications.
---------------------------------------------------------------------------
\205\ 2022 NPRM, 87 FR at 33687.
---------------------------------------------------------------------------
PACE asked the Commission to clarify that the new amendments
requiring that time be kept in UTC format applies only to new records
moving forward.\206\ It also requested the Commission allow businesses
a reasonable time to implement the proposed changes since it may
require reprogramming software and IT systems.\207\ The Commission
clarifies that the new formatting requirements apply only to new
records created after the proposed amendments go into effect.
Additionally, as stated in Section III.A.2--Call Detail Records, the
Commission will allow sellers and telemarketers a one hundred eighty-
day grace period to implement any new systems, software, or procedures
necessary to comply with that new provision. The Commission believes
that should provide companies sufficient time to reprogram any software
systems necessary to also comport with the new formatting requirements.
---------------------------------------------------------------------------
\206\ PACE 33-15 at 5.
\207\ Id.
---------------------------------------------------------------------------
EPIC requests the Commission require companies to maintain records
in a format that is easily retrievable and inexpensive to produce and
make clear the regulated party is responsible for the cost of producing
the records.\208\ EPIC also requests the Commission impose more
specific formatting requirements and require telemarketers and sellers
to keep their records in a format that ``is commonly used to work with
large data sets'' and ``easily readable'' such as ``separate columns
for separate data points rather than every data point within the same
single data field.'' \209\ The Commission considered EPIC's suggestions
and declines to impose more specific formatting requirements.
Technology is advancing at such a rapid pace that the Commission is
concerned more specific formatting requirements might become obsolete
in the future. Moreover, in the Commission's experience, companies that
use technologies such as an autodialer to make telemarketing calls
rather than manual means typically retain records of those calls in an
easily retrievable format. The Commission believes allowing companies
to retain records as they would in the ordinary course of business
strikes an appropriate balance between law enforcement's interest in
obtaining the information necessary to enforce the TSR and industry's
concerns
[[Page 26774]]
about burden. Finally, the Commission does not believe it is
appropriate to require sellers and telemarketers to affirmatively bear
the cost of producing records to private litigants regardless of the
outcome of their suits as EPIC requests,\210\ when Congress already
included a provision in the Telemarketing Act that allows a court to
award the cost of the suit and any reasonable attorney or expert
witness fees to the prevailing party.\211\
---------------------------------------------------------------------------
\208\ EPIC 34-23 at 13.
\209\ Id.
\210\ Id.
\211\ 15 U.S.C. 6104(d).
---------------------------------------------------------------------------
12. Section 310.5(c)--Violation of Recordkeeping Provisions
The 2022 NPRM proposed clarifying that the failure to keep each
record required by Section 310.5 in a complete and accurate manner
constitutes a violation of the TSR.\212\ The Commission received five
comments on this proposal. EPIC and NAAG support the proposal, stating
it is a ``common-sense approach in deterring deceptive telemarketers/
sellers from harming consumers'' \213\ and ``inaccurate or incomplete
records are of little use.'' \214\ PACE also supports the proposed
clarification, stating the proposal is ``logical and in line with the
spirit of the TSR and its accompanying legislation.'' \215\ But PACE
raised concerns about the requirement that records be kept in an
accurate and complete manner, arguing that companies who fail to keep
all or some records in a complete and accurate manner through
inadvertent error should not be penalized in the same way as
telemarketers and sellers who fail to keep all or some categories of
records.\216\ Instead, PACE urges leniency for situations where the
failure is inadvertent rather than willful and requests the Commission
provide ``a 30-day cure period when the alleged violation can be easily
corrected.'' \217\
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\212\ 2022 NPRM, 87 FR 33687.
\213\ NAAG 34-20 at 10.
\214\ EPIC 34-23 at 5.
\215\ PACE 33-15 at 6.
\216\ Id.
\217\ Id. PACE also cites to the example NFIB provided in its
comment as an example of why PACE believes the Commission should
provide some leniency and an opportunity to cure rather than
penalize inadvertent errors.
---------------------------------------------------------------------------
NFIB and Sirius object to this proposal.\218\ Sirius proposes the
Commission ``count violations by each type of record rather than by
each record, as proposed.'' \219\ NFIB argues allowing civil penalties
for ``each erroneous error'' is as ``perverse as the evil the FTC
states it is addressing, for it would allow the FTC to put a seller or
telemarketer out of business for a relatively minor mistake that
affected many records.'' \220\ NFIB provides an example to illustrate
its concerns describing a situation where a company ``made the
relatively minor mistake of keeping calls in the time zone of the
person called, rather than in Coordinated Universal Time (UTC)
format.'' \221\ NFIB believes in this situation the company would be
facing astronomically high fines for the hundreds of thousands of calls
it makes a year.\222\ Instead, NFIB argues the FTC should provide a
reasonable time period to cure these errors once discovered, such as 90
days, and only commence imposing fines for each week after the
reasonable period expires.\223\ According to NFIB, this would be a more
balanced system that ``avoids both the extreme that a relatively minor
design violation yields an astronomical fine that puts the seller or
marketer out of business and the opposite extreme that a violation
results in such a small fine that a seller or marketer accepts fines as
an annoying but manageable cost of doing business.'' \224\
---------------------------------------------------------------------------
\218\ NFIB 33-4 at 6-7; Sirius 34-18 at 8.
\219\ Sirius 34-18 at 8.
\220\ NFIB 33-4 at 7.
\221\ Id.
\222\ Id.
\223\ Id.
\224\ Id.
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The Commission recognizes NFIB's and PACE's concerns regarding
inadvertent errors resulting in large penalties and, thus, included a
safe harbor provision for call detail records in the proposed
amendments. As discussed in Section III.A.13--Safe Harbor for
Incomplete or Inaccurate Records Pursuant to Section 310.5(a)(2) below,
the Commission believes it has provided a reasonable grace period for
sellers and telemarketers to cure any inadvertent deficiencies in their
recordkeeping system before any civil penalties might apply and the
proposed example NFIB raises would fall squarely within the safe
harbor, provided the company followed the other requirements of the
safe harbor.
Regarding Sirius's suggestion that failure to retain each type of
record equal one violation, the Commission is not persuaded imposing
civil penalties for each type of record would provide sufficient
incentive for companies to abide by the recordkeeping provisions given
the limited number of categories of records sellers and telemarketers
are required to retain.\225\
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\225\ Although Sirius did not provide a definition for what it
meant by ``type of record,'' the Commission interprets it to mean
the categories the Commission has outlined under the amended Section
310.5(a), which would limit the number of categories to eleven.
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13. Section 310.5(d)--Safe Harbor for Incomplete or Inaccurate Records
Kept Pursuant to Section 310.5(a)(2)
The Commission proposed including a safe harbor provision for
temporary and inadvertent errors in keeping call detail records
pursuant to Section 310.5(a)(2). Specifically, the 2022 NPRM stated a
seller or telemarketer would not be liable for failing to keep records
under Section 310.5(a)(2) if it can demonstrate that: (1) it
established and implemented procedures to ensure completeness and
accuracy of its records under Section 310.5(a)(2); (2) it trained its
personnel in the procedures; (3) it monitors compliance and enforces
the procedures, and documents its monitoring and enforcement
activities; and (4) any failure to keep accurate or complete records
under Section 310.5(a)(2) was temporary and inadvertent.\226\
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\226\ 2022 NPRM, 87 FR at 33687.
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The Commission received four comments on this proposal. PACE states
a ``safe harbor for maintaining call detail records is necessary''
while Sirius states it would ``provide a good foundation for seller and
telemarketer compliance plans.'' \227\ WPF states it does not ``object
to the safe harbor proposed'' because it was ``narrow enough to allow
companies to make the kinds of mistakes that occur in day to day
business, and provides incentives to correct the errors.'' \228\
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\227\ PACE 33-15 at 6; Sirius 34-18 at 8.
\228\ WPF 34-21 at 4.
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NFIB, however, states it does not deem the safe harbor sufficient
because it is ``complex and limited'' and does not provide a ``great
source of comfort to sellers and marketers in its current form.'' \229\
Because the safe harbor would apply in the scenario NFIB posits above
where a company fails to keep call times in UTC format, the Commission
believes the safe harbor provides adequate protection against
inadvertent and temporary errors. The Commission, however, will revise
this provision to provide sellers or telemarketers thirty days to cure
an inadvertent error, as PACE suggests.\230\
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\229\ NFBI 33-4 at 8.
\230\ PACE 33-15 at 6; see also Section III.A.12 (Violation of
Recordkeeping Provisions which provides additional discussion about
the proposed safe harbor).
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14. Section 310.5(e)--Compliance Obligations
The Commission proposed modifying the compliance obligations in
Section 310.5(e) to state that, in the event the seller and
telemarketer failed to allocate responsibility between themselves for
[[Page 26775]]
maintaining the required records, the responsibility for complying with
the recordkeeping requirements would fall on both parties.\231\ The
Commission received four comments on this proposal. NAAG, PACE, and
Sirius supported the proposal.\232\ PACE states that ``not only do we
consider this fair, but we believe it will encourage parties to
negotiate their contracts and cease regarding TSR recordkeeping as an
afterthought.'' \233\
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\231\ 2022 NPRM, 87 FR at 33687.
\232\ NAAG 34-20 at 10; PACE 33-15 at 6; Sirius 34-18 at 8.
\233\ PACE 33-15 at 6.
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EPIC, however, objects to this amendment and strongly urges the
Commission to require both telemarketers and sellers to retain records
rather than allowing them to allocate responsibilities.\234\
Specifically, EPIC raises a concern that a seller may allocate
responsibilities to a telemarketer that resides outside the United
States and would not be subject to U.S. jurisdiction and process.\235\
EPIC argues that if the Commission is inclined to designate only one
party, it should be the seller who is responsible because the seller
should be accountable for the telemarketers it hires, is less likely to
be overseas and undercapitalized compared to telemarketers, and likely
receives most of the sales proceeds.\236\ But EPIC still believes the
Commission should explicitly require both sellers and telemarketers be
responsible for recordkeeping to prevent any gamesmanship where sellers
move overseas to avoid liability.\237\ In the event the Commission is
not persuaded, EPIC also argues the Commission should require sellers
to audit their telemarketers, including reviewing an actual production
of preserved records, and require sellers who hire overseas
telemarketers to require those telemarketers to have a U.S.-based agent
so their records would be subject to U.S. jurisdiction and
process.\238\
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\234\ EPIC 34-23 at 8-10.
\235\ Id at 10.
\236\ Id.
\237\ Id.
\238\ Id.
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The Commission shares EPIC's concerns regarding gamesmanship and
the challenges of obtaining records from overseas entities. The
Commission is also concerned about sellers hiring unscrupulous
telemarketers and disclaiming any responsibility for recordkeeping by
allocating the responsibility to those telemarketers. The Commission
notes that under the proposed amendment, sellers who allocate
recordkeeping responsibilities to their telemarketers would be required
to ``establish and implement practices and procedure to ensure the
telemarketer is complying with the [TSR's recordkeeping provisions].''
\239\ But given the concerns EPIC has raised, the Commission will
modify this provision to also require sellers who allocate
recordkeeping responsibilities to their telemarketer to retain access
rights to those records so the seller can produce responsive records in
the event it has hired a telemarketer overseas. Requiring sellers to
ensure their telemarketers are abiding by the TSR's recordkeeping
provisions and retain access to their telemarketer's records of
telemarketing activities on the seller's behalf should not impose
onerous obligations, and such access may never be necessary. Sellers
likely already take such steps in the ordinary course of business,
given that telemarketers are acting as their agents and their
telemarketers' violations of the TSR could also expose them to
liability under the TSR.
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\239\ 2022 NPRM, 87 FR at 33694.
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15. Authority To Require Recordkeeping
NFIB argues the new recordkeeping proposals exceed the FTC's
statutory authority under the Telemarketing Act.\240\ Section 6102(a)
of the Telemarketing Act directs the Commission to: (1) prescribe rules
prohibiting deceptive or abusive telemarketing acts or practices; \241\
(2) include in those rules a definition of deceptive acts or abusive
practices that shall include fraudulent charitable solicitations and
may include actions that constitute assisting or facilitating such as
credit card laundering; \242\ and (3) include in those rules a specific
list of abusive practices that govern patterns and timing of
unsolicited calls, and disclosures of certain material information in
sales or charity calls.\243\ It also states at the end of Section
6102(a) that ``[i]n prescribing the rules described in this paragraph,
the Commission shall also consider recordkeeping requirements.''
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\240\ NFIB 33-4 at 5-6.
\241\ 15 U.S.C. 6102(a)(1).
\242\ Id. 6102(a)(2).
\243\ Id. 6102(a)(3).
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NFIB argues the directive to consider recordkeeping requirements
applies only to the specific list of abusive practices under Section
6102(a)(3) and, since the other paragraphs are silent as to
recordkeeping, the Act affirmatively prohibits the FTC from requiring
recordkeeping.\244\ The Commission does not agree. The language of the
Act shows the directive to consider recordkeeping applies to the Act's
mandate to promulgate rules addressing deceptive or abusive
telemarketing practices and is not limited to the specific abusive
practices identified in Section 6102(a)(3).
---------------------------------------------------------------------------
\244\ NFIB 33-4 at 6.
---------------------------------------------------------------------------
Section 6102(a) generally requires the Commission to promulgate
rules regarding deceptive or abusive telemarketing acts or practices.
Section 6102(a)(1) states: ``[t]he Commission shall prescribe rules
prohibiting deceptive telemarketing acts or practices and other abusive
telemarketing acts or practices.'' \245\ Sections 6102(a)(2) and (a)(3)
then identify specific provisions that Congress instructs the
Commission to include, or consider including, when it promulgates its
rules under Section 6102(a)(1). Section 6102(a)(2) directs the
Commission to ``include in such rules respecting deceptive
telemarketing acts or practices'' a definition of deceptive
telemarketing acts or practices, which may include, among other things,
credit card laundering.\246\ Section 6102(a)(3) directs the Commission
to ``include in such rules respecting other abusive telemarketing acts
or practices'' specific requirements including: (1) ``a requirement
that telemarketers may not undertake a pattern of unsolicited telephone
calls which the reasonable consumer would consider coercive or abusive
of such consumer's right to privacy''; (2) ``restrictions on the hours
of the day and night when unsolicited telephone calls can be made to
consumers''; (3) ``a requirement that any person engaged in
telemarketing for the sale of goods or services'' make certain
disclosures; and (4) ``a requirement that any person engaged in
telemarketing for the solicitation of charitable contributions'' make
certain disclosures.\247\ At the end of Section 6102(a)(3), in a
separate unnumbered sentence, the Act states ``[i]n prescribing the
rules described in this paragraph, the Commission shall also consider
recordkeeping requirements.'' \248\ Thus, Congress directed the
Commission to promulgate rules prohibiting deceptive or abusive
telemarketing acts or practices under Section 6102(a)(1), and Sections
6102(a)(2) and (a)(3) merely inform what types of acts or practices the
Commission should include, or consider including, when it promulgates
those rules.\249\
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\245\ 15 U.S.C. 6102(a)(1) (emphasis added).
\246\ Id. 6102(a)(2) (emphasis added).
\247\ Id. 6102(a)(3) (emphasis added).
\248\ Id.
\249\ The Commission also notes that the official codification
of the Telemarketing Act in the United States Code aligns the
indentation of the statement ``In prescribing the rules described in
this paragraph, the Commission shall consider recordkeeping
requirements'' with Section 6102(a) rather than with Section
6102(a)(3). As such, it supports the Commission's position that the
directive to consider recordkeeping refers generally to Section
6102(a) and is not limited to the specific acts and practices listed
in Section 6102(a)(3). See, e.g., <a href="https://www.govinfo.gov/content/pkg/USCODE-2011-title15/pdf/USCODE-2011-title15-chap87.pdf">https://www.govinfo.gov/content/pkg/USCODE-2011-title15/pdf/USCODE-2011-title15-chap87.pdf</a> (last
visited November 21, 2023).
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[[Page 26776]]
NFIB's interpretation of Section 6102(a)(3) improperly divorces
that provision from the rest of the statute. As discussed, Section
6102(a)(3) contains Congress's specific guidance regarding the types of
rules the Commission must adopt or consider adopting to implement
Section 6102(a)(1)'s general grant of authority to ban deceptive or
abusive telemarketing practices. Section 6102(a)(3) states when the
Commission ``prescrib[es] the rules described'' by Congress, it ``shall
also consider recordkeeping requirements.'' This provision thus
authorizes the Commission to adopt--or not adopt--recordkeeping
requirements and declare violations of such requirements to be an
abusive telemarketing practice.
But even if Section 6102(a)(3) did not expressly authorize the
Commission to consider recordkeeping requirements, the Commission may
still require recordkeeping under Section 6102(a)(1). Congress's
purpose in enacting the Telemarketing Act was to prevent deceptive or
abusive telemarketing acts or practices.\250\ As the Commission has
noted over the years, recordkeeping provisions prevent deceptive or
abusive telemarketing acts or practices because they are necessary to
effectively enforce the TSR.\251\ NFIB's assertion that ``the rules for
recordkeeping do not prevent or address deceptive or other abusive
telemarketing acts or practices'' is not an accurate assertion \252\
and it is undermined by the Commission's law enforcement experience and
that of other enforcers.\253\
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\250\ H.R. Rep. No. 103-20, 103rd Cong., 1st Sess. (``House
Report'') at 1; S. Rep. No. 103-80, 103rd Cong., 1st Sess. (``Senate
Report'') at 1 (stating the purpose of the bill was ``to prevent
fraudulent or harassing telemarketing practices'').
\251\ Original TSR 60 FR at 43857; 2003 TSR Amendments, 68 FR at
4653; 2014 TSR Rule Review, 79 FR at 46735.
\252\ NFIB 33-4 at 5-6.
\253\ See, e.g., NAAG 34-20 at 3-10.
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Even if Section 6102(a)(1) could be read as being silent on
recordkeeping, that would not prohibit the Commission from including
recordkeeping in any rules the Commission promulgates under this
section of the Act. Rather, Congress directed the Commission to
prescribe rules prohibiting deceptive telemarketing acts or practices
and the Commission is granted authority to issue rules, including
recordkeeping provisions, for any deceptive or abusive telemarketing
acts or practices it identifies in promulgating the TSR.\254\
Congress's silence would make sense given the Commission had yet to
identify these deceptive or abusive acts or practices in the TSR at the
time the Telemarketing Act was passed, and it was unknown whether and
what form of recordkeeping would be necessary to ensure
compliance.\255\ Interpreting the Telemarketing Act to prohibit the
Commission from requiring recordkeeping would contradict the Act's
stated purpose--to ``enact legislation that will offer consumers
necessary protection from telemarketing deception and abuse.'' \256\
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\254\ See. e.g., U.S. Sugar Corp. v. EPA, 830 F.3d 579, 617-18
(D.C. Cir. 2016) (upholding EPA's authority to require recordkeeping
in regulating even though Congress was silent on that issue because
``Congress plainly intended EPA to regulate sources burning `any'
solid waste, a goal presumably advanced by the recordkeeping
presumption'').
\255\ Congress has amended the Telemarketing Act numerous times
over the years but made no changes to the recordkeeping provision.
See, e.g., supra note 13. Given that the TSR has always included
recordkeeping requirements since its inception in 1995 and the FTC
has reported to Congress on its rulemaking efforts at various
congressional hearings, Congress's silence on this issue can be
interpreted as agreement with the FTC's statutory construction. See,
e.g., Washington All. of Tech. Workers v. U.S. Dep't of Homeland
Sec., 50 F.4th 164, 182 (D.C. Cir. 2022) (quoting Jackson v. Modly,
949 F.3d 763, 772-73 (D.C. Cir. 2020)).
\256\ 15 U.S.C. 6101(5). The Commission's position is also
supported by the legislative history, which demonstrates that
Congress intended for the Commission to consider recordkeeping
requirements more broadly. See Senate Report at 7. The Senate Report
references Section 3(a)(5) in an earlier version of the Act that
directed the Commission to ``prescribe rules regarding telemarketing
activities'' and in prescribing those rules to ``consider the
inclusion of . . . (5) recordkeeping requirements.'' Telemarketing
and Consumer Fraud and Abuse Prevention Act, S. 568, 103rd Cong.
(1993). At minimum, this legislative history supports the position
that the Commission may require recordkeeping for all abusive
telemarketing acts or practices it identifies in promulgating the
TSR and is not limited to those specific acts or practices listed in
Section 6103(a)(3).
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Nothing in the text of the Act prevents the Commission from
requiring persons to keep records substantiating their compliance with
any requirement of the TSR. Nor does NFIB explain why Congress would
have intended to deprive the Commission of records essential to the
enforcement of the rule. NFIB's interpretation would give telemarketers
and sellers a perverse incentive to commit deceptive and abusive
practices while destroying any record of those violations.
Finally, even if a court determines the Act only permits
recordkeeping for rules that address the specific acts and practices
listed in Section 6102(a)(3), the TSR's recordkeeping provisions meet
those criteria. The Final Rule requires recordkeeping for eleven
general categories of information: (1) advertisements, including
telemarketing scripts and robocall recordings; (2) call detail records;
(3) prize recipients; (4) customers; (5) customer information to
establish a business relationship; (6) previous donors; (7)
telemarketers' employees; (8) consent; (9) service providers; (10)
entity-specific DNC; and (11) versions of the FTC's DNC. Each of these
categories is necessary to ensure compliance with the provisions of the
TSR the Commission promulgated to address the specifics acts or
practices identified in Section 6102(a)(3).
For example, Section 6102(a)(3)(A) of the Act requires the FTC to
prohibit ``a pattern of unsolicited telephone calls which the
reasonable consumer would consider coercive or abusive of such
consumer's right to privacy.'' \257\ Accordingly, the Commission
promulgated Section 310.4(b) of the TSR to prohibit certain ``patterns
of calls,'' \258\ including prohibitions against robocalls, calls to
consumers who have asked a specific seller to stop calling, and calls
to consumers who have registered their phone numbers on the FTC's DNC
Registry.\259\ As explained in more detail in Section II--Overview of
the Proposed Amendments to the TSR above, the Commission needs all
eleven categories of information set forth in the Final Rule, including
the requirement that sellers and telemarketers retain call detail
records to ensure compliance with these prohibitions.\260\
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\257\ 15 U.S.C. 6102(a)(3)(A).
\258\ 16 CFR 310.4(b).
\259\ 16 CFR 310.4(b)(1)(iii) and (b)(1)(v). See also Original
TSR, 60 FR at 43854 (stating the entity-specific DNC provisions are
intended to effectuate the requirements of Section 6102(a)(3)(A) of
the Telemarketing Act); 2002 NPRM, 67 FR at 4518 (proposing the DNC
Registry to ``fulfill the mandate in the Telemarketing Act that the
Commission should prohibit telemarketers from undertaking `a pattern
of unsolicited telephone calls which the reasonable consumer would
consider coercive or abusive of such consumer's right to privacy''')
(quoting 15 U.S.C. 6102(a)(3)(A)); 2006 Denial of Petition for
Proposed Rulemaking, Revised Proposed Rule With Request for Public
Comments, Revocation of Non-enforcement Policy, Proposed Rule
(``2006 NPRM''), 73 FR 58716, 58726 (proposing adding an express
prohibition against [robocalls] pursuant to Section 6102(a)(3)(A) of
the Telemarketing Act).
\260\ See supra Sections II.A (Recordkeeping) and II.C (New
Definition for ``Previous Donor'').
---------------------------------------------------------------------------
Similarly, Section 6102(a)(3)(B) of the Act requires the FTC to
place restrictions on when telemarketers can make unsolicited calls,
while Sections 6102(a)(3)(C) and (D) require the FTC to mandate certain
disclosures. The FTC promulgated Section 310.4(c) of the TSR
[[Page 26777]]
to prohibit calls to a person's residence outside of certain hours and
Sections 310.4(d) and (e) to require telemarketers to disclose the
identity of the seller or charity, the purpose of the call, the nature
of the good or service being sold, and that no purchase is required to
win a prize or participate in a prize promotion. The TSR's existing and
amended recordkeeping requirements are necessary to ensure compliance
with these provisions of the TSR. For example, call detail records are
needed to ensure telemarketers abide by the call time restrictions,
while the requirements to retain records of advertisements,
telemarketing scripts, robocalls, consent, customers, prize recipients,
and call details regarding the content of the call are required to
determine whether a telemarketer has made the necessary disclosures.
B. Modification of the B2B Exemption
The 2022 NPRM proposed narrowing the B2B exemption to require B2B
telemarketing calls to comply with Section 310.3(a)(2)'s prohibition on
misrepresentations and Section 310.3(a)(4)'s prohibition on false or
misleading statements.\261\ The Commission received twelve comments on
this proposal.\262\ Rapid Financial Services, LLC and Small Business
Financial Solutions, LLC (collectively, ``Rapid Finance''), EPIC, NAAG,
USTelecom--The Broadband Association (``USTelecom''), WPF, and three
anonymous commenters all support the proposal.\263\ EPIC strongly
supports the proposal, stating ``there is no reason to believe that
phone-based attempts to exploit small business victims have diminished
since the pandemic began.'' \264\ NAAG states ``misrepresentations and
false or misleading statements, in any form, are harmful to trade and
commerce in general.'' \265\ WPF argues ``there is no downside to this
particular update--the FTC Act already prohibits such activity.'' \266\
The anonymous commenters expressed concern over the harm that
businesses suffer from deceptive telemarketing.\267\
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\261\ 2022 NPRM, 87 FR at 33687.
\262\ The Commission received an additional ten comments
addressing whether the Commission should generally repeal the B2B
exemption in its entirety. The Commission addresses those comments
in the 2024 NPRM, issued this same day.
\263\ Anonymous 34-11, 33-11, and 33-13; EPIC 34-23 at 17; NAAG
34-20 at 10; Rapid Finance 34-17 at 3; USTelecom 33-14 at 3-4; WPF
34-21 at 4.
\264\ EPIC 34-23 at 17.
\265\ NAAG 34-20 at 10.
\266\ WPF 34-21 at 4.
\267\ Anonymous 34-11, 33-11, and 33-13.
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USTelecom highlights small and medium-sized businesses (``SMBs''),
in particular, ``can be disproportionately impacted by malicious B2B
telemarketers'' and scammers primarily use phones as the primary means
of contacting SMBs.\268\ USTelecom also argues bad actors hide behind
the B2B exemption and other legal ambiguities to avoid accountability,
citing to a particularly pernicious example of a high-volume B2B
telemarketing robocall campaign purporting to sell services that help
SMBs boost their companies' Google listing that tied up the business's
phone lines.\269\
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\268\ USTelecom 33-14 at 3-4.
\269\ Id.
---------------------------------------------------------------------------
Rapid Finance states, as a general matter, it ``does not oppose,
and indeed supports the application of the TSR to B2B calls to prohibit
material misrepresentations and false or misleading statements in B2B
telemarketing transactions, including prohibiting the specific
misrepresentations listed in Section 310.3(a)(2).'' \270\ Rapid Finance
explains its business customers are ``often the target of telemarketers
seeking to peddle so-called debt settlement services to them.'' \271\
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\270\ Rapid Finance 34-17 at 3.
\271\ Id. Rapid Finance also argues that the amendments will
close the gap between how B2B sellers and B2B telemarketers are
treated under the TSR. Id. at 6-7. Rapid Finance appears to be under
the misimpression that the B2B exemption only applies to
telemarketers and not to sellers. That is incorrect and the
Commission clarifies that the exemption under Section 310.6(a)(7)
applies to both sellers and telemarketers. The Commission also notes
that Rapid Finance raised other issues that the Commission is not
addressing because they are unrelated to the focus of this
rulemaking. Id. at 6.
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NFIB, Revenue Based Finance Coalition (``RBFC''), Third Party
Payment Processors Association (``TPPPA''), and PACE all object to this
proposed amendment.\272\ RBFC argues amending the TSR to apply to
deceptive B2B telemarketing would ``undermine the Supreme Court's
interpretation of the FTC's authority to impose penalties,'' \273\
citing AMG Capital Management, LLC v. FTC.\274\ RBFC's arguments are
inapposite because the Supreme Court's decision in AMG concerned the
FTC's authority to obtain consumer redress under Section 13(b) of the
FTC Act; \275\ the decision did not address or implicate the
Commission's authority to promulgate rules under the Telemarketing Act.
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\272\ NFIB 33-4 at 8-12; RBFC 34-13 at 1-4; TPPPA 34-14 at 2;
PACE 33-15 at 7-9.
\273\ RBFC 34-13 at 3.
\274\ AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021).
\275\ 15 U.S.C. 53(b).
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PACE and NFIB argue applying the TSR to B2B telemarketing exceeds
the scope of the FTC's authority under the Telemarketing Act.\276\ They
claim the Telemarketing Act is limited to consumer harm because of its
``consistent use of consumer-oriented language'' and the focus on
consumer harm in the statutory text and legislative history. \277\ PACE
also argues the Telemarketing Act's directive for the Commission to
identify deceptive telemarketing practices is also limited to consumer
harm, because the Commission itself has historically conceptualized
deception from a consumer perspective in its policy statements.\278\
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\276\ NFIB 33-4 at 11; PACE 33-15 at 7-9.
\277\ PACE 33-15 at 8; see also NFIB 33-4 at 11 (arguing all
five findings in the Telemarketing Act reference consumer harm and
not harm to businesses).
\278\ PACE 33-15 at 7-9. NFIB raises separate objections to
repealing the B2B exemption based on changing market forces
described in the Commission's 2022 ANPR. NFIB 33-4 at 9-10. As
explained in the 2024 NPRM that the Commission is issuing
concurrently with this Final Rule, the Commission declined to move
forward with narrowing the B2B exemption as proposed in the 2022
ANPR. As such, the Commission will not address NFIB's argument here
since it is not applicable in requiring B2B telemarketing to comply
with the TSR's misrepresentation provisions.
---------------------------------------------------------------------------
The Commission disagrees. The Telemarketing Act directs the FTC to
promulgate a rule that addresses deceptive and abusive telemarketing
practices which, in the Commission's law enforcement experience,
includes B2B telemarketing. The language of the Act supports the
Commission's position.
First, the Act defines ``telemarketing,'' as ``a plan, program, or
campaign which is conducted to induce purchases of goods or services .
. ., by use of one or more telephones and which involves more than one
interstate telephone call.'' \279\ The Act exempts from the definition
of telemarketing ``the solicitation of sales through the mailing of a
catalog'' which meet certain criteria and ``where the person making the
solicitation does not solicit customers by telephone but only receives
calls initiated by customers in response to the catalog during those
calls. . . .'' \280\ The Act only specifies that ``telemarketing'' must
involve the use of one interstate telephone call but does not identify
who must participate in the call. To the extent it identifies any
participant, it uses the term customers, which includes
businesses.\281\
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\279\ 15 U.S.C. 6106(4).
\280\ 15 U.S.C. 6106(4) (emphasis added).
\281\ See, e.g., Customer, Merriam-Webster Dictionary, available
at <a href="https://www.merriam-webster.com/dictionary/customer">https://www.merriam-webster.com/dictionary/customer</a> (last visited
Feb. 1, 2024) (defining customer as ``one that purchases a commodity
or service'').
---------------------------------------------------------------------------
Second, Section 6102(a)(1) directs the Commission to ``prescribe
rules
[[Page 26778]]
prohibiting deceptive telemarketing acts or practices and other abusive
telemarketing acts or practices.'' \282\ Section 6102(a)(2) directs the
Commission to include in its rules ``a definition of deceptive
telemarketing acts or practices which shall include fraudulent
charitable solicitations, and which may include acts or practices of
entities or individuals that assist or facilitate deceptive
telemarketing, including credit card laundering.'' \283\ Congress used
broad language, similar to the language of the FTC Act, in directing
the FTC to promulgate a rule. The Act does not limit the scope of the
rule promulgated under the Act to telemarketing that harms natural
persons. Nor does the Act prohibit applying the rule to telemarketing
that harms businesses or other organizations.
---------------------------------------------------------------------------
\282\ 15 U.S.C. 6102(a)(1).
\283\ 15 U.S.C. 6102(a)(2).
---------------------------------------------------------------------------
Third, Sections 6102(a)(3)(C) and (D) direct the Commission to
require ``any person engaged in telemarketing'' to ``promptly and
clearly disclose to the person receiving the call the purpose of the
call is to'' sell a good or service or solicit a charitable
solicitation.\284\ Once again, Congress did not specify that the
disclosure must be made to a natural person rather than a business. It
simply specified that the disclosure be made to the person who received
the call.
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\284\ 15 U.S.C. 6102(a)(3)(C) and (D) (emphasis added).
---------------------------------------------------------------------------
Although PACE and NFIB argue the Commission's authority is limited
to addressing deceptive or abusive telemarketing practices that harm
natural persons because of the Act's liberal use of the term
``consumer,'' \285\ none of the Act's provisions described above uses
the word ``consumer.'' Moreover, the Act never defines the term
``consumer.'' Given the Act's broad language, the most logical reading
of the term ``consumer'' is that it encompasses all--including
businesses--who consume a product or service.
---------------------------------------------------------------------------
\285\ NFIB 33-4 at 11; PACE 33-15 at 7-9.
---------------------------------------------------------------------------
The absence of a definition is notable when Congress has defined
``consumer'' in other contexts, such as when it enacted the Magnuson-
Moss Warranty--Federal Trade Commission Improvement Act in 1975
(``Magnuson-Moss'').\286\ Under Title I of Magnuson-Moss, which
extended the Commission's jurisdiction over consumer product
warranties, Congress narrowly defined ``consumer'' to mean a buyer of
any ``consumer product'' which is ``normally used for personal, family,
or household purposes.'' \287\ Congress also clarified that the narrow
definition of consumer was limited to Title I of the Magnuson-Moss Act
and did not apply to Title II, which among other things, codified the
FTC's ability to seek consumer redress by filing civil actions in
Federal court.\288\ Under Title II, Congress stated the term
``consumer'' in the FTC Act should still be construed broadly without
the limitations imposed in section 101(3) of title I of S. 356.\289\
Here, no such definition exists. If Congress had intended to limit the
scope of the Telemarketing Act to those acts and practices directed at
individuals rather than businesses, it would have done so.
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\286\ Title I of that legislation created the Magnuson-Moss
Warranty Act (``Magnuson-Moss''), Public Law 93-637 (1975) (codified
as amended at 15 U.S.C. 2301), extending Commission jurisdiction
over consumer product warranties. Title II, separately known as the
Federal Trade Commission Improvement Act (``FTCIA''), modernized the
FTC Act by expanding the Commission's anti-fraud powers, including
power to ``redress consumer injury resulting from violations of the
[FTC Act]'' by filing civil actions in district court. S. Rep. No.
93-151, at 3 (1973). Public Law 93-637; Public Law 93-153. p. 2533
(1975) (codified as amended at 15 U.S.C. 45 et seq.).
\287\ 15 U.S.C. 2103(1) and (3).
\288\ See supra note 286.
\289\ S. Rep. No. 93-151, at 27.
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The Commission's position is also supported by the legislative
history. A Senate Report on the Act explained that, in directing the
Commission to define ``fraudulent telemarketing acts or practices'' in
its rulemaking, that Congress intended the rule ``to encompass the
types of unlawful activities that are currently being addressed by the
both the FTC and the States in their telemarketing cases.'' \290\ The
Report also stated Congress intends the ``rule to be flexible enough to
encompass the changing nature of [fraudulent telemarketing] activity
while at the same time providing telemarketers with guidance as to the
general nature of prohibited conduct.'' \291\ At the time the
Telemarketing Act was passed, the Commission's law enforcement
experience included cases against deceptive B2B telemarketing.\292\ In
promulgating the original TSR, the Commission considered exempting all
B2B telemarketing but stated, given its ``extensive enforcement
experience pertaining to deceptive telemarketing directed to
businesses,'' it did not believe ``an across-the-board exemption for
business-to-business contacts is appropriate.'' \293\ Instead, the
original TSR excluded from the B2B exemption telemarketing schemes that
sell nondurable office or cleaning supplies because, in the
Commission's law enforcement experience, these B2B schemes ``have been
by far the most significant business-to-business problem area [that]
such telemarketing falls within the Commission's definition of
deceptive telemarketing acts or practices.'' \294\ The Commission also
stated it would reconsider the scope of the B2B exemption ``if
additional business-to-business telemarketing activities become
problems after the Final Rule has been in effect.'' \295\ Each time the
Commission has considered applying the TSR to other B2B telemarketing,
it has done so based on its law enforcement experience in keeping with
Congress's directive.\296\
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\290\ Senate Report at 7.
\291\ Id.
\292\ See Prepared Statement of the Federal Trade Commission
before the United States House of Representatives Committee on Small
Business (Sept. 28, 1994) (detailing the Commission's law
enforcement actions against telemarketers who have harmed small
businesses).
\293\ Original TSR, 60 FR at 43861-62.
\294\ Id.
\295\ Id. at 43862.
\296\ 2022 NPRM, 87 FR at 33682-83. Although the Commission's
law enforcement efforts have primarily focused on harms to small
businesses, the Commission believes that the Telemarketing Act
authorizes the Commission to apply the TSR to B2B telemarketing more
broadly for the reasons stated here. Similar to the recordkeeping
provision, the Commission notes that Congress has amended the
Telemarketing Act numerous times but made no changes to prohibit the
TSR's application to some B2B telemarketing. Congress's silence here
can also be interpreted as agreement with the FTC's statutory
construction. See supra note 255.
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But even if the term ``consumer'' is construed more narrowly to
exclude businesses, the Act's language still supports the Commission's
position that the Act allows it to regulate B2B telemarketing. First,
one of the Act's findings states ``[c]onsumers and others are estimated
to lose $40 billion a year in telemarketing fraud.'' \297\ The
legislative history makes clear Congress was concerned about
telemarketing fraud against small businesses.\298\ Second, the Act uses
broad language in the definition of telemarketing, in its directives to
promulgate rules regarding deceptive or abusive telemarketing under
Section 6102(a)(1), and in its directives of what to include in those
rules under Sections 6102(a)(2), (a)(3)(C), and (a)(3)(D). These
provisions do not contain any reference to a ``consumer.'' \299\ If
Congress intended to construe consumer narrowly, Congress's omission of
the term consumer from
[[Page 26779]]
these provisions of the Act demonstrates Congress did not intend to
limit the TSR to telemarketing that harms only individual consumers.
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\297\ 15 U.S.C. 6101(3) (emphasis added).
\298\ The legislative history supports the Commission's position
that, even assuming a narrower definition of consumer, the
Telemarketing Act allows the Commission to regulate B2B
telemarketing. The Senate Report on the Act explains that
telemarketing fraud ``affects a cross section of Americans,
including small business.'' Senate Report at 2.
\299\ 15 U.S.C. 6102(a) and 6106(4).
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Finally, RBFC and TPPPA make general objections that prohibiting
misrepresentations in B2B telemarketing is unnecessary; that it would
``unduly burden legitimate business activities''; \300\ and would not
provide small businesses any additional protections when the FTC has
authority already to pursue bad actors that harm businesses under the
FTC Act.\301\ RBFC also argues if the Commission were to prohibit
misrepresentations in B2B telemarketing, it should only do so in the
areas where there is a history of deception such as the top five scams
identified in the Better Business Bureau's research report issued in
2018.\302\
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\300\ TPPPA 34-14 at 2.
\301\ RBFC 34-13 at 2-3.
\302\ RBFC 34-13 at 3; see also Better Business Bureau, Scams
and Your Small Business Research Report, at 7-8 (2018), available at
<a href="https://www.bbb.org/content/dam/bbb-institute-">https://www.bbb.org/content/dam/bbb-institute-</a>(bbbi)/files-to-save/
bbb_smallbizscamsreport-final-06-18.pdf (last visited Dec. 11,
2023). RBFC argues that any application of the TSR should be limited
to the BBB's top five scams impacting small businesses including:
``(1) bank/credit card company imposters, (2) directory listing and
advertising services; (3) fake invoice/supplier bills; (4) fake
checks; and (5) tech support scams.'' RBFC 34-13 at 3.
---------------------------------------------------------------------------
The Commission is not persuaded by these arguments. The Commission
notes that requiring B2B telemarketers to comply with the TSR's
prohibitions against misrepresentations would provide the Commission
with additional tools to obtain monetary redress for those harmed by
illegal telemarketing and civil penalties against bad actors who
violate the law, creating a deterrent effect. Importantly, the proposed
amendment refrains from imposing any burdens on B2B sellers and
telemarketers, including recordkeeping requirements. And, as commenters
have noted, because businesses must already comply with the FTC Act,
which prohibits deceptive or unfair conduct, complying with the TSR
should not create significant burden.\303\ The Commission also does not
believe it should limit the prohibition against misrepresentations to
just the five top scams identified in the BBB's 2018 report. The
Commission has monitored deceptive telemarketing impacting small
businesses since 1995 and has observed not only the increase in
deceptive telemarketing but how easily scammers shift tactics and
peddle different products or services to small businesses.\304\ Given
the Commission's extensive law enforcement experience in B2B
telemarketing cases--including schemes involving deceptive business
directory listings, web hosting or design, search engine optimization
services, and government impersonators \305\--the Commission believes
applying the TSR's prohibitions against misrepresentations in Section
310.3(a)(2) and 310.3(a)(4) is appropriate.
---------------------------------------------------------------------------
\303\ RBFC 34-13 at 2-3; WPF 34-21 at 4.
\304\ See Section II.B (B2B Telemarketing).
\305\ Id.
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C. New Definition of ``Previous Donor''
The 2022 NPRM proposed adding a new definition for the term
``previous donor'' to identify consumers who have donated to a
particular charity within the two-year period immediately preceding the
date the consumer receives a robocall on behalf of that charity.\306\
The Commission proposed including this new definition to make clear
that telemarketers are allowed to place charity robocalls only to
consumers who have previously donated to that charity within the last
two years.\307\
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\306\ 2022 NPRM, 87 FR at 33687-88.
\307\ To qualify for this narrow exemption, telemarketers must
also comply with the provisions of Section 310.4(b)(1)(v)(B).
---------------------------------------------------------------------------
The Commission received three comments on the new definition. WPF
supports the new definition, stating it would ``clarify the exemption
for charitable donations'' and ``effectively close what has been a
fairly significant loophole.'' \308\ EPIC also supports the new
definition and the clarification that the robocall exemption only
applies to consumers who have previously donated to the soliciting
charity, but it also urges the Commission to emphasize the limited
scope of this exemption from the general prohibition against
robocalls.\309\ One anonymous commenter objected to this new
definition, arguing there should not be an exemption to place robocalls
to prior donors in the first place.\310\
---------------------------------------------------------------------------
\308\ WPF 34-21 at 1.
\309\ EPIC 34-23 at 16.
\310\ Anonymous 34-7.
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The Commission emphasizes the exemption to allow a telemarketer to
place charity robocalls is narrow in scope and amending the TSR to add
a new definition of ``previous donor'' will ensure the exemption
remains narrow. The Commission understands some consumers do not want
to receive any robocalls, including from charities they have supported
through a donation. In such cases, the Commission notes that a consumer
who does not want to receive such robocalls may request to be added to
that charity's do-not-call list. If the consumer has done so, the
exemption to place robocalls does not apply and it is a violation of
the TSR for a telemarketer to place robocalls to the consumer on behalf
of that charity.\311\
---------------------------------------------------------------------------
\311\ See Section 310.4(b)(1)(v)(B)(iii) (requiring sellers and
telemarketers to comply with all other requirements of this part,
which include the entity-specific do not call provisions).
---------------------------------------------------------------------------
D. Corrections to the Rule
In the 2022 NPRM, the Commission proposed the following five
corrections to the Rule:
<bullet> In all instances where Sections 310.6(b)(1), (b)(2), and
(b)(3) cross-reference Sections 310.4(a)(1), (a)(7), (b), and (c),
change these citations so that they cross-reference Sections
310.4(a)(1), (a)(8), (b), and (c).
<bullet> Modifying the time requirements in the definition of EBR
from months to days as follows:
[cir] Changing the time requirement to qualify for EBR in Section
310.2(q)(1) from 18 months between the date of the telephone call and
financial transaction to 540 days.
[cir] Changing the time requirement to qualify for EBR in Section
310.2(q)(2) from three months between the date of the telephone call
and the date of the consumer's inquiry or application to 90 days.
<bullet> Adding an email address to Section 310.7 for State
officials or private litigants to provide notice to the Commission that
they intend to bring an action under the Telemarketing Act.
<bullet> Amending Section 310.5(a)(7) so it is consistent in form
with the new proposed additions to Section 310.5(a).
<bullet> Amending Section 310.5(f) to remove an extraneous
word.\312\
---------------------------------------------------------------------------
\312\ 2022 NPRM, 87 FR at 33688.
---------------------------------------------------------------------------
The Commission did not receive any comments on the proposed
modifications and will implement the amendments as proposed.
The Commission will also make the following additional non-
substantive modifications to the Rule:
<bullet> Change all references in the TSR from ``this Rule'' to
``this part.''
<bullet> Renumber the footnotes in the TSR so the first footnote
starts at one.
Finally, as described in Section III.B--Modification of the B2B
Exemption, some commenters did not understand the term ``consumer''
includes businesses. To address any confusion, the Commission will
change references to ``consumer'' in the amendments of the
recordkeeping requirements and definition of EBR to the defined term
``person.'' \313\ The Commission will also modify the references to
``consumer'' and ``business'' in the new recordkeeping requirement to
retain call
[[Page 26780]]
detail records in Section 310.5(a)(2)(iv) to ``individual consumer''
and ``business consumer.'' While these modifications do not
substantively alter the scope or application of the TSR, the Commission
believes they will resolve any remaining uncertainty.
---------------------------------------------------------------------------
\313\ 310 CFR 310.2(y).
---------------------------------------------------------------------------
IV. Paperwork Reduction Act
The current Rule contains various provisions that constitute
information collection requirements as defined by 5 CFR 1320.3(c), the
definitional provision within the Office of Management and Budget
(``OMB'') regulations implementing the Paperwork Reduction Act (PRA).
44 U.S.C. chapter 35. OMB has approved the Rule's existing information
collection requirements through October 31, 2025.\314\ The 2022 NPRM's
proposed amendments made changes in the Rule's recordkeeping
requirements that increased the PRA burden as detailed below.\315\
Accordingly, FTC staff submitted the 2022 NPRM and the associated
Supporting Statement to OMB for review under the PRA.\316\ On June 16,
2022, OMB directed the FTC to resubmit its request when the proposed
rule is finalized.\317\
---------------------------------------------------------------------------
\314\ OMB Control No: 3084-0097, ICR Reference No: 202208-3084-
001, available at <a href="https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202208-3084-001">https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202208-3084-001</a> (last visited Dec. 11, 2023).
\315\ 2022 NPRM, 87 FR at 33690-91.
\316\ This PRA analysis focuses only on the information
collection requirements created by or otherwise affected by these
now final rule amendments.
\317\ See OMB Control No. 3084-0097, ICR Reference 202204-3084-
004, Notice of Office of Management and Budget Action (June 16,
2022).
---------------------------------------------------------------------------
None of the public comments submitted addressed the estimated PRA
burden included in the 2022 NPRM, but some commenters did raise general
burden concerns.\318\ Other commenters concurred that sellers and
telemarketers likely retained the required records in the ordinary
course of business and that the cost of electronic storage is
decreasing.\319\ The Commission's responses to those concerns are set
forth in more detail in Section III--Final Amended Rule, and in some
instances the Commission made modifications to the proposed rule to
address the concerns and reduce the estimated PRA burden.
---------------------------------------------------------------------------
\318\ See, e.g., ECAC 34-22 at 3; NFIB 33-4 at 4-5; Sirius 34-18
at 7-8.
\319\ See, e.g., NAAG 34-20 at 9; PACE 33-15 at 2-5.
---------------------------------------------------------------------------
The Final Rule contains new recordkeeping requirements and
modifications to existing recordkeeping requirements. The new
recordkeeping provisions require sellers or telemarketers to retain:
(1) a copy of each unique prerecorded message; (2) call detail records
of telemarketing campaigns; (3) records sufficient to show a seller has
an established business relationship with a consumer; (4) records
sufficient to show a consumer is a previous donor to a particular
charitable organization; (5) records regarding the service providers
that a telemarketer uses to deliver outbound calls; (6) records of a
seller or charitable organization's entity-specific do-not-call
registries; and (7) records of which version of the Commission's DNC
Registry were used to ensure compliance with this Rule. The Final Rule
modifies existing recordkeeping requirements by: (1) changing the time-
period for retaining records from two years to five years; \320\ (2)
clarifying the records necessary for sellers or telemarketers to
demonstrate that the person it is calling has consented to receive the
call; and (3) specifying the format for records that include phone
numbers, time, or call duration.
---------------------------------------------------------------------------
\320\ As described above in Section II.A--Recordkeeping and in
the 2022 NPRM, changing industry practice including increased
spoofing of Caller ID information has made it more difficult to
identify the telemarketers and sellers responsible for particular
telemarketing campaigns and has hindered evidence gathering. As a
result, two years is no longer always a sufficient amount of time
for the Commission to fully complete its investigations of
noncompliance and therefore the Commission is increasing the
required retention period for recordkeeping under the Rule. Given
the decreasing cost of data storage, the Commission does not believe
that changing the length of time sellers and telemarketers are
required to keep records will be unduly burdensome. 2022 NPRM, 87 FR
at 33680-82, 33686.
---------------------------------------------------------------------------
As explained above and in the 2022 NPRM,\321\ the Commission
believes that for the most part, sellers and telemarketers already
generate and retain these records either because the TSR already
requires it or because they already do so in the ordinary course of
business. For example, to comply with the TSR, sellers and
telemarketers must already have a reliable method to identify whether
they have a previous business relationship with a customer or whether
the customer is a prior donor. They must also access the DNC Registry
and maintain an entity-specific DNC registry. Moreover, sellers and
telemarketers are also likely to keep records about their existing
customers or donors and service providers in the ordinary course of
business. The Final Rule now further requires telemarketers and sellers
to keep call detail records of their telemarketing campaigns.
Specifically, it requires sellers and telemarketers to keep call detail
records of their telemarketing campaigns because in the Commission's
experience, sellers and telemarketers use technologies that can easily
generate these records. If a seller or telemarketer does not use such
technology, however, and an individual telemarketer must manually enter
a single telephone number to initiate a call to that number, then the
seller or telemarketer does not need to retain records of the calling
number, called number, date, time, duration and disposition of the
telemarketing call under Sections 310.5(a)(2)(vii) and (x) of the Final
Rule for those calls. The Commission made this modification to reduce
the anticipated PRA burden for those sellers and telemarketers who
manually place telemarketing calls. However, as a matter of caution,
the Commission estimates the anticipated PRA burden will stay roughly
the same as what was projected in 2022 NPRM, because that estimate was
largely based on the use of automated mechanisms. Further, the
Commission's enforcement of the Rule and review of the comments shows
few sellers and telemarketers manually place telemarketing calls.\322\
Thus, the anticipated PRA burden could be significantly lower than the
estimates set out below.
---------------------------------------------------------------------------
\321\ 2022 NPRM, 87 FR at 33690-91.
\322\ See, e.g., PACE 33-15 at 2.
---------------------------------------------------------------------------
A. Estimated Annual Hours Burden
The Commission estimates the PRA burden of the Final Rule based on
its knowledge of the telemarketing industry and data compiled from the
Do Not Call Registry. In calendar year 2022, 10,804 telemarketing
entities accessed the Do Not Call Registry; however, 549 were exempt
entities obtaining access to data.\323\ Of the non-exempt entities,
6,562 obtained data for a single State. Staff assumes these 6,562
entities are operating solely intrastate, and thus would not be subject
to the TSR. Therefore, Staff estimates approximately 3,693
telemarketing entities (10,804--549 exempt--6,562 intrastate) are
currently subject to the TSR. The Commission also estimates there will
be 75 new entrants to the industry per year.
---------------------------------------------------------------------------
\323\ See National Do not Call Registry Data Book for Fiscal
Year 2022 (``Data Book''), available at <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/DNC-Data-Book-2022.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/DNC-Data-Book-2022.pdf</a> (last visited Dec. 11,
2023). An exempt entity is one that, although not subject to the
TSR, voluntarily chooses to scrub its calling lists against the data
in the Registry.
---------------------------------------------------------------------------
The Commission has previously estimated that complying with the
TSR's current recordkeeping requirements requires 100 hours for new
entrants to develop recordkeeping systems that comply with the TSR and
1 hour per year for established entities to file and store records
after their systems are created, for a total annual
[[Page 26781]]
recordkeeping burden of 4,385 hours for established entities and 7,500
hours for new entrants who must develop required record systems.\324\
---------------------------------------------------------------------------
\324\ See Information Collection Activities; Proposed
Collection; Comment Request 87 FR 23177 (Apr. 19, 2022).
---------------------------------------------------------------------------
Because the Final Rule contains new recordkeeping requirements, the
Commission anticipates that in the first year after the proposed
amendments take effect, every entity subject to the TSR would need to
ensure that their recordkeeping systems meet the new requirements. The
Commission estimates this undertaking will take 50 hours. This includes
10 hours to verify the entities are maintaining the required records,
and 40 hours to create and retain call detail records. This yields an
additional one-time burden of 184,650 hours for established entities
(50 hours x 3,693 covered entities).
For new entrants, the Commission estimates that the new
requirements will increase their overall burden for establishing new
recordkeeping systems by 50 hours per year. This yields a total added
burden for new entrants of 3,750 hours (50 hours x 75 new entrants per
year) in addition to what OMB has already approved.\325\
---------------------------------------------------------------------------
\325\ See ``Recordkeeping for new entrants for live &
prerecorded calls'' under IC (Information Collection) List,
available at <a href="https://www.reginfo.gov/public/do/PRAViewIC?ref_nbr=202208-3084-001&icID=185985">https://www.reginfo.gov/public/do/PRAViewIC?ref_nbr=202208-3084-001&icID=185985</a> (last visited Dec. 11,
2023).
---------------------------------------------------------------------------
B. Estimated Annual Labor Costs
The Commission estimates annual labor costs by applying appropriate
hourly wage rates to the burden hours described above. The Commission
estimates that established entities will employ skilled computer
support specialists to modify their recordkeeping systems. Applying a
skilled labor rate of $30.97/hour \326\ to the estimated 184,650 burden
hours for established entities yields approximately $5,718,611 in one-
time labor costs during the first year after the amendments take
effect.
---------------------------------------------------------------------------
\326\ This figure is derived from the mean hourly wage shown for
``Computer Support Specialist.'' See ``Occupational Employment and
Wages-May 2022'' Bureau of Labor Statistics, U.S. Department of
Labor, Last Modified April 25, 2023, Table 1 (``National employment
and wage data from the Occupational Employment Statistics survey by
occupation, May 2022'') available at <a href="https://www.bls.gov/news.release/pdf/ocwage.pdf">https://www.bls.gov/news.release/pdf/ocwage.pdf</a> (last visited October 24, 2023).
---------------------------------------------------------------------------
As described above, the Commission estimates that with the Final
Rule new entrants will spend approximately 50 additional hours per year
to establish new recordkeeping systems. Applying a skilled labor rate
of $30.97/hour to the estimated 3,750 burden hours for new entrants,
the Commission estimates that the annual labor costs for new entrants
would be approximately $116,138.
C. Estimated Non-Annual Labor Costs
Staff previously estimated the non-labor costs to comply with the
TSR's recordkeeping requirements were de minimis because most affected
entities would maintain the required records in the ordinary course of
business. Staff estimated that the recordkeeping requirements could
require $50 per year in office supplies to comply with the Rule's
recordkeeping requirements. Because the Final Rule requires retention
of additional records, Staff estimates that these requirements will
increase to $60 per year in office supplies on average for each of the
3,768 covered entities per year in office supplies. This equates to
roughly $226,080 in total for all covered entities.
The new recordkeeping requirements also require entities to retain
call detail records and audio recordings of prerecorded messages used
in calls. Staff estimates the costs associated with preserving these
records will also be de minimis. The Commission regularly obtains call
detail records from voice providers when investigating potential TSR
violations, and these records are kept in databases with small file
sizes even when the database contains information about a substantial
number of calls. For example, the Commission received a 2.9 gigabyte
database that contained information about 56 million calls. The
Commission also received a 1.2 gigabyte database that contained
information about 5.5 million calls. Similarly, audio files of most
prerecorded messages will not be very large because prerecorded
messages are typically short in duration. Storing electronic data is
very inexpensive. Electronic storage can cost $.74 per gigabyte for
onsite storage including hardware, software, and personnel costs.\327\
Commercial cloud-based storage options are less expensive and can cost
around $.20 per gigabyte per year.\328\ The Commission estimates the
non-labor costs associated with electronically storing audio files of
prerecorded messages and call detail records will cost around $5 a year
on average for each of the 3,768 covered entities per year for
electronic storage. This equates to roughly $18,840 in total for all
covered entities.
---------------------------------------------------------------------------
\327\ See Gartner, Inc. ``IT Key Metrics Data 2020:
Infrastructure Measures--Storage Analysis.'' Gartner December 18,
2019.
\328\ Amazon's storage rate for S3 Standard--Infrequent Access
storage is $0.0125 per GB per month. See <a href="https://aws.amazon.com/s3/pricing/?nc=sn&loc=4">https://aws.amazon.com/s3
[…truncated; see source link]Indexed from Federal Register on April 16, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.