Double Check

Posted: 5/2003

Double Check
Some New FTC Telesales Rules May Apply
to Telecom Providers

By Jim Veilleux

Telecom
companies that think they are exempt from the Federal Trade Commission’s new
Telephone Sales Rule, which went into effect at the end of March, need to double
check. There are at least two ways in which the FTC’s new rules apply to them.

Although the Federal Communications
Commission is the primary regulator for common carriers, the FTC claims
jurisdiction under some conditions. First, contracted call centers that work for
telecom carriers must follow the FTC regulations, even if the company they do
the work for is exempt from FTC jurisdiction. Second, carriers that sell added
noncommon carrier services, such as Internet access, are covered by the rules,
according to some attorneys in the area.

The FTC’s "Do-Not-Call"
list has gotten the vast majority of attention on these rules, however marketers
also need to be aware of a number of other new provisions. Key among them is the
FTC’s new requirement for "express verifiable authorization," or EVA,
that now will apply to potentially millions of telephone sales that previously
had no similar requirement.

Under the provision for EVA,
virtually all outbound telemarketing sales and many inbound calls will require
some kind of documentation that the customer agreed to the transaction –before
the marketer even can send an invoice. There are three documentation options
available:

• A signed agreement from the
  customer

• A recording of the authorization

• A "welcome package"
  sent by first-class mail.

Whether a transaction must have
express verifiable authorization depends on a number of factors. Payments by
credit or debit card, for example, are not required to have EVA since there are
existing protections for credit/debit card payments. However, because telecom
carriers routinely use LEC or direct billing, the FTC rules apply.

Other exceptions relevant to telecom
companies include business-to-business sales and unsolicited, inbound
transactions.

However, there are exceptions to the
exceptions, the biggest of which is that inbound sales require EVA if they
involve an upsell. So, for example, a customer service call wherein the customer
service representative suggests a new product now requires EVA.

Although the rule provides three
options for EVA, as a practical matter most telemarketing sales cannot
reasonably use a signed authorization. That leaves recorded authorization and a
first-class welcome package as practical options. However, the welcome package
option has some limitations. First, mail packages have no audit trail, so
proving that a mail package was sent is almost impossible. In addition, between
the cost of first-class postage, materials and operations, mailing welcome
packages is expensive — usually as much as $1 or more. Lastly, welcome packages
are generally not good for ensuring the customer actually is protected from an
unintended transaction. When "welcome packages" were allowed by the
FCC as a verification method for long-distance changes, less than a third of
telecom companies used them, preferring third-party verification by more than
two to one.

Recorded authorizations are fast,
inexpensive and easy to use. Marketers have the option of using either their own
equipment or a recording service bureau. Many call centers have call loggers and
can record every conversation. Unfortunately, many call loggers are not equipped
to archive recordings for the two years required by the FTC. Recording service
bureaus — many of them already provide third-party verification to the telecom
industry — are available that can record transactions and store and retrieve
them for years. Some of these service bureaus can provide options for the
records to be reviewed by the client, as well as customers and regulators.

To use the recording option for EVA,
the marketer needs a script to make sure all the requirements of the FTC are
met. These include the number of payments, charges or debits (if more than one);
the date(s) that payments, charges or debits will be submitted for payment; the
amount of the payments, charges or debits; customer’s or donor’s name; billing
information sufficiently specific that the customer knows what account will be
charged; a telephone number for the customer to use for inquiry during normal
business hours; and the date of the oral authorization.

One advantage of a recording service
bureau is that these items can be pre-recorded as an interactive script,
eliminating the risk that the sales representative forgets to ask a question or
give a required disclosure.

What’s the bottom line on the new
recording requirements? If you bill in any way other than credit or debit cards
and you’re either making outbound sales or upselling on your inbound sales,
you’ll probably want to record the customer’s authorization and keep that
recording for two years.

Jim Veilleux is president of
VoiceLog LLC, a provider of third-party verification services. He can be reached
at jveilleux@voicelog.net.