What are the Exemptions from the Telemarketing Sales Rule (TSR")?

What are the Exemptions from the Telemarketing Sales Rule?

Some Types of Businesses and Individuals

Some types of businesses, individuals, and activities are outside the FTC’s jurisdiction, and not covered by the TSR. Certain calls or callers also are completely or partially exempt from the Rule’s provisions. The following sections explain the coverage of the Rule and the exemptions.

The FCC’s jurisdiction extends to some entities and activities that are not subject to regulation by the FTC. For more information about the FCC’s rules, visit fcc.gov.

Some types of businesses are not covered by the TSR even though they conduct telemarketing campaigns that may involve some interstate telephone calls to sell goods or services. These three types of entities are not subject to the FTC’s jurisdiction, and are not covered by the TSR:

  • banks, federal credit unions, and federal savings and loans.

  • common carriers — such as long-distance telephone companies and airlines — when they are engaging in common carrier activity.

  • non-profit organizations — those entities that are not organized to carry on business for their own, or their members’, profit.

Nevertheless, any individual or company that contracts with one of these three types of entities to provide telemarketing services must comply with the TSR.

Examples:

  • A non-bank company that contracts with a bank to provide telemarketing services on the bank’s behalf is covered.

  • A non-airline company that contracts with an airline to provide telemarketing services on behalf of the airline is covered.

  • A company that is acting for profit is covered by the TSR if it solicits charitable contributions on behalf of a non-profit organization.

 

Sellers of Certain Investments

Under the Telemarketing Act, a number of entities and individuals associated with them that sell investments and are subject to the jurisdiction of the Securities and Exchange Commission or the Commodity Futures Trading Commission are not covered by the TSR — even if they engage in a plan, program, or campaign to sell through interstate telephone calls. However, these entities and individuals are covered by the FCC’s telemarketing rules.

These entities are: brokers, dealers, transfer agents, municipal securities dealers, municipal securities brokers, government securities brokers, and government securities dealers (as those terms are defined in Section 202(a)(11) of the Investment Advisers Act of 1940); and futures commission merchants, including brokers, commodity trading advisers, commodity pool operators, leverage transaction merchants, floor brokers, or floor traders (as those terms are defined in Section 6(1) of the Commodity Exchange Act).

 

The Business of Insurance

The McCarran-Ferguson Act provides that the FTC Act, and by extension, the TSR, are applicable to the business of insurance to the extent that such business is not regulated by state law. Whether the McCarran-Ferguson exemption removes insurance-related telemarketing from coverage of the TSR depends on the extent to which state law regulates insurance telemarketing.  If state law regulates the telemarketing at issue and enforcement of the TSR would conflict with and effectively supersede those statelaws, then the TSR would not apply.  Unlike the jurisdictional exemptions for banks and non-profit organizations, which do not extend to third-party telemarketers making calls on their behalf, in the case of the telemarketing of insurance products and services, the TSR does not necessarily apply simply because the campaign is conducted by a third-party telemarketer.

 

Some Types of Calls

Some types of calls also are not covered by the Rule, regardless of whether the entity making or receiving the call is covered. These include:

  • unsolicited calls from consumers.

  • calls placed by consumers in response to a catalog.

  • business-to-business calls unless they involve retail sales of nondurable office or cleaning supplies, or solicit sales or charitable contributions from employees.

  • calls made in response to general media advertising (with some important exceptions).

  • calls made in response to direct mail advertising (with some important exceptions).

 

Exemptions Explained

Unsolicited Calls from Consumers

Any call from a consumer that is not placed in response to a solicitation by the seller, charitable organization, or telemarketer is exempt from coverage. Because the consumer initiates the call without any inducement from the seller or telemarketer, the call is not considered part of a telemarketing plan, program, or campaign conducted to sell goods or services or to induce a charitable contribution. Some examples include calls to:

  • make hotel, airline, car rental, or similar reservations.

  • contact a department store or charity without prompting from an advertisement or solicitation.

Calls are not considered “unsolicited” when placed by consumers in response to a prerecorded call.  If a seller or telemarketer “upsells” a consumer during an unsolicited call initiated by the consumer, the upsell is covered by the TSR.

 

Calls Made in Response to a Catalog

Generally, the TSR does not apply to calls placed by consumers in response to a mailed catalog if the catalog:

  • contains a written description or illustration of the goods or services offered for sale;

  • includes the business address of the seller;

  • includes multiple pages of written material or illustrations;

  • has been issued at least once a year; and

  • the catalog seller doesn’t solicit consumers by phone, but only receives calls initiated by consumers in response to the catalog, and during the calls, only accepts orders without additional solicitation. The catalog seller may give the consumer information about — or attempt to sell the consumer — other items in the same catalog that prompted the consumer’s call or in a similar catalog.

If a telemarketer offers goods or services that are not in the catalog that prompted the consumer’s call — or in a substantially similar catalog — the sales transaction is covered by the TSR. Regardless of the TSR’s application to a particular sale, catalog merchandise sales also are covered by the FTC’s Mail or Telephone Order Merchandise Rule (16 C.F.R. Part 435).

 

Business-to-Business Solicitation Calls, Unless They Involve the Sale of Nondurable Office or Cleaning Supplies, or Solicit Sales or Charitable Contributions from Employees

Most phone calls between a telemarketer and a business are exempt from the TSR.  However, business-to-business calls to induce the retail sale of nondurable office or cleaning supplies are not exempt and must comply with the TSR. Examples of nondurable office or cleaning supplies include paper, pencils, solvents, copying machine toner, and ink — in short, anything that, when used, is depleted, and must be replaced. Goods like software, copiers, computers, mops, and buckets are considered durable because they can be used again.

Although sellers and telemarketers involved in telemarketing sales to businesses of nondurable office or cleaning supplies must comply with the TSR’s requirements and prohibitions, the TSR specifically exempts them from the recordkeeping requirements and from the National Do Not Call Registry provisions. These sellers and telemarketers do not have to create or keep any particular records, or purge numbers on the National Do Not Call Registry from their call lists to comply with the TSR.

In addition, telemarketing calls that solicit consumers at their work — that is, calls to business lines that solicit individual employees to buy products or services for their own use or make personal charitable contributions — also are not business-to-business solicitations and are not exempt from the TSR.

 

Calls Made in Response to General Media Advertising

The TSR generally does not apply to calls consumers make in response to general media advertising, such as TV commercials; infomercials; home shopping programs; radio ads; print ads in magazines, newspapers, the Yellow Pages, or online directories; and banner ads and other forms of mass media advertising and solicitation. Telemarketers receiving these kinds of inbound calls from consumers nevertheless have to comply with three important requirements:

First, the prohibitions on certain payment methods, namely the use of remotely created payment orders and remotely created checks, cash-to-cash money transfers, and cash reload mechanisms, apply to inbound calls in response to general media advertising. If a seller or telemarketer uses remotely created payment orders or checks, or accepts cash-to-cash money transfers or cash reload mechanisms, it will violate the TSR.

  • Remotely created payment orders and checks are electronic checks that merchants can create after obtaining a consumer’s bank account number. These are different from paper checks that consumers write and sign.

  • Cash-to-cash money transfers are made electronically from one person to another in a different location by money transfer providers like MoneyGram and Western Union.

  • A cash reload mechanism is an authorization code PIN number or other security measure that allows consumers to convert cash into an electronic form.

Sellers and telemarketers that comply with these prohibitions in inbound telemarketing remain exempt from the TSR requirements if they otherwise qualify for the general media exemption. Therefore, they are covered by the TSR only if they violate the prohibition.

Second, if a seller or telemarketer “upsells” a consumer during a call initiated by the consumer, the upsell is covered by the TSR.

Third, the TSR does cover calls from consumers in response to general media advertisements relating to:

  • franchises not covered by the FTC’s Franchise Rule,

  • business opportunities not covered by the FTC’s Business Opportunity Rule,

  • credit card loss protection,

  • credit repair,

  • recovery services,

  • advance-fee loans,

  • investment opportunities, or

  • debt relief services

An investment opportunity is anything that is offered, offered for sale, sold, or traded based on representations about past, present, or future income, profit, or appreciation. Examples of investment opportunities include art, rare coins, oil and gas leases, precious or strategic metals, gemstones, or FCC license or spectrum lottery schemes. In addition, business ventures that are not covered by the FTC’s Franchise Rule are investment opportunities.

 

Calls Made in Response to Direct Mail Advertising

Direct mail advertising includes, but is not limited to, postcards, flyers, door hangers, brochures, “certificates,” letters, email, faxes, or similar methods of delivery sent to an identified person or family urging them to call a specified phone number about an offer of some sort. For purposes of the TSR, “direct mail” is not limited to messages sent by conventional mail delivery or private couriers. The exemption for calls responding to direct mail advertising is available both to telemarketers soliciting sales of goods or services and to telefunders soliciting charitable contributions.

Sales solicitations: Generally, consumer calls in response to a direct mail solicitation that clearly, conspicuously, and truthfully makes the disclosures required by the TSR are exempt from the TSR. These disclosures are:

  • cost and quantity;

  • material restrictions;

  • limitations or conditions;

  • any “no-refund” policy; and

  • if the offer includes a prize promotion, credit card loss protection, or a negative option feature, the information about any of those elements of the offer required by the TSR.

If you are a seller or telemarketer who uses direct mail, you may use this exemption only if your direct mail solicitation messages make the disclosures required by Section 310.3(a)(1) of the TSR clearly, conspicuously, and truthfully.

Charitable solicitations: Consumer calls in response to direct mail messages that solicit charitable contributions are exempt, provided they contain no material misrepresentation about:

  • the nature, purpose, or mission of the entity on whose behalf the contribution is requested;

  • the tax deductibility of any contribution;

  • the purpose for which the contribution will be used;

  • the percentage or amount of the contribution that will go to a charitable organization or program;

  • any material aspect of a prize promotion; or

  • a charitable organization or telemarketer’s affiliations, endorsements, or sponsorships.

There is no exemption for calls responding to any direct mail advertising that relates to credit card loss protection, credit repair, recovery services, advance-fee loans, investment opportunities, prize promotions, debt relief services, franchises not covered by the FTC’s Franchise Rule, or business opportunities not covered by the FTC’s Business Opportunity Rule. This is regardless of whether the advertisement makes the disclosures required by the TSR and contains no misrepresentations.

In addition, as with the general media exemption, it is a violation of the TSR for a seller or telemarketer engaged in direct mail solicitation to accept remotely created payment orders or checks, cash-to-cash money transfers, or cash reload mechanisms. However, sellers and telemarketers that comply with these prohibitions in inbound telemarketing remain exempt from the TSR’s requirements. Therefore, they are covered by the TSR only if they violate the prohibition.

Lastly, “upselling” is not exempt.  Upselling occurs when a seller or telemarketer tries to sell additional goods or services during a single phone call, after an initial transaction. Any instances of upselling following an exempt transaction are covered by the TSR.

Even if the initial transaction is exempt because it’s an unsolicited call from a consumer, a response to a general media advertisement or certain direct mail solicitations, or an outbound non-sales call (say, a customer service call), any upsell following the initial transaction is subject to all relevant provisions of the TSR.

Examples:

A consumer calls a department store to ask about the price of a microwave oven. Because the call is not the result of a solicitation by the seller, the initial inquiry is exempt from the Rule. If the seller tries to upsell a refrigerator during the same call, the upsell transaction is subject to the TSR.

 

A consumer calls in response to an infomercial advertising a home gym product for sale. If the home gym product is the only item offered during the call, the call is exempt. But if the telemarketer offers a free-trial offer to a cookbook series after the sales pitch for the home gym, the cookbook offer constitutes a separate transaction and is an upsell covered by the TSR. If both the home gym product and the cookbook series are prominently featured in the general media advertisement, transactions involving either or both products fall within the general media exemption. But if the cookbook is visible on the set of the infomercial, mentioned only in passing, or mentioned as an afterthought, pitching the cookbook during the a consumer’s call about the home gym product is considered an upsell and is not exempt from the TSR.

 

Partial Exemptions

Some calls are exempt from most provisions of the TSR, but not all. These include:

  • calls relating to the sale of 900-Number pay-per-call services.

  • calls relating to the sale of franchises and business opportunities.

  • calls that are part of a transaction that involves a face-to-face sales presentation.

 

Calls Relating to the Sale of 900-Number Services

The sale of 900-Number pay-per-call services, which is subject to the FTC’s 900-Number Rule, is exempt from most provisions of the TSR. Still, to comply with the TSR, sellers of pay-per-call services must not:

  • call any number on the National Do Not Call Registry or on that seller’s Do Not Call list.

  • deny or interfere with a person’s right to be placed on any Do Not Call Registry.

  • call outside permissible calling hours.

  • place robocalls to consumers who have not agreed to accept them.

  • abandon calls.

  • fail to transmit Caller ID information.

  • threaten or intimidate a consumer or use obscene language.

  • cause any telephone to ring or engage a person in conversation with the intent to annoy, abuse, or harass the person called.

Partial coverage under the TSR does not affect the obligation of sellers and providers of 900-Number Services to comply with the 900-Number Rule (16 C.F. R. Part 308).

 

Calls Relating to the Sale of Franchises and Business Opportunities

Calls relating to the sale of franchises that are covered by the FTC’s Franchise Rule (16 C.F.R. Part 436) and business opportunities subject to the Business Opportunities Rule (16 C.F.R. Part 437) are exempt from most provisions of the TSR but not all. Sellers and telemarketers selling franchises subject to the Franchise Rule or business opportunities subject to the Business Opportunities Rule must not:

  • call numbers that are on the National Do Not Call Registry or on that seller’s Do Not Call list.

  • deny or interfere with a person’s right to be placed on any Do Not Call Registry.

  • call outside permissible calling hours.

  • place robocalls to consumers who have not agreed to accept them.

  • abandon calls.

  • fail to transmit Caller ID information.

  • threaten or intimidate a consumer or use obscene language.

  • cause any telephone to ring or engage a person in conversation with the intent to annoy, abuse, or harass the person called.

Partial coverage under the TSR does not affect the obligation of franchisors to comply with the Franchise Rule or the Business Opportunity Rule.

 

Calls that are Part of a Transaction Involving a Face-to-Face Sales Presentation

The TSR generally does not cover telephone transactions where the sale of goods or services or a charitable contribution is not completed until after a face-to-face presentation by the seller or charitable organization, and the consumer is not required to pay or authorize payment until then. This exemption is for transactions that begin with a face-to-face sales presentation and are completed in a phone call, as well as those that begin with a phone call and are completed in a face-to-face sales presentation.

The key to the face-to-face exemption is the direct, substantive and personal contact between the consumer and seller. The goal of the TSR is to protect consumers against deceptive or abusive practices that can arise when a consumer has no direct contact with an invisible and anonymous seller other than the telephone sales call. A face-to-face meeting provides the consumer with more information about — and direct contact with — the seller, and helps limit potential problems the TSR is designed to remedy.

Nevertheless, even in transactions where there is a face-to-face meeting, telemarketers must not:

  • call numbers on the National Do Not Call Registry or on that seller’s Do Not Call list.

  • deny or interfere with a person’s right to be placed on any Do Not Call Registry.

  • call outside permissible calling hours.

  • place robocalls to consumers who have not agreed to accept them.

  • abandon calls.

  • fail to transmit Caller ID information.

  • threaten or intimidate a consumer or use obscene language.

  • cause any telephone to ring or engage a person in conversation with the intent to annoy, abuse, or harass the person called.

If the transaction is completed in a face-to-face meeting at the consumer’s home or away from the seller’s place of business, the seller must comply with the FTC’s Cooling Off Rule (16 C.F.R. Part 429).

 

For more information, see here:  https://www.ftc.gov/tips-advice/business-center/guidance/complying-telemarketing-sales-rule

 

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