June, 2004

FEDERAL TRADE COMMISSION
The FTC has reached a settlement with a company and four individuals resolving allegations of improper debt collection activity. The settlement involved a $300,000 civil penalty.

A Federal District Court has approved a settlement between the FTC and Canadian telemarketers. The FTC alleged that the defendants sold bogus credit card protection and advance fee credit card services to United States customers. The FTC alleged that the defendants misrepresented their identity and deceived consumers regarding liability for unauthorized charges on their credit cards. The FTC worked with provincial police in Canada to obtain a permanent injunction, including summary judgment against the defendants. The total fine and judgment against the defendants was more than $4,000,000. Advance fee credit cards and credit card protection continue to be types of telemarketing drawing high scrutiny from enforcement authorities. If you sell these types of services, or any other type of service, for that matter, it is extremely important that your materials are compliant and that you monitor your sales activities to ensure adherence to those materials.

The proposed fee increase under the Telemarketing Sales Rule for the national “do-not-call” list comment period ended on June 1st. The agency will now respond to these comments and promulgate the final rule.

FLORIDA
The Attorneys General in Florida and Minnesota have filed suit against a major long distance company alleging that incorrect bills were intentionally sent to consumers to generate inbound calls during which an upsell would be made. Telemarketing and consumer protection laws in general still apply to inbound calls if an upsell is made during the call.

MARYLAND
Maryland has amended its state telemarketing law to incorporate the Telemarketing Sales Rule and the Telephone Consumer Protection Act. Violations of either federal statute will now constitute violations of state law, as well. State law provides for payment of a reasonable attorney’s fee, while federal law generally does not.

MICHIGAN
Ten states, including Michigan, have settled charges against a local and long distance telephone reseller. Their suit alleged deceptive telemarketing practices, including “slamming” and misrepresentations regarding the price of services.

NEW JERSEY
New Jersey has adopted a regulation requiring registration for commercial telemarketers. There are no exemptions to the rule for residential telemarketers. The registration requires a fee but no bond, although the registering company must also obtain a certificate to do business in the state and have a registered agent in the state. You can download the form for this registration at http://www.state.nj.us/lps/ca/donotcall/tmarketform.pdf.

NEW YORK
A proposal has been introduced in the New York General Assembly which would amend the state’s definition of “established customer” to limit it to contacts regarding renewal of an existing contract or payment of debt pursuant to an existing contract. Please contact me if you would like a copy of a chart which sets forth the federal definition of established customer, as well as the state definitions which can vary from the federal one.

NORTH CAROLINA
The North Carolina Attorney General has filed suit to enforce terms of its state debt counseling law against a nonprofit organization. Many states regulate debt counseling, even if performed by a nonprofit. State laws can limit fees charged, require a license, and in some cases ban debt counseling entirely. Further, enforcing authorities including states, the FCC and the IRS are scrutinizing the relationships between nonprofit debt counselors and any for profit companies they may work with. Generally, these relationships must be at arms length and meet many other requirements. Businesses should document all contracts made in these situations to protect both entities.

TENNESSEE
Tennessee has become the first state to adopt a law designed to discourage off-shoring by businesses in call center or data entry areas. The law directs the State Commissioner of Finance Administration to promulgate regulations to authorize a preference in state contracts to data entry and call center vendors providing services solely by citizens in the United States, who reside in the United States or are authorized to work in the United States. I have prepared a Memorandum which summarizes legislation affecting off-shore activities and would be happy to provide it to you upon request. Several states’ proposals are much more burdensome than the law adopted by Tennessee. Additionally, some laws already adopted have a disproportionate effect on foreign call centers. These laws include requirements to disclose the location of the call center (as opposed or in addition to the actual business making the call) and/or the “true name” of the telemarketing sales representative. The latter type of requirement is especially difficult for persons from countries whose names are hard to pronounce or unfamiliar to consumers in the United States.

UTAH
Although a Utah court has ruled that state law does not apply to interstate recorded telephone calls, the Utah Division of Consumer Protection continues to attempt to enforce some of its state laws against interstate calls. It is surprising that the Division would ignore a controlling court decision and such a course of action could subject the Division to sanctions, although the courts may be loathe to impose sanctions against a governmental body.

WISCONSIN
The Wisconsin Attorney General has obtained a judgment against a company after filing suit alleging “cramming,” i.e., billing customers for voice-activated email message services, which were not authorized by the consumers.

Wisconsin has also obtained a judgment against a telecommunications company alleging “slamming” and false or misleading statements.

Wisconsin has also filed suit against a company which allegedly faxed illegal time-share advertising to consumers. As you may know, “fax blasting” laws will likely subject the sender to TCPA suits, including class-actions.