“Hidden” Exemptions To Telemarketing Requirements

By William E. Raney

If determining what restrictions applied to a given call involved only a review of one source of such restrictions, there would be little need for compliance staff, attorneys (gasp!), or even the regulators that enforce such restrictions.

The Telemarketing Sales Rule, for example, is only 17 (sparse) pages long and for the most part can be reviewed and understood by a layman.

Other federal and state restrictions are similar:  the careful review of a given source usually will lead the reader to a compliant solution.

The complexities of compliance, however, arise not from a single source of restrictions but the fact that a given campaign is subject to multiple sets of sometimes conflicting rules including federal agencies like the Federal Trade Commission, Federal Communications Commission, Federal Reserve, etc. and 50 different states’ laws and regulations.  To compound this complexity, each of the above regulators can have multiple sources of restrictions, sometimes conflicting with each other. 

For example, the FCC is charged with enforcement of the Telephone Consumer Protection Act which is a statute passed by Congress.  The FCC has implemented the terms of the TCPA in a regulation and explained that regulation in more than 10 different commentaries published in the Federal Register.  The commentary has been supplemented with specific opinion letters in response to questions asked regarding the TCPA, and the FCC has issued hundreds of Citations and Notices of Apparent Liability implementing those restrictions with regard to specific fact situations. Both the FTC and FCC have separate rules for scripting, curfews, call abandonment, etc.

Courts of law, at state and federal levels, further, have issued decisions in lawsuits with regard to the TCPA and these sometimes conflict with each other.  For example, there is a significant division in court opinion regarding whether a case filed under the TCPA presents a “federal question” such that a TCPA case could be heard in federal court.  This dispute is unlikely to be resolved unless the Supreme Court or Congress specifically speaks to the issue, so whether or not your TCPA case can be heard in federal court depends on where the case is filed.

State law, if possible, is even more confusing, not so much because of the number of sources of interpretation regarding a given restriction, but because of the vast number of states and other jurisdictions, such as Puerto Rico and the District of Columbia, which attempt to regulate calls placed from or to their jurisdiction.  These restrictions can include scripting, curfews, registrations, do-not-call lists, dialer restrictions, etc.  These are all topics addressed by the federal laws above.

State laws are sometimes more restrictive, less restrictive, or even totally contrary to similar federal restrictions, which is where your compliance staff and counsel come in.  First, their job should be to determine what requirements exist applicable to your particular business activity.  Second, they should determine what actually applies as many restrictions exempt activities based on factors such as who is calling, who you are calling, or the type of goods and services involved.  Finally, your compliance staff should implement applicable restrictions.

The second of these steps presents great opportunities for savings if properly executed.  For example, more than 25 states require “registration” for telemarketers including bonds, fees, and substantial disclosures in some cases.  Of these states, however, nearly half exempt all but the highest risk (in the opinion of the state regulator) offers involving sweepstakes, “free” gift offers etc.  Several of the remaining states’ restrictions “sunset” after the business has been in existence for a certain period of time and meets other restrictions regarding its business.

Finally, some of these exemptions are not readily apparent from the text of the statute, but your well trained and experienced compliance staff should be able to recognize and implement even these “hidden” exemptions.  This leads us to the title of this article and an analysis of Alaska’s telemarketing registration statute.

Alaska Telemarketing Statute - Alaska Statute § 45.63.010, et seq.

Alaska statute requires registration, written contracts for telephone sales, disclosures, and prohibits certain representations in scripts among other restrictions.  The definition of “telephone seller” is any person who is required to register under the statute. Alaska Statute § 45.63.100(5).  The statute provides for several exemptions to registration including issuers or subsidiaries of publicly-traded companies, licensed insurance agents, supervised financial institutions, etc. Id. at § 45.63.080.   The “hidden” exemptions result from the definition of “telephone seller.”

The Alaska statute does not specifically exempt the above entities from the other state restrictions besides registration (including disclosures, written contract, etc.) but applies those restrictions only to “telephone sellers.”

Because the definition of “telephone seller”, however, is anyone required to register, and because many entities are exempt from registration, these same entities are exempt from the other restrictions applicable to “telephone sellers” even though the statute does not specifically list these exemptions for the other restrictions (disclosures, etc.).

Thus, this statute has “hidden” exemptions based on how terms are defined. In other states, “hidden” exemptions arise based on how the statute is implemented, and even informally interpreted by the regulators involved.  Your staff should be able to find these exemptions and present a compliant solution to you, sometimes at great savings.

William E. Raney is a partner at the law firm of Copilevitz & Canter, LLC. His practice focuses on First Amendment issues and compliance with state and federal telemarketing laws. His clients include nonprofit organizations, publicly traded companies, as well as telemarketing service bureaus, both in the United States and overseas. He is a 1995 graduate of the University of Virginia School of Law and appeared before the United States Supreme Court with his firm’s senior partner, Errol Copilevitz, in the 2003 charitable fundraising case Illinois ex rel. Madigan v. Telemarketing Associates.