To help you understand how to sell to consumers through telemarketing, while complying with the law, we have created this guide for every telemarketer in order to understand consumer disclosures. The guide introduces the regulations contained in the Telemarketing Sales Rule.
If you are an advertiser who wants to reach consumers through a telemarketing campaign, you may be focused on how important your first impression will be with each consumer that you contact.
As a part of this first impression, you will need to respect your consumers’ legal rights. The benefits of reaching thousands of consumers efficiently, come with legal requirements meant to protect those consumers from receiving unwanted solicitations.
Your communications must include specific disclosures to protect consumers and avoid engaging in illegal solicitations. Running telemarketing campaigns requires familiarity with various telemarketing laws and regulations.
What is the Telemarketing Sales Rule?
The Telemarketing Sales Rule (TSR) was constructed by the Federal Trade Commission (FTC) with the intent to protect consumers’ rights when it comes to telemarketing solicitations.
Additional state and federal laws work in conjunction with the TSR to regulate the telemarketing sector, including the Telephone Consumer Protection Act (TCPA).
The TSR does the following:
- Requires advertisers to make specific disclosures of material information.
- Prohibits misrepresentations.
- Sets limits on the times telemarketers may call consumers.
- Prohibits calls to consumers who have asked not to be called again.
- Sets payment restrictions for the sale of certain goods and services.
In this guide, we will focus on the first point — the TSR’s specific requirements for disclosing information to consumers when marketing to them.
Disclosure of certain “material information” is required before consumers purchase the goods or services that are the subject of your telemarketing calls, both on outbound and inbound calls. Material information includes details a consumer needs in order to make an informed decision about whether to purchase your products or services.
This information must be disclosed before you ask for any payment information from the consumer. If you have pre-acquired account information for the consumer (enabling you to charge her/his account without directly asking for account information) the consumer must still provide her/his express informed consent to purchase any goods or services during the call.
What is the penalty for violating the Telemarketing Sales Rule?
Not only is it considered deceptive to keep certain information from consumers, but it also comes with legal consequences for advertisers and sellers.
Violating the TSR by failing to provide consumers with the proper disclosures at the right time, can result in civil penalties. These monetary fines can reach up to $43,280 for each violation. Violators may also be subject to nationwide injunctions that prohibit certain conduct, as well as having to pay redress to consumers who were negatively affected by their unlawful marketing and sales practices.
How can my organization best comply with consumer disclosure requirements?
As an advertiser, there are various disclosure requirements that you need to comply with, depending on the nature of the interactions you plan to have with consumers. Whether your telemarketing campaign involves outbound sales calls featuring promotions, prizes, or free product features, you will want to learn more about what disclosures are required for each type of campaign.
Disclosures for outbound sales calls
When contacting consumers through outbound sales calls, several disclosures must be made promptly, including:
- Your company’s identity, namely its corporate name or registered DBA.
- That the purpose of the call must be communicated.
- The nature of the goods or services offered.
- In the case of a prize promotion, that no purchase or payment is necessary to participate and that a purchase or payment will not increase the odds of winning.
Disclosures before consumers make a purchase
Beyond these initial disclosures, there are additional TSR requirements concerning information that you must comply with before obtaining consumers’ consent to purchase. These include, but are not limited to, disclosing the following:
- The total cost of the offered goods or services, including (where applicable) the amount of installment payments and the amount of each payment.
- All material restrictions, limitations or conditions for purchasing the subject goods or services, as these could affect the consumer’s decision to purchase.
- The policy for honoring refunds and cancellations. This statement must include a clear and conspicuous disclosure of the terms and conditions of the policy that are likely to affect the consumer’s decision to purchase.
Disclosures for prize promotions
If you are running a prize promotion, you must provide consumers with the following information:
- The odds of winning the featured prize(s).
- That no purchase is necessary and that purchase or payment will not increase the odds of winning.
- How to enter the promotion without payment or purchase.
Disclosures for offering free products and services
If you are offering something for free, such as a free-trial or a free-to-pay conversion, that has a future paid component, under the TSR you must clearly and conspicuously disclose the following:
- That the consumer’s account will be charged unless he or she takes affirmative action to avoid the charge, such as canceling a subscription.
- The date(s) on which the charge(s) will be submitted for payment.
- The specific steps the consumer must take to avoid the charge(s).
Complying with Telemarketing Sales Rule
In this blog, we have described just some of the TSR requirements that advertisers must follow in order to comply with the law. Please note that there are state-specific regulations and other federal laws, such as the TCPA, that also apply when telemarketing throughout the country. As always, it is best to discuss your telemarketing plans with a lawyer in advance of any campaign launch to ensure that you do not run afoul of any state or federal telemarketing regulations.
If you would like to learn more about how to comply with the TSR, we can help. Please contact us at info@kleinmoynihan.com or (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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This post was originally published on August 12, 2020 and updated on August 23, 2021.
Photo by Saulo Mohana on Unsplash
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