By David Thompson, CPCU
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The Do Not Call Rule
Effective August 25, 2003 the ability of individuals and businesses to legally fax certain documents has been restricted. While it’s true that some aspects of a new “fax rule” have been stayed until 2005 some restrictions are in effect now. The ability of telemarketers (including insurance agencies) to make unsolicited sales telephone calls is restricted as of October 1, 2003. This article addresses both the “do not call” and “do not fax” rules.
Both the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) have recently published rules that will have significant impact on businesses, including those engaged in the business of insurance. This article summarizes the rules and focuses on the impact on insurance agencies as well as others engaged in the business of insurance. The rules affect the ability to make telephone calls to residential and wireless phone numbers effective October 1, 2003 and also significantly affect the ability of one entity to legally send a fax to another entity effective August 25, 2003. Keep in mind these are federal rules and violators are subject to federal fines as well as possible civil suits.
The FTC Rule
With enough media attention to dwarf major world events, the FTC advertised their new “do not call” list in the summer of 2003. Individuals were advised that they could visit a web site or call a toll free number and register their home or wireless phone numbers on the national “do not call list.” Telemarketers will be prohibited, as of October 1, 2003, from calling those who have registered on the FTC list. However, there is “fine print” in the FTC rule that seldom makes media reports. Some of the fine print is:
- The rule applies only to interstate calls…made from one state to another state.
- The rule applies only to residential and wireless (cellular) phone numbers. Sales calls to businesses are not affected.
- Several industries were specifically exempted from the rule including common carriers, banks, credit unions, savings and loans, companies engaged in the business of insurance, airlines, political organizations and non-profit organizations.
- Telemarketers are still able to contact those with whom they have an “established business relationship” unless that person specifically asks to be placed on the company specific do not call list.
- The rule deals only with telephone calls and does not cover fax transmissions.
Considering the exemption for the business of insurance the FTC rule has little, if any, impact on an insurance agency or company. However, don’t rush to judgment with excitement and start dialing and faxing away. Read on….
The FCC Rule
The FCC rule affects both telephone calls and faxes. The telephone call part is effective the same date as the FTC rule, October 1, 2003. The fax portion of the rule has two dates at which points various restrictions take effect: August 25, 2003 and January 1, 2005. Make no mistake about it, the FCC rule will have significant impact on the way almost every business conducts itself when it comes to telemarketing calls and routine faxes. Complying with the rule will be onerous.
Telephone call restrictions.
The most important difference between the FTC rule and the FCC rule is that the FCC rule does affect the business of insurance. Like the FTC rule, the FCC rule affects only sales calls to residential and wireless phone numbers. It also addresses both interstate and intrastate calls. Few of the exemptions found in the FTC rule exist in the FCC rule.
While the FTC rule exempted a significant number of businesses, the FCC rule offers fewer exemptions. The exemptions, relating to telephone calls, are:
- Where there is an “established business relationship” (EBR) with a consumer. Note however that even where an EBR exists the consumer can request to be placed on that company’s do not call list. This exemption allows, for example, an insurance agency to call a customer for whom they write homeowners coverage and solicit auto coverage. It’s important to note that the typical insurance agency is required to maintain its own “do not call list” of those consumers who have asked to be placed on such list. In addressing the EBR the FCC states: “We emphasize here that the definition of “established business relationship” requires a voluntary two-way communication between a person or entity and a residential subscriber regarding a purchase or transaction made within eighteen (18) months of the date of the telemarketing call or regarding an inquiry or application within three (3) months of the date of the call. Any seller or telemarketer using the EBR as the basis for a telemarketing call must be able to demonstrate, with clear and convincing evidence, that they have an EBR with the called party. The Commission clarifies that the established business relationship exemption does not permit companies to make calls based on referrals from existing customers and clients, as the person referred presumably does not have the required business relationship with the company that received the referral”
- Prior express permission. Sellers may contact consumers who have registered on the national do not call list if that consumer has given permission to do so by way of a signed and written document.
- Tax exempt non-profit organizations.
- Quoting the FTC: “… to persons with whom the marketer has a personal relationship. As discussed herein, a “personal relationship” refers to an individual personally known to the telemarketer making the call. In such cases, we believe that calls to family members, friends and acquaintances of the caller will be both expected by the recipient and limited in number.”
Again, it’s important to note that the business of insurance is not exempted from the FCC rule. In simple language, the typical agency producer or customer service representative who sits at a phone and makes cold calls to residential (including wireless) phone numbers must make certain that the number being called is not registered on the national do not call list. Fines for failing to do so are up to $1,500 per violation. The FTC web site (www.ftc.gov) offers information to telemarketers on how to access the do not call list.
While it’s likely infrequent, should an insurance agency use pre-recorded sales messages when calling a consumer there are specific conditions that must be met for these to be permitted. The FCC rule should be read for in-depth discussion about when such calls are permitted and how they may be conducted.
In addressing the caller ID issue the FCC states: “The Commission has determined to require all sellers and telemarketers to transmit caller ID information, regardless of their calling systems. In addition, any person or entity engaging in telemarketing is prohibited from blocking the transmission of caller ID information.”
For those businesses who plan to make telemarketing calls it’s important that they obtain the “do not call list” before calls are made. The FTC will maintain the database of numbers and their web site has information about obtaining the list. Specific area codes may be ordered, or the entire country. Preliminary information suggests that there will be a charge of $29 per area code with the first five area codes being free. There will also be a way to check individual numbers via the same web site. Again, refer to the FTC web site for specifics since procedures are subject to change.
Unsolicited Fax Rule
Key to understanding and complying with the unsolicited fax rules are two definitions:
- Unsolicited advertisement:“Any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person’s prior express invitation or permission.” An example of an unsolicited advertisement would be a fax sent to a business advertising agency services and insurance products. An example of a fax that is not an unsolicited advertisement would be an agency monthly newsletter sent to customers and prospects, as long as the newsletter did not advertise products or services for sale.
- Established business relationship (EBR): “A voluntary two-way communication between a person or entity and another party regarding a purchase or transaction.” (Note: Unlike the 18-month or 3-year limit in the “Do Not Call” rule there is no time limit “look-back” on the EBR in the fax rule.)
Congress passed the Junk Fax Prevention Act of 2005 in June 2005. The new law will not apply where an organization has an EBR. It will also not apply to faxes that do not fit the “unsolicited advertisement” criteria mentioned above. The law maintains the EBR exception that allows associations and companies to send unsolicited commercial faxes to their members and clients. In addition to restoring the EBR, the fax bill requires that all unsolicited commercial faxes include an opt-out provision on the first page of the fax, providing cost-free, 24-hour means for the recipient to request to be removed from the fax distribution list. The opt-out method could be a toll free phone number, a toll free fax number, or an e-mail address the recipient could use. Once a recipient opts out, future unsolicited faxes may not be sent. An example of such opt-out notice is:
You may request not to receive future faxes advertising goods or services from [insert business entity name]. To stop receiving such faxes, please call [insert toll-free phone number] or send a fax to [insert toll-free fax number] at any time. You may also send an e-mail to [insert e-mail address.] Your fax or communication must include the specific telephone number of the fax machine at which you do not wish to receive faxes from us. We will remove your fax number from our lists and will not send you additional faxes advertising goods or services unless you request that we do so.
Absent an EBR the law can be onerous for businesses and the provisions are outlined below.
The law prohibits the use of any telephone facsimile machine, computer or other device to send an “unsolicited advertisement” to a telephone facsimile machine. (This would include “blast fax” documents that many computer servers are capable of sending.) The prohibition against faxing unsolicited commercial advertisements applies to all faxes that contain unsolicited commercial advertisements: business-to-consumer, business-to-business, consumer-to-consumer, and consumer-to-business. This rule applies to fax transmissions sent to residential or commercial fax machines. There are no exceptions for non-profit or tax exempt organizations.
Absent an EBR, a sender must obtain prior permission (which may be written or verbal) before sending an unsolicited advertisement via fax.
It’s important to note that the law applies only to advertisements for sales or services where the intent is to compel the receiver to purchase a product or service. Informational faxes that do not relate to offering products or services are not covered by the rule. Examples of permitted and non-permitted faxes where there is no EBR are:
Permitted:
- A certificate of insurance faxed to a contractor
- A copy of a declarations page faxed to a bank
- A newsletter offering no products for sale faxed to a customer or non-customer
- A technical coverage letter faxed to a customer or non-customer
- Legislative updates
Not permitted:
- Unsolicited fax advertisements where there is not an EBR, unless the sender has received the prior permission of the recipient
- A fax sent to a prospect from whom there is no EBR, asking for an appointment to quote insurance
If violations of the rule take place it’s the recipient who must initiate a complaint. Fines of up to $11,000 are possible.
In addition to the prohibition against sending unsolicited advertising faxes, all faxes (not just unsolicited advertising faxes) must contain the following information:
- The date and time sent; and
- An identification of the business, entity, or individual sending the fax; and
- The telephone number of the fax machine or a telephone number of that business, entity, or individual.
E-Mail SPAM Rule
The CAN-SPAM Act of 2003 affects those who send commercial e-mails. It should be noted that a commercial e-mail is any e-mail that advertises or promotes a commercial product or service. For example, if an agency were to send out e-mails to prospects offering to quote the insurance of the recipient that e-mail falls under the CAN-SPAM Act. However, routine e-mail between existing customers (such as endorsement requests, sending quotes for coverage requested by the client, or verifying driver’s license numbers) would not fall under the act. Only when an e-mail advertises or promotes a product (even if only part of the e-mail does this) does the e-mail fall under the CAN-SPAM Act.
Below is information on the CAN-SPAM act from the Federal Trade Commission web page.
The CAN-SPAM Act: Requirements for Commercial Emailers
The CAN-SPAM Act of 2003 (Controlling the Assault of Non-Solicited Pornography and Marketing Act) establishes requirements for those who send commercial email, spells out penalties for spammers and companies whose products are advertised in spam if they violate the law, and gives consumers the right to ask emailers to stop spamming them.
The law, which became effective January 1, 2004, covers email whose primary purpose is advertising or promoting a commercial product or service, including content on a Web site. A "transactional or relationship message" – email that facilitates an agreed-upon transaction or updates a customer in an existing business relationship – may not contain false or misleading routing information, but otherwise is exempt from most provisions of the CAN-SPAM Act.
The Federal Trade Commission (FTC), the nation's consumer protection agency, is authorized to enforce the CAN-SPAM Act. CAN-SPAM also gives the Department of Justice (DOJ) the authority to enforce its criminal sanctions. Other federal and state agencies can enforce the law against organizations under their jurisdiction, and companies that provide Internet access may sue violators, as well.
What the Law Requires
Here's a rundown of the law's main provisions:
- It bans false or misleading header information. Your email's "From," "To," and routing information – including the originating domain name and email address – must be accurate and identify the person who initiated the email.
- It prohibits deceptive subject lines. The subject line cannot mislead the recipient about the contents or subject matter of the message.
- It requires that your email give recipients an opt-out method. You must provide a return email address or another Internet-based response mechanism that allows a recipient to ask you not to send future email messages to that email address, and you must honor the requests. You may create a "menu" of choices to allow a recipient to opt out of certain types of messages, but you must include the option to end any commercial messages from the sender.
Any opt-out mechanism you offer must be able to process opt-out requests for at least 30 days after you send your commercial email. When you receive an opt-out request, the law gives you 10 business days to stop sending email to the requestor's email address. You cannot help another entity send email to that address, or have another entity send email on your behalf to that address. Finally, it's illegal for you to sell or transfer the email addresses of people who choose not to receive your email, even in the form of a mailing list, unless you transfer the addresses so another entity can comply with the law.
- It requires that commercial email be identified as an advertisement and include the sender's valid physical postal address. Your message must contain clear and conspicuous notice that the message is an advertisement or solicitation and that the recipient can opt out of receiving more commercial email from you. It also must include your valid physical postal address.
Penalties
Each violation of the above provisions is subject to fines of up to $11,000. Deceptive commercial email also is subject to laws banning false or misleading advertising.
Additional fines are provided for commercial emailers who not only violate the rules described above, but also:
- "harvest" email addresses from Web sites or Web services that have published a notice prohibiting the transfer of email addresses for the purpose of sending email
- generate email addresses using a "dictionary attack" – combining names, letters, or numbers into multiple permutations
- use scripts or other automated ways to register for multiple email or user accounts to send commercial email
- relay emails through a computer or network without permission – for example, by taking advantage of open relays or open proxies without authorization.
- The law allows the DOJ to seek criminal penalties, including imprisonment, for commercial emailers who do – or conspire to:
- use another computer without authorization and send commercial email from or through it
- use a computer to relay or retransmit multiple commercial email messages to deceive or mislead recipients or an Internet access service about the origin of the message
- falsify header information in multiple email messages and initiate the transmission of such messages
- register for multiple email accounts or domain names using information that falsifies the identity of the actual registrant
- falsely represent themselves as owners of multiple Internet Protocol addresses that are used to send commercial email messages.
Summary
While the FTC “do not call” rule has limited impact on the operations of the typical insurance agency or company the FCC rule has significant impact on those engaged in the business of insurance, as well as almost all other businesses. Unsolicited fax rule can impact many agencies, as can the e-mail SPAM rule.
Business owners need to become familiar with the rules and make certain they are in compliance. Significant financial penalties are possible for those who do not comply with the rules. Additional information is available at the FTC and FCC web sites, www.ftc.gov, www.donotcall.gov, and www.fcc.gov
David Thompson 7/6/05 |
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