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It's Dinnertime, and the Phone Starts Ringing

Regulations have done little to stem the tide of telemarketers flooding the market in search of sales.

By James R. Barney / October 7, 1997

We may not agree on much in this country, but one thing most of us can agree on is that telemarketing is a big nuisance.

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One survey, done by Walker Research in 1990, showed that 70 percent of Americans consider telemarketing an invasion of their privacy. To make matters worse, telephone scam artists reap an estimated $40 billion a year from unwary consumers, especially the elderly and the poor, according to the Federal Trade Commission.

The Telephone Consumer Protection Act of 1991 (TCPA) was Congress's first attempt at providing some concrete solutions to the serious problems of telemarketing.

Time and place restrictions prohibit commercial calls to certain facilities, such as hospitals and suicide prevention centers, and they prohibit calls to private residences between 9 p.m. and 8 a.m.

Do-not-call regulations also require telemarketers to maintain lists of consumers who have requested not to be contacted. (People on these lists aren't to be called again for a period of 10 years.) Each telemarketer must maintain a written do-not-call policy that's available to consumers who request it.

Disclosure regulations include a long list of items that, depending on the nature of the solicitation, must be disclosed to consumers. At a minimum, telemarketers have to provide the name of the individual who is calling, the company or organization being represented, and a phone number or address where they can be reached.

But there are loopholes

Although the TCPA allows recovery of up to $500 for each violation, there are several loopholes that make recovery difficult at best.

For instance, if a telemarketer violates someone's do-not-call request, he or she can escape liability simply by claiming the call was an "honest mistake." With such innocuous recovery provisions, it's no wonder very few suits are won against telemarketers, except where obvious fraud is involved.

And, despite their aim to regulate the telemarketing industry, TCPA regulations have done little to stem the rising tide of telemarketers flooding the market in search of sales prospects. In fact, telemarketing now employs more than 400,000 people, yielding $435 billion a year in sales. Some analysts predict an annual growth rate of as much as 300 percent.

Frustrated by the increasing number of intrusive calls to their homes, many people now wonder why Congress didn't simply ban telemarketing altogether.

Yet, because telemarketing falls generally under the protection of the First Amendment, lawmakers were faced with a dilemma. The Supreme Court has long held that Congress must have a compelling reason to prohibit any form of speech, and the limitation must apply equally to everyone. But Congress wanted to allow an exception for so called "nonprofit" calls to private residences. Thus, constitutionally speaking, lawmakers could not ban commercial telemarketing while still allowing non-profit calls.

Why the exception for nonprofits? One reason was to lend a helping hand to charitable organizations, which traditionally rely on "phone drives" to raise money. Another reason was the perceived utility of telephone surveys conducted for demographic purposes.

The most significant reason was probably that politicians themselves rely on telemarketing campaigns to raise money, sway voters, and conduct public opinion polls during elections. During the 1996 presidential campaign, for example, Bill Clinton and Bob Dole each paid nearly $1 million to large commercial telemarketing firms. Likewise, many congressional candidates have made telemarketing the cornerstone of their campaign strategies.

A rather ineffective law

By making the decision to regulate rather than prohibit commercial telemarketing, Congress greatly reduced the effectiveness of the law.

In recent years, the telemarketing industry has grown at an unprecedented rate, due in part to the Telecommunications Reform Act of 1996, which allowed greater competition among cable, the Internet, and telephone providers. Industry analysts say the Telecommunications Reform Act caused an explosion in the telemarketing industry, with giant competitors pouring billions into new businesses and fighting each other for market-share.