MARGARET WARNER: The average American gets about 300 telemarketing calls each year, hawking everything from credit cards, to phone service to charitable causes. For consumers, it's a huge annoyance. For companies, it's a big business. In 2001, American consumers spent more than $275 billion on purchases from telemarketers. The telemarketing industry says that's about 4 percent of total consumer sales. Consumers who don't want these calls can demand that that company never call them again, and some states have do-not-call lists.
But many consumers want more, and last month the Federal Trade Commission unveiled new telemarketing rules to reduce the flood of unwanted calls. Among the changes: Create a national do-not-call registry-- consumers would sign up with the FTC; require telemarketers to transmit caller ID information; and sharply restrict computer-dialed calls that produce dead air when the homeowner answers because the company doesn't have enough sales people to service the calls. Violators could be fined up to $11,000 per call. Charities and some kinds of companies would be exempt. Here to discuss the proposals are Eileen Harrington, associate direct for marketing practices of the Federal Trade Commission's Bureau of Consumer Protection; and Matt Mattingley, director of government affairs for the American Teleservices association, a telemarketing industry group. Welcome to you both. First, Ms. Harrington, just a little news consumers can use. How will consumers be able to sign up for this?
EILEEN HARRINGTON: They can't sign up yet, but when the registry is operative, consumers will be able to sign up online or by a toll-free number.
MARGARET WARNER: And when will it be operating?
EILEEN HARRINGTON: About seven months after we receive what we expect will be quick approval from Congress for funding and to collect fees to offset the funds that we expend to set up this registry.
MARGARET WARNER: You're going to actually charge the industry to pay for this?
EILEEN HARRINGTON: That's right. That's right.
MARGARET WARNER: Now, what about the other two features, the caller ID and the end to this, what i guess is called predictive dialing that produces those dead-air calls?
EILEEN HARRINGTON: What we're really talking about is a return address, if you will, for phone calls, for telemarketing calls. Caller ID is the way that consumers can tell who's calling, and by requiring a transmission, then consumers will be able to look on their caller ID and get a useful telephone number.
MARGARET WARNER: But how soon will that go into effect?
EILEEN HARRINGTON: Telemarketers will have to transmit that information within a year of the effective date of the rule, which is any day now.
MARGARET WARNER: So your organization obviously does not like this rule. What's your argument?
MATT MATTINGLEY: I think our reservations would be in two areas. First of all, we already have a national do-not-call policy that's been in effect since 1991. You alluded to it in your opening remarks. Any tele... any consumer who objects to being called by a telemarketer can ask to be placed on that company's do-not- call list, which the company must then maintain for ten years. The other area that we would object to is that experience in the states that have these do- not-call lists in effect show that they don't work. The premise that the consumer is given is that you sign up for this do-not-call list and telemarketers won't call you anymore, but, in fact, that's not the case.
MARGARET WARNER: Why isn't it the case?
MATT MATTINGLEY: There are exempted categories in all of these states, indeed with the Federal Trade Commission's proposal. Typically, for example, politicians are at the top of every exempted list. They're free to call you and ask you for money at any time. Non-profits and charities are also typically exempt. Customers with whom you have an established business relationship you can call. The Federal Trade Commission does not have jurisdiction over banks and financial institutions, over common carriers, over the insurance industry. These are all big users of telemarketing. So the premise, again, that the consumer has that he's not going to be called is not going to happen. They will continue to be called.
MARGARET WARNER: All right, Ms. Harrington, two arguments he's made. One is there already is a system; and two is, at least in the states do-not-call lists do not work.
EILEEN HARRINGTON: The system we have isn't working for consumers. The company by company opt out, in many instances, doesn't result in fewer calls because oftentimes the telemarketers hang up before you can finish your sentence, "Would you please put me on the do-not-call list?" We have over 64,000 written comments from individuals in this rule-making, which is a phenomenal number of comments for people around the country to send to an agency in Washington, D.C., that many of them have never heard of before. And the overwhelming sentiment in these comments is that the existing system simply doesn't work for consumers.
Now, what we're talking about doing, really, is giving consumers choices. They can choose to opt out on a company-by-company basis. That choice will still be available. They can do nothing, and they will continue to get the calls that they receive now, or they can put their phone number on the national list, and it will result in a very significant reduction in the calls that they receive. The exemptions that Mr. Mattingley talks about are very few in the FTC rule, and the biggest one for existing business relationships is one that his association and other industry groups lobbied hard for during the rulemaking. It simply gives businesses an opportunity to contact their customers for 18 months after a purchase is made, but even during that 18-month period, if a consumer doesn't want more calls, they can say, "don't call me anymore," and the calls have to stop.
MARGARET WARNER: So in other words, if your cable company, which you obviously have an existing relationship, wants to call you, say, to sell you Internet services, you can say, "look, not only don't I want it, i don't want to you call me anymore"?
EILEEN HARRINGTON: That's right. Now, as Mr. Mattingley, and you, I think, mentioned, there are state laws, state, "do not call us." If the call is an intrastate call that's coming from somewhere in your state, that's not going to be subject to the federal law because it doesn't involve interstate commerce. The 27 states have do-not-call laws, and that call would be covered by the state law. We expect that more states will enact their own laws.
MARGARET WARNER: And what percentage... if there's 100 million, 105 million households in America, what percentage do you expect will sign up for this?
EILEEN HARRINGTON: Well, if we look at the state experience, we could have well over the half of the residential phone subscribers sign up. In some states, well over that percentage has signed up. I'm not sure where matt gets the notion that these do-not-call registries don't work in the states. Everything that we see is that they've worked quite well and that the citizens of the states that have enacted these laws are quite satisfied with them.
MARGARET WARNER: Mr. Mattingley, in a lot of these states, I mean, i know a number have new rules going into affect January 1 of 2003, already more than half the homes have signed up, for instance, in Minnesota. What does that tell you?
MATT MATTINGLEY: Well, it tells me that there's a difference in how the states monitor and establish their programs. You say in some states as many as 50 percent of the households sign up, but in other states, it averages 5 percent. What's the difference? The difference we find in the signup rates between these two types of states are those states which charge a nominal registration fee, typically $5. Those are the states in which an average of 5 percent of the consumers sign up. Where it's free is where you have 50 percent or more that sign up.
MARGARET WARNER: What if their view is they just don't want the calls? They want to read newspaper ads or they want to go on the Internet, but they don't want to be called at home.
MATT MATTINGLEY: Because they're reacting to a stereotype and a vague generalization as opposed to a specific product offer. I would say that of the $275 billion in sales last year from telemarketers, probably not one of those consumers that purchased from a telemarketer woke up that morning and said, "I hope a telemarketer calls me today." It's when they are presented with a specific offer that they react and accept. If I say to you, "would you like a telemarketer to call you today?", your reaction is probably going to be negative. But if I make that specific, an offer for children's books or for fishing gear, then it becomes specific, and the consumer then makes that decision based on a specific offer, not a vague, nonspecific offer.
MARGARET WARNER: But you don't want to give the consumer the choice of whether they'd rather make a blanket "no" versus what you're suggesting, which is a company- by-company or offer-by-offer "no"?
MATT MATTINGLEY: Our position would be that anyone who signs up for a blanket do-not-call program deprives themselves of the choice of making a determination based on specific information.
EILEEN HARRINGTON: Well, I think consumers are going to continue to buy books and fishing gear and whatever else they want with or without the federal do-not-call registry. The issue here is who has the authority to decide whether a phone in my home is going to ring. Do I have the authority to make that decision, or do telemarketers have the sole authority to decide when my phone is going to ring? We think consumers should have a choice. We think consumers can make informed choices and have confidence, that consumers will do exactly what they want to do with these choices.
MARGARET WARNER: Will this wipe out your industry if this becomes a national...
MATT MATTINGLEY: Well, I don't think there's any question that if you take 60 percent of the customer pool out of the marketplace, it can't help but have an adverse effect on the industry. And that is what concerns our industry more than anything else is the sheer size of such a list. And it returns once again to the premise that the best decision is an informed decision, not a generalized decision. And that is where we think the current proposal on the table here by the Federal Trade Commission goes off... off base. You mentioned we have 27 states that have lists now. We already have an existing national program that's been in effect since 1991. There is a nationwide voluntary industry list that's maintained by the Direct Marketing Association. The Federal Communications Commission is also considering a national do-not-call policy. How many lists does it take to oversee an industry? We're layering layer upon layer of bureaucracy on an industry to accomplish something that we can accomplish already now with better enforcement and better education.
MARGARET WARNER: Eileen Harrington and Matt Mattingley, thank you both.
EILEEN HARRINGTON: Thank you, Margaret.
MATT MATTINGLEY: Thank you.
RAY SUAREZ: More information on the national do not call list, as well as how to sign up for state and industry lists can be found on our Web site.