Implications of the national do-not-call registry.

While the effect of the national do-not-call registry on nonprofit organizations is lessened by certain exemptions, the rule will have some impact on the solicitation and member outreach activities of charitable and other nonprofit organizations. This column describes the scope of the new rule.

Earlier this year, changes enacted by the Federal Trade Commission (FTC) relating to rules implementing the Telemarketing and Consumer Fraud and Abuse Prevention Act (the Telemarketing Sales Rule) resulted in the national do-not-call registry. Individual consumers began adding their names to the registry in June 2003, and enforcement began in October despite last-minute court action. (Emergency Congressional response enabled enforcement to proceed while litigation continues.)

The good news for nonprofit organizations: Telemarketers calling to solicit charitable contributions are not covered by the rule. However, it is important to note that if an individual makes a request to a specific organization that he or she not be contacted by phone, the organization must honor the request. If the organization subsequently phones the individual, the organization may be subject to a fine of as much as $11,000. Businesses are not eligible to be listed in the national registry.

In addition, on June 26, 2003, the Federal Communications Commission, which has jurisdiction over all telemarketers (including those that are exempt from the Telemarketing Sales Rule), revised its rules implementing the Telephone Consumer Protection Act of 1991 and established, in coordination with the FTC, a national do-not-call registry covering all commercial interstate and intrastate telemarketing calls.

Overview of the new rule

Now that the FTC's registry is operational, it is an "abusive telemarketing act or practice" to call anyone whose telephone number appears on the registry. Engaging in such an act subjects a telemarketer to various enforcement actions and penalties by the FTC, states, and private parties. Furthermore, telemarketers are effectively required to access the registry and update their calling lists of registered names every three months.

A telemarketer, however, may call an individual listed on the national do-not-call registry if the telemarketer has received express, written authorization or if the telemarketer has an "established business relationship" with the person. Such relationships exist in cases where a consumer has 1) purchased, rented, or leased goods or services from the seller in the past 18 months or 2) made an inquiry or application regarding the seller's products or services in the past three months. Although the rule does not specifically address this issue, it is likely that membership in a nonprofit organization qualifies as an established business relationship. Even where such a relationship exists, however, individuals may not be called if they have stated that they do not wish to be contacted by phone. A telemarketer will not be liable for calling a number that is listed on the registry if the telemarketer can demonstrate that it has

1. established and implemented written procedures for complying with the rule;

2. trained its personnel in such procedures;

3. maintained a list of telephone numbers that it may not call because the people at those numbers have previously stated that they do not wish to receive calls from the telemarketer;

4. established a process to prevent telemarketing to numbers on the do-not-call registry by using a version of the registry obtained from the commission no more than three months prior to the date of the call and maintaining records documenting this process;

5. monitored and enforced these procedures; and &substantiated that any subsequent call in violation of the rule is the result of error.

Application of the rule

The Telemarketing Sales Rule applies to any person engaged in telemarketing, which is defined as "a plan [or] program, which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and [that) involves more than one interstate telephone call." Market research, debt collection, and political campaign activities, for example, are not covered by the rule because they are not conducted to induce the purchase of goods or services or a charitable contribution. On the other hand, solicitations to nonmembers exhorting them to purchase an association publication, enroll in an educational course, or register for a conference would be covered by the rule.

Solicitations to induce charitable contributions (as well as sales of nondurable office or cleaning supplies) are specifically exempted from the do-not-call registry rules. Thus, it is still permissible to solicit charitable contributions from individuals who list their phone numbers on the national do-not-call registry.

Effect on nonprofit organizations

Associations and other nonprofit organizations are affected by the Telemarketing Sales Rule, but the effect is limited, particularly if 1) the organization markets solely to its members with whom an established business relationship already exists and 2) the organization can demonstrate a process for compliance to the rule. Further, because businesses are not eligible to be listed in the national do-not-call registry, to the extent that an association's calling activities are directed at businesses and other entities, rather than individuals, the rule does not apply. For example, calling a member company about exhibiting at a trade show would not be covered. However, association marketing and member outreach activities focused on individuals are subject to the rule if marketing lists include nonmembers. These efforts might include activities such as convention promotion or marketing efforts for association-related books, tapes, and other materials. In addition, association leadership must review promotional activities related to association affinity programs, ensuring that affinity partners comply with the rule in all telephone contacts directed to individuals, whether members or nonmembers.

Other requirements recently adopted by the FTC:

* A for-profit telemarketer soliciting on behalf of a charitable organization must promptly identify the organization and the fact that the call is being made to solicit a charitable contribution.

* While telemarketers soliciting charitable contributions are not required to comply with the national do-not-call registry, they are required to accept and honor an individual's specific request not to be called.

* Call abandonment, where the consumer answers the phone only to find that the telemarketer has ended the call, is prohibited. A safe harbor, however, is provided for telemarketers that meet certain requirements.

* A seller or telemarketer must follow certain billing rules to ensure that the payment method affords the consumer the liability limits and dispute resolution protections detailed in the Fair Credit Billing Act or the Electronic Funds Transfer Act.

* Telemarketers are not allowed to traffic in unencrypted consumer account numbers for telemarketing and may not buy or sell unencrypted consumer account numbers.

* Telemarketers must obtain the consumer's "express, informed consent" before submitting a charge for payment.

* One year after the release of the amended rule, telemarketers will be required to transmit their telephone numbers and, if possible, their names to consumers' caller identification services.

Charitable and other nonprofit organizations should ensure that their solicitation and other outreach activities to individuals comply with the new rules. When contracting with a third party to conduct such services, organization leadership must be certain that the contractual arrangements include indemnification provisions to protect against violations of the Telemarketing Sales Rule by the telemarketer.

Jerald A. Jacobs, a partner in tire Nonprofit Organizations Practice of Shaw Pittman, Washington, D.C., is general counsel to ASAE.