Telemarketing 101: Five Material Disclosures

The FTC’s Telemarketing Sales Rule (TSR) governs the procedures sellers must undertake when conducting sales through outbound telemarketing – or when “upselling” during calls initiated by consumers.  Among other things, telemarketers must promptly disclose the identity of the seller, the nature of what’s for sale, and that the purpose of the call is to sell goods or services.  These and other disclosures are required before and during the actual pitch.

There are also five crucial disclosures of material information that must be made prior to asking a consumer to break out the plastic.

1.  Cost and Quantity. Before customers pay, you must clearly and conspicuously explain exactly what it is they’re buying and the total cost. 

2.  Material Restrictions, Limitations, or Conditions. If the offer comes with strings attached, you must clearly and conspicuously disclose material restrictions, limitations, or conditions – defined as information a consumer needs to understand in order to make an informed decision about whether to buy something.

3.  Refund Polices. If you have an “all sales are final” policy, you must let consumers know that before they buy.  If your pitch mentions refunds, cancellation, or exchanges, you must clearly and conspicuously disclose the terms and conditions.

4.  Prize Promotions. If you offer a prize promotion or make any claim that someone has won or may win something, you must disclose certain facts to consumers, including their odds of winning.  If the odds can’t be calculated because they depend on how many people enter, you must explain that to consumers, along with other factors used to calculate the odds.   In addition, you must tell them that no purchase is necessary to participate and that buying something won’t increase their chances of winning.  If they don’t want to buy anything but still want to enter, the Rule says you must give instructions on how to participate.  Are there any material costs or conditions to receive or redeem a prize?  They must be disclosed, too.  For example, if the prize is a “vacation,” but winners must pay for their own hotel, you have to make that clear to consumers.

5.  Negative Options. If the offer includes a negative option, tell customers about all material terms and conditions, including that their account will be charged unless they take affirmative steps, what they have to do avoid charges, and the date when charges will be submitted for payment.  It’s not sufficient just to say that customers will have to call a toll-free number to cancel.  You must give them the number they’ll have to call.

As important as it may be to adhere  to the rule, you must also have some mechanism in place to demonstrate compliance- recording all calls is a great way to do this, but do not record a call unless you first obtain the consumer’s permission to do so.  If you don’t have permission, then you’ve violated California law, which makes it illegal for one party to record a telephone conversation without the other party’s consent.

Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.

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