[Federal Register Volume 78, Number 62 (Monday, April 1, 2013)]
[Notices]
[Pages 19483-19488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-07427]
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FEDERAL TRADE COMMISSION
Telemarketing Sales Rule Information Collection Activities;
Proposed Collection; Comment Request
AGENCY: Federal Trade Commission (``Commission'' or ``FTC'').
ACTION: Notice.
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SUMMARY: The information collection requirements described below will
be submitted to the Office of Management and Budget (``OMB'') for
review, as required by the Paperwork Reduction Act (``PRA''). The FTC
is seeking public comments on its proposal to extend through August 31,
2016, the current PRA clearance for information collection requirements
in its Telemarketing Sales Rule (``TSR''). That clearance expires on
August 31, 2013.
DATES: Comments must be submitted on or before May 31, 2013.
ADDRESSES: Interested parties may file a comment online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``TSR PRA Comment, FTC
File No. P094400'' on your comment, and file your comment online at
https://ftcpublic.commentworks.com/ftc/tsrrulepra by following the
instructions on the web-based form. If you prefer to file your comment
on paper, mail or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex
J), 600 Pennsylvania Avenue NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Requests for additional information or
copies of the proposed information requirements for the Franchise Rule
should be addressed to Craig Tregillus, Staff Attorney, Division of
Marketing Practices, Bureau of Consumer Protection, Federal Trade
Commission, Room H-238, 600 Pennsylvania Ave. NW., Washington, DC
20580, (202) 326-2970.
SUPPLEMENTARY INFORMATION: Under the PRA, 44 U.S.C. 3501-3521, federal
agencies must obtain approval from OMB for each collection of
information they conduct or sponsor. ``Collection of information''
means agency requests or requirements that members of the public submit
reports, keep records, or provide information to a third party. 44
U.S.C. 3502(3); 5 CFR 1320.3(c). As required by section 3506(c)(2)(A)
of the PRA, the FTC is providing this opportunity for public comment
before requesting that OMB extend the existing paperwork clearance for
the TSR, 16 CFR part 310 (OMB Control Number 3084-0097).
The TSR, 16 CFR 310, implements the Telemarketing and Consumer
Fraud and Abuse Prevention Act, 15 U.S.C. 6101-6108 (``Telemarketing
Act''), as amended by the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act (``USA PATRIOT Act''), Public Law 107056 (Oct. 25, 2001).
The Act seeks to prevent deceptive or abusive telemarketing practices
in telemarketing, which, pursuant to the USA PATRIOT Act, includes
calls made to solicit charitable contributions by third-party
telemarketers. The Telemarketing Act mandated certain disclosures by
telemarketers, and directed the Commission to include recordkeeping
requirements in promulgating a rule to prohibit such practices. As
required by the Telemarketing Act, the TSR mandates certain disclosures
for telephone sales and requires telemarketers to retain certain
records regarding advertising, sales, and employees. The required
disclosures provide consumers with information necessary to make
informed purchasing decisions. The required records are to be made
available for inspection by the Commission and other law enforcement
personnel to determine compliance with the Rule. Required records may
also yield information helpful to measuring and redressing consumer
injury stemming from Rule violations.
In 2003, the Commission amended the TSR to include certain new
disclosure requirements and to expand the Rule in other ways. See 68 FR
4580 (Jan. 29, 2003). Specifically, the Rule was amended to cover
upsells \1\ (not only in outbound calls, but also in inbound calls) and
additional transactions were included under the Rule's purview. For
example, the Rule was extended to the solicitation by telephone of
charitable donations by third-party telemarketers
[[Page 19484]]
in response to the mandate of the USA PATRIOT Act. Finally, the
amendments established the National Do Not Call Registry
(``Registry''), permitting consumers to register, via either a toll-
free telephone number or the Internet, their preference not to receive
certain telemarketing calls.\2\ Accordingly, under the TSR, most
sellers and telemarketers are required to refrain from calling
consumers who have placed their numbers on the Registry.\3\ Moreover,
sellers and telemarketers must periodically access the Registry to
remove from their telemarketing lists the telephone numbers of those
consumers who have registered.\4\
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\1\ An ``upsell'' is the solicitation in a single telephone call
of the purchase of goods or services after an initial transaction
occurs. The solicitation may be made by or on behalf of a seller
different from the seller in the initial transaction, regardless of
whether the initial transaction and the subsequent solicitation are
made by the same telemarketer (``external upsell''). Or, it may be
made by or on behalf of the same seller as in the initial
transaction, regardless of whether the initial transaction and
subsequent solicitation are made by the same telemarketer
(``internal upsell'').
\2\ 68 FR 4580 (Jan. 29, 2003). The Registry applies to any
plan, program, or campaign to sell goods or services through
interstate phone calls. This includes telemarketers who solicit
consumers, often on behalf of third-party sellers. It also includes
sellers who provide, offer to provide, or arrange to provide goods
or services to consumers in exchange for payment. It does not limit
calls by political organizations, charities, or telephone surveyors.
\3\ 16 CFR 310.4(b)(1)(iii)(B).
\4\ 16 CFR 310.4(b)(3)(iv). Effective January 1, 2005, the
Commission amended the TSR to require telemarketers to access the
Registry at least once every 31 days. See 69 FR 16368 (Mar. 29,
2004).
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In 2008, the Commission promulgated amendments to the TSR regarding
prerecorded calls, 16 CFR 310.4(b)(1)(v), and call abandonment rate
calculations, 16 CFR 310.4(b)(4)(i).\5\ The amendment regarding
prerecorded calls added certain information collection requirements.\6\
Specifically, the amendment expressly authorized sellers and
telemarketers to place outbound prerecorded telemarketing calls to
consumers only if: (1) The seller has obtained written agreements from
those consumers to receive prerecorded telemarketing calls after a
clear and conspicuous disclosure of the purpose of the agreement; and
(2) the call discloses and provides an automated telephone keypress or
voice-activated opt-out mechanism at the outset of the call.\7\
Although the opt-out mechanism requirement took effect on December 1,
2008, the written agreement requirement did not take effect until
September 1, 2009.\8\
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\5\ See 73 FR 51164 (Aug. 29, 2008).
\6\ By contrast, the revised standard for measuring the call
abandonment rate did not impose any new or affect any existing
reporting, recordkeeping or third-party disclosure requirements
within the meaning of the PRA. That amendment relaxed the prior
requirement that the abandonment rate be calculated on a ``per day
per campaign'' basis by permitting, but not requiring, its
calculation over a 30-day period, as industry requested.
\7\ The prerecorded call amendment provided the first ever
explicit authorization in the TSR for sellers and telemarketers to
place prerecorded telemarketing calls to consumers. The pre-
amendment call abandonment prohibition of the TSR implicitly barred
such calls by requiring that all telemarketing calls be connected to
a sales representative, rather than a recording, within two seconds
of the completed greeting of the person who answers. The
requirements apply not only to prerecorded calls that are answered
by a consumer, but also to prerecorded messages left on consumers'
answering machines or voicemail services.
\8\ See 73 FR 51164, 51166.
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In 2010, the Commission published additional amendments taking
effect that year to require specific new disclosures in the sale of a
``debt relief service,'' as that term is defined in Section 310.2(m) to
include for-profit credit counseling services, debt settlement, and
debt negotiation services. The amendments result in PRA burden for all
covered entities--both new and existing respondents--that engage in
telemarketing of these services. The amendments, among other things:
(1) Applied the TSR to inbound telemarketing of debt relief services;
\9\ and (2) added new required disclosures and prohibited
representations to curb deceptive practices prevalent in the
telemarketing of debt relief services.
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\9\ While the TSR already covered outbound calls by debt relief
service providers, the amendments also brought inbound debt-relief
calls within the TSR's reach.
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Burden Statement
Estimated Annual Hours Burden: 1,319,984 hours.
The estimated burden for recordkeeping is 15,610 hours for all
industry members affected by the Rule. The estimated burden for the
disclosures that the Rule requires for both the live telemarketing call
provisions of the TSR and those regarding prerecorded calls is
1,304,374 hours for all affected industry members. Thus, the total PRA
burden is 1,319,984 hours. These estimates are explained below.
Number of Respondents: As a preliminary matter, only telemarketers
and sellers, not telefunders (third-party telemarketers soliciting
contributions on behalf of charities), are subject to the Registry
provisions of the Rule, and only sellers, not telemarketers or
telefunders, are subject to the new express agreement obligations
attributable to the prerecorded call disclosure requirements.\10\ The
Registry data does not separately account for telefunders; they are a
subset of the overall number of telemarketing entities known to access
the Registry for any given year.\11\
In calendar year 2012, 28,601 telemarketing entities accessed the
Registry. Of these entities, 641 were ``exempt'' entities obtaining
access to data.\12\ By definition, none of the exempt entities are
subject to the TSR. In addition, 22,321 sellers and 5,639 telemarketers
accessed the Registry. Of those, however, 15,854 sellers and 3,996
telemarketers with independent access to the Registry obtained data for
just one state. Staff assumes that these entities are operating solely
intrastate, and thus would not be subject to the TSR.\13\ Applying this
Registry data, staff estimates that 8,110 telemarketing entities
(28,601--641--15,854--3,996) are currently subject to the TSR, of which
6,467 (22,321--15,854) are sellers and 1,643 (5,639--3,996) are
telemarketers.\14\
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\10\ Telemarketers and telefunders must comply, however, with
the abandoned call provisions of the TSR and the opt-out
requirements of the 2008 amendments.
\11\ For the sake of simplicity and to err conservatively, FTC
staff's burden estimates for provisions less likely to be applicable
to telefunders (e.g., prize promotion disclosure obligations for
outbound live calls, under 16 CFR 310.4(d)) will not be reduced by a
separate estimate for the subset of telemarketers that are
telefunders. Conversely, estimates of the number of new-entrant
telemarketers will incorporate new-entrant telefunders.
\12\ An exempt entity is one that, although not subject to the
TSR, voluntarily chooses to scrub its calling lists against the data
in the Registry.
\13\ These entities would nonetheless likely be subject to the
Federal Communications Commission's (``FCC'') Telephone Consumer
Protection Act regulations, including the requirement that entities
engaged in intrastate telephone solicitations access the Registry.
\14\ For purposes of these calculations, staff assumes that
telemarketers making prerecorded calls download telephone numbers
listed on the Registry, rather than conduct online searches, because
the latter may consume much more time. Other telemarketers not
placing the high-volume of automated prerecorded calls may elect to
search online, rather than to download.
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Recordkeeping Hours
Staff estimates that the above-noted 8,110 telemarketing entities
subject to the Rule each require approximately one hour per year to
file and store records required by the TSR for an annual total of 8,110
burden hours. The Commission staff also estimates that 75 new entrants
per year would need to spend 100 hours each developing a recordkeeping
system that complies with the TSR for an annual total of 7,500 burden
hours.\15\ These figures, based on prior estimates, are consistent with
staff's current knowledge of the industry. Thus, the total estimated
annual recordkeeping burden for new and existing telemarketing
entities, including those offering debt relief services and making
prerecorded calls,\16\ is 15,610 hours.
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\15\ This figure includes new entrants making prerecorded calls
and offering debt relief services, based on prior estimates that
neither would require more than 100 hours to comply with those
requirements. See 74 FR 11952, 11954 n.17 (Mar. 20, 2009); 75 FR
48458, 48504 (Aug. 10, 2010).
\16\ The recordkeeping requirements for prerecorded calls are de
minimis, and are subsumed within the PRA estimates above for
existing and new telemarketing entities. As in its prior estimates,
staff continues to believe that any ongoing incremental burden on
sellers to create and retain electronic records of written
agreements by new customers to receive prerecorded calls should not
be material since the agreements may be obtained and recorded
electronically pursuant to the Electronic Signatures In Global and
National Commerce Act (commonly, ``E-SIGN''). Although telemarketers
(and telefunders) that place prerecorded calls on behalf of sellers
or charities must capture and transmit to the seller any requests
they receive to place a consumer's telephone number on the seller's
entity-specific do-not-call list, this obligation extends both to
live and prerecorded telemarketing calls, and is also subsumed
within the PRA estimates above.
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[[Page 19485]]
Disclosure Hours
Staff believes that in the ordinary course of business a
substantial majority of sellers and telemarketers make the disclosures
the Rule requires because to do so constitutes good business practice.
To the extent this is so, the time and financial resources needed to
comply with disclosure requirements do not constitute ``burden.'' 16
CFR 1320.3(b)(2). Moreover, many state laws require the same or similar
disclosures as the Rule mandates. Thus, the disclosure hours burden
attributable solely to the Rule is far less than the total number of
hours associated with the disclosures overall. As when the FTC last
sought 3-year OMB clearance for this Rule, staff estimates that most of
the disclosures the Rule requires would be made in at least 75 percent
of telemarketing calls even absent the Rule.\17\ Accordingly, staff has
continued to estimate that the hours burden for most of the Rule's
disclosure requirements is 25 percent of the total hours associated
with disclosures of the type the TSR requires.
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\17\ 75 FR 48504; 74 FR 11954.
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Based on previous assumptions, staff estimates that of the 8,110
telemarketing entities noted above, 3,726 conduct inbound
telemarketing.\18\ Inbound calls from consumers in response to direct
mail solicitations that make certain required disclosures are exempt
from the TSR.\19\ Although such calls are exempt from the Rule, the
Commission believes it is likely that industry members choosing to make
the requisite disclosures in direct mail solicitation may do so in an
effort to qualify for the exemption. Thus, Commission staff believes it
is appropriate to include in the relevant burden hour calculation both
the burden for compliance with the Rule's oral disclosures and the
burden incurred by entities that make written disclosures in order to
qualify for the inbound direct mail exemption. Accordingly, staff
estimates that, of the 3,726 entities that conduct inbound
telemarketing, approximately one-third (1,242) will choose to
incorporate written disclosures in their direct mail solicitations that
exempt them from complying with the Rule.\20\
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\18\ While staff does not have information directly stating the
number of inbound telemarketers, data last appearing in the DMA 2009
Statistical Fact Book (February 2009), p. 18, shows that 17% of all
direct marketing in 2008 was by inbound telemarketing and 20% was by
outbound telemarketing. Accordingly, based on such relative
weighting, staff estimates that the number of inbound telemarketers
is approximately 3,726 ((8,110 x 17) / (17 + 20)).
\19\ Some exceptions to this broad exemption exist, including
solicitations regarding prize promotions, investment opportunities,
business opportunities other than business arrangements covered by
the Franchise Rule or Business Opportunity Rule, advertisements
involving goods or services described in 310.3(a)(1)(vi),
advertisements involving goods or services described in 310.4(a)(2)-
(4); and any instances of upselling included in such telephone
calls.
\20\ Since only ``sellers,'' and not ``telemarketers,'' would
make the written disclosures, and this estimate includes both, it
conservatively overstates the number of entities subject to the
requirement.
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Staff necessarily has made additional assumptions in estimating
burden. From the total volume of outbound and inbound calls, staff
first calculated disclosure burden for initial transactions that
resulted in sales, derived from external data and/or estimates drawn
from a range of calendar years (2001-2010). Staff recognizes that
disclosure burdens may still be incurred regardless of whether or not a
call results in a sale. Conversely, a substantial percentage of
outbound calls result in consumers hanging up before the seller or
telemarketer makes the required disclosure(s). However, because the
requirements in Sec. 310.3(a)(1) for certain disclosures before a
consumer pays for a telemarketing purchase apply only to sales, early
call cessation (i.e., consumers hanging up pre-disclosure or before
full disclosure) is excluded from staff's burden estimates for Sec.
310.3(a)(1).
For transactions in which a sale is not a precursor to a required
disclosure, i.e., the upfront disclosures required in all outbound
telemarketing calls and outbound or inbound ``upsell'' calls by Sec.
310.4(d), staff has calculated burden for initial transactions based on
estimates of the total volume of outbound and inbound calls, discounted
for anticipated early hang-ups. For transactions in which a sale is a
precursor to required disclosure, i.e., Sec. 310.3(a)(1), the
calculation is based on the volume of direct sales.
Based on the most recently available applicable industry data and
further FTC extrapolations, staff estimates that 2.4 billion outbound
telemarketing calls are subject to FTC jurisdiction, that 484 million
of these calls result in direct sales,\21\ and that there are 1.9
billion inbound calls that result in direct sales. Staff retains its
longstanding estimate that, in a telemarketing call involving the sale
of goods or services, it takes 7 seconds \22\ for telemarketers to
recite the required pre-sale disclosures plus 3 additional seconds \23\
to disclose the information required in the case of an upsell. Staff
also retains its longstanding estimates that at least 60 percent of
sales calls result in ``hang-ups'' before the telemarketer can make all
the required disclosures and that ``hang-up'' calls allow for only 2
seconds of disclosures.\24\
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\21\ For staff's PRA burden calculations, only direct sales
orders by telephone are relevant. That is, sales generated through
leads or customer traffic are excluded from these calculations
because such sales are not subject to the TSR's recordkeeping and
disclosure provisions. The direct sales transactions total of 484
million is based on an estimated 1.6 billion sales transactions from
outbound calls being subject to FTC jurisdiction reduced by an
estimated 30 percent attributable to direct orders. This percentage
estimate is derived from the most recent available direct sales data
for telephone marketing to consumers. See DMA Statistical Fact Book
(2001), p. 301.
\22\ See, e.g., 60 FR 32682, 32683 (June 23, 1995); 63 FR 40713,
40714 (July 30, 1998); 66 FR 33701, 33702 (June 25, 2001); 71 FR
28698, 28700 (May 17, 2006); 74 FR 11952, 11955 (Mar. 20, 2009).
\23\ 71 FR 3302, 3304 (Jan. 20, 2006); 71 FR 28698, 28700.
\24\ See, e.g., 60 FR 32683.
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Staff bases all ensuing upsell calculations on the volume of
additional sales after an initial sale, with the assumption that a
consumer is unlikely to be predisposed to an upsell if he or she
rejects an initial offer--whether through an outbound or an inbound
call. Using industry information, staff assumes an upsell conversion
rate of 40% for inbound calls as well as outbound calls.\25\ Moreover,
staff assumes that consumers who agree to an upsell will not terminate
an upsell before the seller or telemarketer makes the full required
disclosures.
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\25\ This assumption originated with industry response to the
Commission's 2003 Final Amended TSR. See 68 FR 4580, 4597 n.183
(Jan. 29, 2003). Although it was posited specifically regarding
inbound calls, FTC staff will continue to apply this assumption to
outbound calls as well, barring the receipt of any information to
the contrary.
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Based on the above inputs and assumptions, staff estimates that the
total time associated with these pre-sale disclosure requirements is
865,333 hours per year: (2.4 billion outbound calls x 40% lasting the
duration x 7 seconds of full pre-sale disclosures = 1,866,667) + (2.4
billion outbound calls x 60% terminated after 2 seconds of disclosures
= 800,000) + (484 million outbound calls resulting in direct sales x
40% upsell conversions x 3 seconds of related disclosures = 161,333) +
(1.9 billion inbound calls x 40% upsell
[[Page 19486]]
conversions x 3 seconds = 633,333)] x an estimated 25% of affected
entities not already making such disclosures independent of the TSR =
865,333 hours.
The TSR also requires several general sales disclosures in
telemarketing calls before the customer pays for goods or services.\26\
These disclosures include the total costs of the offered goods or
services, all material restrictions, and all material terms and
conditions of the seller's refund, cancellation, exchange, or
repurchase policies (if a representation about such a policy is a part
of the sales offer).
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\26\ 16 CFR 310.3(a)(1)(i)-(iii).
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Staff estimates that the general sales disclosures for outbound
calls require 377,949 hours annually. This figure includes the burden
for written disclosures (1,242 inbound telemarketing entities estimated
to use direct mail \27\ x 10 hours \28\ per year x 25% burden = 3,105
hours), as well as the figure for oral disclosures [(484 million
outbound calls x 8 seconds x 25% burden = 268,889 hours) + (484 million
outbound calls x 40% (upsell conversion) x 20% sales conversion x 8
seconds x 25% burden = 21,511 hours) + (1.9 billion inbound calls x 40%
upsell conversion x 20% sales conversion x 8 seconds x 25% burden =
84,444 hours)] = 377,949 hours.\29\
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\27\ See supra text preceding note 20.
\28\ FTC staff believes a typical firm will spend approximately
10 hours per year engaged in activities ensuring compliance with
this provision of the Rule; this, too, has been stated in prior FTC
notices inviting comment on PRA estimates. No comments were
received, and staff believes this estimate remains reasonable.
\29\ The percentage and unit of time measurements are FTC staff
estimates.
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To estimate the time required to provide the general sales
disclosures for calls offering debt relief services, staff employs
different assumptions and calculations set forth when the debt relief
amendments were issued.\30\ Employing that analysis, as modified in
response to a public comment to account for inbound debt relief
sales,\31\ staff continues to assume that outbound calls to sell and
inbound calls to buy debt relief services are made only to consumers
who are delinquent on one or more credit cards.\32\ For simplicity, and
lacking specific information or prior comment to the contrary, staff
further assumes that each such consumer will receive one outbound call
and place one inbound call for these services.
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\30\ 75 FR 48504-05.
\31\ Debt relief sales in outbound calls have always been
subject to the general sales disclosure requirements, and are
subsumed in the outbound general sales disclosure totals.
\32\ By extension upsells on these initial calls would not be
applicable. Moreover, staff believes that few, if any, upsells on
initial outbound and inbound calls would be for debt relief.
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To estimate the number of consumers who are delinquent on one or
more credit cards, staff assumes that couples constitute a single
decision-making unit, as do single adults (widowed, divorced,
separated, never married) within each household. According to the most
current U.S. Census Bureau data available, there are 157,356,000
decision-making units.\33\ Of these, 113,611,032 have one or more
credit cards,\34\ and there are 3,101,581 decision-making units with at
least one delinquent credit card account.\35\
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\33\ U.S. Census Bureau, Income, Poverty, and Health Insurance
in the United States: 2011, (September 2012), p. 6, available at
http://www.census.gov/prod/2012pubs/p60-243.pdf (reflecting
119,927,000 households in 2010); U.S. Census Bureau, Sharing a
Household: Household Composition and Economic Well Being: 2007-2010
(June 2012), p. 4, available at www.census.gov/hhes/www/poverty/publications/P60-242.pdf (reflecting 37,429,000 adults living with a
householder that is neither a spouse nor cohabiting partner in
2010).
\34\ The estimate of consumers with one or more credit cards is
derived by multiplying the estimated decision making units
(157,356,000) by the percentage of consumers with one or more credit
cards (72.2%). Federal Reserve Bank of Boston, Consumer Payments
Research Center, The 2009 Survey of Consumer Payment Choice (April
2011), p. 8, available at www.bostonfed.org/economic/ppdp/2011/ppdp1101.pdf.
\35\ The estimate of consumers with a delinquent account is
derived by multiplying the estimate of consumers with one or more
credit cards (113,611,032) by the delinquency rate for credit cards
(2.73%). Board of Governors of the Federal Reserve System, Charge
Off and Delinquency Rates on Loans and Leases at Commercial Banks,
available at http://www.federalreserve.gov/releases/chargeoff/delallsa.htm (reporting a 2.73% delinquency rate for credit cards
for the fourth quarter of 2012).
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Accordingly, since reciting the general sales disclosures takes
eight seconds, staff estimates that the general sales disclosure burden
for inbound debt relief calls is 1,723 hours (3,101,581 inbound debt
relief calls x 8 seconds x 25% burden / 3,600).
The general sales disclosures required by Sec. 310.3(a)(1)(i)-
(iii) must also be made by sellers and telemarketers for some inbound
calls that are excluded from the general media and direct mail
exemptions from the TSR for inbound calls; \36\ namely, calls in
response to ads for investment opportunities, certain business
opportunities,\37\ credit card loss protection (``CCLP''),\38\ credit
repair,\39\ loss recovery services,\40\ and advance fee loans.\41\
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\36\ 16 CFR 310.6(b)(5) (general media) and 310.6(b)(6) (direct
mail).
\37\ Staff has previously accounted only for the business
opportunity exclusion, which so significantly overstated the number
of complaints not covered by the Franchise Rule or Business
Opportunity Rule that it served as a proxy for all the other
exclusions. See infra note 46. With the recent burgeoning increase
in advance fee loan complaints, that may no longer be the case, and
staff accordingly now accounts for all the exclusions, even though
some may seem trivial.
\38\ 16 CFR 310.3(a)(1)(vi).
\39\ 16 CFR 310.4(a)(2).
\40\ 16 CFR 310.4(a)(3).
\41\ 16 CFR 310.4(a)(4).
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Staff's estimates for each of these types of inbound calls begins
by comparing the number of complaints reported to the FTC's Consumer
Sentinel system in the most recent year to the total number of reported
fraud complaints for the year. The resulting percentage of total fraud
complaints must be adjusted to reflect the fact that only a relatively
small percentage of telemarketing calls are fraudulent. To extrapolate
the percentage of fraudulent telemarketing calls, staff divides a
Congressional estimate of annual consumer injury from telemarketing
fraud ($40 billion) \42\ by the most recent available total of consumer
and business-to-business telemarketing sales ($332.4 billion in
2010),\43\ or 12%. The two percentages are then multiplied together to
determine the percentage of the 1.9 billion annual inbound
telemarketing calls represented by each type of fraud complaint.
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\42\ The FBI believes that this estimate now overstates
telemarketing fraud losses as a result of its investigations and
closings of once massive telemarketing boiler room operations. See
FBI, A Byte Out of History: Turning the Tables on Telemarketing
Fraud (Dec. 8, 2010), available at www.fbi.gov/news/stories/2010/december/telemarketing_120810/telemarketing_120810.
\43\ DMA 2010 Statistical Fact Book (January 2010), p. 5,
available at http://www.ftc.gov/sentinel/reports/sentinel-annual-reports/sentinel-cy2012.pdf.
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Thus, for the 7,117 Sentinel complaints about investment
opportunities in 2012,\44\ or 0.7% of the 1,074,937 total fraud
complaints reported,\45\ the general sales disclosure burden is 4,222
hours (1.9 billion inbound calls x 0.001 [0.007 x 0.12] x 8 seconds /
3,600). Likewise, the burden for business opportunity sales (17,231
including complaints for multi-level marketing/pyramids/chain letters)
is 8,444 hours (1.9 billion x 0.002 [0.016 x 0.12] x 8 seconds /
3,600); \46\ for advance fee loan sales (38,885 complaints), 16,888
hours (1.9 billion x 0.004 [0.036 x 0.12] x 8 seconds / 3,600); for
credit repair sales (2,094
[[Page 19487]]
complaints), 844 hours (1.9 billion x 0.0002 [0.002 x 0.12] x 8 seconds
/ 3,600); and 422 hours for loss recovery services (612 complaints)
(1.9 billion x 0.0001 [0.001 x 0.12] x 8 seconds / 3,600). The
exemptions therefore add an additional 30,820 hours to the general
sales disclosure burden. Altogether, the general sales disclosure
burden thus is 410,492 hours (377,949 for outbound sales + 1,723 for
debt relief inbound sales + 30,820 for non-exempt inbound sales).
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\44\ FTC, Consumer Sentinel Data Book for January-December 2012
(February 2013) (``Sentinel Data''), Appendix B3, p. 83.
\45\ Sentinel Data at 7.
\46\ Sentinel Data at 7, 80. While this total excludes
``Franchises/Distributorships'' covered by the Franchise Rule and
thus not subject to the TSR, the data cannot additionally be
segregated to omit ``Work-At-Home'' opportunities now covered by the
Business Opportunity Rule and thus also not subject to the TSR.
Staff therefore believes this total significantly overstates the
opportunities subject to the TSR.
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Additional specific disclosures are required if the call involves a
prize promotion,\47\ the sale of credit card loss protection
products,\48\ an offer with a negative option feature,\49\ or the sale
of a debt relief service.\50\ Staff estimates that the specific sales
disclosures other than for debt relief services will require 23,971
hours annually [(484 million calls x 5% [estimate for outbound calls
involving prize promotions] x 3 seconds x 25% burden = 5,042 hours) +
(484 million calls x 0.1% [estimate for outbound calls involving CCLP]
x 4 seconds x 25% burden = 134 hours) + (484 million calls x 40% upsell
conversions x 20% sales conversions x 0.1% [estimate for outbound calls
involving CCLP upsells] x 4 seconds x 25% burden = 11 hours) + (1.9
billion inbound calls x 40% upsell conversion x 20% sales conversion x
0.1% [estimate for inbound calls involving CCLP upsells] x 4 seconds x
25% burden = 42 hours) + (484 million calls x 10% [estimate for
outbound calls involving negative options] x 4 seconds x 25% burden =
13,444 hours) + (484 million calls x 40% upsell conversion x 20% sales
conversions x 10% [estimate for outbound calls involving negative
option upsells] x 4 seconds x 25% burden = 1,076 hours) + (1.9 billion
inbound calls x 40% upsell conversions x 20% sales conversions x 10%
[estimate for inbound calls involving negative option upsells] x 4
seconds x 25% burden = 4,222 hours).
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\47\ 16 CFR 310.3(a)(1)(iv)-(v).
\48\ 16 CFR 310.3(a)(1)(vi).
\49\ 16 CFR 310.3(a)(1)(vii).
\50\ 16 CFR 310.3(a)(1)(viii).
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Staff estimates that reciting the debt relief disclosures in each
sales call will take ten seconds, and therefore the disclosure burden
associated with the debt relief disclosures is 4,308 hours (3,101,581
outbound debt relief calls x 10 seconds x 25% burden = 2,154 hours) +
(3,101,581 inbound debt relief calls x 10 seconds x 25% burden = 2,154
hours). Thus, the total specific sales disclosure burden is 28,279
hours annually (23,971 for non-debt-relief calls) + 4,308 (for debt
relief calls).
Cumulatively, therefore, the total annual burden for all of the
sales disclosures is 438,771 hours (410,492 general + 28,279 specific
sales disclosures) or, by rough approximation (allowing that some
entities conducting inbound telemarketing will be exempt from oral
disclosure if making certain written disclosures), 54 hours annually
per firm (438,771 / 8,110).
Finally, any entity that accesses the Registry, regardless whether
it is paying for access, must submit minimal identifying information to
the operator of the Registry. This basic information includes the name,
address, and telephone number of the entity; a contact person for the
organization; and information about the manner of payment. The entity
also must submit a list of the area codes for which it requests
information and certify that it is accessing the Registry solely to
comply with the provisions of the TSR. If the entity is accessing the
Registry on behalf of other seller or telemarketer clients, it has to
submit basic identifying information about those clients, a list of the
area codes for which it requests information on their behalf, and a
certification that the clients are accessing the Registry solely to
comply with the TSR.
As it has since the Commission's initial proposal to implement user
fees under the TSR, FTC staff estimates that affected entities will
require no more than two minutes for each entity to submit this basic
information, and anticipates that each entity will have to submit the
information annually.\51\ Based on the number of entities accessing the
Registry that are subject to the TSR, this requirement will result in
270 burden hours (8,110 entities x 2 minutes per entity). In addition,
FTC staff continues to estimate that up to one-half of those entities
may need, during the course of their annual period, to submit their
basic identifying information more than once in order to obtain
additional area codes of data. Thus, this would result in an additional
135 burden hours. Accordingly, accessing the Registry will impose a
total burden of approximately 405 hours per year.
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\51\ See 67 FR 37366 (May 29, 2002). The two-minute estimate
likely is conservative. The OMB regulation defining ``information''
under the PRA generally excludes disclosures that require persons to
provide facts necessary simply to identify themselves, e.g., the
respondent, the respondent's address, and a description of the
information the respondent seeks in detail sufficient to facilitate
the request. See 5 CFR 1320.3(h)(1).
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Cumulative of the foregoing components, disclosure burden for new
and existing telemarketing entities, including those making prerecorded
calls,\52\ is 1,304,374 hours (865,333 [pre-sale disclosures] + 410,492
[general sales disclosures] + 28,279 [specific sales disclosures] + 270
[Registry access]). Thus, the total recordkeeping and disclosure burden
is 1,319,983 hours (15,610 + 1,304,374).
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\52\ The required opt-out disclosure for all prerecorded calls
mandated by the 2008 amendments would not require any material time
expenditure, and arguably less time than a pre-existing and now
identical FCC disclosure requirement. In any event, because the
``opt-out'' disclosure applies only to prerecorded calls, which are
fully automated, no additional manpower hours would be expended in
its electronic delivery.
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Estimated Annual Labor Cost: $15,593,528.
Estimated Annual Non-Labor Cost: $5,101,246.
Recordkeeping Labor and Non-Labor Costs
1. Labor Costs
Assuming a cumulative burden of 7,500 hours a year to set up
compliant recordkeeping systems for new telemarketing entities (75 new
entrants/year x 100 hours each), and applying to that a skilled labor
rate of $25/hour,\53\ labor costs would approximate $187,500 yearly for
all new telemarketing entities. As indicated above, staff estimates
that existing telemarketing entities require 8,110 hours, cumulatively,
to maintain compliance with the TSR's recordkeeping provisions.
Applying a clerical wage rate of $14/hour,\54\ recordkeeping
maintenance for existing telemarketing entities would amount to an
annual cost of approximately $113,540. Thus, the estimated labor cost
for recordkeeping associated with the TSR for both new and existing
telemarketing entities, including prerecorded and debt relief calls, is
$301,040.
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\53\ This rounded figure is derived from the mean hourly wage
shown for Computer Support Specialists in the U.S. Department of
Labor, Bureau of Labor Statistics, May 2011 National Occupational
Employment and Wage Estimates United States, available at
www.bls.gov/oes/current/oes_nat.htm#15 0000.
\54\ This rounded figure is derived from the mean hourly wage
shown for Office Clerks, General. See id.
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2. Non-Labor Costs
Staff believes that the capital and start-up costs associated with
the TSR's information collection requirements are de minimis. The
Rule's recordkeeping requirements mandate that companies maintain
records, but not in any particular form. While those requirements
necessitate that affected entities have a means of storage, industry
members should have that already for business purposes
[[Page 19488]]
independent of the Rule. Even if an entity finds it necessary to
purchase a storage device, the cost is likely to be minimal, especially
when annualized over the item's useful life. The Rule's disclosure
requirements require no capital expenditures.
Affected entities may need some storage media such as file folders,
computer back-up tapes, or paper in order to comply with the Rule's
recordkeeping requirements. Although staff believes that most affected
entities would maintain the required records in the ordinary course of
business, staff estimates that the approximately 8,110 telemarketing
entities subject to the Rule spend an annual amount of $50 each on
office supplies as a result of the Rule's recordkeeping requirements,
for a total recordkeeping cost burden for both new and existing
telemarketing entities, including those making prerecorded calls, of
$405,500.
Disclosure Burden Labor & Non-Labor Costs
1. Labor Costs
The estimated annual labor cost for disclosures for all
telemarketing entities is $15,652,488. This total is the product of
applying an assumed hourly wage rate of $12 \55\ to the earlier stated
estimate of 1,304,374 hours pertaining to the pre-sale, general and
specific disclosures and supplying basic identifying information to the
Registry operator.
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\55\ This rounded figure is derived from the mean hourly wage
shown for Telemarketers. See supra note 56.
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2. Non-Labor Costs
Oral disclosure estimates, discussed above, and totaling-1,304,374
hours, applied to a retained estimated commercial calling rate of 6
cents per minute ($3.60 per hour), amounts to $4,695,746 in phone-
related costs.\56\
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\56\ Staff believes that remaining non-labor costs would be
incurred largely by affected entities in the ordinary course of
business and would not materially exceed those ordinary costs.
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Staff believes that the estimated 1,242 inbound telemarketing
entities choosing to comply with the Rule through written disclosures
incur no additional capital or operating expenses as a result of the
Rule's requirements because they are likely to provide written
information to prospective customers in the ordinary course of
business. Adding the required disclosures to that written information
likely requires no supplemental non-labor expenditures.
Thus, cumulatively for both new and existing telemarketing
entities, including prerecorded and debt relief calls, total labor
costs are $15,593,528 ($301,040 (recordkeeping) + $15,652,488
(disclosure)); total capital and other non-labor costs are $5,101,246
($405,500 (office supplies) + $4,695,746 (telephone charges)).
Request for Comment: Pursuant to Section 3506(c)(2)(A) of the PRA,
the FTC invites comments on: (1) Whether the disclosure requirements
are necessary, including whether the information will be practically
useful; (2) the accuracy of our burden estimates, including whether the
methodology and assumptions used are valid; (3) how to improve the
quality, utility, and clarity of the disclosure requirements; and (4)
how to minimize the burden of providing the required information to
consumers. All comments should be filed as prescribed in the ADDRESSES
section above, and must be received on or before May 31, 2013. You can
file a comment online or on paper. For the Commission to consider your
comment, we must receive it on or before May 31, 2013. Write ``TSR PRA
Comment, FTC File No. P094400'' on your comment.
Your comment--including your name and your state--will be placed on
the public record of this proceeding, including to the extent
practicable, on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the Commission tries
to remove individuals' home contact information from comments before
placing them on the Commission Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which is * * * privileged or confidential'' as provided in Section 6(f)
of the FTC Act 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c).\57\ Your comment will be kept confidential only if
the FTC General Counsel, in his or her sole discretion, grants your
request in accordance with the law and the public interest.
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\57\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/infofurnishersrulepra, by following the instructions on the web-
based form. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that Web site.
If you file your comment on paper, write ``TSR PRA Comment, FTC
File No. P094400'' on your comment and on the envelope, and mail or
deliver it to the following address: Federal Trade Commission, Office
of the Secretary, Room H-113 (Annex J), 600 Pennsylvania Avenue NW.,
Washington, DC 20580. If possible, submit your paper comment to the
Commission by courier or overnight service.
Visit the Commission Web site at www.ftc.gov to read this Notice.
The FTC Act and other laws that the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. The Commission will consider all timely and responsive
public comments that it receives on or before May 31, 2013. You can
find more information, including routine uses permitted by the Privacy
Act, in the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
David C. Shonka,
Acting General Counsel.
[FR Doc. 2013-07427 Filed 3-29-13; 8:45 am]
BILLING CODE 6750-01-P