Federal Register, Volume 81 Issue 72 (Thursday, April 14, 2016)

[Federal Register Volume 81, Number 72 (Thursday, April 14, 2016)]
[Notices]
[Pages 22082-22088]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08655]

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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 for an additional
three years the current PRA clearance for information collection
requirements in its Telemarketing Sales Rule (``TSR''). That clearance
expires on August 31, 2016.

DATES: Comments must be submitted on or before June 13, 2016.

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 your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite
CC-5610 (Annex J), Washington, DC 20580, or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex
J), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Requests for additional information or

[[Page 22083]]

copies of the proposed information requirements for the TSR should be
addressed by mail to Craig Tregillus, Staff Attorney, Division of
Marketing Practices, Bureau of Consumer Protection, Federal Trade
Commission, Room CC-8607, 600 Pennsylvania Ave. NW., Washington, DC
20580, or by telephone to (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 Telemarketing 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 cover the solicitation by telephone
of charitable donations by third-party telemarketers 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 survey
companies.
\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\
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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.
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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;
\8\ and (2) added new required disclosures and prohibited
representations to curb deceptive practices prevalent in the
telemarketing of debt relief services.\9\
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\8\ 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.
\9\ Most recently, the Commission published further amendments
in 2015 that prohibit the use of certain payment methods in both
outbound and inbound telemarketing, expand the advance fee ban on
recovery services, and clarify several provisions to reflect
Commission enforcement policy. 80 FR 77554 (Dec. 14, 2015). The
prohibitions on the use of remotely created payment checks, remotely
created payment orders, cash-to-cash money transfers and cash reload
mechanisms do not take effect until June 13, 2016. The other
amendments took effect upon publication. None of the prohibitions
and clarifications in these amendments result in PRA burden for
covered entities. 80 FR at 77558.
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Burden Statement:
Estimated Annual Hours Burden: 1,238,670 hours.
The estimated burden for recordkeeping is 14,541 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
1,223,777 hours for all affected industry members and estimated
reporting burden is 352 hours. Thus, the total PRA burden is

[[Page 22084]]

1,238,670 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\
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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.
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In calendar year 2015, 22,401 telemarketing entities accessed the
Registry. Of these entities, 498 were ``exempt'' entities obtaining
access to data.\12\ By definition, none of the exempt entities are
subject to the TSR. In addition, 16,248 sellers and 5,259 telemarketers
accessed the Registry. Of those, however, 11,250 sellers and 3,612
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 7,041 telemarketing entities
(22,401-498-11,250-3,612) are currently subject to the TSR, of which
4,998 (16,248-11,250) are sellers and 1,647 (5,259-3,612) are
telemarketers.\14\
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\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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(a) Recordkeeping Hours

Staff estimates that the above-noted 7,041 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 7,041
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 14,541 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 11,952, 11,954 n. 17 (Mar. 20, 2009); 75 FR
48,458, 48,504 (Aug. 10, 2010); 78 FR 19,483, 19,484 n. 15 (Apr. 1,
2013).
\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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(b) 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\ 78 FR at 19,485.
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Based on previous assumptions, staff estimates that of the 7,041
telemarketing entities noted above, 3,235 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 might do so only
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, consistent with its previous analyses, staff estimates
that, of the 3,235 entities that conduct inbound telemarketing,
approximately one-third (1,078) 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 3,235 ((7,041 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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Consistent with its past practice, 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 (2001-2012).
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,

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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 before any
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), consistent with past estimates, staff has continued to
calculate 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 industry data and further FTC extrapolations,\21\ staff
estimates that 2.3 billion outbound telemarketing calls are subject to
FTC jurisdiction, that 450 million of these calls result in direct
sales,\22\ and that there are 1.8 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 \23\ for telemarketers to recite the required pre-sale
disclosures plus 3 additional seconds \24\ 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.\25\
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\21\ Staff employs the methodology, assumptions, and studies it
has consistently used since their development for the 2003 TSR
amendments to determine, indirectly from external sales data and the
relative percentages of inbound and outbound calls, the number of
telemarketing calls and resulting number of sales because no call or
sales number totals are otherwise available. Staff relies on its own
prior estimates that of the $134.7 billion of sales from outbound
calls to consumers in 2012 (DMA 2013 Statistical Fact Book, at 5),
92.8% of those sales, or $125 billion, are subject to FTC
jurisdiction, with the average value of a sale being $85, and 20% of
outbound calls resulting in a sale.
\22\ 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 450
million is based on an estimated 1.5 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 only known available outside direct
sales data for telephone marketing to consumers. See DMA Statistical
Fact Book (2001), p. 301.
\23\ See, e.g., 60 FR 32,682, 32,683 (June 23, 1995); 63 FR
40,713, 40,714 (July 30, 1998); 66 FR 33,701, 33,702 (June 25,
2001); 71 FR 28,698, 28,700 (May 17, 2006); 74 FR 11,952, 11,955
(Mar. 20, 2009); 78 FR at 19,485.
\24\ 71 FR 3302, 3304 (Jan. 20, 2006); 71 FR at 28,700; 78 FR at
19,485.
\25\ See, e.g., 60 FR at 32,683; 78 FR at 19,485.
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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.\26\ 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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\26\ 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, absent 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
826,389 hours per year: [(2.3 billion outbound calls x 40% lasting the
duration x 7 seconds of full pre-sale disclosures / 3,600 (conversion
of minutes to hours) x 25% burden = 447,222 hours) + (2.3 billion
outbound calls x 60% terminated after 2 seconds of disclosures / 3,600
x 25% burden = 191,667 hours) + (450 million outbound calls resulting
in direct sales x 40% upsell conversions x 3 seconds of related
disclosures / 3,600 x 25% burden = 37,500 hours) + (1.8 billion inbound
calls x 40% upsell conversions x 3 seconds / 3,600 x 25% burden =
150,000 hours)] = 826,389 hours).
The TSR also requires several general sales disclosures in
telemarketing calls before the customer pays for goods or services.\27\
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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\27\ 16 CFR 310.3(a)(1)(i)-(iii).
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Staff estimates that the general sales disclosures for
telemarketing calls require 352,695 hours annually. This figure
includes the burden for written disclosures (1,078 inbound
telemarketing entities estimated to use direct mail \28\ x 10 hours
\29\ per year x 25% burden = 2,695 hours), as well as the figure for
oral disclosures [450 million outbound calls x 8 seconds / 3,600 x 25%
burden = 250,000 hours) + (450 million outbound calls x 40% upsell
attempts x 20% sales conversion x 8 seconds / 3,600 x 25% burden =
20,000 hours) + (1.8 billion inbound calls x 40% upsell attempts x 20%
sales conversion x 8 seconds / 3,600 x 25% burden = 80,000 hours)] =
352,695 hours.\30\
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\28\ See supra text preceding note 20.
\29\ 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.
\30\ 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.\31\ Employing that analysis, as modified in
response to a public comment to account for inbound debt relief
sales,\32\ 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.\33\ 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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\31\ 75 FR at 48,504-05.
\32\ 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.
\33\ 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 162,016,000
decision-making units.\34\ Of these,

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116,975,552 have one or more credit cards,\35\ and there are 3,193,433
decision-making units with at least one delinquent credit card
account.\36\
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\34\ U.S. Census Bureau, Income and Poverty in the United
States: 2014, (September 2015), p. 6, available at http://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-252.pdf (reflecting 124,587,000 households in 2014); U.S. Census
Bureau, Sharing a Household: Household Composition and Economic Well
Being: 2007-2010 (June 2012), Table 2, 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).
\35\ The estimate of consumers with one or more credit cards is
derived by multiplying the estimated decision making units
(162,016,000) 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.
\36\ The estimate of consumers with a delinquent account is
derived by multiplying the estimate of consumers with one or more
credit cards (116,975,552) 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 1,774 hours (3,193,433 inbound debt
relief calls to decision-making units with at least one delinquent
credit card account x 8 seconds / 3,600 x 25% burden).
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; \37\ namely, calls in
response to ads for investment opportunities, certain business
opportunities,\38\ credit card loss protection (``CCLP''),\39\ credit
repair,\40\ loss recovery services,\41\ and advance fee loans.\42\
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\37\ 16 CFR 310.6(b)(5) (general media) and Sec. 310.6(b)(6)
(direct mail).
\38\ 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 47. 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.
\39\ 16 CFR 310.3(a)(1)(vi).
\40\ 16 CFR 310.4(a)(2).
\41\ 16 CFR 310.4(a)(3).
\42\ 16 CFR 310.4(a)(4).
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Staff's estimates for each of these types of non-exempt inbound
calls begins by comparing the number of complaints reported to the
FTC's Consumer Sentinel system in the most recent complete year to the
total number of reported fraud complaints for that 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) \43\ by recent available data on
total consumer and business-to-business telemarketing sales ($305.1
billion in 2012),\44\ or 13%. The two percentages are then multiplied
together to determine the percentage of the 1.8 billion annual inbound
telemarketing calls represented by each type of fraud complaint.
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\43\ 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 https://www.fbi.gov/news/stories/2010/december/telemarketing_120810/telemarketing_120810. See also
Internet Crime Complaint Center, 2009Annual Report on Internet Crime
(citing $559.7 million of losses claimed in consumer complaints),
available at http://www.justice.gov/criminal-fraud/mass-marketing-fraud.
\44\ DMA 2013 Statistical Fact Book (January 2013), p. 5.
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Thus, for the 7,355 Sentinel complaints in 2015 about investment
opportunities covered by the TSR,\45\ or 0.6% of the 1,246,849 total
fraud complaints reported that year,\46\ the general sales disclosure
burden is 3,200 hours (1.8 billion inbound calls x 0.0008 [0.006 x
0.13] x 8 seconds / 3,600). Likewise, the burden for business
opportunity sales (10,059 complaints), including complaints for multi-
level marketing/pyramids/chain letters) is 4,000 hours (1.8 billion x
.001 [0.008 x 0.13] x 8 seconds / 3,600); \47\ for advance fee loan
sales (19,908 complaints), 8,000 hours (1.8 billion x 0.002 [0.016 x
0.13] x 8 seconds / 3,600); for credit repair sales (1,751 complaints),
400 hours (1.8 billion x 0.0001 [0.001 x 0.13] x 8 seconds / 3,600);
400 hours for loss recovery services (2,509 complaints) (1.8 billion x
0.0001 [0.001 x 0.13] x 8 seconds / 3,600); 120 hours for CCLP sales
(266 complaints) (1.8 billion x 0.00003 [0.0002 x 0.13] x 8 seconds /
3,600). The exceptions to the TSR's inbound call exemptions therefore
add an additional 16,120 hours to the general sales disclosure burden.
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\45\ FTC, Consumer Sentinel Network Data Book for January-
December 2015 (February 2016) (``Sentinel Data''), Appendix B3, p.
83, available at https://www.ftc.gov/reports/consumer-sentinel-network-data-book-january-december-2015.
\46\ Sentinel Data at 7.
\47\ 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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Altogether, the general sales disclosure burden thus is 370,589
hours (352,695 hours for outbound sales + 1,774 hours for debt relief
inbound sales + 16,120 hours for non-exempt inbound sales).
Additional specific disclosures are required if the call involves a
prize promotion,\48\ the sale of credit card loss protection
products,\49\ an offer with a negative option feature,\50\ or the sale
of a debt relief service.\51\ Staff estimates that the specific sales
disclosures other than for debt relief services will require 22,363
hours annually [(450 million direct sales transactions from outbound
calls x 5% [estimate of percentage of sales transactions involving
prize promotions] x 3 seconds / 3,600 x 25% burden = 4,688 hours) + 450
million direct sales transactions from outbound calls x 0.1% [estimate
of percentage of sales transactions involving CCLP] x 4 seconds / 3,600
x 25% burden = 125 hours) + (450 million sales transactions from
outbound calls x 40% attempted upsell conversions x 20% sales
conversions x 0.1% [estimate of percentage of outbound calls involving
CCLP upsells] x 4 seconds x 25% burden / 3,600 = 10 hours) + (1.8
billion inbound calls x 40% attempted upsell conversions x 20% sales
conversions x 0.1% [estimate of percentage of inbound calls involving
CCLP upsells] x 4 seconds x 25% burden / 3,600 = 40 hours) + (450
million sales transactions from outbound calls x 10% [estimate of
percentage of outbound calls involving negative options] x 4 seconds /
3,600 x 25% burden = 12,500 hours) + (450 million sales transactions
from outbound calls x 40% attempted upsell conversions x 20% sales
conversions x 10% [estimate of percentage of outbound calls involving
negative option upsells] x 4 seconds x 25% burden / 3,600 = 1,000
hours) + (1.8 billion inbound calls x 40% attempted upsell conversions
x 20% sales conversions x 10% [estimate of percentage of inbound calls
involving negative option upsells] x 4 seconds / 3,600 x 25% burden =
4000 hours).
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\48\ 16 CFR 310.3(a)(1)(iv)-(v).
\49\ 16 CFR 310.3(a)(1)(vi). It is neither staff's understanding
nor belief that CCLP sales occur through inbound calls. Staff
anticipates, however, the potential for such sales in an upsell
following an inbound call.
\50\ 16 CFR 310.3(a)(1)(vii).
\51\ 16 CFR 310.3(a)(1)(viii).
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Staff estimates that reciting the specific sales disclosures in
each debt relief sales call will take ten seconds, and therefore the
disclosure burden associated with the debt relief disclosures is 4,436
hours (3,193,433 outbound debt relief calls x 10 seconds

[[Page 22087]]

x 25% burden = 2,218 hours) + (3,193,433 inbound debt relief calls x 10
seconds x 25% burden = 2,218 hours).
Thus, the total specific sales disclosure burden is 26,799 hours
annually (22,363 for non-debt-relief calls) + 4,436 (for debt relief
calls).
Cumulatively, therefore, the total annual burden for all of the
sales disclosures is 397,388 hours (370,589 hours general sales
disclosures + 26,799 hours specific sales disclosures).

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.\52\ Based on the number of entities accessing the
Registry that are subject to the TSR, this requirement will result in
235 burden hours (7,041 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
117 burden hours. Accordingly, accessing the Registry will impose a
total burden of approximately 352 hours per year.
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\52\ See 67 FR 37,366 (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 debt relief
and prerecorded calls,\53\ is 1,223,777 hours (826,389 hours [pre-sale
disclosures] + 370,589 hours [general sales disclosures] + 26,799 hours
[specific sales disclosures]).
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\53\ 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 worker hours would be expended in its
electronic delivery.
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Thus, total recordkeeping, disclosure, and reporting burden is
1,238,670 hours (14,541 hours + 1,223,777 hours + 352 hours).
Estimated Annual Labor Cost: $15,893,001.

(a) Recordkeeping Labor Cost

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 $26.92/hour,\54\ labor costs would approximate $201,900 yearly
for all new telemarketing entities. As indicated above, staff estimates
that existing telemarketing entities require 7,041 hours, cumulatively,
to maintain compliance with the TSR's recordkeeping provisions.
Applying a clerical wage rate of $15.33/hour,\55\ recordkeeping
maintenance for existing telemarketing entities would amount to an
annual cost of approximately $107,939. 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
$309,839.
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\54\ This figure is derived from the mean hourly wage shown for
``Computer Support Specialist.'' ``Occupational Employment and
Wages--May 2015,'' Bureau of Labor Statistics, U.S. Department of
Labor, released March 30, 2016, Table 1 (``National employment and
wage data from the Occupational Employment Statistics survey by
occupation, May 2014''), available at http://www.bls.gov/news.release/ocwage.t01.htm.
\55\ This figure is derived from the mean hourly wage shown for
Office Clerks, General. See id.
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(b) Disclosure Labor Cost

The estimated annual labor cost for disclosures for all
telemarketing entities is $15,578,681. This total is the product of
applying an assumed hourly wage rate of $12.73 \56\ to the earlier
stated estimate of 1,223,777 hours pertaining to the pre-sale, general
and specific disclosures.
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\56\ This figure is derived from the mean hourly wage shown for
Telemarketers. See supra note 54. It is applied additionally to the
ensuing calculation of reporting labor cost regarding the Registry
operator.
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Estimated labor cost supplying basic identifying information to the
Registry operator is $4,481 (352 hours x $12.73 per hour).
Thus, cumulatively for both new and existing telemarketing
entities, including prerecorded and debt relief calls, total labor
costs are $15,893,001 [($309,839, recordkeeping) + ($15,578,681
disclosure) + ($4,481, reporting)].
Estimated Annual Non-Labor Cost: $4,757,647.

(a) Recordkeeping

Staff believes that the capital and start-up costs associated with
the TSR's recordkeeping provisions are de minimis. They mandate that
companies maintain records, but not in any particular form. While the
requirements necessitate that affected entities have a means of
storage, industry members should have that already for business
purposes 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.
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, consistent with its prior analyses, staff estimates that the
estimated 7,041 telemarketing entities subject to the Rule continue to
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 $352,050.

(b) Disclosure

Consistent with its past practice of applying the disclosure
estimates discussed above, and totaling 1,223,777 hours, to a retained
estimated commercial calling rate of 6 cents per minute ($3.60 per
hour), staff estimates a total of $4,405,597 in telephone charges.\57\
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\57\ Staff believes that other non-labor costs would be incurred
largely by affected entities in the ordinary course of business and,
beyond that, would not materially exceed those ordinary costs.

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[[Page 22088]]

Staff believes that the inbound telemarketing entities choosing to
comply with the Rule by making 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 disclosures
required by the direct mail exemption 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 capital
and/or other non-labor costs are $4,757,647 ($352,050 (office supplies)
+ $4,405,597 (telephone charges)).
Request for Comment: Pursuant to section 3506(c)(2)(A) of the PRA,
the FTC invites comments on: (1) Whether the disclosure, recordkeeping,
and reporting requirements are necessary, including whether the
resulting 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 June 13, 2016.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before June 13, 2016.
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), 16 CFR
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).\58\ Your comment will be kept confidential only if
the FTC General Counsel grants your request in accordance with the law
and the public interest.
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\58\ 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/tsrrulepra, by following the instructions on the web-based form.
When 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, mail your
comment to the following address: Federal Trade Commission, Office of
the Secretary, 600 Pennsylvania Avenue NW., Suite CC-5610 (Annex J),
Washington, DC 20580, or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Constitution Center,
400 7th Street SW., 5th Floor, Suite 5610 (Annex J), Washington, DC
20024. If possible, submit your paper comment to the Commission by
courier or overnight service.
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 June 13, 2016.
For information on the Commission's privacy policy, including routine
uses permitted by the Privacy Act, see http://www.ftc.gov/ftc/privacy.htm.

David C. Shonka,
Acting General Counsel.
[FR Doc. 2016-08655 Filed 4-13-16; 8:45 am]
BILLING CODE 6750-01-P