Taking Calls

Are state and federal laws taking the telephone out of your sales arsenal?
Magazine Contributor
3 min read

This story appears in the January 2002 issue of Entrepreneurs Start-Ups magazine. Subscribe »

When you read about the new state laws regulating telemarketing, you probably envision the national firms that are always calling to pitch magazines or time-shares. But small businesses are also affected. If your employees call potential clients trying to drum up business, federal rules require you to maintain a list of customers who don't wish to be called. Laws in your state may also require you to register, post a bond, reconcile your call list with a state no-call list, or not make calls during certain hours. It depends on your state's laws.

Those laws are expanding steadily. While no federal law tailored to telemarketing has been passed since 1994, various state legislatures debated 250 separate bills in 2001 alone. Nineteen states now have state-run no-call lists, including five new states last year (Colorado, Indiana, Louisiana, Texas and Wisconsin). New laws regulating telemarketing took effect last year in Indiana, Missouri and New York.

"This is a politically popular issue," says Tyler Prochnow, a Kansas City, Missouri, attorney who represents the American Teleservices Association, a trade group for telemarketing companies. Consumers love hearing that the annoying calls during dinner will stop, but business groups worry about the increased cost and threat of major fines. Missouri, for instance, fined Fort Lauderdale, Florida-based Access Resources Services Inc. $75,000 in August for violating its no-call law.

It's the Law

To avoid such fines, you have to understand a patchwork of state and federal laws and regulations. The Telephone Consumer Protection Act of 1991, enacted in 1995, led to FTC regulations spelling out what telemarketers must do. "For the first time it drew a bright line," Prochnow says, "so companies know what they have to do and consumers know what they should hear." Telemarketers must give descriptions, names and phone numbers for their companies, the total cost of any goods or services ordered, and any restrictions, such as blackout dates for travel deals. Calls are prohibited between 9 p.m. and 8 a.m., and each company must maintain a list of consumers who say they don't wish to be called.

When a consumer says, "Don't call me again," you must abide by that-for 10 years. If not, you can be liable for a $500 fine. Prochnow reports that savvy consumers are tracking sales calls and sending companies an increasing number of demand letters.

When there's a state-run no-call list, any company doing business by phone must purchase it for about $500 per quarter. Note, however, that you usually can offer services to existing customers even if they're on the list.

Twenty-eight states also have registration and bonding systems to discourage phone scams. However, most businesses-such as publicly traded companies, real estate and insurance firms, companies with retail stores, those in business at least three years, etc.-are exempt from registration.

Before you start phoning customers, consult your attorney about applicable laws and regulations. Abiding by them can not only keep you out of legal trouble, but it can also save the time and expense of calling consumers who don't want to hear from you.

Steven C. Bahls, dean of Capital University Law School in Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.

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