Telemarketing Sales Rule; Information Collection Under OMB Review

FEDERAL TRADE COMMISSION

Telemarketing Sales Rule; Information Collection Under OMB Review

AGENCY: Federal Trade Commission (``FTC'').

ACTION: Notice of amended application to the Office of Management and

Budget (``OMB'') under the Paperwork Reduction Act (44 U.S.C. 3501 et

seq.) for clearance of information collection requirements contained in

a revised proposed trade regulation rule pursuant to the Telemarketing

and Consumer Fraud and Abuse Prevention Act.

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SUMMARY: The FTC is seeking OMB clearance for information collection

requirements contained in revised proposed regulations implementing the

Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C.

6101-6108 (``Telemarketing Act'' or ``the Act'').

The Telemarketing Act requires the Commission to issue a rule

prohibiting deceptive and abusive telemarketing acts and practices. In

accordance with the statutory directive, the Commission issued a Notice

of Proposed Rulemaking on February 14, 1995 (60 FR 8313). Since that

time, the Commission has made revisions to the recordkeeping and

disclosure requirements contained in the initially proposed rule.

Specifically, the Commission has reviewed the public comments and

has incorporated many of the suggestions received from industry on how

to minimize the recordkeeping burden. The revised proposed rule

requires the following records to be kept for a twenty-four month

period: advertising and promotional materials, and telemarketing

scripts; information regarding prize recipients and prize distribution;

sales information; and information regarding employees directly

involved in telephone sales. The recordkeeping provisions will be

helpful in preserving evidence of compliance with the rule.

Absent the recordkeeping requirements, Commission staff believes

that this is the type of information that would be retained by these

entities in any event during the normal course of business because this

information would be useful in resolving private, non-governmental

inquiries and disputes. The definition of ``burden'' for OMB purposes

excludes any effort that would be expended regardless of a regulatory

requirement. 5 C.F.R. Sec. 1320.7(b)(1). Further, the revised proposed

rule clarifies that records kept in the ordinary course of business

need not be duplicated or separately maintained. Thus, the only burden

would be for retaining the records for an additional period of time.

Nonetheless, the Commission is increasing the estimate of burden

hours imposed by the recordkeeping requirements to take into account

any time necessary to develop, modify, construct, or assemble any

materials or equipment. Staff estimates that approximately 40,000

industry members could be affected by these recordkeeping requirements.

Staff further estimates that no more than 100 companies would find it

necessary to develop, modify, construct, or assemble materials or

equipment in order to comply with the proposed rule. Staff further

estimates that it would take these 100 entities approximately 100 hours

each during the first year of [[Page 32683]] compliance to assemble the

necessary equipment, for a total of 10,000 burden hours. Staff also

estimates that the companies that already have recordkeeping systems

would require only one hour to comply with the proposed recordkeeping

requirements, for a total burden estimate of 49,900 hours. The

Commission is requesting that this figure be rounded up to 50,000

hours. A burden estimate of 50,000 hours, which is a yearly estimate,

would allow approximately 100 new companies to enter the industry

during each succeeding year without requiring the Commission to modify

the burden estimate.

The Commission's February 14, 1995 Application to OMB did not

request clearance for the various disclosure requirements contained in

the proposed Telemarketing Rule. The Commission is now submitting these

disclosure requirements to OMB for clearance. The primary purpose of

the rule's disclosure requirements is to assist in preventing deceptive

and abusive telemarketing acts or practices by ensuring that customers

are informed of the purpose of the call and the terms and conditions of

the potential sale.

Specifically, the revised proposed rule requires sellers or

telemarketers to disclose the identity of the seller; the purpose of

the call; the nature of goods or services; and that no purchase is

necessary to win if a prize promotion is offered in conjunction with a

sales offer of goods or services. If requested, the telemarketer must

also disclose the no-purchase entry method of the prize promotion.

Staff estimates that 40,000 industry members make approximately 9

billion calls per year, or 225,000 calls per year per company. However,

sections 310.6(d) and (e) provide that if an industry member chooses to

solicit consumers by using advertising media other than direct mail or

by using direct mail solicitations that make certain required

disclosures, they are exempted from complying with other disclosures

required by the rule. Because the burden of complying with written

disclosures is much lower than the burden of complying with all the

rule's provisions, staff estimates that at least 9,000 firms will

choose to adopt marketing methods that exempt them from oral disclosure

requirements. Staff estimates that it will take 7 seconds for callers

to disclose the required information. Staff also estimates that at

least 60% result in ``hang-ups'' before the seller or telemarketer can

make all the required oral disclosures. Staff estimates that hang-up

calls last for only 2 seconds. Accordingly, staff estimates that the

total disclosure burden of these requirements is approximately 250

hours per firm or 7.75 million hours.

The revised proposed rule also requires additional disclosures

before the customer pays for goods or services. Specifically, the

sellers or telemarketers must disclose the total costs to purchase,

receive, or use the offered goods or services; all material

restrictions; all material terms and conditions of the seller's refund,

cancellation, exchange, or repurchase policies if a representation

about the policy is part of the sales offer; and that no purchase is

necessary to win if a prize promotion is offered in conjunction with a

sales offer of goods or services. The telemarketer must disclose the

non-purchase entry method for the prize promotion. Staff estimates that

approximately 10 seconds is necessary to make these required

disclosures. However, these disclosures need only be made where a call

results in an actual sale. Staff estimates that sales occur in

approximately 6 percent of telemarketing calls. Accordingly, the

estimated burden for the disclosures is 37.5 hours per firm or 1.163

million hours.

Alternately, the disclosures required before the customer pays for

goods or services may be in writing. As discussed above, staff

estimates that approximately 9,000 firms will choose to comply with

this optional written disclosure requirement. Although this burden

estimate is difficult to quantify, mailing campaigns appear to be much

less burdensome for firms than are individual oral disclosures. Staff

also finds that these disclosure requirements are closely consistent

with the ordinary business practices of most members of the industry.

Nonetheless, staff has no reliable data from which to conclude that

there is no separately identifiable burden associated with this

provision. Therefore, staff estimates that a typical firm will spend

approximately 10 hours per year engaged in activities ensuring

compliance with this provision of the rule, for an estimated burden

estimate of 90,000 hours.

Total Yearly Burden

Based on these figures, staff estimates the total yearly burden of

the proposed rule to be 9,053,000 hours (50,000 recordkeeping hours +

9,003,000 disclosure hours). The basis for this estimate is described

in more detail in the Supporting Statement submitted with the Amended

Request for OMB Review.

DATES: Comments on this application must be submitted on or before June

30, 1995.

ADDRESSES: Send comments both to Office of Information and Regulatory

Affairs, Office of Management and Budget, New Executive Office

Building, Room 3228, Washington, DC 20503, ATTN: Desk Officer for the

Federal Trade Commission, and to the Office of the Secretary, Room 159,

Federal Trade Commission, Washington, DC 20580. Copies of the

submission to OMB may be obtained from the Public Reference Section,

Room 130, Federal Trade Commission, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: David M. Torok, Attorney, Bureau of

Consumer Protection, Division of Marketing Practices, Federal Trade

Commission, Washington, DC 20580, (202) 326-3140.

Donald S. Clark,

Secretary.

[FR Doc. 95-15186 Filed 6-21-95; 8:45 am]

BILLING CODE 6750-01-M