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entitled 'Telemarketing: Implementation of the National Do-Not-Call
Registry' which was released on January 28, 2005.
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
January 2005:
Telemarketing:
Implementation of the National Do-Not-Call Registry:
GAO Highlights:
Highlights of GAO-05-113, a report to congressional committees:
GAO-05-113:
Why GAO Did This Study:
In response to consumer frustration and dissatisfaction with unwanted
telemarketing calls, Congress has passed several statutes directing the
Federal Trade Commission (FTC) and Federal Communications Commission
(FCC) to regulate intrusive and deceptive telemarketing practices,
authorizing both agencies to establish the National Do-Not-Call
Registry (the national registry), and authorizing FTC to collect fees
to fund this national registry. The objective of the national registry
is to limit the numbers of unwanted telemarketing calls that registered
consumers receive. The Conference Report for the Consolidated
Appropriations Act, 2004, mandated that GAO evaluate the implementation
of the national registry. Specifically, this report addresses (1) how
FTC and FCC have implemented and operated the national registry, (2)
fees collected to cover costs to operate the national registry, and (3)
how FTC has measured the success of the national registry.
What GAO Found:
FTC and FCC have done several things to implement the national
registry, including issuing regulations and coordinating with each
other on the development of regulations and enforcement efforts. FTC
has contracted out management of the operational aspects of the
registry.
Fees for the national registry were less than costs incurred in fiscal
year 2003 but covered costs in fiscal year 2004, the first full year
of operation. Fees collected by FTC in fiscal year 2003 fell short of
actual costs incurred by about $9.4 million. However, fees collected in
fiscal year 2004 covered FTC’s $14 million in costs incurred. FTC uses
appropriated funds to cover costs associated with the national registry
and, as required, reduces its appropriations by the amount of fees
collected. FCC uses appropriated funds to cover its costs associated
with the national registry.
FTC established three objectives to measure whether the national
registry was successful-(1) having the system operational in calendar
year 2003, (2) having the system capable of enrolling about 60 million
telephone numbers within the first 12 months of operation, and (3)
reducing by 80 percent unwanted calls to consumers who sign up for the
registry. The national registry was operational in calendar year 2003,
and 62 million telephone numbers had been registered by consumers as
of June 2004, within 12 months after registration opened. FTC cannot
measure how much unwanted calls have been reduced because it does not
know how many calls were being received before the establishment of the
registry. However, as an alternative, FTC relied upon two surveys. The
results of one survey showed that respondents had an 80 percent
reduction in unwanted telemarketing calls since registering on the
national registry. However, this result is questionable because, among
other problems, the survey relied on respondents’ recall of the number
of telemarketing calls received at least three months prior. The two
surveys found that about 90 percent and 87 percent of registered
consumers surveyed reported receiving fewer calls. The surveys may
provide indications of the national registry’s overall performance;
however, GAO is uncertain how representative the results are because,
for example, one survey did not use a probability sample that can be
projected nationwide. FTC and FCC provided informal technical comments
to our report, which we incorporated where appropriate. According to
FTC, there is no evidence that the national registry is not working.
FTC Fees Collected and Costs Incurred for the National Registry:
[See PDF for image]
[End of figure]
www.gao.gov/cgi-bin/getrpt? GAO-05-113.
To view the full product, including the scope and methodology, click on
the link above.
For more information, contact Paul L. Jones at (202) 512-8777 or
jonespl@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Implementation and Operation of the National Registry:
Fees Collected for the National Registry Did Not Cover Costs in Fiscal
Year 2003 But Did in Fiscal Year 2004:
FTC Reported Three Objectives to Measure Whether the National Registry
Was Successful:
Agency Comments:
Appendix I: FTC Lawsuits and FCC Enforcement Actions Related to the
National Do-Not-Call Registry:
Appendix II: Information on the Two Surveys About the National Do-Not-
Call Registry:
Appendix III: Comments from the Federal Trade Commission:
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Staff Acknowledgments:
Tables:
Table 1: FTC and FCC Identified Inconsistencies Related to the National
Registry Enforcement:
Table 2: FTC's Estimation of National Registry Fee to Raise about $18
million to Cover Estimated Costs to Implement, Operate, and Enforce the
National Registry in Fiscal Year 2003:
Table 3: FTC's Estimation of National Registry Fee to Raise About $18
Million to Cover Estimated Costs to Implement, Operate, and Enforce the
National Registry in Fiscal Year 2004:
Table 4: FTC's Costs Related to the National Registry for Fiscal Years
2003 and 2004:
Table 5: FCC Enforcement Actions under the National Registry as of
December 31, 2004:
Figures:
Figure 1: Timeline of FTC and FCC Actions to Implement the National
Registry:
Figure 2: Number of Telemarketers Who Accessed the National Registry,
as of June 1, 2004.
Abbreviations:
FCC: Federal Communications Commission:
FTC: Federal Trade Commission:
United States Government Accountability Office:
Washington, DC 20548:
January 28, 2005:
The Honorable Thad Cochran:
Chairman:
The Honorable Robert C. Byrd:
Ranking Member:
Committee on Appropriations:
United States Senate:
The Honorable Jerry Lewis:
Chairman:
The Honorable David R. Obey:
Ranking Member:
Committee on Appropriations:
House of Representatives:
The Federal Trade Commission (FTC) and Federal Communications
Commission (FCC) have promulgated regulations governing the $720
billion telemarketing industry pursuant to a number of statutory
mandates to regulate telephone solicitations. In response to consumer
frustration and dissatisfaction with unwanted telemarketing calls,
Congress has passed several statutes directing the FTC and FCC to
regulate intrusive and deceptive telemarketing practices, authorizing
both agencies to establish the National Do-Not-Call Registry (the
national registry), and authorizing the FTC to collect fees to fund the
national registry. In general, the national registry is a listing of
telephone numbers received from consumers, who registered with the FTC
to prevent unwanted telemarketing calls. Telemarketers are required to
access the national registry to remove registered consumers from their
telephone call lists and violators may be subject to enforcement
actions. The objective of this national registry is to limit the number
of unwanted telemarketing calls that registered consumers receive.
The Conference Report for the Consolidated Appropriations Act of 2004
directed that we evaluate FTC's and FCC's implementation of the
national registry and determine whether FTC has achieved its goal of
reducing by 80 percent the number of telemarketing calls received by
registered consumers.[Footnote 1] Accordingly, taking into
consideration our consultation with your staff, this report addresses
(1) how FTC and FCC have implemented and operated the national
registry, (2) fees collected to cover the costs to operate the
registry, and (3) how FTC has measured the success of the national
registry, including its assessment of whether telemarketing calls
received by registered consumers have been reduced by 80 percent.
To respond to the first objective, we reviewed laws, regulations, and
rules related to the national registry and FTC and FCC documents
describing the roles and responsibilities of each commission with
respect to the implementation, operation, and enforcement of the
national registry. We obtained and reviewed FTC's contract with AT&T
Government Solutions, which is managing the operational aspects of the
national registry database that contains telephone numbers of consumers
who have registered and information about alleged violations of the
national registry's provisions reported by registered consumers (e.g.,
consumer complaint data). For the second objective, we reviewed FTC's
Federal Register notices of proposed rulemaking and final rules to
establish the national registry fees and obtained information from FTC
about its estimation of the national registry fees to be paid by
telemarketers, actual fees collected, and actual costs incurred to
implement, operate, and enforce the national registry. To assess the
reliability of FTC's cost and fee collection data, we talked with
agency staff about data quality control procedures and reviewed
relevant documentation. We determined the data were sufficiently
reliable for the purposes of this report.
For the third objective, we obtained information on FTC's objectives
for assessing the national registry's success. FTC included in its
assessment of the national registry's success surveys conducted by two
private companies addressing the effectiveness of the national
registry. We reviewed these surveys to determine whether they could be
used to measure the success of the national registry. We also met with
FTC and FCC staff to discuss all three objectives. We conducted our
review from April through December 2004 in accordance with generally
accepted government auditing standards.
Results in Brief:
FTC and FCC initially responded to their statutory mandates by
regulating certain telemarketing practices, ranging from limiting the
hours when unsolicited calls may be made to prohibiting calls
altogether under certain circumstances (i.e., when a consumer had asked
the entity not to call), but both commissions ultimately decided to
implement the national registry to address continued consumer
frustration regarding unwanted telemarketing calls. As directed by
statute, FTC and FCC consulted and coordinated with each other to
maximize the consistency of their regulations and enforcement of the
national registry. FTC entered into a contract with AT&T Government
Solutions to manage the operational aspects of the national registry
and a consumer complaint database.
The national registry started accepting consumer telephone number
registrations in late June 2003, and telemarketers began accessing the
national registry to obtain registered consumer telephone numbers in
September 2003. FTC and FCC began enforcing the provisions of the
national registry in October 2003--the beginning of fiscal year 2004.
Consumers can register their telephone numbers and file complaints by
telephone (1-888-382-1222) or on FTC's Web site (www.donotcall.gov),
the latter being the most popular method. Registered consumers can file
complaints when they believe a telemarketer has called them in
violation of the national registry provisions. FTC's Web site provides
guidance to consumers about how to register their telephone numbers and
file complaints. Another Web site (www.telemarketing.donotcall.gov)
provides guidance to organizations[Footnote 2] (hereafter referred to
as telemarketers) about how to access the national registry database to
obtain the telephone numbers of persons who do not wish to receive
telemarketing calls. Telemarketers pay an annual fee[Footnote 3] to
subscribe to the registry and are to renew their subscription every 12
months after their initial subscription date. FTC and FCC do not take
action on every complaint alleging a violation of the national registry
provision; rather they consider a number of factors, such as the number
of complaints filed against a telemarketer and the potential that a
telemarketer will make future unlawful calls, to determine whether to
take action against a telemarketer for violations of the national
registry provisions. FTC's enforcement actions usually are accomplished
by seeking injunctive relief and sometimes consumer redress in federal
court;[Footnote 4] actions for civil penalties are generally filed by
the Department of Justice on behalf of FTC and are less common. FCC's
enforcement efforts are generally accomplished through an
administrative process. Both commissions can obtain civil penalties up
to $11,000 per violation.
Fees collected by FTC did not cover all costs to implement, operate,
and enforce the national registry in fiscal year 2003. FTC collected
about $5.2 million in fiscal year 2003 and incurred costs of about
$14.6 million--a shortfall of about $9.4 million. FTC set fees in
fiscal year 2003 based on its estimate of the number of telemarketers
that would pay to access the national registry, and the average number
of area codes that a telemarketer would pay to access. According to
FTC, it collected fewer fees than costs incurred for two reasons.
First, FTC did not begin collecting fees until September 2003 because
its appropriations funding, which provided the total estimated fees
that could be collected, was enacted later than anticipated, delaying
implementation of the fee collection process. Second, FTC overestimated
the number of telemarketers that would pay to access the registry and
the average number of area codes that would be accessed. FTC revised
its fee, effective September 1, 2004, based on the number of
telemarketers that had paid to access the national registry and the
average number of area codes accessed. FTC collected about $14 million
in fiscal year 2004 that covered costs incurred of about $14 million.
FTC uses appropriated funds to cover costs to implement, operate, and
enforce the national registry and is required to reduce its
appropriations by the amount of fees collected. FCC uses appropriated
funds to cover costs associated with its enforcement of the national
registry.
According to FTC staff, the commission has measured the success of the
national registry on the basis of three objectives--(1) having the
national registry operational during calendar year 2003 (consumers
could register their telephone numbers, telemarketers could access the
national registry to obtain telephone numbers, and FTC and FCC could
obtain information from the national registry for enforcement
purposes); (2) having a system that could enroll about 60 million
telephone numbers in the national registry within the first 12 months
of when consumers began to register; and (3) reducing unwanted calls to
consumers who sign up for the national registry, approximating
Missouri's experience (some states had previously established their own
do not call registries) of reducing by about 80 percent the
telemarketing calls to registered consumers.[Footnote 5] With respect
to its objectives, FTC (1) had the national registry operational in
October 2003 and (2) achieved its objective when it reached about 62
million telephone numbers registered in its system within the first 12
months of consumer registration. With respect to reducing unwanted
calls, FTC cannot measure how much unwanted calls have been reduced
because it does not know how many calls were being received before the
establishment of the registry. However, as an alternative, FTC has
cited two private survey polls as evidence that the national registry
has resulted in a reduction of unwanted telemarketing calls. The
results of one survey showed that respondents had an 80 percent
reduction in unwanted telephone calls since registering on the national
registry. This result is questionable because the survey relied on
respondent recall of the number of calls received at least 3 months
prior. In addition, one poll found that over 90 percent of registered
consumers surveyed reported receiving fewer telemarketing calls, and
the other poll found that 87 percent of those who had signed up for the
national registry had reported receiving fewer telemarketing calls. The
two surveys may provide indications of the national registry's overall
performance; however, we are uncertain about how representative the
results of each actually are of the opinions and experiences of adults
nationwide because, for example, one survey did not use a probability
sample that can be projected nationwide, and the other survey had a low
response rate, among other things. Notwithstanding these concerns about
the surveys' methodologies, the FTC told us that they found no
evidence, anecdotal or otherwise, that contradicts the results of the
surveys.
Background:
The Telephone Consumer Protection Act of 1991 (FCC's basic statutory
mandate with respect to telemarketers) required FCC to issue
regulations to protect consumers' privacy by preventing unwanted
telemarketing calls and authorized, but did not require, FCC to fulfill
this requirement by creating a national do-not-call database.[Footnote
6] The Telemarketing and Consumer Fraud and Abuse Prevention Act of
1994 (FTC's specific statutory mandate regarding telemarketing)
required FTC to issue rules prohibiting deceptive telemarketing acts or
practices and other abusive telemarketing acts or practices [Footnote
7] but did not specifically mention a national registry.[Footnote 8]
Both commissions have promulgated regulations imposing requirements on
telemarketing practices, ranging from restrictions on the hours when
unsolicited calls may be made to provisions prohibiting calls under
certain circumstances. FTC's regulations are known as the Telemarketing
Sales Rule,[Footnote 9] and FCC's as the Rules and Regulations
Implementing the Telephone Consumer Protection Act of 1991.[Footnote
10]
The two commissions have different but overlapping jurisdiction over
the activities of entities that make telemarketing calls: thus,
telemarketers may have to comply with one or both sets of regulations.
FCC's authority covers entities that use the telephone to advertise,
including those making intrastate telephone solicitations, while FTC's
authority under its telemarketing law is limited to entities engaged in
interstate telemarketing. In addition, by statute, certain entities are
wholly or partially exempt from FTC jurisdiction but remain subject to
FCC jurisdiction. These include common carriers,[Footnote 11] banks,
credit unions, savings and loan institutions, airlines, nonprofit
organizations, and insurance companies.
FTC and FCC initially responded to the statutory mandate to address
unwanted telemarketing by prohibiting calls to individuals who
previously had stated to telemarketers that they did not wish to
receive calls made by or on behalf of a particular seller. These
regulatory provisions are called "entity-specific" do-not-call
provisions, and they remain in effect as a complement to the national
registry.[Footnote 12] Telemarketers are required to maintain lists of
consumers who have specifically requested to have their names placed on
the company-specific do-not-call list, and it is a violation of law for
them to call a consumer who has asked to be placed on the company's
list. Thus, those consumers who have not placed their telephone numbers
on the national registry still can instruct telemarketers to place them
on an entity-specific do-not-call list. In addition to FTC's and FCC's
entity-specific do-not-call provisions, consumers can register their
telephone numbers on state do-not-call lists. FCC stated in a July 2003
Report and Order that 36 states had established their own statewide do-
not-call lists to respond to the growing consumer frustration with
unsolicited telemarketing calls.[Footnote 13]
Entering one's telephone number on the national registry will not stop
all unwanted solicitations. There are several exemptions in the law
that allow organizations to call consumers, even if their telephone
numbers are on the national registry. Exempt organizations include
charities, organizations conducting surveys, political fundraisers,
those calling on behalf of tax exempt organizations, and those calling
under an "established business relationship" or with the consumer's
written permission. Under an established business relationship, a
telemarketer can call a consumer for a period of up to 18 months after
the consumer's last purchase or financial transaction with the business
or up to 3 months after the consumer's last inquiry or application to
the business. However, even if a business relationship was established,
the company is required to comply with a request under the previously
mentioned entity-specific do-not-call provision. Thus, if the consumer
tells the company they do not want to be solicited by telephone, the
company is prohibited from calling again. Similarly, the consumer can
use the entity-specific option to ask a paid fundraiser for a
charitable organization to stop soliciting them for a specific charity
by telephone.[Footnote 14]
Implementation and Operation of the National Registry:
On the basis of its experience and growing evidence that the entity-
specific provisions were ineffective and overly burdensome on
consumers, in January 2002, FTC proposed a national do-not-call
registry and 1 year later adopted its proposal to amend its
Telemarketing Sales Rule to create the national registry and prohibit
telemarketing calls to consumers who registered their telephone
numbers. FTC also allowed states to transfer to the national registry
those consumer telephone numbers on their state registries. As of
December 2004, 17 states have transferred their state list and adopted
the national registry as the state registry.[Footnote 15]
FCC revised its regulations pursuant to the Telephone Consumer
Protection Act, in June 2003, to require telemarketers under its
jurisdiction to comply with the requirements of the national registry.
In addition, in accordance with the Telephone Consumer Protection Act,
FCC required states with their own state registries to include on the
state registry those telephone numbers registered on the national
registry from their respective states. FCC required this to reduce the
potential for consumer confusion and reduce regulatory burdens on the
telemarketing industry. FCC allowed an 18-month transition period for
states to download information from the national registry to their
state registry.
In March 2003, Congress passed the Do-Not-Call Implementation Act (the
Implementation Act), which authorized FTC to establish fees "sufficient
to implement and enforce" the national registry.[Footnote 16] Initial
registration of consumer telephone numbers began in late June 2003. In
July 2003, FTC set fees to be paid by telemarketers to access the
national registry. In September 2003, in response to legal challenges
to the national registry and requirements, Congress passed additional
legislation expressly authorizing FTC to implement and enforce a
national do-not-call registry under the Telemarketing and Consumer
Fraud and Abuse Prevention Act and ratifying the National Do-Not-Call
Registry regulation as promulgated by FTC in 2002.[Footnote 17] To
manage the anticipated large number of consumers who would want to
register via the telephone, FTC had a two-stage process whereby
consumers west of the Mississippi could register by telephone starting
June 27, 2003, and on July 7, 2003, telephone registration was opened
to the rest of the country. FTC and FCC began enforcement of the
national registry on October 1, 2003; and FTC issued a revised rule to
increase telemarketer fees in July 2004. Figure 1 provides a timeline
of FTC and FCC actions to implement the national registry.
Figure 1: Timeline of FTC and FCC Actions to Implement the National
Registry:
[See PDF for image]
[End of figure]
Under the Implementation Act, FTC and FCC were to consult and
coordinate with each other to maximize consistency between their
regulations governing the national registry. The Implementation Act
required both FTC and FCC to provide a written report to Congress 45
days after FCC finalized its rulemaking on the national registry. Each
commission's report was to cover their efforts to maximize consistency
in their enforcement efforts by (1) conducting an analysis of the
telemarketing rules implemented by both commissions, (2) listing any
inconsistencies between the two commissions and the effects of such
inconsistencies on consumers and on telemarketers paying for access,
and (3) providing proposals to remedy any inconsistencies. FTC and FCC
issued reports in September 2003 that analyzed differences related to
enforcement of the national registry and other areas where they had
common enforcement interests related to solicitations by telemarketers,
such as abandoned calls and calling time restrictions.[Footnote 18]
As shown in table 1, differences related specifically to the national
registry that FTC and FCC identified in their reports included (1)
jurisdiction, (2) definition of established business relationship, (3)
instances where the telemarketer caller had a personal relationship
with a consumer, and (4) instances where tax-exempt nonprofit entities
use for-profit telemarketers to solicit on their behalf. FTC and FCC
consulted and coordinated to address the inconsistencies that they
identified. For example, since FCC's jurisdiction is broader than
FTC's, FCC decided to focus its enforcement efforts on activities over
which FTC does not have jurisdiction, such as common carrier and
intrastate telemarketing. In other cases, the two agencies proposed
monitoring the impact of the inconsistencies to determine whether any
action was needed. Table 1 summarizes FTC's and FCC's inconsistencies
with respect to the national registry and decisions made to address the
differences.
Table 1: FTC and FCC Identified Inconsistencies Related to the National
Registry Enforcement:
FTC: FTC's jurisdiction is narrower than FCC's in that it excludes
purely intrastate telemarketing campaigns and calls involving certain
industries;
FCC: FCC's jurisdiction is broader in that it includes the
types of business activities exempt from FTC jurisdiction and both
interstate and intrastate activities;
FTC and/or FCC remedy: FCC will
focus its enforcement efforts on entities such as common carriers and
intrastate activities.
FTC: FTC defines an established business relationship on the basis of
either (1) a consumer's purchase, rental, or lease of a seller's goods
or services or a financial transaction between the consumer and the
seller; or (2) the consumer's inquiry or application regarding a
product or service;
FCC: FCC defines established business relationship as a voluntary two-
way communication between a person or entity and a consumer based on
the consumer's purchase or transaction with the entity or on the
consumer's inquiry or application regarding the entity's products or
services, regardless of whether any payment was involved;
FTC and/or FCC remedy: FTC reported that the commissions would monitor
whether telemarketers take advantage of the potentially broader FCC
exemption for an established business relationship and whether
consumers reported receiving more unwanted telemarketing calls as a
result. If this occurs, the two Commissions are to work together to
reconcile the different requirements.
FTC: FTC does not make exceptions for telemarketing calls to persons
known personally by the telemarketer;
FCC: FCC makes an exception for telemarketing calls to persons known by
the telemarketer caller (e.g., family member or friend);
FTC and/or FCC remedy: FTC reported that it would monitor instances
where this might occur to determine whether it needs to modify its
enforcement of this provision.
FTC: FTC requires for-profit telemarketers making interstate telephone
solicitations on behalf of tax-exempt nonprofit entities to comply with
the entity-specific do-not-call provisions but not with the provisions
of the national registry;
FCC: FCC rules exempt such entities from its entity-specific do-not-
call provisions and from the national registry provisions;
FTC and/or FCC remedy: FCC reported that the commissions would work
together to remedy the inconsistency.
Source: FTC and FCC September 8, 2003, reports to Congress on
regulatory coordination.
[End of table]
In addition to the above, FTC noted minor differences related to
monitoring and enforcement with respect to safe harbor provisions and
differences regarding entities that can be held liable for
violations.[Footnote 19] FTC did not believe differences for these two
issues were significant enough to warrant any action, and FCC had not
identified these as inconsistencies in its report.
FTC and FCC entered into a Memorandum of Understanding that further
established both commissions' intent to work together in a cooperative
and coordinated fashion to implement consistent, comprehensive,
efficient, and nonredundant enforcement of federal telemarketing
statutes and rules. FTC and FCC agreed that (1) the commissions would
meet at least quarterly to discuss matters of mutual interest; (2) FTC
would provide FCC with national registry information through the
Consumer Sentinel system;[Footnote 20] (3) the commissions would make
available to each other consumer complaints regarding possible
violations of federal telemarketing rules; (4) the commissions would
endeavor to avoid unnecessarily duplicative enforcement actions; (5)
the commissions would engage in joint enforcement actions, when
necessary, that are appropriate and consistent with their respective
jurisdictions; (6) the commissions would coordinate public statements
on joint cases; and (7) the Memorandum of Understanding was to remain
in effect until modified by mutual consent of both parties or
terminated by either party upon 30 days advance written notice. FTC and
FCC staff said that they tend to meet more frequently than quarterly to
discuss matters of mutual interest.
Operation of the National Registry:
FTC's December 2002 regulation establishing the national registry set
forth a process for consumers to register their telephone numbers and
for telemarketers to obtain these numbers to remove them from their
call lists. Consumers who want to place their telephone number(s) on
the national registry can register either on FTC's Web site
(www.donotcall.gov) or by telephone (1-888-382-1222). A consumer can
enter up to three telephone numbers at one time by registering online.
The consumer must also enter their e-mail address, which is used for
confirmation and completion of the registration process. Consumers are
to receive an e-mail of the Web site registration, which they must
respond to within 72 hours in order to confirm registration. To
register a number by telephone, a consumer must call the national
registry from the telephone he or she wants to register. The consumer's
telephone number is confirmed at the time the call is made, and
registration is completed at that time. A registered telephone number
remains on the national registry for 5 years before expiration at which
time the consumer may re-register it. A consumer can use FTC's national
registry Web site or toll free number to verify the registration's
expiration date. According to FTC, of the approximately 62 million
registered consumer telephone numbers as of August 2004, 61 percent
registered on FTC's Web site, 22 percent registered using the toll-free
telephone number, and 17 percent came from state downloads.
FTC entered into a contract, dated March 1, 2003, with AT&T Government
Solutions to provide services necessary to develop, implement, and
operate the national registry. The contract provided that the
contractor was to develop and provide a secure database that included
the telephone numbers collected from consumers during the registration
process as well as receive telephone numbers from states that decided
to include consumer telephone numbers from their do-not-call registries
in the national registry. The database was also to include information
on the date the registration was made and the expiration date of the
registration. The automated database was to, among other things, permit
consumers to confirm or alter their registration; provide reports and
access to information regarding registration to FTC personnel; provide
a system to allow telemarketers to access consumer telephone numbers
and pay fees, when required; provide for a system to gather consumer
complaint information concerning alleged violations of the national
registry; provide a system that transferred all valid processed
consumer complaints to the FTC in a format that would be compatible
with the FTC's Consumer Sentinel system; and allow appropriate federal,
state, and other law enforcement personnel access to consumer
registration and telemarketer information maintained in the national
registry.
Until December 31, 2004, covered telemarketers are to access the
national registry within 3 months of making a call to drop from their
call lists the telephone numbers of consumers who have registered.
However, Congress directed FTC to amend its regulation to require
telemarketers to access information at least once a month.[Footnote 21]
FTC issued a notice of proposed rulemaking February 13, 2004, and a
final rule on March 29, 2004, to require, effective January 1, 2005,
that telemarketers must obtain national registry telephone numbers and
purge registered telephone numbers from their call lists at least every
31 days. In promulgating the final rule, FTC explained that 31 days was
used to define the statutory monthly requirement in order to provide a
set interval at which telemarketers must access the telephone numbers
in the national registry. An interval of 31 days rather than 30 days
was used to mirror the length of the most frequently occurring and
longest month. The FCC rule was also amended to require that
telemarketers download the registry every 31 days. FTC also explained
in promulgating the final rule that it had set the effective date as
January 2005 to allow businesses 9 months to ready their systems and
procedures and to enable FTC and its contractor sufficient time to
implement necessary changes to the national registry system to
accommodate the increased usage.
FTC and FCC have mechanisms in place to handle consumer complaints.
Both commissions provide numerous ways for consumers to file
complaints. These include by mail, over the telephone, by facsimile, by
e-mail directly to the agency and through their Web sites for the
national registry. In filing a complaint, both FTC and FCC require that
the consumer have been on the national registry for 3 months, but
differ in the information consumers are to provide. For example, FTC
requires consumers to provide their telephone number, the company name
or telephone number, and the date of the violation. FCC requires
consumers to provide their name and telephone number, the
telemarketer's name or telephone number, any specific information about
the complaint, and the date of the violation.
According to FTC and FCC, the requirement that consumers have been on
the national registry for 3 months will be revised to 31 days on
January 1, 2005, when telemarketers are required to remove registered
telephone numbers from their call lists every 31 days. As of December
11, 2004, consumers had filed 557,727 complaints through the national
registry's Web site and 117,610 complaints via the telephone. According
to FCC staff, FCC has established a process for handling complaints
against common carriers[Footnote 22] that differs from those used for
noncommon carriers.[Footnote 23] Under this process, FCC serves a
common carrier with a notice of complaint that includes a copy of the
complaint and a specified time in which to respond. With respect to
noncommon carriers, FCC and FTC may initiate an investigation of the
complaint depending on the number of complaints they have received
against the company and other factors.
FTC and FCC do not take action on all consumer complaints. Rather, FTC
and FCC said that they consider a number of factors when determining
which alleged violations to pursue that include the type of violation
alleged, the nature and amount of harm to consumers (e.g. invasion of
privacy or financial harm), the potential that telemarketers will make
future unlawful calls, and securing meaningful relief for affected
consumers. FTC's enforcement actions generally are accomplished by
seeking injunctive relief and sometimes consumer redress in federal
court; actions for civil penalties (up to $11,000 per violation) are
filed by the Department of Justice on behalf of FTC and are less
common.[Footnote 24] FCC's enforcement efforts are generally
accomplished through an administrative process whereby FCC first issues
citations against entities not otherwise regulated by FCC for
violations of laws it enforces. For subsequent violations by such
entities, or for initial violations by FCC regulated entities (such as
common carriers, broadcasters, or other licensees), FCC may impose a
civil penalty through forfeiture proceedings or take additional
enforcement actions that include, for example, cease and desist
proceedings, injunctions, and revocation of common carrier license
operating authority for violations of the requirements of the national
registry.[Footnote 25] Enforcement of a forfeiture order is done in
federal court through the Department of Justice, which handles
violations of statutes that FCC enforces.[Footnote 26] Fines collected
through civil penalties go to the U.S. Treasury's general fund and are
not retained in either commission's accounts for their use.[Footnote
27]
As of December 2004, FTC filed 9 lawsuits for injunctive relief, and in
some cases, consumer redress, and the Department of Justice had filed
one lawsuit on behalf of FTC for violations of the national registry.
As of December 2004, FCC reported that it had initiated 99
investigations against companies that allegedly made calls to consumers
on the national registry. FCC's investigations have resulted in 16
citations for violations of the national registry. In addition, 2
companies have entered into consent decree settlements[Footnote 28]
involving substantial voluntary monetary payments and implementation of
strict compliance plans, 54 investigations have been closed because the
calls underlying the complaints were not legally actionable, and the
remaining 27 investigations are under active consideration. In some
instances, consumers had an established business relationship but did
not realize it. Also, as mentioned earlier, FTC and FCC have various
factors they consider with respect to which complaints to pursue;
therefore, not all complaints are investigated. Appendix I provides
more information on FTC's ten lawsuits, and FCC's 16 citations and 2
consent decrees related to enforcement of the national registry
provisions.[Footnote 29]
Fees Collected for the National Registry Did Not Cover Costs in Fiscal
Year 2003 But Did in Fiscal Year 2004:
FTC collected about $5.2 million in fees in fiscal year 2003 and
incurred costs of about $14.6 million to implement, operate, and
enforce the national registry. This is a shortfall of about $9.4
million. In fiscal year 2004, FTC collected about $14 million in fees
and incurred costs of about $14 million to implement, operate, and
enforce the national registry. FTC attributed the FY 2003 shortfall in
fees to unexpectedly short partial year operations (less than one
month) and to fees being set too low due to lack of information about
(1) the number of telemarketers that would pay to access the registry
and (2) the average number of area codes that telemarketers would
access.[Footnote 30] FTC revised the national registry access fee
effective September 1, 2004, using information on the number of
telemarketers that had actually paid to access the registry in fiscal
year 2003 and the number of average area codes accessed. FTC uses funds
from its salaries and expenses account to cover costs of implementing,
operating, and enforcing the national registry and is required to
reduce its general fund appropriations by the amount of fees collected.
In fiscal years 2003 and 2004, appropriations estimates of fees to be
collected for the national registry ($18.1 million and $23.1 million,
respectively) were greater than the actual amount of fees collected and
costs incurred.[Footnote 31] Because the estimates were greater than
the actual amounts of fees collected by the national registry, the
differences represented funds available for other allowable expenses
covered by the salaries and expenses appropriation.[Footnote 32] FCC's
costs associated with its enforcement of the national registry are
funded in its salaries and expenses account. According to FCC staff,
FCC does not distinguish costs associated with enforcing the national
registry from its other enforcement efforts.
In 2003 when FTC initiated its fee structure, it based the fee for the
national registry on the number of entities that would be required to
pay the fee and the number of area codes that a telemarketer would
access annually. FTC estimated that $18 million would be needed to
implement, operate, and enforce the national registry requirements. In
two separate notices of proposed rule making for the original national
registry fee, FTC stated that it made a number of assumptions to
estimate the number of entities that would be required to pay and the
number of areas codes to be accessed. Because of an absence of
information available about the number of companies then in the
marketplace that made telemarketing calls to consumers covered by
national registry regulations, FTC sought public comment on its
assumptions and methodology but received virtually no comments.
Consequently, FTC estimated the fee based on those assumptions and
estimates and noted that the fees might need to be reexamined
periodically and adjusted to reflect actual experience with operating
the registry. FTC's original fee rule established an annual fee of $25
for each area code requested from the national registry, up to a
maximum of $7,375 (300 area codes or more). The first 5 area codes are
provided at no cost. FTC provided for free access to the first 5 area
codes to limit the burden that might be placed on small businesses that
only require access to a small portion of the national registry. FTC's
rule also permits exempt organizations to have free access to the
national registry with the intent that should the exempt organizations
want to purge their calling lists as a matter of customer service, they
would be able to obtain the information necessary to do so. Once a
telemarketer paid for access to a selected number of area codes, or was
granted free access, it could access those area codes as often as it
deemed appropriate for the annual period covered. If, during the course
of the annual period, a telemarketer needed to access telephone numbers
from more area codes than those initially selected, it would be
required to pay for access to those additional area codes. For purposes
of additional payments, the annual period was divided into two periods
of 6 months each. Obtaining additional area codes for the first 6-month
period required a payment of the full year fee of $25 for each new area
code whereas for new area codes to be used for the second 6-month
period, telemarketers would be assessed a reduced $15 fee for each area
code. Table 2 shows FTC's estimation of the national registry fee to
raise approximately $18 million in fiscal year 2003.
Table 2: FTC's Estimation of National Registry Fee to Raise about $18
million to Cover Estimated Costs to Implement, Operate, and Enforce the
National Registry in Fiscal Year 2003:
73.
Multiplied by cost per area code: $25.
Average amount of fees to be collected per entity; $1,825.
Multiplied by estimated number of entities accessing database: 10,000.
Estimated total amount to be collected in fees: $18,250,000.
Source: Federal Register dated July 31, 2003.
Note: Federal Register Vol. 68. No. 147, (dated July 31, 2003), pg.
45141.
[End of table]
According to FTC, it collected about $5.2 million in fiscal year 2003.
FTC said it collected fewer fees than anticipated for two reasons.
First, FTC did not begin collecting fees until September 2003 because
its appropriations funding, which provided the total estimated fees
that could be collected, was enacted later than anticipated, delaying
implementation of the fee collection process. Second, the number of
telemarketers that accessed the national registry and the average
number of area codes that they accessed were smaller than FTC
estimated. FTC estimated that 10,000 companies would pay for the
national registry data and that, on average, telemarketers would access
73 area codes. In June 2004, FTC used information from the national
registry to reexamine its estimates for setting the fee. As figure 2
shows, about 7,100 companies had paid for access to the national
registry as of June 2004. The average number of area codes accessed was
63.
Figure 2: Number of Telemarketers Who Accessed the National Registry,
as of June 1, 2004:
[See PDF for image]
[End of figure]
FTC published a revised fee rule for the national registry on July 30,
2004. The revised final fee rule established the fee for each area code
to be $40 per year, with the first 5 area codes provided to each
telemarketer at no charge. Exempt organizations would continue to be
allowed access to the national registry at no charge. The maximum
amount that would be charged any single telemarketer would be $11,000,
which would be charged to any telemarketer accessing 280 or more area
codes.[Footnote 33] The reduced fee charged to telemarketers requesting
access to additional area codes during the second 6 months of the
semiannual period would be $20. The fee was based on the number of
telemarketers that had accessed the national registry as of June 1,
2004, the actual average number of area codes accessed, and FTC's
estimate that $18 million would be needed to cover estimated costs
associated with the national registry in fiscal year 2004.[Footnote 34]
Table 3 shows FTC's estimation for the national registry fee to raise
approximately $18 million in fiscal year 2004. In fiscal year 2004, FTC
collected about $14 million in fees.
Table 3: FTC's Estimation of National Registry Fee to Raise About $18
Million to Cover Estimated Costs to Implement, Operate, and Enforce the
National Registry in Fiscal Year 2004:
Average number of area codes accessed: 63.
Multiplied by cost per area code; $40.
Average amount of fees to be collected per entity: $2,520.
Multiplied by estimated number of entities accessing database: 7,100.
Estimated total amount to be collected in fees: $17,892,000.
Source: FTC.
[End of table]
Funds collected through the national registry fees are to cover FTC
costs related to the implementation, operation, and enforcement of the
national registry. In its original fee rule dated July 31, 2003, FTC
identified its costs as falling into three broad categories.[Footnote
35] First are the actual contract costs along with associated agency
costs to develop and operate the national registry. The second category
of costs relates generally to enforcement efforts. The third category
of costs covers FTC infrastructure and administration costs, including
information technology structural supports. Table 4 summarizes the
costs incurred for the three broad categories plus overhead costs for
fiscal years 2003 and 2004, as reported by FTC. As shown in the table
4, FTC incurred costs of about $15 million in fiscal year 2003 and
about $14 million in fiscal year 2004.
Table 4: FTC's Costs Related to the National Registry for Fiscal Years
2003 and 2004:
Cost category: Contract;
Cost for fiscal year 2003: $4,332,338;
Cost for fiscal year 2004: $4,339,200.
Cost category: Enforcement;
Cost for fiscal year 2003: $3,449,715;
Cost for fiscal year 2004: $7,282,188.
Cost category: Infrastructure and overhead;
Cost for fiscal year 2003: $12,375,012;
Cost for fiscal year 2004: $9,432,276.
Cost category: Total;
Cost for fiscal year 2003: $20,157,065;
Cost for fiscal year 2004: $21,053,664.
Cost category: Minus costs associated with other telemarketing sales
rule efforts;
Cost for fiscal year 2003: $5,550,815;
Cost for fiscal year 2004: $7,077,409.
Cost category: Net total costs for national registry;
Cost for fiscal year 2003: $14,606,250;
Cost for fiscal year 2004: $13,976,255.
Source: FTC.
[End of table]
FTC Reported Three Objectives to Measure Whether the National Registry
Was Successful:
According to FTC staff, the commission had three objectives to measure
whether the national registry was successful. These were to (1) have
the system up and running during calendar year 2003, (2) to ensure that
the system could enroll about 60 million telephone numbers in the
national registry in the first year of operation, and (3) reduce
unwanted calls to consumers who sign up for the national registry,
approximating Missouri's experience of reducing telemarketing calls by
about 80 percent.
The national registry was up and running in calendar year 2003.
Performance goals were contained in FTC's contract with AT&T Government
Solutions to develop and maintain the national registry. The contractor
was responsible for, among other things, consumer registration,
telemarketer access to the registry, law enforcement access to the
registry, and collecting consumer complaint information concerning
violations of the national registry provisions. The contract contained
specific performance measurements for completing various tasks
associated with the national registry. FTC considered the national
registry to be fully operational October 2003 when both commissions
began enforcing national registry provisions.
FTC also reached its expectation based on states' experience to enroll
60 million telephone numbers in the national registry in the first year
of operation. FTC began receiving consumer registration of telephone
numbers in June 2003, and, as of June 2004, 62 million telephone
numbers had been registered on the national registry.
On the basis of the experience of certain states with do-not-call
registry laws, FTC anticipated that consumers who entered their
telephone numbers in the national registry would experience as much as
an 80 percent reduction in unsolicited telemarketing calls. However,
measuring the actual reduction in telemarketing calls is not possible
because baseline data on the volume of telemarketing calls consumers
received prior to the national registry's implementation are not
available to make a comparison and determine what change has occurred
in calls received. As an alternative, FTC has cited polls taken by
Harris Interactive® and the Customer Care Alliance as evidence that the
national registry has resulted in a reduction of unwanted telemarketing
calls. Specifically, in January 2004, Harris Interactive® found that
about 90 percent of those who signed up for the national registry had
fewer telemarketing calls, and 25 percent of those registered indicated
they had received no telemarketing calls since signing up.[Footnote 36]
In June 2004, a Customer Care Alliance telephone survey reported that
87 percent of those who had signed up for the national registry had
received fewer telemarketing calls.[Footnote 37] This survey also
attempted to quantify changes in the volume of unsolicited calls
registered consumers had received since signingup, reporting an 80
percent reduction; however, we have concerns about how this was done
and the accuracy of the results. The two surveys may provide
indications of the national registry's overall performance; however, we
are uncertain about how representative the results of each actually are
of the opinions and experiences of adults nationwide because, for
example, the Harris survey did not use a probability sample that can be
projected nationwide and the Customer Care survey had a low response
rate, among other things. Notwithstanding these concerns about the
surveys' methodologies and implementation problems, the FTC told us
that they found no evidence, anecdotal or otherwise, that contradicts
the results of the surveys. Furthermore, FTC considers the surveys'
results to have found that most people know about the national registry
and that most people who say they have a telephone number on the
national registry say they are getting fewer calls, creating some
confidence that the results are generally correct. See appendix II for
a more detailed discussion of the two surveys.
FTC staff said that complaints filed also provide an alternative
measure of the success of the national registry. As of December 11,
2004, 675,337 complaints had been filed since FTC and FCC began
accepting complaints in October 2003. FTC staff noted that as a
percentage of the total number of telephone numbers registered, this is
about 1 percent and is indicative of the success of the national
registry. While the number of complaints may be an indication of the
national registry's success, few complaints could also be the result of
consumer complacency or reluctance to take the time to file a
complaint.
The Implementation Act required FTC and FCC to each provide an annual
written report for fiscal years 2003 through 2007 on the national
registry to include (1) an analysis of the effectiveness of the
national registry; (2) the number of consumers who have placed their
telephone numbers on the national registry; (3) the number of persons
paying fees for access to the national registry and the amount of such
fees; (4) an analysis of the progress of coordinating the operation and
enforcement of the national registry with similar registries
established and maintained by the various states; (5) an analysis of
the progress of coordinating operation and enforcement of the national
registry with the enforcement activities of the FCC pursuant to the
Telephone Consumer Protection Act; and (6) a review of the enforcement
proceedings under the Telemarketing Sales Rule in the case of FTC and
Telephone Consumer Protection Act in the case of FCC. The FCC issued
its annual report for fiscal year 2003 on December 15, 2004. As of
December 2004, the FTC had not issued its annual report for fiscal year
2003, but it plans to have it issued by February 2005.
Agency Comments:
We provided FTC and FCC with draft copies of this report for their
review and comment. FTC and FCC agreed with the contents of our report
and provided informal technical comments on the draft, which we have
incorporated where appropriate. In addition, FTC noted that
quantitative measurement of the effectiveness of a program based on
"before and after" snapshots is difficult, particularly in situations
like the national registry where only anecdotal evidence of a baseline
for the "before" figure exists. According to FTC, when reports from
consumers, the media, and professional surveyors consistently conclude
that the national registry effectively and successfully protects
registered consumers against invasions of their privacy by most
commercial telemarketing calls, it is reasonable to infer the program
is working as intended.
We plan to provide copies of this report to Commissioners of the
Federal Trade Commission and the Federal Communications Commission and
interested congressional committees. We will make copies available to
others upon request. In addition, this report will be available at no
charge on GAO's Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please
contact me on (202) 512-8777 or at jonespl@gao.gov. Individuals making
key contributions to this report are listed in appendix IV.
Signed by:
Paul L. Jones, Director:
Homeland Security and Justice Issues:
[End of section]
Appendix I: FTC Lawsuits and FCC Enforcement Actions Related to the
National Do-Not-Call Registry:
The Federal Trade Commission (FTC) identified ten lawsuits related to
the National Do-Not-Call Registry (the national registry) since
enforcement of the national registry became effective October 1, 2004.
The Federal Communications Commission (FCC) has issued 16 citations for
violations of the national registry and has entered into 2 consent
decrees settling investigations of alleged violations of the national
registry.
The ten FTC lawsuits are as follows:
* Telephone Protection Agency, Inc., was charged with falsely claiming
that it would register consumers with the FCC's national registry,
when, in fact, FCC had no such list at the time. The charge also
included other violations of the Telemarketing Sales Rule. (Ongoing
litigation.)
* National Consumer Council was charged with engaging in or causing
others to engage in initiating telephone calls to consumers on the
national registry and initiating or causing others to initiate
telephone calls to consumers within a given area code without first
paying the required access fee for the national registry data, among
other violations of the Telemarketing Sales Rule. (Preliminary
injunction in place, litigation ongoing.)
* Braglia Marketing Group was charged with engaging in or causing
others to engage in initiating telephone calls to consumers on the
national registry, abandoning or causing others to abandon telephone
calls, and initiating telephone calls to consumers within a given area
code without first paying the required access fee for the national
registry data. (Filed on behalf of FTC by the Department of Justice,
on-going litigation.)
* Internet Marketing Group, Inc; OnesetPrice, Inc; First Choice
Terminal, Inc., (Louisiana and Arizona Corporations); B & C Ventures,
Inc; RPM Marketing Group, Inc; National Event Coordinators, Inc; and
several individual defendants were charged with engaging in or causing
others to engage in initiating telephone calls to consumers on the
national registry, among other violations of the Telemarketing Sales
Rule. (Preliminary injunction in place; litigation ongoing.)
* Free Do Not Call List.org and National Do Not Call List. US was
charged with falsely claiming that for a fee it would arrange for
consumers' telephone numbers to be placed on the national registry.
(Stipulated permanent injunction.)
* Vector Direct Marketing, LLC was charged with unauthorized billing to
consumers' for purported do-not-call protection services and for
removal of personal information from telemarketers' files and falsely
claiming to consumers that for a fee it would remove consumers'
personal information from telemarketers' lists. (Stipulated permanent
injunction entered June 2004.)
* 4086465 Canada, Inc., a corporation doing business as International
Protection Center and Consumers Protection Center was charged with
falsely claiming to consumers inter alia, that for a fee it would
arrange for consumers' telephone numbers to be placed on the national
registry. (Ongoing litigation.)
* Debt Management Foundation Services was charged with engaging in or
causing others to engage in initiating telephone calls to consumers on
the national registry and initiating telephone calls to consumers
within a given area code without first paying the required access fee
for the national registry data, among other violations of the
Telemarketing Sales Rule. (Preliminary injunction in place; litigation
ongoing.)
* 3R Bancorp was charged with engaging in or causing others to engage
in initiating telephone calls to consumers on the national registry and
initiating or causing others to initiate telephone calls to consumers
within a given area code without first paying the required access fee
for the national registry data, among other violations of the
Telemarketing Sales Rule. (Litigation ongoing.)
* FGH International, Inc. was charged with initiating or causing
telephone calls to numbers on the national registry and calls to
consumers within a given area code without first paying the required
access fee. (Litigation ongoing.)
FCC has issued 16 citations for violations of the national registry and
has entered into 2 consent decrees settling investigations of alleged
violations of the national registry. Table 5 summarizes FCC's
enforcement actions as of December 31, 2004.
Table 5: FCC Enforcement Actions under the National Registry as of
December 31, 2004:
Date of action: 1. Sep. 27, 2004;
Company name: Equity One;
No. of complaints: 6;
States where affected consumers located: California, Florida, Oregon,
and Pennsylvania;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 2. Sep. 16, 2004;
Company name: Envision Mortgage Services, Inc;
No. of complaints: 13;
States where affected consumers located: California;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 3. Sep. 07, 2004;
Company name: Primus;
No. of complaints: 98;
States where affected consumers located: California, Connecticut,
Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, New
Jersey, New York, North Carolina, Ohio, Pennsylvania, Puerto Rico,
Tennessee, Texas, and Virginia;
Type of enforcement action taken: Consent decree settlement --$400,000
voluntary payment and implementation of compliance plan.
Date of action: 4. July 06, 2004;
Company name: BLS Funding;
No. of complaints: 31;
States where affected consumers located: Arizona, California, Colorado,
Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, New
Mexico, New Jersey, and Virginia;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 5. July 02, 2004;
Company name: See Through Windows & Doors LLC;
No. of complaints: 123;
States where affected consumers located: Maryland and Virginia;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 6. June 04, 2004;
Company name: Planet Mortgage Corporation;
No. of complaints: 42;
States where affected consumers located: California;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 7. May 28, 2004;
Company name: Fresh Start Financial;
No. of complaints: 1;
States where affected consumers located: California;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 8. May 17, 2004;
Company name: Key Financial Corporation;
No. of complaints: 97;
States where affected consumers located: Alabama, California, Florida,
Ohio, and Virginia;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 9. March 31, 2004;
Company name: American Standard Mortgage;
No. of complaints: 13;
States where affected consumers located: Colorado, Illinois, and Ohio;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 10. Feb. 12, 2004;
Company name: Mortgage Concepts, Inc;
No. of complaints: 480;
States where affected consumers located: Arizona, California, Georgia,
Nevada, Ohio, Oregon, South Carolina, and Washington;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 11. Jan. 30, 2004;
Company name: L.A.P. Holdings, LLC a.k.a. First Finance;
No. of complaints: 84;
States where affected consumers located: Arizona, California, Florida,
Maryland, and Michigan;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 12. Jan. 12, 2004;
Company name: Nations Mortgage;
No. of complaints: 163;
States where affected consumers located: Florida and Ohio;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 13. Dec. 22, 2003;
Company name: Debt Masters;
No. of complaints: 1;
States where affected consumers located: Nebraska;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 14. Dec. 22, 2003;
Company name: Ban-Cor Mortgage;
No. of complaints: 109;
States where affected consumers located: California;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 15. Dec. 22, 2003;
Company name: Cactus Cash, Inc;
No. of complaints: 14;
States where affected consumers located: Arizona;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 16. Dec. 22, 2003;
Company name: Dynasty Mortgage;
No. of complaints: 259;
States where affected consumers located: Arizona and California;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 17. Dec. 18, 2003;
Company name: CPM Funding, Inc;
No. of complaints: 8;
States where affected consumers located: California, Florida, and New
Mexico;
Type of enforcement action taken: Warning letter/citation sent to
company.
Date of action: 18. Nov. 03, 2003;
Company name: AT&T Corporation (FTC's contractor, AT&T Government
Solutions, is a unit within the larger corporation.);
No. of complaints: 29 complainants reporting 78 separate alleged
company-specific do-not-call violations, as well as 438 complaints
alleging national registry violations;
States where affected consumers located: Alabama, California,
Connecticut, Florida, Georgia, Michigan, Minnesota, New Jersey, Ohio,
Oregon, Rhode Island, South Carolina, and Washington;
Type of enforcement action taken: Initially proposed forfeiture
$780,000 ($10,000 per violation) for company-specific violations
(Forfeiture not final); Consent decree settlement - $490,000 voluntary
payment and implementation of compliance plan for separate national
registry and company-specific do- not-call investigations.
Source: FCC staff and Web site.
[End of table]
[End of section]
Appendix II: Information on the Two Surveys About the National Do-Not-
Call Registry:
Two surveys have been conducted about the National Do-Not-Call Registry
(the national registry) since it went into effect in October 2003--one
survey by Harris Interactive® and one by Customer Care
Alliance.[Footnote 38] The results of these surveys may provide some
indications of the national registry's overall performance; however, we
are uncertain about how representative the results of each actually are
of the opinions and experiences of adults nationwide, and we are
uncertain of the accuracy of the measures in the Customer Care Alliance
survey. Notwithstanding limitations of these surveys, FTC considers the
surveys' results to have found that most people know about the national
registry and that most people who say they have a telephone number on
the national registry say they are getting fewer calls creating some
confidence that the results are generally correct.
The Harris Interactive Survey:
The Harris Interactive survey was conducted on-line within the United
States in January 2004 with a sample of nearly 3,400 adults from its
multimillion-member Harris Poll market research panel of individuals
specially recruited to participate in large surveys. In this brief
survey, respondents were asked whether they knew about the national
registry; whether they had registered for it; and, for those who had
registered, an opinion question was asked about whether they had
received more, about the same, or less telemarketing calls since
registering. While respondents were asked whether they believed survey
research firms and pollsters were exempt from calling restrictions,
they were asked no further questions about their knowledge of what
types of telemarketing calls are prohibited and what types of calls are
exempt. Of all respondents, 91 percent indicated that they had heard of
the national registry, and 57 percent indicated that they had signed-up
for it. Of those who had registered, 25 percent answered that they had
received no telemarketing calls since signingup, and 67 percent
responded that they had received a little or far less calls than before
signingup. Two-thirds (68 percent) of respondents who had registered
answered that they did not know if survey research firms and pollsters
were allowed to call. The survey data were weighted using both
demographic and propensity score weights to be representative of the
total adult population. However, because the survey sample consisted of
computer users in its market research panel and the sample was selected
using nonprobabilistic methods, we are uncertain how representative the
results actually are of the opinions and experiences of adults
nationwide.
Customer Care Alliance Survey:
Customer Care Alliance conducted a telephone survey during February
through April 2004 with about 850 adults nationwide. Among other topics
and as in the Harris survey, respondents were asked whether they were
aware of the national do-not-call legislation, and if so, whether they
had signedup for the national registry. However, unlike the Harris
survey, for those who had signed-up, this survey attempted to quantify
changes in the number of telemarketing calls the respondents had
received since signing-up for the national registry compared to prior
to registering. To measure changes in telemarketing call volume, these
respondents were asked to estimate about how many telemarketing calls
they had received per month prior to registering for the national
registry and in the month prior to being interviewed for the survey.
Respondents were also asked whether they had been on the national
registry for more or less than 3 months. No questions were asked about
respondents' knowledge of what types of telemarketing calls are
prohibited and what types of calls are exempt from the national
registry. Ninety-two percent of all respondents answered that they were
aware of the national do-not-call legislation, and 60 percent of all
respondents said that they had placed their primary home telephone
number on the national registry. Respondents who had signedup for the
national registry reported receiving an average of about 30
telemarketing calls per month prior to registering and an average of 6
calls per month after signingup, for an 80 percent reduction.
We are uncertain how representative the results of the Customer Care
Alliance survey are of the opinions and experiences of adults
nationwide because of certain limitations. First, the reported survey
response rate was only 20 percent. Second, there appears to be a high
degree of nonresponse bias in the respondent sample that may be due to
the low response rate. The report indicates that the sample of survey
respondents overrepresented adults in the U.S. population 45 years of
age and older and underrepresented adults between the ages of 18 and
44. Additionally, individuals with incomes of less than $35,000 were
greatly underrepresented and those with incomes of more than $50,000
were overrepresented.
We are also uncertain about the accuracy of the measures used in the
survey because of additional limitations. First, calls from charitable
organizations were incorrectly included in a list of the types of
prohibited telemarketing calls that was read to respondents in several
questions. Second, while the approach to quantify changes in
telemarketing call volume gives the appearance of obtaining
quantifiable numbers about the national registry's effect on the
telemarketing call volume, we are uncertain about the validity of the
answers to these questions. In a telephone interview, a month is a long
time period to expect respondents to accurately recall telemarketing
call volume. This recall is even more of a problem when respondents are
asked to recollect during a telephone interview monthly call volumes
from more than 3 months in the past, and over 80 percent of the
individuals who reported signingup for the national registry said they
had done so more than 3 months prior to being interviewed. So, given
the length of time that had transpired since registering for such a
large percentage of the survey sample and the complexities of what
types of telemarketing calls are prohibited and what types of calls are
exempt, we believe that it is unlikely that respondents could have
accurately estimated the average number of calls received per month
either before or after registering.
[End of section]
Appendix III: Comments from the Federal Trade Commission:
FEDERAL TRADE COMMISSION:
WASHINGTON, D.C. 20580:
THE CHAIRMAN:
January 18, 2005:
Mr. Paul L. Jones:
Director, Homeland Security and Justice:
US Government Accountability Office:
441 G Street NW:
Washington, DC 20548:
Dear Mr. Jones:
Thank you for the opportunity to comment on the Government
Accountability Office's draft report titled Telemarketing:
Implementation of the National Do-Not-Call Registry (GAO-05-113) ("GAO
Report" or "Report"). As the GAO Report concludes, the National Do-Not-
Call Registry ("DNC Registry") is successful by three measures.
Specifically, the Commission had the DNC Registry operational by the
end of calendar 2003; the system could and did enroll over 60 million
telephone numbers within one year of operation (June 2004); and all
evidence indicates that most consumers who say they have registered
their telephone numbers are receiving substantially fewer telemarketing
calls.
We understand that the agencies' respective staffs have worked
cooperatively throughout the preparation of this Report and that the
Commission staff has provided informal technical comments on the draft
of the Report to the GAO staff, the vast majority of which have been
incorporated. The Commission does not disagree with the contents of the
Report. As FTC staff noted, quantitative measurement of the
effectiveness of a program based on "before and after" snapshots is
often difficult, particularly in situations like the Do-Not-Call
program where only anecdotal evidence of a baseline for the "before"
figure exists. Nonetheless, when reports from consumers, the media, and
professional surveyors consistently conclude that the DNC Registry
effectively and successfully protects registered consumers against
invasions of their privacy by most commercial telemarketing calls, it
is reasonable to infer that the program is working as intended. This is
especially so when there is no evidence to the contrary.
In addition, viewed from the perspective of industry compliance, the
DNC Registry is a striking success. The relatively small number of
complaints - 675,337 through December 11, 2004, or 1% of the number of
registrations through that date - suggests that overall compliance with
the DNC Registry is high. Additionally, the FTC's early enforcement
record sends a strong message to telemarketers that the FTC is ready
and able to address violations of the DNC Registry. To date, ten law
enforcement actions have been filed in federal district court, either
by the Department of Justice on behalf of the FTC to obtain injunctions
and civil penalties, or by the FTC itself to obtain injunctions and
consumer redress.
Finally, with respect to state participation in the DNC Registry, we
believe that harmonization efforts have continued to be successful. All
but eight of the states that maintain their own registries have shared
their registration data with the DNC Registry, thereby minimizing
consumer confusion and making telemarketer access to the DNC Registry
more efficient. The Commission continues to work with the remaining
states to coordinate their registries and relevant laws with the DNC
Registry.
The Commission appreciates the opportunity to review and comment on
GAO's Report.
By direction of the Commission.
Signed by:
Deborah Platt Majoras:
Chairman:
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Paul L. Jones, Director (202) 512-8777:
Linda R. Watson, Assistant Director (202) 512-8685:
Staff Acknowledgments:
In addition to those mentioned above, David Alexander, John E. Bagnulo,
Frances Cook, Katherine Davis, and Julian L. King made key
contributions to this report.
FOOTNOTES
[1] H.R. Conf. Rep. No. 108-401, at 637 (2003).
[2] Organizations that may use the Web site include telemarketers,
sellers, service providers, and exempt organizations. Telemarketers
include persons, who in connection with telemarketing, initiate or
receive telephone calls to or from a customer. Sellers include
organizations that, in connection with a telemarketing transaction,
provide, offer to provide, or arrange for others to provide goods or
services to a consumer. A seller may also be a telemarketer, if it is
calling on its own behalf. Or a seller may retain one or more
telemarketer(s). Service providers are persons who provide assistance
to sellers or telemarketers to engage in telemarketing. Exempt
organizations are organizations that are exempt from both FTC's and
FCC's requirements to access the national registry, such as charities
and political fundraisers, but that voluntarily choose to access the
information solely for the purpose of preventing telephone calls to
telephone numbers in the national registry.
[3] FTC defines an "annual period" consisting of 12 months following
the first day of the month in which the telemarketer paid the fee. For
example, a telemarketer that pays its annual fee on September 15, 2003,
has an annual period that runs from September 1, 2003, through August
31, 2004.
[4] Injunctive relief is to prevent or stop violations of law under
both the Telemarketing Sales Rule and section 5 of the Federal Trade
Commission Act (FTC act), 15 U.S.C. § 45 (2000) and consumer redress is
to compensate for any harm to the consumer.
[5] In the supplementary information to a final rule issued January 29,
2003, FTC noted that Missouri reported a 70 to 80 percent reduction in
the number of telephone calls people had received after the
implementation of the state registry, based on anecdotal information.
[6] Pub. L. No. 102-243, § 3(a), 105 Stat. 2394, 2396-97 (1991)
(codified at 47 U.S.C. § 227(c)).
[7] Pub. L. No. 103-297, § 3(a)-(c), 108 Stat. 1545, 1546 (1994)
(codified at 15 U.S.C. § 6102(a)-(c)).
[8] Several lawsuits challenged both the constitutionality of the
national registry and FTC's authority to establish it and one court
enjoined FTC from implementing the registry. On October 7, 2003, the
court of appeals stayed the injunction pending FTC's appeal and the
court's review. FTC v. Mainstream Marketing Services, Inc., 345 F.3d
850 (10TH Cir. 2003). The decisions against the national registry were
overturned on appeal early in 2004. Mainstream Marking Services, Inc.,
v. FTC, 358 F.3d 1228 (10TH Cir. 2004), cert. denied, 125 S.Ct. 47
(2004).
[9] 6 C.F.R. pt. 310 (2004).
[10] 47 C.F.R. § 64.1200 (2004).
[11] In a telecommunications context, a common carrier is a
telecommunications company that holds itself out to the public for hire
to provide communications transmission services.
[12] The original entity-specific program did not apply to calls made
by or on behalf of charitable organizations--FTC's statute addressed
only calls "to induce purchases of goods or services," and FCC's
statute-exempted calls by tax-exempt nonprofits (which FCC extended to
calls by or on behalf of tax-exempt nonprofits when it set up the
program). The definition of telemarketing in FTC's statute was
subsequently amended to cover charitable solicitations. In response,
FTC decided to expand its entity-specific program to cover charitable
calls by for-profit telemarketers hired by charities to solicit
donations. It was not able to cover calls made directly by charities
because the amendment to cover charitable calls did not alter the
telemarketing law's reliance on the FTC act's jurisdictional
limitations as to nonprofit organizations.
[13] The 36 states, identified in supplementary information to FCC's
July 2003 regulations for the national registry are Alabama, Alaska,
Arizona, Arkansas, California, Colorado, Connecticut, Florida,
Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine,
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana,
New Jersey, New Mexico, New York, North Dakota, Oklahoma, Oregon,
Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont, Wisconsin,
and Wyoming.
[14] However, only paid fundraisers subject to FTC jurisdiction are
required to abide by the request, because FCC exempted such businesses
from its entity-specific do-not-call provision while FTC expanded its
entity-specific provision to cover such businesses in response to a
2001 statutory amendment.
[15] The 17 states (identified by FTC) are Alabama, Arkansas,
California, Colorado, Connecticut, Florida, Georgia, Idaho, Kansas,
Kentucky, Maine, Massachusetts, Minnesota, New York, North Dakota,
Oklahoma, and Pennsylvania. According to FTC, eight states do not now
share their registries with the FTC--Indiana, Louisiana, Mississippi,
Missouri, Tennessee, Texas, Wisconsin, and Wyoming. FTC staff said they
continue to work with the states to coordinate the registries with the
National Do-Not-Call Registry.
[16] Pub. L. No. 108-10, § 2, 117 Stat. 557, 557 (2003).
[17] Pub. L. No. 108-82, 117 Stat. 1006 (2003). The United States Court
of Appeals for the 10th Circuit also ruled that, on the basis of FTC's
existing statutory responsibilities prior to the September 2003
legislation, FTC had the authority to create the national registry.
Mainstream Marketing Services, Inc., v. FTC, 358 F.3d 1228 (10th Cir.
2004), cert. denied, 125 S.Ct. 47 (2004).
[18] "Call abandonment" occurs when a consumer answers the telephone,
only to find no one on the line. This happens because telemarketers use
automatic equipment to increase their efficiency and sometimes results
in no sales representative on the telephone when the consumer answers
the calls. "Calling time restrictions" refers to hours of the day that
telemarketers are allowed to make telephone solicitations.
[19] Safe harbor provisions protect a telemarketer from liability when
a violation of the national registry is made in error, and the
telemarketer can demonstrate compliance with each of several provisions
of the national registry.
[20] Consumer Sentinel is an FTC law enforcement resource that contains
a database of more than 1 million consumer complaints, as well as
litigation resources and guides. It is accessible to more than 1,000
law enforcement agencies. Consumer Sentinel contains complaints on
consumer fraud, identity theft, and national registry violations.
[21] Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, div.
B, tit. V, 118 Stat. 3, 89.
[22] See 47 C.F.R. §§ 1.716-1.718 (2003).
[23] Noncommon carrier entities subject to FCC enforcement include
companies engaged in the business of banking, credit unions, savings
and loans, airlines, and companies engaging in the business of
insurance.
[24] FTC can seek civil penalties on its own when the Department of
Justice fails to bring suit within 45 days of FTC having forwarded the
case for filing and litigation. 15 U.S.C. §56 (2000).
[25] Forfeiture proceedings are administrative proceedings to determine
the appropriate monetary penalty for repeated or willful violations.
They must follow a violation of a previously issued citation, unless
the violator holds an FCC license or other authorization, in which case
no warning is necessary before a forfeiture is proposed. They involve
notice and an opportunity to respond before issuance of a forfeiture
order requiring payment of a civil penalty. See 47 U.S.C. §§ 503(b)
(2001); 47 C.F.R. § 1.80 (2003). Cease and desist proceedings generally
involve an order to show cause why an order to cease and desist from
violating any FCC rule or regulation should not be issued. After a
hearing or waiver of the hearing, FCC may decide to issue the cease and
desist order, and the order may be appealed to the U.S. Court of
Appeals for the District of Columbia. See 47 U.S.C. §§ 312(b)-(c),
402(b) (2001). An injunction requiring compliance with an FCC order may
be issued by a federal court upon application by the FCC or the U.S.
Department of Justice for enforcement of the order. See 47 U.S.C. §
401(b) (2001).
[26] 47 U.S.C. §§ 504(a), 401(c) (2001).
[27] 47 U.S.C. § 504(a) (2001); 31 U.S.C. §3302(b) (2001).
[28] FCC officials told us that unlike consent decrees at other
agencies, FCC's consent decree process doesn't involve adoption by
court order. In this context, a consent decree settlement is a written
agreement between FCC and the party under investigation that is adopted
by FCC order. See 47 C.F.R §1.93. Such a settlement may be reached in
the context of ongoing FCC administrative proceedings, such as
forfeiture or cease and desist proceedings. See id. §1.94. Any
violation of such a consent decree is considered a violation of an FCC
order and can subject the party to the sanctions associated with such a
violation. See id. §1.95.
[29] FTC and FCC have taken additional enforcement actions against
telemarketers under each agency's telemarketing statutes. The 10
lawsuits, 16 citations, and 2 consent decrees reflect enforcement
actions specific to the national registry.
[30] According to FTC staff, the short operations period in fiscal year
2003, which affected the fees collected, also had continuing effects
into fiscal year 2004.
[31] The estimates were closer to FTC's actual costs for implementing
and enforcing all of the provisions of its telemarketing regulations
(the Telemarketing Sales Rule), which were $20.1 million for fiscal
year 2003 and $21.2 million for fiscal year 2004. While the Do-Not-Call
Implementation Act authorizes the FTC to establish only fees
"sufficient to implement and enforce the provisions relating to the
'do-not-call' registry of the Telemarketing Sales Rule," it provides
that fees actually collected are available "to offset the costs of
activities and services related to the implementation and enforcement
of the Telemarketing Sales Rule, and other activities resulting from
such implementation and enforcement." Pub. L. No. 108-10,117 Stat. 557,
557 (2003).
[32] GAO, Federal User Fees: Budgetary Treatment, Status, and Emerging
Management Issues, GAO/AIMD-98-11 (Washington, D.C.: Dec. 19, 1997),
18.
[33] The final rule for the fee structure reduced the maximum number of
area codes for which an entity would be charged from 300 to 280 to more
closely correlate the charges with the number of active area codes in
the country.
[34] While FTC estimated that $18 million would be needed to cover
costs associated with the national registry in fiscal years 2003 and
2004, FTC said that estimates of the annual costs associated with
operating the national registry may vary from fiscal year to fiscal
year.
[35] Federal Register Vol. 68. No. 147, pg. 45141.
[36] Harris Interactive® conducted an on-line poll within the United
States between January 19 and 28, 2004, among 3,378 adults nationwide.
[37] Customer Care Alliance is a consortium of companies that provides,
among other things, services for clients to assess consumer
satisfaction with their products. The company conducted its national
registry telephone survey of 851 people from February through April
2004.
[38] Harris Interactive® conducted an additional Harris Poll survey on
the national registry; however, it was done in August 2003, just before
the registry went into effect. In this brief telephone survey of just
over 1,000 adults, respondents were asked whether they knew about the
national registry, whether they had already registered or were planning
to register for it, the extent to which they expected unsolicited
telephone calls to decrease for people who registered, and asked about
their knowledge of the types of unsolicited calls to which the registry
applied. There was no attempt to measure the number of telemarketing
calls respondents had received during any time period.
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