Three main legal entities regulate telemarketing practices in the US: the Federal Communications Commission (FCC) (which regulates both intrastate and interstate calling), the Federal Trade Commission (FTC) and the Attorney General’s Offices that enforce states laws, since many states have their own telemarketing regulations.
In 1991, the Telephone Consumer Protection Act (TCPA) was passed into law. The TCPA is law passed by Congress to protect consumers against unwanted telephone solicitation.
Soon after Congress created the Telephone Consumer Protection Act (TCPA), the Federal Communications Commission (FCC) issued rules and regulations implementing the TCPA, which went into effect on December 20, 1992. The FCC has been revising and adding rules over much of the last twenty years. The FCC’s rules now place several restrictions on telemarketers, including the following:
Together with the FCC, Federal Trade Commission (FTC) created a nationwide Do-Not-Call (DNC) registry and several associated laws. The National Do Not Call (DNC) Registry is a specific provision of TCPA enforcement that was created by the Do-Not-Call Implementation Act of 2003.
The Federal Trade Commission rules state, with some important exceptions, that any businesses or individuals that take part in “telemarketing” must comply with the Telemarketing Sales Rules (TSR). The Telemarketing Sales Rule requires telemarketers to make specific disclosures of material information; prohibits misrepresentations; sets limits on the times telemarketers may call consumers; prohibits calls to a consumer who has asked not to be called again; and sets payment restrictions for the sale of certain goods and services.
Although tax exempt non-profit charities that conduct their own telemarketing are not covered by the TSR, the USA PATRIOT Act, passed in 2001, brought charitable solicitations by for-profit telemarketers within the scope of the TSR. As a result, most of the TSR’s provisions now are applicable to “telefunders” — telemarketers who solicit charitable contributions on behalf of non-profit charities.
Moreover, entities that have been granted tax-exempt status under the IRS are not necessarily Exempt Organizations for purposes of the National Do Not Call Registry. The FTC has challenged the status of “nonprofit organizations” whose role in fact was simply to generate leads for other firms which then charged consumers certain amounts as fees for their services.
Note that the FTC has jurisdiction over nonprofits that operate as for profit, such as for-profit affiliates of nonprofits. Under § 45(m)(1)(B) of the FTC Act, the FTC may notify companies that certain acts or practices have been found in litigated administrative decisions to be deceptive or unfair. Once a company has received a notice listing relevant claims or conduct, it has “actual knowledge”. This notice is called “Notice of Penalty Offenses”. The nonprofit can face civil penalties of up to $50,120 per violation.
In summary, nonprofit that are willing to ask for donations over the phone should consult legal counsel before proceeding.
Case-by-Case Review
At Zecca Ross Law Firm P.C., we understand the importance of conducting a thorough and meticulous case-by-case review when assisting founders in navigating these complex decisions. Our team provides comprehensive guidance and support to ensure that founders are well-informed and empowered to make the best choices for their ventures.
Whether it involves setting up a nonprofit, Zecca Ross Law Firm P.C. is equipped to break down the intricacies of its critical issues. Our goal is to help founders successfully navigate the legal landscape and achieve their business objectives.
If you have any questions or require further clarification on the topics discussed in this article, we invite you to reach out to Zecca Ross Law Firm P.C. at contact@zeccaross.com to schedule a complimentary 15-minute consultation. Our experienced team is here to provide the guidance and expertise you need to make informed decisions and set your venture up for success.
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