WHO IS EXEMPT?: Now that the FTC Has Stated Prerecorded Calls On Sold Leads Violates the TSR Everybody Is Looking For Cover–Here’s Who Is SAFE Right Now

So everyone knows I somehow manage to do two BACK TO BACK and incredible webinars today on the FTC’s new telemarketing sweep and its BIZARRE social media posts last week casting aside years of prior guidance and suggesting that consent for prerecorded marketing calls CANNOT be transferred or sold at all. Really surprising development.

This means (probably) that most callers can no longer safely use prerecorded calls for marketing purposes in connection with third-party purchased leads. Again this is an informal statement by the FTC which has NOT been accepted by any court–and should not be in my view–but it is still leading to a bunch of concern in industry (as it should.)

Many companies have now decided to move way from prerecorded calls in connection with purchase leads, but may already be too late.

The FTC’s new switcheroo position may end up getting retroactive application–nuts–and that means that calls you’ve ALREADY made using a prerecorded voice in reliance on perfectly legal seeming consent may be instantly converted into TSR violations.

Worse yet–as we discussed today on the webinars–the FCC’s big NPRM proceeding may adopt the FTC’s position in an effort to “harmonize” regulations, as we have seen many times in the past. This also may lead to a retroactive declaratory ruling–urged by 28 Ags–that selling leads is AND ALWAYS HAS BEEN illegal, at least in connection with calls to numbers on the DNC list.

WHAT??!!! (Is what half of you are saying)

Umm.. yeah.

Of course I have been warning everyone about this for 8 months and for about 7.8 of those months no other lawyers in the industry seemed to take this MASSIVE THREAT seriously. Which begs the question of why anyone listens to any other lawyers but the Czar… 😉

But in seriousness, industry finally seems to be waking up to the fact that lead sales are in very real danger of becoming illegal–or, more accurately stated, phone calls based upon sold leads are–and everyone wants to know what to do about it.

Answer: go back in time and listen to me back when there was still an avenue to submit comments to the FCC.

I kid. Sort of.

In any event, we are having a critical R.E.A.C.H. board meeting on Friday during which we will discuss what industry’s response should be here–and a legal defense fund plus TRO/PI effort against any enforcement effort of the FTC’s new *cough* guidance is very much on the table. (The APA exists for a reason folks…)

In light of all of this, many people have taken to calling me the Tsar of the T.S.R.–which I think is very fitting and very clever. Obviously that’s a play on the TCPA Czar moniker I have enjoyed for some time.

But the new name means even more responsibility and I need to spend more time focusing on TSR and FTC issues, rather than my traditional TCPA stomping ground.

Obviously doing 2 hours of FREE content on the FTC’s telemarketing sweep and its insane new “regulate by social media” strategy is already more than anybody else is doing. But it is still not enough–the Czar has so much to give! (Which is why everyone loves him so much…)

But in seriousness, I figured I would start by addressing the handful of exempted entities that can simply disregard the FTC’s new TSR actions…

Let’s dive in.

First, the TSR is a rule implemented by the FTC by authority to Congress conveyed via authority granted in 15 U.S. Code § 6101, et seq.

That statute provides a definition of telemarketing, and basically tells the Commission to dream up rules to govern marketers:

(1)The Commission shall prescribe rules prohibiting deceptive telemarketing acts or practices and other abusive telemarketing acts or practices.
(2)The Commission shall include in such rules respecting deceptive telemarketing acts or practices a definition of deceptive telemarketing acts or practices which shall include fraudulent charitable solicitations, and which may include acts or practices of entities or individuals that assist or facilitate deceptive telemarketing, including credit card laundering.
(3)The Commission shall include in such rules respecting other abusive telemarketing acts or practices—
(A)a requirement that telemarketers may not undertake a pattern of unsolicited telephone calls which the reasonable consumer would consider coercive or abusive of such consumer’s right to privacy,
(B)restrictions on the hours of the day and night when unsolicited telephone calls can be made to consumers,
(C)a requirement that any person engaged in telemarketing for the sale of goods or services shall promptly and clearly disclose to the person receiving the call that the purpose of the call is to sell goods or services and make such other disclosures as the Commission deems appropriate, including the nature and price of the goods and services; [1] and
(D)a requirement that any person engaged in telemarketing for the solicitation of charitable contributions, donations, or gifts of money or any other thing of value, shall promptly and clearly disclose to the person receiving the call that the purpose of the call is to solicit charitable contributions, donations, or gifts, and make such other disclosures as the Commission considers appropriate, including the name and mailing address of the charitable organization on behalf of which the solicitation is made.

In prescribing the rules described in this paragraph, the Commission shall also consider recordkeeping requirements.

And so was born the TSR.

Now, the ability to regulate here is not so limitless as it may first appear. Two big limitations exist on the TSR.

The first exists as a limit on the FTC’s authority to regulate. Full stop. This arises out of the FTC Act.

Specifically, 15 U.S. Code § 6105(b) provides that actions of the FTC related to violations of the TSR may be prevented in the “same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made a part of this chapter. Any person who violates such rule shall be subject to the penalties and entitled to the privileges and immunities provided in the Federal Trade Commission Act in the same manner, by the same means, and with the same jurisdiction, power, and duties as though all applicable terms and provisions of the Federal Trade Commission Act were incorporated into and made a part of this chapter.”

So if you are protected/exempt under the FTC Act you are protected/exempt under the TSR.

And under, 15 U.S. Code § 45(a)(2), the Commission is “empowered and directed” to prevent bad conduct by everybody EXCEPT banks, savings and loan institutions, Federal credit unions, common carriers and persons,  subject to the Packers and Stockyards Act, 1921.

So if you are a bank, savings and loan, federal credit union, common carrier, or somehow subject to the Packers and Stockyards Act (say it without a smile), you are EXEMPT from the FTC’s ability to regulate you using the TSR.

Cool. Groovy. Ok.

Notably, however, companies that do work for these entities–i.e. marketers–are NOT exempt. So you have to think that through in analyzing the scope of the exemption to your use case, even if you are an exempted entity (or work for one.)

There is a second limitation on the FTC’s TSR enforcement abilities that are more limited but perhaps more interesting– those related to insurance companies.

Now these limitations do not come from the FTC Act but from something called the McCarran-Ferguson Act, which we’ve all heard of.

Now under McCAFA, 15 U.S.C. 1012: “No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance.”

That’s pretty oddly worded, but as the FTC interprets matters:

 If state law regulates the telemarketing at issue and enforcement of the TSR would conflict with and effectively supersede those state laws, then the TSR would not apply.  Unlike the jurisdictional exemptions for banks and non-profit organizations, which do not extend to third-party telemarketers making calls on their behalf, in the case of the telemarketing of insurance products and services, the TSR does not necessarily apply simply because the campaign is conducted by a third-party telemarketer.

So, per the FTC’s read of McCAFA–which I surprisingly agree with–insurance companies are exempted from the TSR only to the extent a state law regulated the same sort of telemarketing activity at issue. Now, the good news is that LOTS of states–in act, all but Iowa–do regulate telemarketing to some degree. The bad news is that those laws are general in nature and not specific to insurance companies. And McCAFA is quite vague as to what it means to be fore the “purpose of regulating the business of insurance.”

So is an insurance company exempt from the TSR in every state but Iowa? Or is it only exempt in states that have specific marketing focused laws designed to regulate insurers only?

Call us at Troutman Amin, LLP to find out…


We’ll have lots more coverage of the TSR and these fast moving developments and keep a close eye on everything as it unfolds. In the meantime Episode 14 of Deserve to Win should be dropping tomorrow so… stay tuned.

And as soon as I have the webinars for download i will add to the YouTube channel WHICH YOU SHOULD BE FOLLOWING!!

And yes, I know I am amazing. Love you too TCPAWorld.



  1. “There’s no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws.”
    Ayn Rand

  2. The government’s sole function, according to Ayn Rand, is to secure and protect the rights of the individual. Proper laws define the crimes and other actions that violate rights and establish the rules by which government may prosecute these crimes and settle disputes among men. Proper laws thereby place the government’s use of force under objective control.
    But when laws are non-objective, they enslave rather than liberate. The best example of non-objective laws today are the thousands and thousands of pages of impenetrable regulations, whose meaning and purpose you as a citizen must try to guess and whose actual enforcement is determined by the whims of some bureaucrat, which you must try to predict. “Non-objective law,” according to Rand, “is the most effective weapon of human enslavement: its victims become its enforcers and enslave themselves.”
    Rand provides a glimpse of how this regulatory process works in “Have Gun, Will Nudge.” In this essay she discusses the actions of the FCC in the early 1960s to pressure broadcasters to “improve” the quality of their programming. Rand’s observations about the destructive impact of that by-now-forgotten episode of non-objective law apply to the hundreds of other regulatory agencies — from the FDA to the EPA to the SEC — that control an ever greater part of our daily lives.
    It is for this reason that ARI makes a sharp distinction between law and regulation. Laws that protect individual rights are necessary and proper. But in a free society there is no place for regulation: for any attempt to control the individual’s thought, production or trade.
    Ayn Rand

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