Laggard Firms Face Liability on Do Not Call

Last week's federal appeals court ruling on the Do Not Call Registry made suddenly real the possibility of penalties to financial services companies for failure to comply. The Denver court ruled the FTC could begin enforcing the list while legal challenges to it continue. And while many financial services firms with hardcore telemarketing operations were prepared, many others with less obvious exposures may face significant liability.

Firms that have not taken Do Not Call (DNC) seriously are making a mistake, according to Craig Weber, an analyst with Celent Communications (Boston) and author of a new study, "Crunch Time for Do Not Call Compliance: Are Financial Institutions Ready?" Even with the final outcome of the national registry in doubt, DNC regulations have already been enacted in the vast majority of states, and are pending in all the others. "Companies will need to manage DNC issues across 50 jurisdictions anyway, whatever happens with the federal DNC registry," Weber comments. "The other issue is simply that more than 50 million Americans have clearly said, 'Do not call me and try to sell me something.'"

Across the financial services verticals there are no great differences in the compliance requirements and potential impact faced by companies. Differences do exist, however, in where banks, securities firms and insurance companies are likely to be exposed to liability. "Because banks are aggressive in selling loans, mortgages and credit cards over the phone from the home office, their exposure is very high in the call center environment," Weber asserts. "Securities and insurance companies have much more of a field issue, because they have agents -- typically the less experienced ones -- pounding the phones to make sales, open new accounts, etc."

In the abstract, at least, liability for DNC penalties -- up to $11,000 per call under federal regulations -- depends on a company's business model, according to Weber. Firms that depend on cold-calling to generate new business are the most obviously exposed, but they're also the ones likely to have paid more serious attention to DNC. The greatest threat may be faced by "firms where it's not as clear that they're impacted by DNC," Weber notes -- such as securities and insurance companies. "Those companies are exposed, and I would say a good number of them have not addressed the issue at all."

In addition to fines, businesses confronted by DNC enforcement could face disruption to their business-generation efforts, according to Weber: "Whoever enforces a DNC regulation can walk into your call center and say, 'Give me your records, show me who you've called and show me how you know they're not on the DNC list."

Many financial services firms have attempted to comply on the cheap, using paper rather than automated solutions. "They print out a list and give it to their call center and say, 'Every time you make a call, check to see if the number is on this list,'" Weber explains. "There are two major problems with this: one, people making calls don't like to manually flip through lists in numerical order, and, two, the method generates no record of who you called and whether they're on the list."

Weber recommends companies take automated approaches to compliance with DNC. "For example, firms can build their own interface, access their data, update it regularly and store it in their own customer databases," he says. "The other choice is a package solution that sits between your call center reps and the customer they're calling, or between agents and the customers that they're calling."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio