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Home > Research Articles > Do Not Call Registry Could Hurt Charities

Non-Profit Times

Monday, May 13, 2002

By Jeff Jones Volunteers would be able to make fundraising solicitations Some 80 percent of the $23 million revenue generated by the March of Dimes Mothers March® program in 2001 came from past donors or volunteers, who are usually reached through commercial telemarketing firms. But a federally proposed do not call registry could change how the organization reaches those donors and volunteers, and shrink its revenues, said Lori Schulman, associate counsel, March of Dimes in White Plains, N.Y. The Federal Trade Commission (FTC) is proposing a do not call list and other amendments to the Telemarketing Sales Rule (TSR). If adopted, consumers could place their number on a national do not call registry. Charitable organizations doing in-house calls are exempt from the proposed list and beyond the FTC's jurisdiction. But, commercial telemarketing firms that solicit contributions for a charity would have to obey it. "For nonprofits, it creates this standard where if you have professional fundraisers working for you ... all these various rules will apply to you," said Jim Conway, vice president of government relations for The Direct Marketing Association (DMA) in New York City. The USA Patriot Act authorized the FTC to expand the requirements of "abusive telemarketing acts or practices" to include charitable solicitations and defines telemarketing to include charitable solicitations, according to The DMA. "It will not affect them (charitable organizations) if they do not use commercial telephone fundraisers," said Lee Cassidy, executive director of The DMA's Nonprofit Federation. The FTC "has no legislative authority to regulate nonprofits," he said. "However, what they're saying is an agent acting for a nonprofit has to do something that they can't require a nonprofit to do." If such a list is adopted, the following scenario could happen: A person gives to a charity, but later joins a national do not call list. If the charity uses a commercial telemarketing firm, that firm can't legally call that person without the donor's "express verifiable permission." Implications of such a list ring loud in the ears of many nonprofit leaders. "What concerns me the most about it is that nonprofits won't be able to contact their own donors without express verifiable authorization, which means we would have to ask people for permission to call them even though they are clearly March of Dimes supporters," Schulman said. Commercial telemarketing accounted for about 12 percent of the approximately $34.5 million in fundraising expenses for the March of Dimes in 2000. Fundraising accounted for about $192.7 million of the March of Dimes' roughly $214 million revenue in 2000, according to an MOD spokesperson. "Most charities aren't in a position of being able to conduct their own telephone fundraising activities either through volunteers or through their own members or even through bona fide employees," said Greg Lam, an attorney with Copilevitz and Canter, a Kansas City-based firm that represents nonprofits and commercial telemarketing firms. "They just don't have the assets to do that. And they don't have the expertise to do it. They rely quite a bit on professional, outside telemarketing firms to provide them with that assistance." The cost of software to achieve telemarketing efficiency may be too much for some nonprofits to pay, if they want to bring calls in-house, according to an MOD spokesperson. The list may penalize small nonprofits more than larger ones because larger nonprofits may be able to bring it in-house, Schulman said. "But the smaller ones are never going to have the resources to bring it in-house." The FTC's do not call proposal is just the latest in a growing list of similar registries. Florida passed the first do not call law in 1987. About 20 states have some form of do not call law in effect now, and about 24 more states are considering similar legislation. According to the American Teleservices Association (ATA), of the 32 states that introduced such legislation last year, seven passed it and one was vetoed. The popularity of do not call lists with consumers is undeniable. A compilation of 11 state do not call lists amounted to more than 5.5 million consumer numbers, according to CAS Inc., a national telephone number appending service based in Omaha, Neb. A DMA official estimated that 40 million to 60 million names could appear on a national do not call list. The FTC received about 16,000 email and snail mail comments by early March about the Do Not Call registry. Comments are being posted on the FTC's Web site. A public hearing will be held June 5-7. "The message we get from consumers is that they don't want the telephone calls," said Anne Schneider, assistant attorney general in Missouri, which has a state do not call list. "Whether they are from bona fide charitable organizations to whom a consumer might donate anyway, or from any other telemarketer." In Missouri commercial telemarketing firms must adhere to the list even if they're calling for charitable organizations. Charitable organizations are exempt from the list. A majority of states exempt calls made by or on behalf of a charitable organization. But a handful -- Indiana, Arkansas and Louisiana are three -- have do not call laws that exempt calls made by a charity if it's made by a bona fide employee, a volunteer or a member of the charity, but not by a for-profit telemarketing firm, Lam said. Indiana has approximately 780,000 people on its do not call list, according to CAS. "That's a substantial number of the total callable population in Indiana," Lam said. "That has obviously caused organizations to lose their ability to garner financial support from those who have given to them in the past." Copilevitz and Cantor filed a lawsuit in U.S. District Court on behalf of four nonprofits challenging Indiana's rules. The suit is awaiting a trial date. Some state lists have several requirements to meet before a call is made. In Indiana, for example, a charitable organization can make a call if a volunteer or an employee makes the call, the solicitor making the call immediately tells the consumer the solicitor's true first and last name, and says the charitable organization's name, address, and telephone number. That's a mouthful to say in the valuable first moments of a call and results in hang-ups. "Any time you add on to this multitude of disclosure requirements you're erecting a barrier between you and the consumer," said G.M. "Matt" Mattingley, director of government affairs at ATA. "The longer you have to have a customer wait to run through this pre-mandated checklist. … I think people are going to hang up." As proposed, the national Do Not Call registry wouldn't preempt state lists, and would create several lists for telemarketing firms to abide by, DMA officials said. Those are the national FTC Do Not Call list, the state do not call list, and the company specific do not call list. "That's a heavy, heavy burden to say the least," Conway of The DMA said. The FTC asked for comment on how to use a national registry with state lists, but hasn't taken a position on it, said Karen Leonard, a staff attorney for the FTC. Conway said the proposed changes to the TSR, including a national do not call list, will cost the $660 billion teleservices industry substantial revenue losses. He declined to put a specific dollar figure on lost revenues and said it would be speculative at this point. Instead of a FTC national registry, DMA officials want the FTC to consider using and promoting the DMA's national telephone preference service, which includes about 4.5 million consumer numbers. The DMA also wants to work with the FTC to establish a central clearinghouse with states, where a company could go to "scrub" lists. The court is out on whether the proposed Do Not Call list will gain approval, but Cassidy of The DMA Nonprofit Federation expects some changes in the proposed provisions to the TSR. "I think the correct question is will this become a rule exactly as they proposed it, and I think the chances of that are close to zero," Cassidy said. "Certainly there will be modification of their proposal. Do not call? I don't know." At least one person believes if a national list goes into effect nonprofits have the creativity and resources to reach donors anyway. Affected nonprofits will need to return to old fashioned relationship building and rely on direct mail and email to garner donors' phone numbers directly, said Karen Beavor, executive director of Georgia Center for Nonprofits based in Atlanta. "It gets back to the basics of fundraising in my book, which is relationships either through name recognition or some attachment to that particular organization or that cause," Beavor said. "I do think that via email, direct mail and other means they'll be able to build those lists of people who actually want those telephone calls, because I think if you support a cause you'll accept that call."