Ethics Center: Sales & Marketing

If You Cold Call, Get Warm and Cozy with the Rules

If you or people you hire engage in cold calling to generate leads and set appointments, are you doing a good job of making sure approved procedures are continually being followed? If not, you risk running afoul of state or federal Do-Not-Call laws.

Such was the case recently for California-based Farmers Insurance Exchange, Truck Insurance Exchange and Fire Insurance Exchange (collectively referred to as “Farmers”).

Missouri Attorney General Chris Koster said in October that he had settled a lawsuit filed against Farmers for violating Missouri’s telemarketing and No-Call laws. Under the agreement, Farmers will pay $575,000 to the state of Missouri—the largest amount ever paid by a telemarketer for Missouri No-Call and telemarketing violations.

The settlement agreement also requires Farmers, which sells home, life and auto insurance through its independent agents, to adopt policies and procedures to prevent future telemarketing and No-Call violations, including agent training and annual audits of a sample of the company’s agents.

Koster said the Attorney General’s Office received more than 275 No-Call complaints over a four-year period about Farmers agents’ harassing telemarketing practices. Many consumers complained that they continued to be contacted by Farmers agents after instructing them not to call. Unwanted telemarketing calls and harassing treatment by telemarketers annually rank highest on the list of complaints received by the Attorney General’s Office.

“Farmers Insurance simply looked the other way while its agents were flouting Missouri’s no-call law, illegally bombarding Missouri consumers with unwanted telemarketing calls,” Koster said in a statement announcing the settlement. “This historic settlement combined with new training requirements should ensure Farmers reforms its practices to protect Missouri consumers.”

The National Do Not Call Registry has been around since 2004, but a lot of people still aren’t quite sure about the rules. For consumers who register, the DNC list keeps them off of for-profit business call lists. Telemarketers have to update their lists at least every 31 days, but if someone on the list receives a sales call from a company with which they have no existing business relationship after that initial period, that person can file a complaint. If it comes down to it, the penalty can be substantial: the federal penalty is $16,000 for every violation of the Telemarketing Sales Rule.

According to the Federal Trade Commission’s Q&A for Telemarketers about DNC provisions, a company with which a consumer has an established business relationship may call for up to 18 months after the consumer’s last purchase or last delivery, or last payment, unless the consumer asks the company not to call again. In that case, the company must honor the request not to call or be subject to a fine.

If a consumer makes an inquiry or submits an application to a company, the company can call for three months. Once again, if the consumer makes a specific request to that company not to call, the company may not call, even if it has an established business relationship with the consumer.

A consumer whose number is not on the national registry can still prohibit individual telemarketers from calling by asking to be put on the company’s own do not call list.

Most phone calls to a business made with the intent to solicit sales from that business are exempt from the Do Not Call provisions.

While independent producers may manage their business affairs and sales contacts according to their own practices, the carriers they are appointed with provide access to training and instruction on corporate policy and on the law regulating their sales practices when they are selling that carrier’s products.

If cold-calling is something you are considering to drum up more business, make sure to go about it ethically by subscribing to the National Do-Not-Call Registry, follow proper telemarketer etiquette, scrub cold-calling lists at least every 31 days, and develop and maintain office compliance plans.

The consequences of non-compliance could be catastrophic to your business.

Originally published in Advisor Ethics on LifeHealthPro.com on 11/4/15. Reprinted with permission.

For information on affordable errors and omissions insurance for low-risk insurance agents, investment advisors, and real estate broker/owners, please visit EOforLess.com. For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center.