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Reprinted from the December 8, 1996 Fort Worth Star-Telegram


Savvy Consumers Use Regulations to Ring Up Court Awards Against Telephone Marketers.

The Associated Press


©1996 Fort Worth Star-Telegram

Russell Smith at his home in Alexandria, Va.

Russell Smith says he is $17,000 richer this year, all by listening carefully when he answers his telephone.

The Alexandria, Va., computer scientist has been busy suing telephone marketers, those uncanny creatures that always seem to call just as people are sitting down to dinner.

Using little-known regulations that have been on the books for years, Smith has collected money by filing lawsuits in small claims courts over such telemarketing no-nos as not properly identifying themselves or failing to remove his name from their files.

People can reap anywhere from pennies to $1,500 for each violation of U.S. telemarketing code they suffer. And because each suit is relatively small, the targeted companies often settle out of court to avoid paying attorneys' fees.

"They are not going to ignore me. If they are going to ignore me, they are going to pay me damages,'' Smith said.

Star-Telegram/Steve Wilson
"I get to spend $30,'' he said, referring to the filing fee in small claims court. "They get to spend a couple thousand just to get an attorney out there. Win or lose, they have already lost."

Smith isn't alone. A consumer group called Private Citizen, based in Naperville, Ill., says it has 13 members who have won a collective $53,000 this year over telemarketing violations.

In Fort Worth-Dallas, several companies have been accused of telemarketing violations, including Dallas-based computer retailer CompUSA, J.C. Penney Co. of Plano and Warrantech Direct, a telemarketing firm in Euless.

Warrantech supplies extended warranties for CompUSA and handles the telemarketing. In small claims court last month in Virginia, Smith accused CompUSA and Warrantech of failing to remove him from a telemarketing call list and other violations. He is asking for $7,700; the case is pending.

Smith has also accused J.C. Penney Insurance Group, a division of J.C. Penney, of telemarketing violations and says he will sue "as soon as I get the chance.''

J.C. Penney Insurance Group says it obeys all regulations. Jack Schulik, a senior vice president for the insurance group, said even small, $1,500 lawsuits could add up to trouble if they multiply.

That's why the company has developed written policies to prevent violations, he said.

"I wouldn't say that is a huge amount of money,'' he said. "But if a huge amount of people do this, it could be a huge amount of money.''

Officials with Warrantech and CompUSA declined to comment directly on the case.

Randall San Antonio, president of Warrantech Direct, said his company has not violated any rules, and compared the claims by Smith to famous liability cases.

"American Airlines got clobbered for that sign, didn't they?"'

San Antonio said, referring to the recent verdict that forced the airline to turn off giant flight information signs along the entrance road at Dallas//Fort Worth Airport. "And McDonald's got clobbered over the coffee.''

A CompUSA spokeswoman said the company is aware of Smith's suit, but declined further comment.

Companies have little reason to fight the suits, said Robert Schechter, a New York lawyer who is familiar with telecommunications law.

"Think about what a $500 case in small claims court would cost to put on a defense,'' he said. "It is really just not worth it if you are suing for $500.''

Such lawsuits are expected to increase in coming years as the telemarketing sector continues to grow.

The telephone has already outstripped the mailbox as the dominant medium for direct sales, according to the Direct Marketing Association in New York. The DMA expects total consumer telemarketing sales to double by 2001, to $248.8 billion from $124.5 billion. The association maintains its own "do-not-call'' list of 700,000 households, a spokesman said.

The Telephone Consumer Protection Act, enacted in 1992, opened the door for suits like Smith's. Regulators, including the Federal Communications Commission and the Federal Trade Commission, soon followed with a pile of rules.

Telemarketers who fail to supply the phone number or address of the company they represent may be sued for $500 per violation.

Consumer requests to be put on a telemarketer's "do-not-call'' list must be honored. If that request is disobeyed twice in a 12-month period, the consumer can sue for $500 per violation. If consumers can prove that the calls were deliberate or spiteful, they may be able to collect triple damages, or $1,500 per violation.

Telemarketers are required to maintain a written policy on how to get on a "do-not-call'' list. If the consumer requests the policy and does not receive it, or if the telemarketer does not make the policy available, each violation is worth $500, according to the regulations.

The rules have yet to see serious challenges in court, and consumers have won thousands through company settlements, Schechter said.

There are hitches. The rules apply only to unsolicited calls. A company that has done business with a consumer in the past can call that person for follow-up sales under the pretext that the pitch is welcome. And nonprofit and political fund-raising groups are exempt.

If a company can prove that certain violations were accidental, it can escape a penalty. But many companies would rather not rack up court costs to make that point, Schechter says.

Consumers must also learn how to tape the offending calls legally, a lesson that Robert Bulmash, president of Private Citizen, is happy to offer. Consumers should say that they have an answering machine that won't shut off after the phone is picked up, and ask if it is OK if the call is taped. Most telemarketers will say that's fine, Bulmash says.

Private Citizen advises consumers on what to do with junk mail and other types of direct solicitation. For $10, Private Citizen will even sell you a pamphlet called "So You Want to Sue a Telemarketer.''

Bulmash says that by year's end, he expects to have settled seven or eight lawsuits, bringing this year's total to $15,000 "without even filing court papers.''

"The issue should be privacy,'' Bulmash said. "But, unfortunately, it always comes down to money, how much did I get.''

Richard Zelma, owner of a small telephone interconnect service in Norwood, N.J., has been fighting wayward telemarketers since last year, when he saw Bulmash talking about consumer rights on a national TV news magazine.

"Since I work at home, I was the recipient of about three telemarketing calls per day,'' Zelma said. "I was channel surfing, and we saw this thing, and my wife looked at me, and I looked at her, and I said, 'Could this be real? There is a God.'''

He says he wants to sue several companies, including Dean Witter.

"They telemarketed my home five times against my wishes,'' Zelma said. He said he has a case filed against Chase Manhattan Corp.

"These people, when they call, they are abusive and nasty,'' Zelma said. "They don't let up.''

And as long as the industry grows, consumers like Smith and Zelma will be around to fight the abusers.

"This is the sociopathic level of this industry,'' Zelma said. "They have no sense of rights, of privacy. All they have a sense for is revenue.''

Bells are Ringing

Telemarketing, the largest piece of the direct marketing industry, is expected to grow by 8 to 10 percent a year through the 21st century.

(in billions)





Est. growth from 1991

Consumer markets




100 percent





142 percent

(in thousands)





Est. growth from 1991

Consumer markets




47 percent





62 percent

Advertising expenditures
(in billions)





Est. growth from 1991

Consumer markets




76 percent





112 percent

SOURCE: Direct Marketing Association, New York

Questions that Pay

Junkbusters, a company dedicated to stopping direct marketing, has designed a list of questions that consumers can ask telemarketers when they get an unsolicited call. If telemarketers answer "no" to any of these questions, the consumer may be owed $500 to $1,500 for violating federal law.

Updated December 07, 1997. ©Russell Smith. All rights reserved.


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