Non-profits that contract with for-profit firms to sell goods or services on their behalf should become familiar with Federal Trade Commission (FTC) regulations that took effect December 31, 1995. The Telemarketing Sales Rule, which implements the Telemarketing Act signed into law in August 1994, is intended to protect donors and consumers from fraudulent or harassing telephone sales pitches. The law carries penalties of up to $10,000 for violations.

The scope of the regulations over charitable activity is limited, but important. While charities themselves (and their paid staff or volunteers) are exempt from the law and regulations, private telemarketing firms are covered, whether engaged by a charity or anyone else. The Act and regulations do not cover solicitations of "pure" donations for which no goods or services are received. Further, according to an FTC staff advisory, the only "quid pro quo" solicitations that will be covered (such as premiums, tickets and the like) are those in which the goods or services being sold have an actual or claimed market value which is greater than or equal to the value of the donor's payment. Thus, for example, soliciting a donor to buy a $100 ticket to a charity dinner that has a fair market value of $35 would not be covered under the new rules, but telling a person that they can claim a "free" vacation by sending in $300 would be covered.

The rules prohibit telemarketers from making telephone solicitation calls before 8:00 a.m. or after 9:00 p.m., and from calling a person who has indicated that s/he does not want to be solicited.

Telemarketers must disclose the identity of the seller; that the purpose of the call is to sell goods or services; the nature of the goods or services; and, in the case of a prize promotion, that no purchase is necessary to win if a prize promotion is offered in conjunction with a sales offer of goods or services. Callers are prohibited from misrepresenting their affiliation with, or endorsement by, a third-party organization or government entity, or the charitable status of an organization or the tax-deductibility of the purchase.

And while it is always important for non-profits to be extremely careful about sharing their mail lists, the regulations provide another reason. The rules prohibit a person from providing "substantial assistance or support" to any seller or telemarketer when that person "knows or consciously avoids knowing" that the telemarketer is engaged in fraudulent activity, and when such assistance is related to the furtherance of the fraudulent activity. This means that under some circumstances, an organization that rents its mail list to a for-profit telemarketer that is subsequently found to have violated the regulations could be found to have engaged in "assisting and facilitating" fraudulent telemarketing activity. Although the FTC would not have the jurisdiction to file suit against a charity in such instances, a state attorney general's office may attempt to do so.

The Telemarketing Act and regulations provide yet another reminder of how crucial it is for a charity to check all firms carefully before signing any contract, and to exercise proper control over solicitations to protect its financial integrity and good name.