WASHINGTON – For-profit fundraisers are not exempt from telemarketing restrictions simply because they are soliciting donations for charity, a federal judge ruled this week.
The National Federation of the Blind and Special Olympics of Maryland sued the Federal Trade Commission, claiming that the 1994 Telemarketing Sales Act did not apply to nonprofits.
But U.S. District Judge J. Frederick Motz agreed with the FTC, ruling Tuesday that the Patriot Act expanded telemarketing rules in 2001 to include outside “telefunders” that solicit for nonprofits.
“We were glad that the court upheld the application of the Telemarketing Act. We think it was the right decision,” said Michael Bergman, attorney in the office of general counsel at the FTC.
The ruling dealt a blow to non-profits still reeling from the post-9/11 charity drain.
“There is disappointment with the decision, and of course we don’t agree with it,” said Andrew Beato, an attorney who represented both the National Federation of the Blind and Special Olympics of Maryland.
Beato said that the ruling was disappointing not only for the financial impact it will have on charities, but also on the free-speech right of “non-profits and charitable organizations to communicate . . . their nonprofit messages” to donors.
He said that charities are evaluating their options, and have not decided whether to appeal. They have 60 days to challenge Motz’s ruling.
The case, which was filed on April 2, challenged the validity of amendments to the Telemarketing Act. Prior to the changes, “telefunders” who were soliciting for charities were exempt from FTC regulation, because the agency did not have jurisdiction over nonprofits.
Under the new rules, which took effect with the Patriot Act, if a charity uses an outside telefunder, it is subject to the same rules that apply to commercial telemarketers.
Restrictions include a no-call rule from 9 p.m. to 8 a.m., a requirement that caller ID information is transmitted and a company-specific do-not-call provision. That provision prohibits telemarketers from calling anyone who has indicated they do not want further calls from a specific seller or organization.
They are separate from last year’s National Do-Not-Call Registry, which allows people to block calls from all commercial telemarketers, not just specific groups.
Bergman said that nonprofits can get around the Patriot Act expansion of the telemarketing regulations by making the fund-raising calls themselves.
But the charities argued that, regardless of who makes the call, they have a First Amendment right to send that message, and that FTC rules infringe on that right.
Organizations that do not have enough people to run a fund-raising telephone bank in-house have been hiring telemarketers in recent years to do the solicitation for them.
“We are one group that has hired professional fund raisers to do the telemarketing,” said Patricia Krebs, president and CEO of Special Olympics of Maryland. “They’re working within the new guidelines as best they can.”
Krebs said her organization has also been scrambling to do all things it can to keep the funds flowing, by adding twists to other fund-raising projects such as the Polar Bear Plunge, in which volunteers jump into the icy Chesapeake Bay to collect pledges.
She said the loss of telefunders would be a problem, but that her group would continue to raise money and provide services.
“The people of Maryland are wonderful. We’re trying to look and ask our supporters to help us to build on what we have,” Krebs said.
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