Walking the Privacy Tightrope

List owners and the list firms that represent them are walking a tightrope these days. During the past two years, a string of privacy actions have forced them to scrutinize their lists more carefully before renting them out and to pay closer attention to how they use customer data.

For instance, the Children’s Listbroker Privacy Act, introduced in the Senate (S. 2160) in March, and a virtually identical bill introduced in the House (H.R. 4955) in July, seek to prohibit the exchange of children’s personally identifiable information for marketing purposes. In August three list firms settled with the Federal Trade Commission regarding charges that they facilitated fraudulent telemarketing (see “FTC Fines List Firms,” below). Then there’s the July 2003 implementation of the FTC’s national do-not-call registry and the January implementation of the Can-Spam Act. And next January, California civil code section 1798.83 will force marketers that disclose consumers’ personal data to third parties to provide California consumers, upon request, with certain details about what they’re disclosing. (More on this law in next month’s List & Prospecting.)

The result of the increase in legislative activity has led to a heightened awareness of privacy issues. “In the past 18-24 months, we’ve been reviewing all the offers coming across our desk — particularly in the children’s market,” says Dennis Bissig, president of Hackensack, NJ-based list firm Mokrynski & Associates. “Also with the teen market, we have to be extremely proactive in making sure the mailing pieces aren’t [sexually] suggestive but are instead wholesome.”

Mokrynski has also refused a few insurance and financial services offers during the past couple of years because it had doubts regarding the legitimacy and ethics of the offers. Previously, Bissig says, the company might not have been as selective or as thorough in vetting the offers.

Ben Perez, president of Peterborough, NH-based list firm Millard Group, says that marketing to children in particular “rings out loud and clear as being an obvious place you don’t want to mess with,” he says. “Just a couple of years ago, we didn’t worry about it.”

“It’s nothing new to scrutinize” potential list renters that aren’t well-known companies, Perez says, to ensure they are making legitimate offers and have no history of making fraudulent offers. But now it’s becoming much more common for catalogers and other prospective renters to show more than a one- or two-page sample of their offers to list owners. Perez advises list owners and managers to review entire catalogs or other direct mail offers before agreeing to rent out a list. He adds that some of the list owners he represents are going so far as to place orders with prospective renters to gauge the legitimacy and service standards of the companies.

Mokrynski’s Bissig recommends that list owners and managers pay particular attention to prospective renters with noncatalog offers. “With nonprofits or political offers, for instance, we and our clients are extremely proactive in making sure the offer itself is ethically correct and appropriate for our clients’ customers,” he says.

As for telemarketing offers, Perez says that a few Millard catalog clients used to rent their lists to telemarketers. “Once they’d see that the script was cool,” he says, “they’d approve renting to telemarketers. But now, most of our clients have shied away from telemarketers, because it’s not worth the negative exposure.”

Privacy watch

Taking pains to vet the legality and legitimacy of list renters and their offers can help keep you in the good graces of the federal government. Taking similar pains to safeguard the privacy of the data in your files will keep you in the good graces of your customers.

“Honor all opt-out requests using DMA suppression files,” says Larry May, CEO of Greenwich, CT-based list firm Direct Media, “and announce to the world that those are the policies you follow.” May suggests prominently featuring in your print catalog and on your Website a privacy statement “that informs consumers what you’re doing with information you gather on them, what you’re gathering, and that you honor their right to privacy.”

Ian Volner, chair of the regulatory practice group of Washington-based law firm Venable LLP, says that most catalogers do follow through on their privacy policies. “The problem is that sometimes privacy policies noted on their Websites don’t apply to catalog mailings,” he cautions.

A customer who places an order and opts out of receiving promotional offers may assume that he is opting out of both e-mail and direct mail offers, whereas the marketer may have only meant for the opt-out to cover e-mail. This sort of mix-up is especially common among multichannel marketers that operate their channels separately.

Donn Rappaport, chairman/CEO of Princeton, NJ-based list firm American List Counsel, says that to ward off greater FTC intervention — such as the creation of a national do-not-mail list — he advises catalogers to take a closer look at their opt-out policies. “Opt-out isn’t a black-or-white proposition,” Rappaport says. “Catalog clients of ours have tested a form of opt-out where rather than offering for customers to get off all lists, you give them choices of what kinds of offers they would like to get or not get.”

You could provide in your catalog or on your Website a checklist enabling customers to opt in to receive holiday books, for instance, but not sale catalogs. Rappaport says this approach not only shows good faith to consumers, the FTC, and legislators but can also enable mailers to continue contacting customers who don’t want to be cut off from all mailings altogether.

FTC Fines List Firms

The Federal Trade Commission in August announced a settlement with list companies Carney Direct, ListData Computer Services, and NeWorld Marketing for their roles in renting out lists to telemarketing firms that used the customer data to sell advance-fee credit offers. The FTC fined Carney $25,000; ListData and NeWorld were each fined $62,500.

According to Peter Carney, president of Irvine, CA-based Carney Direct, “In essence we forwarded our telemarketing scripts to our list owners for their approval or disapproval. The list owners approved certain scripts and fulfilled our orders. If the list broker or manager can be held liable for the end user’s or the data owner’s [misuse of the list], where does it end?”

But the FTC countered that the scripts sent to the defendants by the telemarketers showed that they were selling advance-fee credit products. The Telemarketing Sales Rule prohibits telemarketers from charging up-front fees for credit products and from guaranteeing or nearly guaranteeing credit. The FTC charged that the list firms knew that some of the list renters were engaged in illegal practices because they had seen the scripts.

The action concerns other list pros, such as Donn Rappaport, chairman/CEO of Princeton, NJ-based list firm American List Counsel, because the FTC “is showing that it will go after other vendors in the pipeline,” he says, “such as the list owner — even though it’s the list user who’s using the data fraudulently.”