Telemarketing and Call Center Operations

Last month, the Indiana Governor signed into law House Bill No. 1444, which amends Indiana’s “do not call” statute and extends liability beyond the telephone solicitor, to individuals or entities that “directly or indirectly control” the telephone solicitor. The amendments take effect July 1, 2017 and affect entities that target Indiana consumers via telephone solicitation, regardless of the location of the entity.

Additional Disclosure Requirements. Currently, telephone solicitors must provide Indiana consumers with two types of information: (1) the solicitor’s first and last name, and (2) the name of the business on whose behalf the solicitor is calling. Under the amended law, solicitors must also immediately disclose their employer’s name or the entity with which they have contracted.

Vicarious Liability. The amendment also extends vicarious liability to individuals and entities that have direct or indirect control of the telephone solicitor, regardless of where such persons or entities are located or domiciled. Civil penalties, however, will not apply if the individual or entity can establish that they did not know and, with reasonable care, could not have known of the violation.

House Bill No. 1444 also amends the definition of “caller” under Indiana’s Regulation of Automatic Dialing Machines, to include officers of a corporation or LLC that are involved in or have notice of prohibited conduct and fail to take reasonable steps to prevent it.

Enforcement and Penalties. Failure to comply with Indiana’s telemarketing law is a deceptive act, for which the Indiana Attorney General may seek a $10,000 civil penalty for the first violation, and $25,000 for each violation thereafter. By expanding liability to principals with direct or indirect control, the Indiana Attorney General now has a wider net to cast in prosecutions for “do not call” violations.

For businesses placing telemarketing calls to Indiana consumers, it would be wise to review current calling practices and make appropriate adjustments as necessary, including with respect to managing risk associated with third parties who arguably may be calling on the business’s behalf.

 

Yesterday, a D.C. district court upheld a recent opinion letter issued by FTC staff that extended robocalling restrictions to telemarketing calls that use so-called soundboard technology or “avatars.”  This technology generally allows a live agent to communicate with a call recipient by playing recorded audio snippets instead of using his or her own live voice.

In September 2009, the FTC staff had taken the position that avatar calls were not considered prerecorded messages under the Telemarketing Sales Rule (TSR).  See FTC Staff Opinion Letter to Call Assistant LLC (Sept. 11, 2009).  In November 2016, however, the FTC decided to revoke its previous letter, explaining that it is now the FTC staff’s opinion that outbound telemarketing calls that utilize avatars are subject to the TSR’s prerecorded call provisions. See FTC Staff Opinion Letter to Call Assistant LLC (Nov. 10, 2016).

The 2016 opinion letter explained that the staff’s change in position is due to the increasing volume of consumer complaints, the increase in how this technology has allegedly been abused by using it to conduct multiple calls at the same time without giving appropriate responses to consumers, and that the soundboard technology does “deliver a prerecorded message” under the statutory language used in the TSR.  The staff said that, even with a 1-to-1 limitation in place (i.e., using the technology to place one call at a time), this would not change the staff’s analysis.

A trade group representing companies that manufacture and use soundboard technology had challenged the FTC staff’s opinion letter, stating that the FTC: (1) circumvented the Administrative Procedures Act’s (APA) notice-and-comment requirements, and (2) violated the First Amendment by exempting pre-recorded solicitation calls between a non-profit charitable organization and its existing donors, but failing to exempt such calls to potential first-time contributors.  The court rejected both claims in Soundboard Ass’n v. FTC, No. 1:17-cv-00150 (D.D.C. Apr. 24, 2017).

First, the court found that, although the November 2016 letter is a final, reviewable agency action, it was at most an interpretive rule that the FTC was not required to issue through notice and comment under the APA.  Second, the court concluded that the letter did no more than subject soundboard calls to valid time, place, and manner restrictions. The court explained that the exemption provided to pre-recorded calls on behalf of charitable organizations to existing donors, but not to charitable organizations’ calls to potential, first-time donors, is a content-neutral regulation of speech that easily satisfies the requisite intermediate scrutiny.

Bottom Line: Companies that use soundboard technology will need prior written consent and will need to comply with the prerecorded message requirements under the TSR effective May 12, 2017, per the FTC’s grace period for compliance (as well as the TSR’s abandoned call provisions, as applicable).

On May 4, 2016, the FCC issued a Notice of Proposed Rulemaking to exempt robocalls made to collect “a debt owed to or guaranteed by the United States” from the TCPA’s prior express consent requirement. The new rules will implement a provision of the Bipartisan Budget Act of 2015. In its Notice, the Commission seeks comment on a number of issues, including as follows:

What types of calls should be covered by the exemption? The Budget Act created the TCPA exemption for calls made “solely to collect a debt” owed to the United States.  The Commission seeks comment on the proper interpretation of that language.  It also proposes to allow debt servicing calls under the exemption because such calls “may provide a valuable service by offering information about options and programs designed to keep at-risk debtors from defaulting or becoming delinquent on their loans.”  Finally, the Commission seeks comment on the proper interpretation and scope of the phrase “owed to or guaranteed by the United States.”
Who can be called? The Commission proposes that the exemption will cover “only calls to the person or persons obligated to pay the debt.”  It would exclude calls to persons who the caller does not intend to reach, and would apply the “one-call window” rule for reassigned numbers.  The Commission seeks comments on these proposals and asks commenters to provide alternative approaches they feel would be appropriate.
Who may place the calls? The Commission proposes that the exemption would cover calls made by creditors and those calling on their behalf, including agents.  It seeks comment on whether it should adopt this approach, or consider a narrower or broader interpretation under the Budget Act exemption.
How should the Commission limit the number and duration of the calls? The Budget Act provides the Commission with discretion to restrict covered calls, including by limiting the frequency and duration of the calls.  Thus, the Commission has proposed a three-call-per-month maximum for autodialed, prerecorded, or artificial voice calls to wireless numbers.  The limit would apply regardless of whether a call went unanswered.  The Commission posits whether a different limitation would be appropriate for live agent calls.  Without setting forth specific proposals, the Commission also seeks comment on the appropriate duration for the calls, as well as other restrictions (i.e., limiting calls hours to 8:00 AM to 9:00 PM).
Should consumers be permitted to stop covered calls? The Commission proposes “that consumers should have a right to stop [covered] calls at any point the consumer wishes.”  It proposes that stop-calling requests would continue to apply even after the debt is transferred to other collectors.  It further proposes to require callers to inform consumers of their right to make a stop-calling request.

Comments on the Commission’s proposals are due on June 6, 2016 and replies are due on June 21, 2016. Following the comment period, we expect the proceeding to move quickly because the Commission is statutorily mandated to adopt rules to implement the exemption no later than August 2, 2016.

iStock_000036215158Large-335x251On January 11, 2016, the FCC’s Consumer and Governmental Affairs Bureau released an order denying a petition by a text message platform provider for a declaratory ruling that the Commission should evaluate TCPA liability for these types of entities under the same standard established for fax broadcasters.  In the Order, the Bureau explained that a separate liability standard for text message apps and platforms was laid out in the Commission’s July 2015 Omnibus TCPA Order and that “text broadcasters can be liable for TCPA violations based on the factors discussed in that decision.”

The petitioner, Club Texting, Inc., filed its request for a declaratory ruling in 2009.  In the petition, Club Texting asked the Commission to apply the fax broadcaster TCPA liability standard to text message platforms, such that “liability will attached only if a text broadcaster ‘demonstrates a high degree of involvement in, or actual notice of, the unlawful activity and fails to take steps to prevent such transmissions.’”  In support of this request, Club Texting claimed that if the Commission made an affirmative finding that text broadcasters are not “senders” for TCPA purposes, it would “promote compliance” by the broadcasters’ third party clients that “are in the best position to ensure that recipients have consented to receive the text messages.”

FCC TCPA Declaratory Ruling

Nearly six years after the petition was filed, the FCC released its July 2015 Omnibus TCPA Order, in which it responded to approximately two dozen petitions for clarification of a variety of TCPA-related issues, including the Commission’s definition of a “caller” for purposes of determining TCPA liability.  In the Order – which is currently being challenged in the U.S. Court of Appeals for the D.C. Circuit – the Commission determined that a calling or texting platform or application may face primary liability under the TCPA as the “caller” based on a case-by-case analysis of whether the entity takes the steps necessary to physically place the telephone call (or text), or is so involved in the placing of a call to have been deemed to initiate it (as opposed to merely having some role, however minor, in the causal chain that results in the making of the telephone call).  The Commission further explained that other relevant factors when making its determination could include “the extent to which a person willfully enables fraudulent spoofing of telephone numbers or assists telemarketers in blocking Caller ID, by offering either functionality to clients,” or whether the text broadcaster “has knowingly allowed its client(s) to use that platform for unlawful purposes.”

The FCC’s standard is similar to the “high degree of involvement” standard applicable to fax broadcasters, but the Commission made clear that it was not applying the fax broadcaster standardper se.  This raises the possibility that outcomes involving calls or texts will differ than they would if faxes were involved.  Until we see cases adjudicating liability, however, we will not know how much of a difference the standard makes in practice.

Club Texting Petition

Against this backdrop, the FCC’s order in Club Texting is primarily procedural.  In denying the Club Texting petition, the Bureau reaffirmed the position in the Order and noted that “the Commission has clarified the standard to be applied to text broadcasters and that standard is not the same standard as applies to fax broadcasters.”  It did not revise the standard, nor did it offer any meaningful clarifications of how the standard will be applied.  Indeed, the order explicitly states that it is not adjudicating the liability of any particular text broadcasting service at this time.

We note that the FCC has proposed to fine a “robocall broadcaster” previously.  The case involved Dialing Services, Inc., a developer of a software platform that allows customers to record their own messages and send them to a designated list of recipients.  The Commission issued a Notice of Apparent Liability against the company in May 2014, and proposed a $2.9 million penalty on the basis that Dialing Services had allowed its customers, through its platform, to make 184 unlawful prerecorded message calls to cell phones.  According to the Commission, because of the company’s involvement in the call process, Dialing Services made or initiated the calls.  The Commission has yet to convert the NAL to a Forfeiture Order, however.  Arguably, the Commission should apply the standard announced in the 2015 TCPA Declaratory Ruling to determine Dialing Services’ liability in the case.

For now, service providers should expect the Commission to continue in its efforts to cast a wide consumer protection net, and companies involved in activities regulated by the TCPA should take whatever steps are necessary to avoid unwanted attention from regulators or the plaintiffs’ bar.

downloadOn Monday, Missouri Attorney General Chris Koster filed a lawsuit against Charter Communications, Inc., alleging that the cable, internet, and telephone service provider’s third party telemarketers made thousands of telemarketing calls to consumers who had placed their numbers on the federal and Missouri do-not-call lists, or requested not to receive telemarketing calls from Charter. According to the Attorney General’s press release, the Office received 350 complaints from Charter subscribers and non-subscribers about telemarketing calls – which some had been receiving up to three times per day.

According to the complaint, Charter had entered into contracts with third-party telemarketers to place telemarketing calls on its behalf to numbers on Charter-provided lists. These third parties allegedly used autodialers, identified themselves as Charter, and received a commission based on sales to phone numbers on the lists provided by Charter. The complaint, which was filed in the U.S. District Court for the Eastern District of Missouri, alleges that these third-party telemarketers made calls to thousands of consumers whose phone numbers were on applicable Do Not Call lists and did not lawfully honor consumers’ requests to be added to DNC lists, and that such calls were made without an applicable Established Business Relationship exemption or consent to be called. The complaint states that Charter is liable for these third parties’ calls, which allegedly violate the Telephone Consumer Protection Act, Telemarketing Sales Rule, and Missouri Merchandising Practices Act’s “No-Call Law” and “Telemarketing Law.”

While we have seen an influx of consumer class action lawsuits alleging TCPA violations in recent years, state Attorneys General have the authority to investigate and seek civil penalties for violations of both federal and state telemarketing laws. Attorney General Koster is seeking, in addition to permanent injunctive relief, civil penalties of at least $500 for each violation of the TCPA, up to $16,000 for each violation of the TSR, and up to $5,000 for each violation of the Missouri Merchandising Practices Act.

Earlier this year, PayPal announced planned changes to its User Agreement that would have, among other things, given the company broad rights to contact people by phone or text messages. The provision stated, in part:

You consent to receive autodialed or prerecorded calls and text messages from PayPal at any telephone number that you have provided us or that we have otherwise obtained. We may place such calls or texts to (i) notify you regarding your account; (ii) troubleshoot problems with your account; (iii) resolve a dispute; (iv) collect a debt; (v) poll your opinions through surveys or questionnaires, (vi) contact you with offers and promotions . . . .

The provision was set to go into effect on July 1, 2015, and the only option to avoid being contacted in this manner was to stop using the service. Predictably, consumers did not react well to the provision, particularly as it related to the offers and promotions. Neither did FTC staff, who contacted PayPal to remind them of their obligations under the Telemarketing Sales Rule and the Do Not Call Registry.

Although the TSR permits telemarketing calls to numbers on the Registry if a consumer has provided express written consent to receive such calls, the proposed language did not meet the requirements for the exception. The staff noted, for example, that the request seeking consent must be “clear and conspicuous” and cannot be “buried” in a lengthy user agreement. Moreover, calls may only be placed to a number specified by a consumer – not to any number “otherwise obtained.”

On June 29, 2015, PayPal revised the proposed language such that the company only reserved rights to place calls or texts to “(i) provide notices regarding your Account or Account Activity, (ii) investigate or prevent fraud, or (iii) collect a debt owed to us.” Based on these changes – and because the company hadn’t yet made any telemarketing calls under the proposed language – the FTC’s Division of Marketing Practices decided not to recommend enforcement action.

As we’ve posted before, few things will get companies in trouble faster than sending unwanted calls or texts. You can ask for permission to send those, but the request has to be done in a way that is clear and conspicuous.

Last month, we reported on a bill that would amend a key provision in New Jersey’s restrictive telemarketing law, which prohibited nearly all telemarketing calls to mobile devices, even when the telemarketer had the consent of the mobile device user.  At the end of January, New Jersey Governor Chris Christie signed the bill, S1382.  The amended law only prohibits unsolicited telemarketing calls to mobile devices.  As a result, telemarketing companies can now make sales calls to mobile devices when the call is either (1) made to a customer with whom there is an existing business relationship, or (2) in response to the customer’s written request.

The amended law became effective upon signing by Governor Christie.

New Jersey currently has the most restrictive law against making telemarketing calls to mobile devices, but that may change in the next two weeks. New Jersey’s legislature recently passed a bill that amends New Jersey’s current telemarketing law which prohibits nearly all telemarketing calls to mobile devices, even if a telemarketer has consent of the cell phone user.  The new bill would amend existing law by only prohibiting unsolicited telemarketing calls to mobile devices.  New Jersey’s current law defines an “unsolicited telemarketing call” as any telemarketing sales call other than a call made in response to a customer request or to an existing customer. Thus, the amendment would permit telemarketers to call mobile devices under these circumstances.

The bill, S1382, passed in both of New Jersey’s houses without much opposition, and now sits with Governor Chris Christie for approval. This bill will take effect immediately upon Governor Christie’s signature or after 45 days if no action is taken. Governor Christie has until the last week of January to either sign or veto the bill.

As companies draw on mobile delivery platforms, cloud-based technologies, and third-party vendors to become more sophisticated in their use of telemarketing, autodialer, and text message campaigns, the business risks and potential for class action lawsuits have greatly increased. The Telephone Consumer Protection Act of 1991 (TCPA) has emerged as a cottage industry with plaintiffs’ attorneys routinely filing class action lawsuits seeking multi-million dollar claims and settlements. The FTC also has not shied away from rigorous telemarketing enforcement under its rules against major big brands and calling platforms, including with theories that are based upon an expansive third party liability interpretation of the agency’s enforcement powers.

Yesterday my litigation partner Lauri Mazzuchetti and I teamed up with Ken Sponsler of CompliancePoint to cover the latest developments and hot topics related to TCPA compliance and litigation, and strategies to consider when defending such matters.  If you missed this 2-hour deep dive into the issues, you can listen to the recording here. And if you would like to stay up to date on this topic, you may also wish to sign up for our TCPA Tracker newsletter so you can receive monthly updates on the latest happenings related to TCPA litigation and compliance.

Last Friday, the U.S. Court of Appeals for the Ninth Circuit held that a marketing consultant for the United States Navy – the Campbell-Ewald Company – could be held liable for a third-party marketer’s violations of the Telephone Consumer Protection Act (“TCPA”) arising out of the transmittal of unsolicited text messages.

The Navy hired Campbell-Ewald to develop and execute a multimedia recruiting campaign and the parties agreed that, as part of the marketing campaign, Campbell-Ewald would send text messages to cellular users that had consented to receive the recruitment solicitation.  Campbell-Ewald outsourced the text message dialing to a company called Mindmatics which was responsible both for generating the list of phone numbers to be dialed and for physically transmitting the text messages.  In the suit, the plaintiff claimed that he did not consent to receipt of the message and alleged that Campbell-Ewald violated the TCPA.  The plaintiff did not name the Navy or Mindmatics as a defendant.

Continue Reading Marketing Consultant May Be Held Liable Under TCPA for Its Third-Party Marketer’s Unsolicited Text Messages