Telemarketing and Call Center Operations

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

Last week, a court preliminarily approved the largest class action settlement alleging violations of the Telephone Consumer Protection Act (TCPA).  Capitol One, along with three debt collection agencies, agreed to pay more than $75 million to settle a consolidated class action lawsuit alleging that the companies used an automatic telephone dialing system (ATDS) and/or artificial prerecorded voice to call consumers’ cellular telephones without the prior express consent of those called.  

Under the TCPA, prior express consent is required for any non-telemarketing call – such as a debt collection call – made to a mobile phone using an ATDS and/or an artificial prerecorded voice.  (A higher standard – prior WRITTEN express consent – is required to make calls to cell phones using an ATDS or a prerecorded voice for any telemarketing).

In addition to alleging that the companies never received prior express consent, certain plaintiffs alleged that (1) their cell phone was called concerning another person’s Capitol One account; (2) Capitol One was repeatedly asked to stop calling, but calls continued nonetheless; and (3) Capitol One obtained plaintiffs’ cell number from a third party via skip tracing. 

The settlement is a good reminder of the repercussions that may follow when a company has not closely reviewed and ascertained the sources from which it obtains phone numbers, whether any are cellular phone numbers and the likelihood that such numbers still belong to the customer (or have since been disconnected and reassigned), and are matched with the correct type of consent to be called.  Even slight oversights in this area are exposing a number of companies to claims of potential violations (and massive financial exposure) under the TCPA.

Several weeks ago, Connecticut enacted legislation making it illegal for telemarketers to send unwanted text messages to consumers, modernizing the State law and bringing it into accord with the federal Telephone Consumer Protection Act (“TCPA”).  Among other things, Connecticut’s “mini-TCPA” bans unsolicited commercial calls, and text and media messages to be sent to an individual’s cell phone, regardless of whether or not the consumer’s telephone number is registered on the State Do-Not-Call list, unless the telemarketer has obtained the consumer’s prior express written consent to send the messages.  The law also requires companies that issue account statements for cell phones, landline telephones, and mobile devices to send consumers written notice at least twice annually, informing them how to register their numbers on the Connecticut Do Not Call registry and how to file a complaint with the State Department of Consumer Protection.

Notably, the law increases the maximum penalty for each violation of the Connecticut mini-TCPA to $20,000 – more than 13 times greater than the maximum penalty that can be imposed under the federal TCPA.  (Penalties under the TCPA range between $500 and $1,500 per violation.)

Connecticut’s new law tells a cautionary tale to telemarketers – be very careful when telemarketing to Connecticut residents because the penalties for a violation can be substantial.

New rules issued by the Federal Communications Commission ("FCC") last year are about to take effect. These rules will make it more difficult for businesses to make telemarketing calls and texts to wireless customers and to certain residential customers by requiring express written consent (1) to make telemarketing calls using an autodialer or prerecorded message to wireless callers, and (2) to send prerecorded message calls to residential subscribers. Previously, any form of consent was permitted for these calls, and, in the case of prerecorded messages to residential subscribers, a business could rely upon an "established business relationship" to place such calls.

With the rise in class action cases for alleged TCPA violations, businesses engaging in telemarketing should review their practices for obtaining customer consent prior to implementation of the new rules on October 16, 2013.

For more information, click to read our client advisory.

On May 21, the Federal Trade Commission (“FTC”) issued a Notice of Proposed Rulemaking (“NPRM”) regarding proposed amendments to the Telemarketing Sales Rule (“TSR”). Notably, the proposed changes would: (1) expressly state that the seller or telemarketer bears the burden of demonstrating an existing business relationship with a customer whose number is listed on the Do Not Call Registry, or that it has obtained an express written agreement from such customer; and (2) clarify that the exemption for calls to businesses extends only to calls inducing sale or contribution from the business, and not to calls inducing sales or contributions from individuals employed by the business. The Commission believes that these proposed revisions are consistent with current enforcement policy.

In addition, the FTC proposes to amend the Rule to explicitly state the following requirements, which it also believes are consistent with current enforcement policy. These proposed amendments would:

  1. Modify the prohibition against sellers sharing the cost of Do Not Call Registry fees to emphasize that the prohibition is absolute;
  2. Illustrate the types of impermissible burdens on consumers that deny or interfere with their right to be placed on a seller’s or telemarketer’s entity-specific do-not-call list (such as requiring the person to listen to a sales pitch before accepting the Do Not Call request or assessing a charge or fee for honoring the request); and
  3. Clarify that the recording memorializing the express verifiable authorization required before a seller or telemarketer bills a customer or donor (unless payment is made by debit or credit card) must include an accurate description, clearly and conspicuously stated, of the goods or services or charitable contribution for which the payment authorization is sought.

Continue Reading FTC Seeks Public Comment on Proposed Amendments to the Telemarketing Sales Rule

A few days ago, a Kansas state court entered a default judgment against Bullseye Target Marketing, a Missouri telemarketing company that solicited roofing business in Kansas, in an action brought by the Kansas Attorney General alleging violations of the Kansas No-Call Act (the state analogue to the federal Telemarketing Sales Rule). The court ordered the company to pay $600,000 in penalties. The action was filed after the Attorney General received complaints from Kansas consumers that they received unsolicited calls offering to schedule roof inspections in areas that had experienced storm damage, despite their numbers being registered on the state do-not-call list. The Kansas No-Call Act generally prohibits businesses from placing telemarketing calls to consumers registered on the state do-not-call list.

This Attorney General action should serve as a reminder that do-not-call compliance is not only being monitored and enforced by the Federal Trade Commission, but states, too, are active in the area.

On May 9, 2013, the Federal Communications Commission ruled that sellers may be held vicariously liable under the Telephone Consumer Protection Act (“TCPA”) for unlawful telemarketing by third parties under certain circumstances. The FCC’s Declaratory Ruling addresses third-party liability for violations of the Do Not Call and prerecorded message restrictions of the Communications Act. The Commission ruled that, under both provisions, a seller may be held vicariously liable for violative calls placed by third-party marketing agents under principles of the federal common law of agency.

The Declaratory Ruling thus resolves a central question that is raised in a number of TCPA lawsuits: sellers may only be held liable for actions of those third party telemarketers that are determined to be agents, applying the federal common law of agency. Moreover, a manufacturer that simply puts a product in the chain of commerce that is later resold by a seller is not likely to be affected by this Ruling, provided that it does not otherwise trigger the TCPA’s seller definition.

With respect to how and under what circumstances the federal common law of agency will be applied to find a seller vicariously liable for the acts of third parties, the future is unclear – particularly with respect to claims based on alleged apparent authority and whether the FCC’s “illustrative examples” of such apparent authority set forth in the Ruling will influence courts in interpreting how the federal common law of agency should apply to the specific facts of a particular case.

For more on this decision, please reference the Kelley Drye client advisory.

On August 14, 2012, New York Governor Andrew Cuomo signed legislation, which will regulate all telemarketers doing business in the State and strengthen consumer protections relating to pre-recorded telemarketing messages. Introduced on June 12, 2012 by Assembly member Didi Barrett (AD 103), the new law aligns significantly with those provisions of the federal Telephone Consumer Protection Act and the Telemarketing Sales Rule, particularly with respect to the requirements relating to obtaining a consumer’s “express written consent” to receive pre-recorded telemarketing messages. The bill has an effective date 90 days after passage.

The new substantive provisions relate to express written consent requirements and heightened opt-out mechanisms. Under the new law, telemarketers may not deliver a pre-recorded message without the express written agreement of the consumer that (1) was obtained only after the telemarketer’s clear and conspicuous disclosure that the purpose of the agreement is to authorize telemarketing calls to that customer; (2) was not executed as a condition of purchasing any goods or service; (3) evidences the willingness of the consumer to receive telemarketing sales calls from a specific seller; and (4) includes the consumer’s telephone number and signature.

Continue Reading New York Enacts Legislation To Strengthen Consumer Protections Against Telemarketers

This afternoon, the FTC announced that the manufacturer of Rascal Scooters has agreed to pay $100,000 to settle charges that it illegally called millions of consumers whose phone numbers were on the national Do Not Call Registry.

The company asked consumers to provide their numbers on sweepstakes entry forms so that the company could contact them if they won. According to the FTC, however, the company also contacted non-winners with sales calls. Although the Telemarketing Sales Rule generally allows a company to call a consumer on the Do Not Call Registry for up to 18 months if it has an “established business relationship” with the consumer, the FTC has warned that companies may not rely on a sweepstakes entry form as the basis for that exception.

This case serves as a reminder that companies cannot misrepresent the reason for collecting phone numbers or assume that just because a consumer gives the company a phone number, the company can place a sales call to the consumer.  

In the past month, we’ve posted two entries (here and here) regarding court decisions interpreting the Telephone Consumer Protection Act (the "TCPA") in the context of mobile marketing campaigns. This morning, our colleagues at the Telecom Law Monitor posted an entry about an FCC decision interpreting the TCPA in the context of a telemarketing case. In that case, a consumer had argued that companies made unsolicited calls to him in violation of the TCPA. The FCC’s decision turned on whether the calls were "telephone solicitations" under the TCPA. The FCC held that unsolicited calls to a consumer were not TCPA violations because the messages were intended for current customers, not as solicitations to obtain new customers. Moreover, the telemarketer’s mistake in directing the calls to a non-customer did not make the calls actionable. This decision will make it harder for a consumer to prove a violation when communications are intended for current customers. A more detailed analysis of the decision is available here.