Thursday, October 17, 2013

Don’t make the wrong call!

Ensuring compliance with the Telemarketing Sales Rule (TSR) and Telephone Consumers Protection Act (TCPA)

* The FTC has long blazed a trail of consumer protection aimed at unscrupulous telemarketers.
* The FCC has strengthened its arsenal of weapons aimed at robocallers.
* Failure to incorporate the 2013 requirements can cost your company millions of dollars.
* Compliance Departments must engage all stakeholders in the organization.
* Building a compliant outbound calling & texting program will protect profits and the brand.



No longer can any sales and service organization naively believe that it will escape the notice of United States federal consumer protection regulators. If your organization uses a telephone to reach consumers, then the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) are two such agencies for which regulatory compliance professionals must maintain a watchful eye.

In conjunction with the robust outbound communication activities that our sales and service operations undertake, careless violations of FTC and FCC consumer communications laws garner sizeable financial penalties. To understand the impact of the October 2013 FCC amendments, it is helpful to review the FTC’s Telemarketing Sales Rule requirements.

FTC Telemarketing Sales Rule 2008 Amendments

The FTC administers the Telemarketing Sales Rule (TSR). Amended in 2008, the TSR governs outbound telephone calls initiated by a telemarketer, including those involving dialing technology (“autodialers”) and pre-recorded messages. As defined by the FTC:

• “Outbound telephone call” to mean a telephone call initiated by a telemarketer to induce the purchase of goods or services or to solicit a charitable contribution;
• “Telemarketer” means any person who, in connection with telemarketing, initiates or receives telephone calls to or from a customer or donor; and
• “Telemarketing” means a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate telephone call.1

Some prerecorded messages still are permitted under these rules — for example, messages that are purely informational. That means a consumer may still receive calls to let him/her know a flight’s been cancelled, reminders about an appointment or messages about a delayed school opening. But the business doing the calling still isn’t allowed to promote the sale of any goods or services. Political calls, calls from certain healthcare providers and messages from a business contacting a consumer to collect a debt also are permitted. Prerecorded messages from banks, telephone carriers and charities also are exempt from these rules if the banks, carriers or charities make the calls themselves.2

While notifying consumers of a store address change is considered informational (thus not telemarketing), inviting them to a grand opening celebration at the new address could be considered part of a “plan, program or campaign” to induce the purchase of goods or services. That is, merely mentioning the grand opening could be the “hook” for a court or regulator to determine that the entire script is “telemarketing.”

The amended TSR expressly bars telemarketing calls that deliver prerecorded messages, unless a consumer previously has agreed to accept such calls from the seller.3 As a result, most businesses became required to obtain the consumer’s written permission before they could call a consumer with prerecorded telemarketing messages, or “robocalls”. In fact, a business has to make it clear it’s asking to call a consumer with these kinds of messages, and it can’t require a consumer to agree to the calls in order to get any goods or services. If the consumer initially agrees to receive robocalls, the consumer also retains the right to change his/her mind and rescind his/her opt-in.

The FTC takes enforcement of the TSR very seriously when it comes to robocall violators. A May 2013 FTC action resulted in a Department of Justice settlement4 resulting from an FTC-led complaint.5 Specifically, citing 16 C.F.R. § 310.4(b)(l )(v)(A), the Defendant company was permanently restrained and enjoined from engaging in, causing others to engage in, or assisting other persons to engage in:

A. Initiating any outbound telephone call that delivers a prerecorded message to induce the purchase of any good or service unless, prior to making any such call, the seller has obtained from the recipient of the call an express agreement, in writing, that:
1. the seller obtained only after a clear and conspicuous disclosure that the purpose of the agreement is to authorize the seller to place prerecorded calls to such person;
2. the seller obtained without requiring, directly or indirectly, that the agreement be executed as a condition of purchasing any good or service;
3. evidences the willingness of the recipient of the call to receive calls that deliver prerecorded messages by or on behalf of a specific seller; and
4. includes such person’s telephone number and signature.

The Defendant was ordered to undergo federal compliance monitoring, extensive recordkeeping and detailed reporting for 10 years. Additionally, the settlement included judgment in the amount of $75,000 entered in favor of the FTC against Defendant as a civil penalty. The Defendant’s judgment was far more lenient that the $16,000 per call that the FTC is authorized to assess under the TSR.

FCC Telephone Consumer Protection Act 2012 Amendments

The FCC administers the Telephone Consumer Protection Act (TCPA). In alignment with the FTC position, revised FCC TCPA rules took effect on October 16, 2013 and require “prior express written consent” for pre-recorded telemarketing calls using autodialer technology made to both cell phones and land line phones. This rule change expressly amends the previous FCC rule which (1) had not required written consent; and (2) had allowed prerecorded telemarketing calls to land line phones where a business relationship existed.

The FCC has taken a very broad view of the use of autodialer technology. Although the rules provide a very specific definition of autodialer, regulators and the courts have interpreted the definition so broadly that any computerized dialing device could be viewed as an autodialer. It is advisable not to make non-consented calls to cellphones, unless your organization has an entirely manual process for initiating the call.

Misuse or misunderstanding the use of autodialer technology in the absence of receiving prior express written consent has expensive consequences. The TCPA has a private right of action and recent class action lawsuits have settled for tens of millions of dollars.6

Costly non-compliance

Non-compliance with the TSR and the TCPA exposes your organization to civil liability and regulatory sanctions and fines. At up to $1,500 per violation, non-compliance with the TCPA text message requirements alone could expose your organization to a sizeable civil judgment. A company that sends a mere 7,000 non-consented text messages could statutorily incur a fine in excess of ten million dollars.

This TCPA text message revision is anticipated to also invite predatory class action litigation as enterprising plaintiff attorneys seek to capitalize on the technical change to the law. Regulatory penalties and class action lawsuits give rise to negative publicity that have the potential to damage your organization’s profitability and its brand.

Build compliance into your outbound calling and texting programs

To address this potential reputational, regulatory, and legal risk exposure, compliance professionals should partner with the stakeholders in the organization who have a vested interest in outbound calling and texting programs. These stakeholder functions will likely include Sales, Marketing, E-Commerce, Call Centers, and Information Technology (yes, IT! They own the autodialer and messaging hardware and software your organization relies upon). And don’t forget those third-party service providers that may actually be managing your call lists, opt-ins, and outbound calling and texting programs.

Once you have marshaled your stakeholders, you will want to undertake:

(1) a review of existing outbound calling and texting programs, approval processes, and vendor contracts; and
(2) provide detailed guidance to management regarding required current changes and safeguards for current and future programs.

You will specifically want to address pre-recorded messages sent to both land line and cellular phones, as well as text messages sent to cellular phones.

Compliant pre-recorded messages

Your organization may call consumers who have provided written permission after being fully informed that they have expressly assented to receive prerecorded calls regarding your products and services. If your organization has not obtained such “prior express written consent” since October 16, 2013, you will want to solicit a revised affirmative written opt-in. Guidance interpreting the amended TCPA treatment of prerecorded calls suggests that a consumer must have the option to affirmatively check an unchecked box beside verbiage that explicitly and plainly explains that the consumer is opting into receiving prerecorded calls to his/her cell phone and/or land line phone.

A prerecorded message system must also adhere to the following opt-out language and activation safeguards:

• Businesses using robocalls are required by law to tell a consumer at the beginning of the message how to stop future calls, and must provide an automated opt-out the consumer can activate by voice or key press throughout the call.
• If the message could be left on voicemail or an answering machine, businesses also have to provide a toll-free number at the beginning of the message that will connect to an automated opt-out system the consumer can use any time.

Compliant text/SMS messages

Changes to existing text message marketing opt-in processes may be required at your organization to conform to the new “prior express written consent” standard. Recognizing that text messages are limited in character length, these changes should be customized for your purposes, but may resemble:

• New text/SMS enrollee receives: “Reply ‘AGREE’ to receive wkly XYZ Discount Alerts. Periodic msgs may be sent using autodialer. Consent not required for purchase. Msg&Data rates may apply” (to fulfill the FCC requirement of obtaining express written consent after the initial request is received AND that his/her consent is not required in conjunction with any other purchase)

• Once the consumer replies with ‘AGREE’, enrollee receives: “Thanks for confirming! You will receive weekly XYZ Discount Alerts! Stop reply ‘STOP XYZ’. Msg&Data rates may apply.” (to fulfill the FCC requirement of explicitly informing the requestor how he/she may rescind the opt-in)

Obtain new consent from current text/SMS subscribers

Your organization may currently have thousands (or hundreds of thousands) of subscribers. When the new rules took effect on October 16, 2013, all consent obtained under the old “prior express consent” standard were invalidated. When the FCC issued its revised rules in February 2012, the agency conveyed that once the new written consent rules became effective, companies would be required to obtain the revised “prior express written consent” before sending additional marketing messages. An established business relationship will also no longer relieve advertisers of prior written consent requirement after the effective date. You may thus seek to ensure that all current subscribers also receive the message inviting them to reply ‘AGREE’.

New text/SMS message marketing programs

These same FCC principles would apply to new text marketing programs that your organization may launch in the future. The FCC interprets “marketing” very broadly in its own favor, so you will want to ensure that your Compliance Department is involved at inception to review new text messaging programs.

Conclusion

As compliance professionals, we must daily balance our organization’s customer-focused mission with the consumer protection regulatory requirements. By taking swift action with your stakeholders now regarding the TSR and TCPA, you can reduce the risk that your organization will make the wrong call.

Notes

1 The Telemarketing Sales Rule, September 2009, http://www.consumer.ftc.gov/articles/0198-telemarketing-sales-rule.

2 Ibid.

3 FTC Issues Final Telemarketing Sales Rule Amendments Regarding Prerecorded Calls, August 19, 2008, http://www.ftc.gov/opa/2008/08/tsr.shtm.

4 United States of America v. Skyy Consulting, Inc., also d/b/a CallFire, a California corporation, United States District Court, Northern District of California, San Francisco Division, Case4:13-cv-02136-DMR, Document 3, Filed 05/13/13, http://www.ftc.gov/os/caselist/1223011/130514callfirestip.pdf.

5 United States of America v. Skyy Consulting, Inc., also d/b/a CallFire, a California corporation, United States District Court, Northern District of California, San Francisco Division, Case4:13-cv-02136-DMR, Complaint, Filed 05/09/13, http://www.ftc.gov/os/caselist/1223011/130514callfirecmpt.pdf.

6 Pari Najafi v. SLM Corporation, et al., United States District Court for the Southern District of California, Case No. 10-cv-0530 MMAAmended Settlement Agreement, October 7, 2011, http://www.manatt.com/uploadedFiles/Content/4_News_and_Events/Newsletters/AdvertisingLaw@manatt/Sallie%20Mae%20amended%20settlement%20agreement.pdf.

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