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.

An Invitation to Connect: The FFIEC Embraces Social Media Regulation

Financial Institutions in the United States have a new “friend” to contend with in their social media circle.

Given the exponential increase in the influence social media has had upon the financial institution landscape in recent years, compliance professionals could have anticipated the recent Federal Register notice. On January 23, 2013 the Federal Financial Institutions Examination Council (FFIEC), composed of the OCC, the Federal Reserve Board of Governors, the FDIC, the NCUA, the CFPB and the State Liaison Committee (“the Agencies”) jointly issued proposed guidance for public comments to be received by March 25, 2013.

This broad-based guidance proposes to address the applicability of federal consumer protection and compliance laws, regulations, and policies to activities conducted via social media by banks, savings associations, and credit unions, as well as by nonbank entities supervised by the Consumer Financial Protection Bureau.¹  Viewed in the broader context of enterprise risk management, the Agencies are seeking to ensure that all supervised financial institutions are effectively assessing and managing risks associated with activities conducted via social media. Specifically, the financial institutions will be expected to incorporate consumer compliance and legal risks, as well as reputation and operational risks associated with social media activities into their governance structure.

The FFIEC’s entry into social media regulation will likely be met with mixed reviews by financial industry compliance professionals. While many organizations have sought to craft policies and procedures to address this multifaceted communication phenomenon, other organizations have struggled with developing a consensus around how to approach social media governance. For organizations that have yet to create or adequately revise social media policies and procedures to encompass its growing importance to commerce, the FFIEC action may provide the impetus that Chief Compliance Officers can leverage to guide corporate boards and C-suite executives to create a social media governance structure.

I read the proposed guidance with great interest. I had expected the FFIEC to provide guidance regarding a financial institution’s active use of social media in its business and by its employees, both in their capacity as employees as well as off-duty. The proposed guidance directly addresses the Compliance and Legal Risks posed by social media with regard to deposit and lending products, payment systems, anti-money laundering and financial privacy. The regulation of an active social media presence clearly reflects the consumer protection best practices that an organization would apply to its other outbound channels, including print, television, and radio marketing, as well as authorized corporate communications.

The portion of the proposed guidance that I found even more insightful was the Reputation Risk topics the FFIEC chose to explicitly consider. Some executives offer the opinion that if their organizations don’t actively foster a social media identity, then the need for social media governance is eliminated. The FFIEC instead acknowledges that even an organization that chooses to forgo promoting an active social media presence is subject to the risks that can be thrust upon an organization by the public. Noting that reputation risk is the risk arising from negative public opinion, the proposed guidance delves into the realm of dissatisfied consumers and negative publicity that can cause significant harm to a law-abiding financial institution. In addition to Fraud and Brand Identity and Third Party Concerns, the FFIEC directly addresses a financial institution’s affirmative obligation to monitor Consumer Complaints and Inquiries initiated via social media.

In an economy overflowing with consumers clamoring to ensure that “there’s an app for that,” financial institutions have worked actively to develop social media channels to harness consumer demand to varying degrees. Additionally, those same consumers who routinely update their social networks (both personal and professional) from their smartphones while waiting for the train or purchasing a latte’, will also launch a Twitter rant or a scathing and aptly-named blog post about your organization before they’ve left your premises. This proposed guidance, which will likely receive many comments before being issued in its final form, is going to eventually become part of your prudential regulator’s examination process.

I would propose that now is the time to address your organization’s social media governance process. Working with your board of directors and your senior leadership colleagues, you can assess the current status of your policies and procedures; identify and address perceived gaps; and provide appropriate guidance to employees within your organization before the regulators arrive to test your practices. Action now will likely ensure that your regulator hits the “Like” button later.

1         Federal Financial Institutions Examination Council [Docket No. FFIEC-2013-0001]: “Social Media: Consumer Compliance Risk Management Guidance,” http://www.ffiec.gov/press/Doc/FFIEC%20social%20media%20guidelines%20FR%20Notice.pdf

EMPOWER THE GRASS ROOTS OF YOUR COMMUNITY

***DISCLAIMER: As always, this brief policy article represents my own research and opinions and does not purport to represent the opinions of nor was it funded by any third party organization.***


"No people is wholly civilized where a distinction is drawn between stealing an office and stealing a purse." -Theodore Roosevelt .

"We believe this (Debit Card Interchange) rule should be thoroughly and expeditiously reviewed prior to implementation to ensure that it will not raise fees or otherwise harm at-risk communities, including communities of color." - Hilary Shelton, NAACP

Although pleas from concerned military, rural and urban families regarding the looming threat to free debit cards and free checking continue to pour in, I have been heartened by the thoughtful messages I've been receiving from fellow financial services industry  leaders describing their grass roots efforts to ignite Congressional action to delay implementation of the ill-conceived Debit Card Interchange Rule (see: http://www.nafcu.org/Tertiary.aspx?id=22587).

As we in the industry are reminded daily, Senate Bill 575 has yet to be brought up for a vote, as Senator Tester (D-MT) has yet to garner the necessary votes for passage. This is not a time to let up, but a time to let loose our resources to bear down on our elected officials to take well-reasoned pro-consumer action to enact a delay while objective study of the proposed Rule's impact can be undertaken.


Our advocates in the Beltway, led by Frank Keating (ABA) and Fred Becker (NAFCU), are to be commended for their tireless efforts, in concert with their state counterparts, to educate the public about the very real household economic effect that implementation of this dubious Rule would wreak. But simply posting any of the following web links on our Internet home pages and expecting our consumers to jump up and take action en masse is an inadequate strategy.
                                                                                                                                                                         http://www.savemyfreechecking.com/


http://www.saveyourdebitcard.com/


http://www.stopthedebitcardrule.com/

We must embrace our consumers with the same level of engagement that we do when meeting their financial product and service needs. Much as our consumers require our expertise and guidance to assist them in identifying appropriate deposit, loan and investment products, so too must we stand ready to assist them to more fully understand the real financial price that their families will pay if we allow the demise of the current free market electronic payments system.

Since we don't solely rely upon a newsletter article, an email campaign or a home page posting to conduct our day-to-day business, we must employ the same face-to-face actions to engage, educate, and empower our loyal consumers to take collective grass roots action. Based upon what some of our colleagues across the nation are doing, I ask you:

* Have you prepared your retail teams with adequate FAQ (Frequently Asked Questions) material to aid them as they educate and assist your consumers to better understand the need to take action on this issue.

* Have you placed prominent educational materials (posters, buck slips, brochures) at your retail locations and ATM kiosks to raise awareness?

* Have you included your Congressional representative(s)' and Senators' district constituent relations office phone numbers and address prominently on such materials?

* Are you offering prepared letters and self-addressed envelopes directed toward those elected officials to your retail branch consumers for their signature and easy mailing?

We must make the looming cost of failing to delay/defeat the Rule very real and very personal to our public. Our consumers trust us with their investment choices, their home-buying dreams, their vehicle financing...they will trust us if we engage them at that same personal, community-based level of compassion and understanding regarding the impending loss of free checking and free debit card transactions. Our consumers deserve our continued best efforts.

Don't forget: The proposed Rule was a pro-business creation conceived by lobbyist Rob Green, Executive Director of the National Council of Chain Restaurants (NCCR), these trade associations represent corporate retail and restaurant conglomerates that have long sought to unilaterally renegotiate the debit card interchange fees to which they had contractually agreed. 

Thank you for your continued efforts at your institutions to engage, educate, and empower your consumers to contact their elected Congressional Representatives to voice their disapproval of this proposed Rule.

D.C. LOBBYIST TARGETS HARD-WORKING FAMILIES

***DISCLAIMER: As always, this brief policy article represents my own research and opinions and does not purport to represent the opinions of nor was it funded by any third party organization.***


"My parents moved to Los Angeles when I was really young, but I spent every summer with my grandparents, and I'd stay with my grandfather on the farm in Longview. He was retired from the railroad, and he had a small farm with some cows and some pigs. I remember part of my youth was feeding hogs and plowing fields and stuff, so that's a part of me." -Forest Whitaker

"We believe this (Debit Card Interchange) rule should be thoroughly and expeditiously reviewed prior to implementation to ensure that it will not raise fees or otherwise harm at-risk communities, including communities of color." - Hilary Shelton, NAACP

I have become very disturbed over the past several weeks as I've received innumerable pleas from cash-strapped rural and urban families regarding the effect of the pending Debit Card Interchange Rules that threaten to add transaction fees for using a debit card and to take free checking away from those hard-working families struggling to make ends meet.

http://www.savemyfreechecking.com/

Why would anyone want to charge families more to purchase children's clothing and groceries. Don't those big retail corporations earn enough profits already?

And why would anyone want to increase restaurant costs for a family that can only only afford to eat out every once in a while, and even waits to splurge for such a luxury for times between special occasions?

I like fast food, but I certainly don't like any politician pulling a fast one that harms our farm families.

Just plain disrespectful to our working men and women in our cities if you ask me or any other patriot!

What does Illinois Senator Dick Durbin have against hard-working dual-income families?
You can call and ask him at (202) 224-2152.

What did debit card interchange fees have to do with a few unscrupulous and irresponsible former mortgage lenders? And what motivated Illinois Senator Dick Durbin to bring his amendment to the Senate Floor to be included in the Restoring American Financial Stability Act of 2010 when he did?

http://www.savemyfreechecking.com/What_Can_I_Do_675.html

Initially it would appear that Senator Durbin, as a member of the Senate Leadership, simply recognized that the Congressional mood for financial reform legislation could easily absorb another "consumer protection" measure. Yet I couldn't help but question who/what had motivated this particular measure, since the public had not been clamoring for it and no definitive study of the debit interchange topic had concluded that it harmed either the consumer public or the sophisticated commercial enterprises that freely contracted to provide or benefit from debit card interchange services.

When a diverse array well-respected public responsibility groups, including the NAACP, the Hispanic Chamber of Commerce, the Black Chamber of Commerce, and the Conference of State Bank Supervisors, join together to urge Congress to revisit the well-funded and erroneous legislation, consumers immediately recognize that something is amiss in Washington. Our Congressional leaders certainly wouldn't approve of such financial measures that harm our hard-working spouses stretching every budget dollar!

Does your Congressional representative stand with urban and farm families on the Debit Interchange issue?
Ask him/her: http://www.savemyfreechecking.com/What_Can_I_Do_675.html

The debit card interchange rule doesn't actually have anything to do with legitimate consumer protection for families. Financial services professionals have always supported the common-sense market-driven consumer protection measures and licensing requirements that protect the public from the few unscrupulous charlatans who engage in predatory practices.

Since financial services professionals are simply honest, hard-working consumers with families just like you and me, they clearly recognize that protecting the integrity and public trust within the financial services industry has always provided a win-win outcome. The majority of potential misdeeds are squelched before any damage can be wrought due to internal control policies, ethics training, licensing requirements, and the self-policing nature of the industry.

The debit card interchange rule was a pro-business creation born upon a conference room table within Suite 1100 at 325 7th Street N.W. in Washington, D.C., home of the National Retail Federation, the National Restaurant Association, the National Council of Chain Restaurants, and the Merchant Payments Coalition. These trade associations represent corporate retail and restaurant conglomerates that have long sought to unilaterally renegotiate the debit card interchange fees to which they had contractually agreed. Apparently dissatisfied with their own business leaders' efforts employing commercial negotiation in the free market, these organizations turned to trade association lobbyists to continue the effort using Federal Government action to harm military families by establishing debit card usage fees and eliminating your free checking account.

Enter Rob Green, Executive Director of the National Council of Chain Restaurants (NCCR), who succeeded Jack Whipple last month to manage all NCCR government relations advocacy. Preceding his move within the confines of Suite 1100, Green was Vice President, Government and Political Affairs at the National Retail Federation (NRF), where he served as a senior lobbyist for the world’s largest retail trade association during the influential time leading up to Senator Durbin's introduction of the debit card interchange "consumer protection" rule.

Lobbyist Green immediately recognized that a perfect storm would briefly open the display window of opportunity for the NRF during which time he would propose a government price-fixing rule that would amount to a 72.7% reduction in interchange revenue for the financial services industry that had built the networks and provided the fraud reduction technology that facilitated cost-savings for consumers and businesses. Imagine if the NRF had found themselves on the receiving end of proposed legislation that would have mandated reducing their retail prices by 72.7% to those very same consumers? Would the NRF have simply "embraced" that legislation? We think not.

I am certainly not accusing Senator Durbin or Rob Green of any violations of federal law, but FEC records detail that more than just burgers and fries were in the bag when the honorable Senator and his colleagues met the former-NRF lobbyist and current NCCR Executive Director at the drive-thru window of opportunity. You yourself may follow the money transfers disclosed in publicly-available documents. While some of the world's largest big box retailers represented by Green poured money into organizations associated with Durbin and his former aides lobbying for the rule, the good Senator wove the rule into the larger legislative framework intended to curb the egregious mortgage-related abuses perpetrated by the few.

From a corporate executive viewpoint framed to maximize shareholder returns, one can certainly understand why the investment into lobbying appeared (and continues) to be a prudent investment. But given the certain unfavorable financial impact that the debit card interchange rule would impose upon American families struggling to emerge from the recent financial downturn, I would urge Senator Durbin to assume a new ethical stance and join his colleague Representative Barney Frank to support further objective study of the issue in the light of day and allow the results of such studies to be fully disclosed to non-lobbyists to allow for a proper analysis of the real impact upon the American family's budget.

For leading this effort on behalf of all American families--rural and urban--I applaud the consistent and untiring effort being put forth by Frank Keating (ABA) and Fred Becker (NAFCU) nationally, as well as John Llewellyn (Michigan Bankers Association) and Jordan Kingdon (Michigan Credit Union League) to educate the public about the very real household economic effect that implementation of this dubious rule would wreak. Ultimately, our collective efforts to preserve consumer choice and to protect business from government unconstitutional price-fixing will prevail in the bright light of day. Thank you.