June 2013

In this issue:

  • Regarding the October 16th change in the Federal Communications Commission definition of "prior express consent," the FCC definition goes beyond what the FTC requires.
  • The FTC has issued revised guidance regarding compliance with the "Red Flags Rule." The guidance requires financial institutions and creditors to institute procedures to protect consumers from identity theft. The new rules are available on the FTC's website.
  • In re: HB InkJet Printer Litigation. The settlement had been challenged by objectors who argued it was not fair or adequate as required by federal law. Plaintiff's counsel had submitted bills for over $7 million in fees and expenses.

Federal Communications Commission
I had a conversation with Kurt Schroeder, an attorney with the FCC, regarding the October 16th change in the definition of “prior express consent” for purposes of prerecorded calls to landlines and predictive dialed (ATDS) calls to cell phones. He confirmed that the new regulation requires disclosure as follows:

The term prior express written consent means an agreement, in writing, bearing the signature of the person called that clearly authorizes the seller to deliver or cause to be delivered to the person called advertisements or telemarketing messages using an automatic telephone dialing system or an artificial or prerecorded voice, and the telephone number to which the signatory authorizes such advertisements or telemarketing messages to be delivered.
(i) The written agreement shall include a clear and conspicuous disclosure informing the person signing that:
(A) By executing the agreement, such person authorizes the seller to deliver or cause to be delivered to the signatory telemarketing calls using an automatic telephone dialing system or an artificial or prerecorded voice; and
(B) The person is not required to sign the agreement (directly or indirectly), or agree to enter into such an agreement as a condition of purchasing any property, goods, or services.
(ii) The term “signature” shall include an electronic or digital form of signature, to the extent that such form of signature is recognized as a valid signature under applicable federal law or state contract law.
47 C.F.R. § 64.1200(f)(8).

Although the FTC definition requires that the consent not be obtained as a condition of any sell, the FTC rule does not require express disclosure of that fact, so the FCC definition goes beyond what the FTC requires.

Comment: I think this is a “scrivener’s error” because the FCC’s commentary to the rule does not state that an affirmative disclosure is required. Schroeder, however, advised compliance with the more detailed disclosure. Given the current class action TCPA environment, I advise the same course.

Federal Trade Commission
The FTC has added eight defendants to a case it brought last year alleging illegal prerecorded calls related to lowering consumer’s credit card rates.  FTC v. WV Universal Management, LLC, et al. Prerecorded calls are allowed only with the prior express written signed consent of the recipient. That consent is not transferrable, i.e. buying an “express consent” lead does not entitle a third party to call that lead absent specific scripting and disclosures to the consumer when the lead is obtained.

The FTC has issued revised guidance regarding compliance with the “Red Flags Rule.” The guidance requires financial institutions and creditors to institute procedures to protect consumers from identity theft. The new rules are available on the FTC’s website.

Wireless Numbers
Almost 36% of U.S. households use wireless phones only, a percentage which has doubled since 2008.

Comment: You must know whether a number you call is a cell phone or not. The FCC has ruled that it is your responsibility to have this knowledge and resources are readily available to determine this question. Two are the Federal Wireless Block and Neustar’s Ported Number Database, available from various sources.With the change in FCC rules going into effect on October 16th, you need to have a solution to this compliance issue in place before that date.

California
The Ninth Circuit Court of Appeals has overturned a trial court’s approval of a class action settlement involving coupons and up to $2.9 million dollars in attorneys’ fees for the plaintiff’s attorney. The court ruled that plaintiff’s attorneys’ fees could not be based on hours spent on the litigation but must be based on the actual redemption rate of the coupons and the amount of money actually received by consumers.

In re: HB InkJet Printer Litigation. The settlement had been challenged by objectors who argued it was not fair or adequate as required by federal law. Plaintiff’s counsel had submitted bills for over $7 million in fees and expenses.

Comment: Coupon settlements are disfavored by federal law. This decision to strike attorney’s fees is one facet of that disfavor.

A California court has denied class certification in a case alleging illegal monitoring of a telephone conversation. Torres v. Nutrisystem, Inc. The plaintiff alleged that Nutrisystem recorded her and others’ telephone calls without notice in violation of California’s monitoring statute. She alleges that she called Nutrisystem’s 1-800 number, disclosed her name and social security number, and discussed insecurity about her weight. During the time, however, inbound calls to that 800 number received an automated message stating that “for quality and training purposes your call may be monitored or recorded.” The court rejected class certification ruling that determination of whether each class member had an expectation of confidentiality during the call would require a detailed factual inquiry into each call. The court also ruled that whether each class member consented would also require a detailed factual inquiry regarding whether they bypassed the above automated message or not.

Comment: This is a huge victory for defendants facing catastrophic class action suits under this California statute. Cal. Pen. Code § 632. The statute provides for damages of $5,000 per call even if there are no actual damages to the plaintiff. Thus, a class of any size would quickly result in a devastating judgment. The case shows that blanket claims of confidentiality may not be accepted by courts and courts may also take a reasonable view of disclosures intended to give notice to consumers (and potential plaintiffs) that calls could be monitored.