May 2013

In this issue:

  • The FCC has issued two citations against prerecorded telephone call companies alleging violation of the TCPA. In both cases, the FCC issued the citation based on political prerecorded calls being placed to consumer cell phones without their prior express consent.
  • The Federal Trade Commission has recently updated its guidance known as the “Dot Com Disclosures.” The law makes clear that consumer protection laws apply equally to marketers across all media. This is especially relevant to lead generation with regard to telemarketing compliance.
  • A Florida court has ruled in favor of a plaintiff who provided his cellular telephone number to a hospital and was later contacted by a related number with regard to collection of a debt. Mais v. Gulf Coast Collection Bureau, Inc.

Federal Communications Commission
The FCC has issued two citations against prerecorded telephone call companies alleging violation of the TCPA. In both cases, the FCC issued the citation based on political prerecorded calls being placed to consumer cell phones without their prior express consent. See In re. Dialing Services LLC, In re. Richard Gilmore d/b/a Democratic Dialing. The companies now can be subject to substantial fines from the FCC if they do not comply with the TCPA’s restrictions, but as a restructure of the law, cannot be fined by the FCC for past actions. The companies could, however, be subject to private causes of action for their alleged illegal activity.

Comment: Prerecorded calls are permitted under the TCPA to cellular telephone numbers only with the prior express consent of the recipient. For political calls, this consent can be oral or written. For sales calls, however, in October of this year, the standard will change to require prior express written signed consent. Although “written” and “signed” can be obtained electronically, this is substantial change in the definition of “prior express consent” for these sales calls.

The FCC has made a declaratory ruling with regard to whether a seller is liable for TCPA violations made by its third party telemarketers. C.G. Docket No. 11-50 May 9, 2013. In the ruling, the FCC held that sellers may be liable for such violations if they had authority to control the telemarketer and did not exercise due diligence with regard to the telemarketer’s activities. This gives some protection to sellers who may have been duped by unscrupulous marketers (e.g. illegal calls, texts, facsimiles, prerecorded calls, etc.).

Comment: Many class actions have been filed against deep pocket sellers based on the unscrupulous marketing activities of their independent contractors. This ruling may provide some protection to defendants in such cases.

Federal Trade Commission
The Federal Trade Commission has recently updated its guidance known as the “Dot Com Disclosures.” The law makes clear that consumer protection laws apply equally to marketers across all media. This is especially relevant to lead generation with regard to telemarketing compliance.

Comment: The FTC has issued an opinion letter specifically setting forth standards for lead generation websites. If you purchase leads generated on the internet, your contract should specifically include reference to and require compliance with this opinion letter. Contact me if you would like to discuss.

The FTC has announced winners of its robocall challenge which searched for a solution to block illegal prerecorded telephone calls. Both winning proposals focus on intercepting and filtering prerecorded calls by preventing calls from lists of numbers associated with legal callers. Both involved caller ID spoof detection.

The FTC has obtained a judgment from the United States District Court against five individuals and a telemarketing company which permanently bars the defendants from telemarketing and making false or misleading statements. FTC v. NHS Systems, Inc., et al. The judge found the defendants led consumers to believe they are affiliated with United States government agencies including the Social Security Administration. The judge ruled they violated the Telemarketing Sales Rule and the FTC Act.

The FTC has filed its first case alleging a business and its owners “crammed” consumers’ mobile phone bills with “premium” text message services. FTC v. Wise Media, LLC. The complaint asks the court to freeze the defendants’ assets.

Comment: When the FTC seeks an immediate court order to freeze assets, it is figuratively “kicking the door down” on defendants if the leads are engaging in financial fraud.

The FTC has filed suit against a company which offered prerecorded calls to other entities and allegedly knew or had reason to know that those other entities were placing illegal prerecorded calls. FTC v. Skyy Consulting, Inc., d/b/a CallFire. The complaint alleges that CallFire assisted others in initiating telephone calls sending prerecorded messages for the sale of consumer insurance, debt consolidation and mortgage services and encouraged the use of its prerecorded messages for such marketing.

Comment: The standard of accomplice liability is adding substantial assistance to another entity if you “know,” “have reason to know,” or “consciously avoid knowing” of illegality. The FTC will vigorously prosecute businesses that are directly involved with allegedly illegal conduct and indirectly involved.

Florida
A Florida court has ruled in favor of a plaintiff who provided his cellular telephone number to a hospital and was later contacted by a related number with regard to collection of a debt. Mais v. Gulf Coast Collection Bureau, Inc. The defendants argued that plaintiff gave them prior express consent to call his cell number. The court ruled that it was not required to defer to the FCC standard of express consent under the Hobbs Act, and the FCC’s definition of prior express consent for debt collection purposes is “not entitled to deference.” The court ruled that the related entity did not obtain express consent even though the hospital may have. The court also ruled that two other defendants were not vicariously liable for the calls of the debt collector.

Comment: This is an extremely important case which shows the pressure that class action plaintiffs can place on defendants even if they are acting within the scope of FCC guidance. At times, compliance personnel should craft legal protections more conservatively than required by regulation or statute to avoid grey areas or be “low hanging fruit” for opportunistic plaintiffs’ counsel.

North Dakota
North Dakota has modified its Telephone Solicitation Act to include text messages within the scope of “telephone solicitations.” (SB 2260).

Utah
A bill has been proposed in the Utah House (HB 245) which would require that registered agents of telephone solicitors provide proof of residency in the state.

Wisconsin
A Wisconsin court has held that an automobile finance company that called plaintiff’s cell phone more than 1,000 times was liable under the TCPA even though the call was placed in “preview” mode. The court ruled that the system had the capacity to act as an ATDS and, therefore, was an ATDS. Nelson v. Santander Consumer U.S.A.

Comment: If you use equipment to manually dial cell phone numbers without the express consent of the recipient, you should ensure that the equipment is not an ATDS as that term is defined by the FCC. It cannot have the capacity to act as an ATDS even if the capacity is temporarily turned off.

White Paper Available
I have prepared a White Paper explaining the changes to the TCPA effective October 15, 2013 and the standards of “prior express consent” for calls or text messages to cell phones. If you would like to review a copy of it, please contact me.