Attention all businesses that market by phone, text or fax:
New FCC rules are set to go into effect October 16 and penalties for noncompliance are severe. Are you ready?

September 25, 2013

Privacy Alert

Author(s): Dan Deane

Businesses that market by phone, text, or fax must take care to ensure compliance with new FCC rules created under the Telephone Consumer Protection Act (TCPA), which go into effect October 16. The new rules tighten the requirements for obtaining consent before sending mass marketing messages through the use of auto-dialers, pre-recordings, texts and faxes. Significantly, the new rules also do away with the exception of presumed consent for pre-existing customers. Businesses that market with these technologies must take heed of these new rules or face potentially crippling liability. The TCPA, which awards statutory damages as high as $1,500 per violation, is a new favorite for class action plaintiffs’ lawyers who will be ready to pounce after the new rules take effect.

In a report and order (the “Order”) issued by the Federal Communications Commission (FCC) on February 15, 2012, a handful of newly adopted rules under the Telephone Consumer Protection Act (TCPA) of 1991 will go into effect on October 16, 2013. The TCPA regulates a variety of marketing communications, including telemarketing calls, faxes, pre-recorded autodialed calls (commonly referred to as RoboCalls) and text messaging. The FCC states that the new rules “offer consumers greater protection from intrusive telemarketing calls and harmonize [the FCC’s rules] with those of the FTC’s [Federal Trade Commission] in a way that reduces industry confusion about telemarketers’ obligations and that does not increase compliance burdens for most telemarketers.” The FCC seeks to “maximize consistency” with The Do-Not-Call Implementation Act (DNCIA), which established a “do-not-call registry” under the FTC’s Telemarketing Sales Rule (“TSR”), which also regulates telemarketers but excludes common carriers from the FTC’s jurisdiction. The FCC believes its Order does just that.

What are the changes to the TCPA?

Here’s what you need to know regarding the changes to the TCPA that will affect the way you communicate with your customers:

Prior Express Written Consent Requirement
You must obtain unambiguous written consent from the consumer BEFORE a prerecorded telemarketing call to a residential line, a prerecorded or autodialed telemarketing call to a wireless number or an autodialed text message by providing “clear and conspicuous disclosure” of the consequences of providing such consent. The consent requirement does not apply to autodialed telephone calls to residential lines that are not prerecorded.

Elimination of the “Established Business Relationship” Exception
Businesses cannot rely on this exception to make telemarketing communications, but must instead obtain express written consent as described above before making contact even to existing customers.

Automated, Interactive Opt-Out Mechanism Requirement
You must include an interactive opt-out mechanism at the outset of the artificial or prerecorded telephone call and make it available through the duration of the entire telephone call. This opt-out mechanism must automatically add the customer’s telephone number to the do-not-call registry and immediately disconnect the call. Businesses must also ensure that a toll-free number is included in the message if the telemarketing call is answered by an answering machine or voicemail so that the customer can opt-out upon hearing the message.

30-Day Period Calling Campaign Allows only 3% of Abandoned Calls
During an individual telemarketing campaign, a business must now limit its abandoned calls to 3% over the entire 30-day period. An abandoned call is when a predictive dialer initiates a call with a telemarketer while the telemarketer is talking to another customer and, as a result, the call is disconnected; a call is considered “abandoned” under FCC regulations if a customer answers the call and does not connect to the telemarketer representative within two seconds of the customer’s greeting.

What are the penalties for non-compliance?

Each individual telephone call, fax or text message disseminated in violation of the TCPA can result in an award of statutory damages ranging from $500 to up to $1,500 for a willful violation, with no limit on the number of violations that can be included in an individual suit. Businesses, especially those that market to a wide audience, should beware of the potential for large fines, penalties and damages and ensure compliance with the TCPA and its newly implemented revisions.

How do you obtain prior express written consent?

This consent can be obtained electronically via e-mail, website forms, telephone keypress functions and any other method compliant with the E-SIGN Act. However, the consumer’s consent must be optional and must not be required to purchase any goods or services. The burden is on the business initiating the telemarketing communication to demonstrate that a “clear and conspicuous disclosure was provided and that unambiguous consent was obtained.” However, there are exceptions to obtaining prior express written consent for the following types of communications:

  • Calls or text messages from the consumer’s cellular carrier (if the consumer is not charged) (e.g., wireless usage notifications)
  • Debt collectors, airline notifications, bank account fraud alerts
  • Schools or workplace (for school or office closings)
  • Informational notices (from tax-exempt nonprofit organizations; political purposes)
  • Health care related entities (governed by HIPAA)
  • Emergency alerts (e.g., permitted by the WARN Act or Commercial Mobile Alert System (“CMAS”))
  • Home loan modifications or refinancing ONLY if to comply with the American Recovery and Reinvestment Act

Businesses should maintain documentation of each consumer’s written consent for a minimum of four years.

Are these rule changes likely to lead to increased litigation?

The short answer is yes. Under the TCPA, the FCC can enforce violations; however, the TCPA also allows claims to be initiated by individual customers. Even before these changes, the TCPA was fertile ground for class action plaintiffs’ lawyers. TCPA class action filings have been on the rise in recent years. Plaintiffs’ lawyers find several aspects of the law appealing, including the potential for statutory damages without the requirement of proving any actual injury. Plaintiffs’ lawyers also like the TCPA because it reaches conduct—automated phone or text messages or phone calls initiated by an automated dialer—that tends to reach large numbers of potential class members and the statute provides a uniform standard that can be applied to all class members. Hence, the class action requirements of numerosity, commonality and typicality are usually easy to establish.  

The new rule changes may spur a further increase in such actions as plaintiffs’ lawyers seek to catch those businesses that haven’t updated their procedures. These class actions typically target retailers and franchisors and any other businesses that attempt to market to a wide audience. Given the uncapped statutory awards available under the TCPA, potential liability can quickly become staggering. Businesses should review their telemarketing practices to ensure that they comply with the new rules.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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