By Matthew R. Friedman
For some, the word invokes memories of a barrage of unsolicited phone calls during dinner — an annoying, invasive practice that they believe is contrary to the public interest and should be prohibited completely. Yet for others, it is an efficient and mission-critical mechanism that facilitates the solicitation of business from a wide and diverse range of customers. In attempt to reconcile these competing beliefs, Congress passed the Telephone Consumer Protection Act of 1991 (TCPA) and tasked the Federal Communications Commission (FCC) with its implementation, including the discretion to exempt certain classes or categories of calls. This article primarily addresses the legal issues arising under the TCPA, including the FCC’s recent rule modification that attempts to harmonize its rules with the Federal Trade Commission’s (FTC) Telemarketing Sales Rule, which went into effect on October 16, 2013. This article also briefly addresses various other laws and regulations of which all telemarketers should be aware.
The TCPA, in relevant part, makes it unlawful for a person to (1) call a wireless number using an automatic telephone dialing system (autodialer) or an artificial or prerecorded voice; and (2) call a residential line using an artificial or prerecorded voice to deliver a message, unless an applicable exception is met. The TCPA and FCC rules also mandate certain in-call notifications and opt-out procedures, limit calls to the period between 8 a.m. and 9 p.m., limit the rate of abandoned calls and require entities to create an internal do-not-call list, as well as develop written policies and training relating to its maintenance.
The most significant effect of the FCC’s recent rule modification is the removal of the “established business relationship" exception, which allowed entities to make telemarketing calls using an artificial or prerecorded voice to residential subscribers, so long as there had been a voluntary two-way communication between the subscriber and the entity based upon an inquiry, application, purchase or transaction by the subscriber regarding products or services offered by the entity. This exception was far-reaching, easily obtained and ensured that an entity’s most likely customers — those residential subscribers who had previously inquired about or purchased that entity’s products — could be easily and repeatedly contacted.
However, as amended, the FCC’s rules now prohibit autodialed or prerecorded calls, including text messages, which are made to residential or wireless numbers for a telemarketing purpose, unless they are made with the prior express written consent of the called party or meet one of the remaining, more narrowly applied exceptions. Additionally, calls made for a non-telemarketing, informational purpose, including calls by or on behalf of tax-exempt non-profit organizations, calls for political purposes and calls for other noncommercial purposes, do not require prior consent if they are made to a residential number. If they are made to a wireless number, then the prior consent of the called party is required, but may be obtained orally. In the event of a dispute, the burden of demonstrating unambiguous consent rests with the calling party.
With regards to prior express written consent, the FCC has determined that a consumer’s written consent must be signed, which may include an electronic or digital form of signature, to the extent it is recognized under federal and state law. Consent obtained in compliance with the E-SIGN Act, including permission obtained via an email, website form, text message, telephone keypress or voice recording, may be sufficient to satisfy the requirement of written consent, but ultimately the critical inquiry is whether the party intended to sign the record. Additionally, the written consent must demonstrate that: (1) the consumer received clear and conspicuous disclosure that the consumer will receive future autodialed or prerecorded calls by or on behalf of this specific entity; (2) the consumer unambiguously agrees to receive such calls at a telephone number the consumer designates; and (3) the written consent was obtained without requiring, directly or indirectly, that the agreement be executed as a condition of purchasing any goods or services.
Furthermore, although the “established business relationship" exception applied only in the context of artificial and prerecorded calls, the TCPA’s other triggering factor — the use of an autodialer — remains subject to regulatory uncertainty and could be a potentially dangerous pitfall for uninformed telemarketers. The TCPA itself defines an autodialer as equipment having the capacity to store or produce telephone numbers to be called, using a random or sequential number generator, as well as dial such numbers, and the FCC has, in turn, clarified that this definition covers any equipment that has the specified capacity to generate numbers and dial them without human intervention. However, the inconsistent application of these definitions by courts and the various pending petitions for clarification before the FCC demonstrate that the types of calling systems constituting an autodialer remain unclear. As such, entities using systems that merely have the capacity to dial numbers without intervention, even if that capacity is disabled, run a risk that their calling activities will fall within the jurisdiction of the TCPA.
Finally, while this article primarily focuses on the TCPA’s autodialer and prerecorded call rules, other federal and state level laws regulate the behavior of telemarketers as well. There are, for example, both federal-level and state-level do-not-call rules that allow consumers to add their numbers to a do-not-call registry. The federal do-not-call rules generally prohibit telemarketing calls to numbers on the list, regardless of whether they are autodialed or prerecorded, unless an exception is met. These exceptions include, for example, calls to any person with whom the caller has an established business relationship, calls by or on behalf of a tax-exempt non-profit and calls made with the called party’s prior express invitation or permission.
State do-not-call rules, meanwhile, vary with regards to the types of calls they prohibit. Some of these states have adopted rules that are more restrictive than the federal rules, by removing exceptions available at the federal level or requiring that certain telemarketers register with the state or post a bond. Additionally, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act) prohibits the sending of mobile service commercial messages (MSCMs), which include messages sent using Internet-to-phone SMS technology if the messages include an Internet reference such as an @ sign in the address, to a subscriber’s wireless device unless express prior authorization has been obtained from the subscriber.
Together, the TCPA and these other laws create a complex web of rules and regulations for telemarketers, which are aggressively enforced by private parties, as well as the federal and state governments, potentially subjecting non-compliant entities to penalties of $1500 per TCPA violation. Additionally, both the party making an unauthorized call and the party on whose behalf the call is made will be held liable for TCPA violations, which raises substantial contracting issues, including the need for an adequate indemnification clause and assurances that third parties are complying with all applicable telemarketing laws. As such, it is critical that all telemarketers and entities contracting with telemarketers conduct an internal audit to ensure that they are compliant with these telemarketing laws and that their agreements are affording them adequate protection.