FCC Releases Final Report and Order Updating Its Rules Implementing the TCPA
On February 15, 2012, the Federal Communications Commission ("the Commission") released a Report and Order ("R & O") pursuant to a Notice of Proposed Rule Making ("NPRM") dated January 20, 2010 updating its rules implementing the Telephone Consumer Protection Act of 1991 ("TCPA" or "the Act"). The R & O purports to maximize consistency with the Federal Trade Commission's ("FTC") analogous Telemarketing Sales Rule and will require significant changes to marketing practices. Specifically, the R & O revises the consent requirement for autodialed and prerecorded telemarketing calls; eliminates the established business relationship exemption; creates requirements for an automated opt-out procedure; revises the rules regarding permissible abandoned calls; and exempts from the TCPA requirements prerecorded calls to residential lines made by health care-related entities governed by the Health Insurance Portability and Accountability Act of 1996 ("HIPAA").
Some of these changes are significant, eliminate defenses entirely and will certainly have an impact on telemarketing and mobile marketing campaigns. Moreover, since the TCPA has been held to be essentially a strict liability statute (at $500 per violation), class actions for violations of the TCPA have resulted in large settlements for what most people would believe is no real injury. These rule changes will likely increase the aggressiveness with which plaintiffs' lawyers may pursue class actions based on TCPA violations. The relatively minor cost of telemarketing and mobile marketing campaigns can easily be dwarfed by the TCPA class actions settlement and/or judgment amounts. Hence, any company that engages in telemarketing or mobile marketing campaign advertising via voice calls or text messages will be required to keep detailed and verifiable records of the written consent of the consumers to whom they are sending such messages (or require that the third-party marketing agency keep such records) or be subject to expensive class action litigation. Also, significantly, the R & O assumes that text messages fall within the scope of the statute as a "call" although there has been no determination that the technology used to transmit such messages constitutes an automatic telephone dialing system as defined by the statute. This issue was raised in some of the comments to the NPRM but apparently ignored by the Commission in its R & O.
The TCPA imposes restrictions on the use of the telephone network–both landline and wireless–for unsolicited advertising and other calls by telephone and facsimile. The Act prohibits certain categories of calls made using an automated telephone dialing system and/or prerecorded calls to wireless numbers including SMS/text message calls. The TCPA also prohibits non-emergency commercial calls to residential lines using an artificial or prerecorded voice without the recipients' prior written consent. The Act authorizes the Commission to adopt limited exemptions.
Written Consent Required for Telemarketing Calls
The R & O now requires prior express written consent for telemarketing robocalls to residential lines and wireless numbers. While the TCPA itself is silent on the issue of what form of express consent is required (e.g., written or oral) for calls that use an automatic telephone dialing system or prerecorded voice to deliver a telemarketing message, the Commission has discretion to determine what form of express consent is required. The Commission has concluded that prior express written consent is required for all telemarketing calls—whether to residential lines or wireless numbers. However, no consent is required for informational and noncommercial calls to residential lines, but prior express consent (oral or written) is still required for autodialed or prerecorded non-telemarketing (e.g., informational and noncommercial) calls to wireless numbers. It appears that the Commission believes that the statute requires some form of consent for such noncommercial calls to wireless numbers and thus consent is still required for these calls. Significantly, while the R & O occasionally mentions "text" messages and notes that a text message is a "call" under the statute and the rules, it does not otherwise expressly discuss text messages nor is much of the reasoning used by the Commission to support these changes applicable to text messages.
Calls Not Subject to Written Consent Requirement
The Commission also specifically discussed certain types of calls that it believes may not be commercial and for which no prior express consent is required—although such determinations may be made on a case-by-case basis. The Commission noted that such calls include debt collection calls, airline notification calls, bank account fraud alerts, school and university notifications, research or survey calls, and wireless usage notifications. These "non-telemarketing" calls also include calls made by the consumer's loan servicer regarding home loan modification or refinance in compliance with the American Recovery and Reinvestment Act. All such identified calls, to the extent that they are noncommercial and do not involve telemarketing messages, do not require any consent when made to residential line customers but still require consent—e.g., oral or written—if made to wireless consumers and other specified recipients. Additionally, the rule providing that prior written consent is not required for calls made to a wireless customer by that customer's wireless carrier if the customer is not charged, has not changed.
Content and Form of the New Written Consent Requirement
Where written consent is required, the R & O concludes that the term "signed" includes an electronic or digital form of signature to the extent such form of signature is recognized as a valid signature under applicable federal or state contract laws. Written agreements obtained in compliance with the ESIGN Act satisfy these requirements, such as agreements obtained via email, website form, text message, telephone keypress or voice recording. The consumer's consent to receive telemarketing robocalls must show that the consumer: (1) received "clear and conspicuous disclosure" of the consequences of providing the requested consent, i.e., that the consumer will receive future calls with prerecorded messages by or on behalf of a specific seller; and (2) having received this information, agrees unambiguously to receive such calls at the telephone number designated by the consumer. Further, the agreement cannot be executed as a condition of purchasing any good or service. The Commission also expressly concludes that the seller bears the burden of demonstrating that a clear and conspicuous disclosure was provided and that unambiguous consent was obtained. This is a significant statement as there are some conflicting court decisions regarding which party has the burden of proving consent.
Elimination of the Established Business Relationship Exemption
The Commission notes that there is no statutory barrier to eliminating the established business relationship exemption since the Act grants the Commission authority to create exemptions to the restrictions on prerecorded calls to residential lines. Hence, the Commission determined that "additional experience, the record before us, and evidence of ongoing consumer frustration lead us to conclude that the exemption has adversely affected consumer privacy rights." Telemarketing calls to residential lines will now require prior written consent—even where the caller and the called party have an established business relationship. The Commission noted that this decision is consistent with the FTC's previous rejection of this exemption. This rule change only affects telemarketing calls placed to residential lines as this exemption was not previously available for telemarketing calls to wireless numbers. The elimination of this exemption is significant as many companies have relied on their customer base as a targeted resource for telemarketing efforts.
Automated Opt-Out Mechanism
Prior to this R & O, the rules required that at the beginning of all artificial and prerecorded message calls, the message identify the entity responsible for initiating the call and provide a telephone number for consumers to call during regular business hours to make a company-specific do-not-call request. This R & O revises the rules to require any artificial or prerecorded message call that could be answered by the consumer in person provide an interactive opt-out mechanism that is announced at the outset of the message and is available throughout the call. When invoked, the op-out mechanism must automatically add the consumer's number to the seller's do-not-call list and immediately disconnect the call. The Commission noted that this technology is widely available and affordable and thus should not be a burden to implement promptly.
Changes to the Abandoned Call Rate
Predictive dialers make calls while the telemarketers may be on other calls and disconnect if the telemarketer is not available—resulting in hang ups or dead-air calls, which are deemed "abandoned" calls. The sales representative must talk to the consumer within two seconds of the called person's completed greeting. The current rule limits the percentage of abandoned calls that a telemarketer may incur to 3% of all calls answered by the called person (as distinguished from an answering machine) over a 30-day period. The R & O revises this restriction to conform to the FTC rules and will now require assessment of the call abandonment rate to occur during a single calling campaign over a 30-day period. A "campaign" is an offer for the same good or service from the same seller. If the single calling campaign exceeds a 30-day period, the abandonment rate will be calculated each successive 30-day period or portion thereof. The Commission claims that this "revised requirement will deprive telemarketers of the opportunity to average abandoned calls across multiple calling campaigns, which can result in targeting abandoned calls to less desirable consumers."
HIPAA Call Exemption
The Commission determined that in view of the privacy protections afforded under HIPAA, all prerecorded health care-related calls to residential lines that are subject to HIPAA are exempt from the consent, identification, time-of-day, opt-out and abandoned call requirements. These calls might otherwise be commercial, but HIPAA allows marketing if the communication imparts information about a product or service that is included in a health care benefits plan offered by the covered entity, gives information concerning treatment, or describes goods or services for case management or care coordination. Significantly, violations of HIPAA are subject to civil and criminal penalties. Notably, HIPAA-related calls made to wireless numbers are not exempt and express consent (oral or written) is still required for such calls. Given that many people, especially in the under-35 age demographic, have only wireless mobile phones and do not have residential landlines, this exemption may provide small comfort to health care providers whose calls to a landline would otherwise be exempt from the requirements of the TCPA but may not be exempt if made to a wireless number.
Implementation of the New Rules
All of the time periods for the implementation of the new rules embodied in the R & O commence upon publication of Office of Management and Budget approval of the new rules in the Federal Register. With that in mind, the time periods for implementation are as follows:
Prior Express Written Consent: 12 months
Elimination of the Established Business Relationship Exemption: 12 months
Automated Interactive Opt-Out: 90 days
Revised Abandoned Call Rule: 30 days
Conclusions and Recommendations
These are only highlights of a long and detailed R & O that makes some significant changes to the current rules for implementing the TCPA. Companies should review their marketing practices in detail to ensure compliance with the new rules. Some specific recommendations include:
- Review and revise marketing practices, guidelines and training to comply with the new requirements.
- Review and revise website opt-in language to include terms consistent with the new prior express written consent requirements.
- Review agreements with third-party marketing agencies and revise as necessary to comply with the new requirements regarding consent, record keeping and interactive opt-out mechanisms.
- Review and revise telemarketing scripts.
- Revise new credit card and other program applications and response cards to obtain the required consent.
© 2012 Perkins Coie LLP