In a July 14, 2015 letter to PayPal, the FTC indicated that consent language buried within a “lengthy user agreement” does not satisfy the requirement under the Telemarketing Sales Rule (TSR) that companies obtain prior express consent before making automated or prerecorded calls (robocalls) for telemarketing purposes.

At issue was a proposed provision in PayPal's recently revised user agreement, which required users to consent to receive telemarketing robocalls sent by PayPal and its affiliates and service providers. The FTC highlighted multiple TSR violations in the user agreement provision, including that (1) the consent language was not clear and conspicuous and instead was “buried in a lengthy user agreement,” (2) PayPal unlawfully required users to consent to receive telemarketing robocalls as a condition of using PayPal’s services, since agreement to the user agreement was a condition of continued use of PayPal’s services, and (3) the scope of the consent improperly extended beyond a specific party to unnamed affiliates and service providers.

After the FTC initiated its investigation but before the language at issue went into effect, PayPal further revised its user agreement to remove the right to engage in telemarketing robocalls altogether, leaving only the ability to use robocalls for notifications of account activity, prevention of fraud and collection of debts. PayPal also addressed a few of the other FTC concerns in its revised language, including a clarification that consent to receive robocalls was not required as a condition to using PayPal’s services and removing the right to have unnamed affiliates engage in robocalls for their own purposes. In its letter to PayPal, the FTC cited these changes favorably and notified PayPal that it was concluding its investigation without recommending any enforcement action, in part because PayPal had revised the original proposed provision to address the FTC’s concerns before it made any telemarketing robocalls to customers.

The FTC’s letter to PayPal raises serious doubts as to whether a consent provision in a user agreement could be used to obtain prior express consent for telemarketing robocalls in accordance with the requirements of the TSR. We recommend that companies review their terms of service and other user agreements to confirm their approach on these issues aligns with the FTC’s position in its letter to PayPal.

Note that the FTC’s letter to PayPal raised only an investigation into the possibility of TSR violations; the letter did not address the prior express written consent requirements of the Telephone Consumer Protection Act (TCPA), which is enforced by the FCC. Please refer to our past updates for more information about consent requirements under the TCPA.

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