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Telemarketing Compliance: Legal Considerations Before You Call

by admin on May 15, 2018 No comments

telemarketing complianceBy: Michael Silverman

Miami resident Adrian Abramovich certainly wasn’t laughing on Thursday May 10th, 2018 when the Federal Communications Commission (“FCC”) levied a $120 MILLION dollar fine on him for his alleged involvement in an illegal robodialing campaign. FCC Chairman Ajit Pai stated that Abramovich did not dispute that he had placed more than 96 million telemarketing robocalls over a three month period in 2016 without the recipient’s consent. Furthermore, Chairman Pai stated that Abramovich’s telemarketing campaign utilized caller ID “spoofing” which masks the calling party’s true phone number and causes the recipient’s caller ID to indicate that the call was being made by a local number. Abramovich’s telemarketing activities allegedly violated a variety of state and federal regulations; caller ID spoofing, for example, is expressly prohibited by the Florida Telemarketing Act, § 501.616(7).

With the record-breaking fine imposed on Abramovich, the FCC is sending a loud and clear message that it will not tolerate those individuals or entities that violate telemarketing laws. Any person or business engaged in telemarketing (be it a healthcare provider with a single telephonic sales representative or a business devoted to telemarketing with a 100 person call center) must heed the FCC’s unsubtle hint that enforcement activity of telemarketing laws is only heating up.

Caller ID “spoofing” and “robocalls” are far from the only regulated activities that telemarketers must be aware of and adhere to, and far fewer than 96 million calls can land a person or business in a serious hot water.

This article is intended to provide a general overview of some of the state and federal regulations that telemarketers need to know of and comply with in an effort to limit potential liabilities.

Federal Telephone Consumer Protection Act

Codified at 47 U.S.C. § 227, the Telephone Consumer Protection Act (“TCPA”) is a federal law that essentially restricts the methodologies by which marketers of goods and/or services are able to reach out to prospective consumers. This includes limiting the use of marketing and advertisements by fax, text, and telephonic transmission. A single violation of the TCPA (e.g. one phone call made in violation of the statute) results in minimum mandatory liability of $500.00. Telemarketing and resulting liability for noncompliance, however, tends to happen in mass numbers.

So what does the TCPA say about telemarketing? Essentially that telemarketers are prohibited, unless otherwise exempted, from utilizing an ‘automatic telephone dialing system’ (“ATDS”) to place telemarketing calls, or to utilize artificial or prerecorded voice messages in those calls.

Call centers dealing with a vast amount of phone numbers typically utilize an ATDS to make as many calls within the shortest timeframe as possible. Such systems, for example, will automatically dial 1000 different numbers simultaneously and then only transfer connected calls to live salespeople. This provides a highly efficient way to conduct telemarketing, enabling the ability to reach a huge audience while utilizing as few (paid) salespeople as possible, saving time and money. Autodialing is so efficient and allows for so many numbers to be called at once that an ATDS is considered a nuisance that needed to be federally regulated. Enter the TCPA.

As with telemarketing regulations generally, noncompliance with the TCPA is no joke! That’s because in addition to the penalties that the government can impose, the TCPA provides for a private cause of action for individuals to bring civil lawsuits, and it has become the latest trend. The TCPA is a strict liability statute, which limits applicable defenses, and it imposes penalties of $500-$1500 per violation. Do the math – a single person called 100 times by a party using an autodialer without the called person’s consent, in violation of the TCPA, is entitled to $50,000 in minimum statutory damages.

Plaintiff lawyers drool over TCPA claims, as they easily lend themselves to becoming class action lawsuits, which plaintiff attorney’s regularly seek to obtain court ordered certification for. While it may seem feasible for a defendant to settle individual actions concerning a party that is called 5 times in violation of the TCPA (minimum statutory liability of $2,500), once threatened with a class of hundreds or thousands of people wrongfully called, the penalties presented by a successful class action are staggering. The possibility of settlement then becomes much more difficult and costly to procure regardless of whether the class has yet been certified. Once threatened with such class action litigation, those 5 calls that could have otherwise likely been settled for far less than the statutory minimum (of $2,500) likely now demands a settlement that easily ranges into the 6-figures.

Take a business, for example, that is accused of engaging in a campaign whereby it allegedly dialed 50,000 numbers using an ATDS without the proper consents, in violation of the TCPA – that’s $25,000,000 in minimum statutory liability. Because of many common elements that the parties called (allegedly in violation of the TCPA) share, these lawsuits easily lend themselves to be styled as class action lawsuits, making them much more difficult to favorably resolve. The possibility alone of a class being certified presents a tremendous threat to the viability of a business, especially because of the statutory liability coupled with the uncertainty of going to trial. As such, class action TCPA lawsuits are regularly settled for tens of millions of dollars each. Look at the following TCPA settlements and heed their warnings to proactively comply:

  • Caribbean Cruise Line, Inc. – $76,000,000
  • Capital One Bank – $75,000,000
  • Sirius XM Radio, Inc. – $35,000,000
  • Bank of America Corp. – $32,000,000
  • Wells Fargo Bank, N.A. – $30,400,000
  • Papa John’s International, Inc. – $16,500,000

The list goes on and on, and impacts institutions ranging from financial to professional sports teams, medical suppliers to clothing companies, and everywhere in between. These settlements are from large institutions that can afford such penalties; for many smaller businesses, liabilities even on a much smaller scale spell out the end of operations.

For a telemarketer to legally utilize an ATDS without running afoul of the TCPA (and being subjected to penalties of $500-$1500 per call) prior to making a call using an ATDS, amongst other requirements, the telemarketer must have a written agreement from the party to be called that: (1) provides consent to be contacted utilizing an ATDS for telemarketing purposes; (2) discloses that the consumer is not required to provide consent (to be contacted via an ATDS) as a condition to purchase; and (3) discloses the specific seller(s) to whom consent to contact is being provided to. Additionally, the agreement must set forth the phone number that the party is consenting to be contacted on, and the called party must take some affirmative action to indicate their consent.

The TCPA does not preempt state law (i.e., individual states are not prohibited from imposing more restrictive regulations than that of the TCPA); as such states are permitted to and already have, for example, placed even tighter restrictions on permissible use of telemarketing technologies as well as call curfews. Accordingly, telemarketers using automated telephone dialing technology or prerecorded/artificial voice messages in their operations need to conduct a state by state analysis on all applicable jurisdictions to be aware of restrictions beyond those imposed by the TCPA.

State Telemarketing Registrations

As discussed in a previous post (entitled “Florida Telemarketing Law in Healthcare: What You Need to Know Now”), putting aside TCPA compliance concerns related to whether or not a telemarketer is using an ATDS or the now-antiquated “finger” dialing, many states require such individuals/entities to register for (or have filed an exemption therefrom) a telemarketing license in each state they conduct business into or out of.

Take the Florida Telemarketing Act (F.S. Title XXXIII §§ 501.601-501.626), for example, which requires that all individuals/entities engaged in telephonic sales pertaining to that state either (1) obtain a Commercial Telephone Seller Business License (as well as to license its individual sales representatives) or (2) have an approved exemption from such licensure on file. Even if an individual/entity engaged in telephonic sales squarely fits into one of the statutorily defined exemptions from telemarketing license requirement, if that individual/entity failed to file for that exemption with the applicable Florida department prior to making any calls, the statute has been violated.

And the penalties for noncompliance with these state statutes, say it with me now – are no joke!

The Florida Telemarketing Act imposes civil fines up to $10,000 per violation and also provides for the imposition of criminal penalties.

Obtaining the telemarketing license or exemption therefrom is but one aspect in complying with the Florida Telemarketing Act. Once permitted to engage in such calls, there are a host of disclosures that must be made to the recipient of the call, including but not limited to providing the identity of the entity and salesperson calling and the product being sold within the first 30 seconds of the call, as well as information pertaining to the sale of goods/services being discussed.

Again, a state by state analysis should be conducted on all jurisdictions that the telephonic sales are being directed into or conducted from, to determine if there are any registration requirements and what the applicable calling restrictions and required disclosures may be.

Federal & State ‘Do Not Call’ Lists

The Federal Trade Commission (“FTC”) established the Telemarketing Sales Rule (“TSR”) in the mid ‘90s as a way help protect consumers from an onslaught of largely unregulated telemarketers. The TSR was later amended to create the National Do Not Call (“DNC”) Registry, which began being enforced on October 1, 2003. The DNC Registry allows consumers to add their number(s) to its database in an effort to prevent unwanted telemarketing calls. Telemarketers are required to search the registry every 31 days to avoid calling any phone numbers that appears on the list.

The National DNC Registry applies to any plan, program or campaign to sell goods or services through interstate phone calls, but does not apply to calls made by political organizations, charities, or surveyors.

Additionally, even if a consumer has placed their number on the DNC Registry, the following phone calls by telemarketers are permissible:

  • Existing Business Relationship (“EBR”) – telemarketers can make calls to a party it has an EBR with up to 18 months after the consumer’s last purchase, delivery or payment;
  • Inquiry Business Relationship (“IBR”) – telemarketers can make calls to a party it has an IBR with up to 3 months after the consumer makes an inquiry with the company; and
  • Express Consent to Contact – telemarketers can make calls to a party that have provided it with permission to do so, indefinitely, unless such consent is revoked.

Even if an entity is complying with the DNC registry (by only calling parties that do not appear on the list, or if they appear on the list are only being contacted because an exemption applies), there are still components of the TSR that the telemarketer must comply with, including disclosures similar to those mandated by the Florida Telemarketing Act, described above. This includes but is not limited to providing: (1) the name of the caller & entity calling; (2) a description outlining the marketing purpose of the call and the goods/services being discussed; (3) the telephone number or address of the calling party; and (4) information pertaining to consumer rights surrounding the purchase of the goods/services before the consumer pays or agrees to pay. Additionally, telemarketers must maintain an internal DNC list and cease contacting those individuals that request to be placed on the same, regardless of whether such individual appears on the federal DNC Registry.

Entities that have proper policies and procedures in place pertaining to compliance with the TSR and DNC Registry can insulate themselves from penalties related to violations by showing that any violations were isolated errors and that the entity falls into a safe harbor. To fit into such safe harbor, an entity must have: (1) established and implemented written procedures to comply with DNC restrictions; (2) trained personnel to comply with the procedures; (3) the ability to monitor and actually enforce compliance with the procedures; (4) maintained updated DNC Lists; and (5) a process for preventing telemarketing calls to those on external and internal DNC Lists. Otherwise, individuals/entities that are found to have violated the TSR can be subjected to penalties of up to $40,000 per violation.

Many individual states also have their own versions of the federal DNC Registry and some impose narrower restrictions on telemarketers than the federal TSR. For example, certain states have calling curfews that are more restrictive than the federal curfew (of 8am – 9pm). As such, telemarketers should review the requirements of each state that they are calling into or making calls from.

Additional Considerations & Conclusion

While there are additional regulations applicable to all telemarketers regardless of the industry they’re telemarketing for, such as state and federal statutes aimed at curbing unfair or deceptive marketing practices, there are other laws that are industry specific. For example, a business involved in healthcare telemarketing must be sure to abide by regulations meant to protect patient health information and the practice of medicine as a whole, such as HIPAA and the Anti-Kickback Statute, respectively.

So how in the world is a company that is engaged in telemarketing supposed to survive without getting hammered out of business by all of these regulations that can give rise to such serious penalties? Proactive compliance is the only way! Know the federal regulations applicable to the business’s operations and conduct a state by state analysis on every state that the entity calls into or out of. It’s absolutely imperative to create a policy and procedure manual that sets forth all of the laws a telemarketer must follow, and the steps it is taking to comply. In many instances a complaint can be prevented from happening in the first place (for example, by adhering to someone’s request for the business to cease calling) or prevented from escalating in a major lawsuit by resolving it prior to the matter exploding in the hands of a plaintiff’s attorney, who may mistakenly believe that the TCPA stands for Total Cash for Plaintiff Attorneys.

The ability to telephonically market a business’s goods and services at a historically unprecedented and efficient rate, which results in drastically increased sales comes with a cost. Better to make that cost a minimal one in the form of compliance, rather to pay the price inherent with violations, which may be prove impossible to overcome. Conduct exhaustive due diligence prior to making the first call, or contact a knowledge consultant or attorney to help do so.

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