For whom the ring tolls: Companies struggle with TCPA

As businesses strive to take advantage of the latest and greatest ways to reach out to their customer base, they are increasingly running up against a law that pre-dates much of that new technology.

The Telephone Consumer Protection Act was passed by Congress in 1991 with the goal of reducing the ever-increasing number of harassing, unwanted phone calls. The law targeted “automatic telephone dialing systems,” equipment with the capability and capacity to store mass quantities of phone numbers and dialing them to deliver pre-recorded messages without direct, number-by-number manual processes.

An important reminder about what the world looked like back in 1991: Fax machines were still popular, cell phones rarely had unlimited plans, and many carriers charged by the text message.

The legislative goal was to establish a fairly simple metric: if an unsolicited call, fax, or text cost the recipient money, those communications should be deemed illegal. The TCPA placed prohibitions and limitations on autodialed and pre-recorded phone calls and fax communications not expressly authorized by the recipient. Consumers were also afforded the right to opt out of these messages.

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Today, the law may be as appreciated as ever given the onslaught of pre-recorded calls anyone with a smartphone is bombarded with each week.

“The FCC gets more complaints about violations of the TCPA than nearly anything else put together,” says Judith Harris, senior counsel at law firm Reed Smith. “It was, and remains, a highly popular statute with consumers. Even members of Congress like to go home to dinner and not be interrupted. It has been a very popular law across the board and especially popular with plaintiffs’ attorneys.”

Unfortunately for businesses, there is a “baby with the bathwater” quality to the law and the approach taken by the Federal Communications Commission, the federal agency that enforces the rule. Name a medium- or large-sized company and odds are good they have either faced scrutiny by the FCC, or been brought into court, over their calling and texting practices.

Critics say the law fails to account for new technologies and practices. Text messages didn’t exist at the time of enactment, yet are covered. Very few are charged by the text message any more. Also, the general public may want certain types of covered communications, especially when signing on to internet-based social media platforms and sharing economy services.

Companies also struggle with barely existent safe harbors and very limited exemptions. In addition to post-violation FCC settlements, there is also the costly specter of class-action lawsuits. Roughly 2,000 TCPA class-action lawsuits were filed in 2014; 2016 is on pace to have that number double. The TCPA provides a private right of action that enables consumers to recover up to $500 for each violation and up to $1,500 for each willful violation. Multiply those damages by thousands upon thousands of plaintiffs and the financial exposure can be massive.

“The only thing that the FCC felt comfortable excluding from the definition was a rotary phone. I’m not joking.”
Michael O’Rielly, Commissioner, FCC

In recent weeks, there has been some attention paid to TCPA in Congress with committee-level discussions of whether to modernize the statute.

The incoming presidential administration may even have an axe to grind regarding the law. In April, the campaign for President-elect Donald Trump was sued in two separate TCPA class actions filed in the Northern District of Illinois. The suits claim the campaign sent unwanted text messages to thousands of cell phones users without prior consent. The lawsuits remain pending.

So, can we expect changes to the law? Experts are not very optimistic.

On July 10, 2015, the FCC issued an anticipated “Omnibus Declaratory Ruling and Order” to resolve 21 petitions related to the enforcement and interpretation of the TCPA. “As expected, the ruling unfairly lumps legitimate businesses in with the telemarketing abusers that the act was intended to deter,” a Reed Smith client advisory at the time said.

The FCC opted not to detail a list of what equipment types meet the definition of auto-dialer. It chose to, instead, create guidelines for defining them. Among those guidelines: present and potential future capability for automated speed dialing.

ACA International, the association of credit and collection professionals, has challenged the rulings with a lawsuit in the U.S. Court of Appeals. It argues that the FCC has exceeded the scope of its authority, adding in, perhaps on a wing and a prayer, a claim that the law restricts the First Amendment right of companies to exercise free speech. Oral arguments were heard in October; an opinion is forthcoming.

“The omnibus order really gave the act an enormously expansive interpretation,” Harris says. “We will see what the court of appeals does with that.”

“Talk like this about modernizing TCPA could get somewhere, especially if the decision is affirmed by D.C. Circuit,” she adds. “I can’t imagine, however, that members of Congress are going to be all that interested in doing something dramatic with such a popular act. The complaints from consumers to the FCC number in the tens of thousands. I wouldn’t be shocked if Congress does something to get at the plaintiff’s lawyers, but that will just increase the burden on the FCC because people will have no place else to go.”

Calls to modernize the definition of an automatic dialer face a conundrum that dates back to the TCPA’s inception. “The law never really dealt with the root of what consumers would consider to be the problem,” Harris says. “Consumers don’t care if they have been dragged out of the shower by a call that was placed by an auto-dialer or of it was manually dialed. What they care about is the volume of calls.”

FCC OMNIBUS ORDER

The following is from the Federal Communications Commission’s 2015 “omnibus” order regarding the Telephone Consumer Protection Act.
With this order—which resolves 21 separate requests for clarification or other action regarding the TCPA or the Commission’s rules and orders—we affirm the vital consumer protections of the TCPA while at the same time encouraging pro-consumer uses of modern calling technology. Further, the clarity we provide in this Declaratory Ruling and Order will benefit consumers and good-faith callers alike by clarifying whether conduct violates the TCPA and by detailing simple guidance intended to assist callers in avoiding violations and consequent litigation. Among other actions, we:
Strengthen the core protections of the TCPA by confirming that:
Callers cannot avoid obtaining consumer consent for a robocall simply because they are not “currently” or “presently” dialing random or sequential phone numbers;
Simply being on an acquaintance’s phone contact list does not amount to consent to receive robocalls from third-party applications downloaded by the acquaintance;
Callers are liable for robocalls to reassigned wireless numbers when the current subscriber to or customary user of the number has not consented, subject to a limited, one-call exception for cases in which the caller does not have actual or constructive knowledge of the reassignment;
Internet-to-phone text messages require consumer consent; and
Text messages are “calls” subject to the TCPA, as previously determined by the Commission.
Empower consumers to stop unwanted calls by confirming that:
Consumers may revoke consent at any time and through any reasonable means; and
Nothing in the Communications Act or our implementing rules prohibits carriers or Voice over Internet Protocol (VoIP) providers from implementing consumer-initiated call-blocking technology that can help consumers stop unwanted robocalls.
Recognize the legitimate interests of callers by:
Clarifying that application providers that play a minimal role in sending text messages are not per se liable for unwanted robocalls;
Clarifying that when collect-call services provide consumers with valuable call set-up information, those providers are not liable for making unwanted robocalls;
Clarifying that “on demand” text messages sent in response to a consumer request are not subject to TCPA liability;
Waiving our 2012 “prior express written consent” rule for certain parties for a limited period of time to allow them to obtain updated consent;
Exempting certain free, pro-consumer financial- and healthcare-related messages from the consumer-consent requirement, subject to strict conditions and limitations to protect consumer privacy; and
Providing and reiterating guidance regarding the TCPA and our rules, empowering callers to mitigate litigation through compliance and dispose of litigation quickly where they have complied.
Source: FCC

There are now clear-cut examples of the sort of harassing phone calls the law sought to address and the permitted uses for things like prescription refills and overdraft alerts from banks. “The real question is what do you do about the huge middle?” Harris asks of the gray areas companies often find themselves mired in.

Although the FCC has, to date, shown little institutional will to overhaul the law, there have been pockets of dissent among commissioners.

In a 2015 speech to the Professional Association for Customer Engagement, Commissioner Michael O’Rielly blasted the idea that equipment can be deemed, in the present, to be an auto-dialer if it has future capabilities. By that logic, he said, even the average smartphone could be so defined merely by the ability to download apps that provide the functionality. “The only thing that the FCC felt comfortable excluding from the definition was a rotary phone,” he said. “I’m not joking.”

O’Rielly also touched upon one of the law’s biggest headaches for businesses: reassigned phone numbers “Every day, an estimated 100,000 cell phone numbers are reassigned to new users,” he said. There is no comprehensive database of which numbers belong to which users. It is only a matter of time before a company calls a number that, unbeknownst to them, has been reassigned to someone that hasn’t given consent.”

This wouldn’t be as much of a problem if the FCC “adopted the common-sense interpretation” that a company needs the consent of the intended recipient of the call, as opposed to the person who picked up the phone, or if the Commission had provided a safe harbor for companies that follow best practices to try to limit the number of stray calls. “But that’s not what the FCC did,” O’Rielly said. “Instead, it declared that the caller must have the consent of the actual recipient, but will get one free call to try to determine if the number has been reassigned.” After that, the caller is deemed to have “constructive knowledge” that the number was reassigned and, if a call is misdialed, there is no lenience.

The FCC has a very slanted and expansive view of what is reasonable in terms of what constitutes a binding opt-out. “In essence, consumers are allowed to revoke consent via any means and any verbiage chosen by the consumer,” O’Rielly said. “E-mail, yes; written letter, yes; phone call, yes; text, yes; Facebook posting, maybe; verbally screaming at a sales clerk, probably; skywriting, possibly.”

“The plaintiffs bar has been very aggressive in going after companies and initiating class actions for alleged TCPA violations,” says David Klein, a telecommunications lawyer with the firm Klein Moynihan Turco. Critics say that catching violations has become something of a cottage industry in recent years, with some attorneys setting up boiler room phone banks in an effort to seize upon actionable calls.

Klein advises companies to be keenly aware of how customer communications could inspire a complaint.

“I recommend that they get prior express written consent before any and all calls,” he says, adding that he is called upon to craft the consent language. “Typically, it is positioned as part of the registration process at the time of sign-up for the purchase of a given product or service, or in connection with communicating their interest in getting them.”

Other best practices: record all calls and honor all opt-out requests. “If you call someone and they don’t answer the phone, or it is answered by voicemail, do not call again, because there is only a one-call exception,” Klein adds. “If they don’t pick up, you call again, and they can prove that you called them twice without consent, then it’s a violation.

Documenting consent to receive calls can be build it into the sign-up process. “It’s not enough to just have it in the terms and conditions, there should be a clear disclosure directly above the submit button, with an unpopulated checkbox, that says they agree to receive auto-dialed, pre-recorded calls, and text messages ‘to the number supplied above.’ That consent cannot be a condition of purchase,” Klein says. “That, together, is the magic language. Retaining copies of this consent, with screenshots, an IP address, and date stamp is the ‘get out of jail’ card.”

“Clients see all this as a big pain, but I tell them that the alternative is that the company could be looking at going out of business if a class action is brought against them once you start adding up all those calls,” he adds.

A danger of the law is that it has not kept pace with how Americans use technology. “At the time the law was passed, only a small percentage of Americans had cell phones,” says and John Ryan, a partner at law firm Hinshaw & Culbertson. “Now, if you fast forward, there are studies showing that 60 percent of people between the ages of 20 and 50 don’t have a home phone number. There are more restrictions on calling cell phones than a home landline. If a debt collector is calling a home landline, they do not need express consent to make that call; if they are calling on a cell phone, they need consent. Now, because cell phones are being used like land lines, hey should probably be treated like landlines.”

With that backdrop, Ryan warns that companies need to insulate themselves, as much as they can, from lawsuits. “The more policies and procedures you have in place to prevent a TCPA claim, the more you will hopefully prevent a class from being certified,” he says. “Unfortunately, there is no way to eliminate those individual claims, unless you want to manually dial and use artificial prerecorded voices and reduce your productivity by a thousand-fold.”

“It seems like no sector or organization is safe from the aggressive TCPA litigation being pursued by plaintiffs’ attorneys,” says Mark Brennan, a partner at law firm Hogan Lovells. “When you combine the heavy statutory damages, the lack of any cap on damages, and the impractical compliance requirements and interpretations of the statute posed by the regulator, TCPA is a sea-level issue for an increasing number of organizations.”

Organizations that have not reviewed their TCPA and “do not call list” compliance framework recently should take a fresh look, Brennan says. “This is an area of the law which is evolving rapidly, where the stakes continue to get higher,” he says. “These are increasingly headline-grabbing amounts.”

“For companies that are making efforts to stay on top of the compliance issues it is important to monitor for new developments, reassess your frameworks if you haven’t looked at them in a while, and try to put yourself in the shoes of both the recipient of the call and the regulators and judges who may be looking at your situation,” he adds. “Think about how your actions might be perceived by consumers and what their expectations may be.”

Brennan reiterates that no matter the size or sector, your company may be in the firing line. “We routinely find that small business and start-ups may not have considered the TCPA requirements when launching their services,” he says. “It is something that is often overlooked. We have also seen—and the TCPA litigation reflects this—a number of mature, large, and global organizations that also appear to have overlooked it and are routinely getting sued … TCPA is something that I think, for many years, has been a sleeper issue, but the plaintiffs’ attorneys have woken up to it.”

 “When you want to have some efficiency with a large volume of calling, you are going to bring in technology to help and that is where the TCPA provides a number of hurdles,” says Alysa Zeltzer Hutnik, a partner of law firm Kelley Drye & Warren who specializes in TCPA compliance. “You can’t just dabble with it and hope you get it right. You need to know what you are doing so you don’t get exposed. The trend with lawsuits is up, up, up. It is surprising when a company hasn’t received a TCPA demand.”

Don’t let the aim to be perfect get in the way of progress, says Lauri Mazzuchetti, also a partner with Kelley Drye & Warren.

“There are so many pitfalls even when you are doing everything right, but by being knowledgeable and informed about what the obligations are and coming up with a strategic approach—with a written set of policies, processes, and training for your team and the third parties that may be helping—you can dramatically decrease your risk exposure. Once you have a compliance program in place it is a lot easier to be able to update the program as you have tweaks in the law.”

Both recommend periodic audits of call records and TCPA compliance. “You may think you have good processes, but until you put them to the test you don’t know if they are really working as intended,” Hutnik says.