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FCC's Tough New Telemarketing Rules: What Corporations Need to Know

Wednesday, October 2, 2013

By Martin W. Jaszczuk, Thomas Cunningham, and Tamra Miller

Next month, the Telephone Consumer Protection Act — one of the most dangerous statutes for American businesses in effect today — will become even more unforgiving.

Apparently not yet satiated by the many millions of dollars in settlements that America's corporations have been forced to hand over in TCPA class action settlements, the Federal Communications Commission last year adopted several significant changes to its regulations that will take effect on Oct. 16. Among those are two modifications that will skew the playing field ever more in favor of plaintiffs seeking to extract big dollars for the annoyance of receiving telemarketing calls: (1) the requirement that prior to placing calls businesses obtain written — not oral — consent, and (2) the elimination of the “established business relationship” defense for certain calls to residential phone lines.

The Demise of Oral Consent

These new regulations, adopted by the FCC on July 11, 2012, will require businesses to obtain “prior express written consent” before placing telemarketing calls to mobile phones using an automatic telephone dialing system (ATDS) or an artificial or prerecorded voice (47 C.F.R. § 64.1200(a)(2)). The same regulations will now also require businesses to obtain “prior express written consent” before placing telemarketing calls to residential lines using an artificial or prerecorded voice (47 C.F.R. § 64.1200(a)(3)). As a result, effective Oct. 16, oral consent is not enough. There are three problems with this new regulation.

First, the written consent requirement adds additional teeth to an already intolerant statute. But why? Over the last few years, countless big conglomerates and small mom-and-pop shops alike have been forced to incur significant costs in defending and potentially settling class actions seeking massive penalties for seemingly annoying telephone calls, text messages, or unwanted faxes. To our knowledge, no one has complained that defendants are not getting hit hard enough in these class actions. So why does the FCC feel the need to make an already tough statute even harsher?

Second, the new requirement is designed to address a problem that does not need addressing. If a consumer wants to receive telemarketing calls and orally communicates this desire to a business, why does the FCC need to step into and void this agreement between two consenting parties?

The changes will make an already demanding statute even more challenging for businesses.

Granted, written consent is easier to prove than oral consent, and businesses that make telemarketing calls based on oral consent may have difficulty proving this affirmative defense at trial. But should that choice not be left to the business judgment of the officers running their respective corporations? There is little reason for the FCC to force a company to have better proof of its potential affirmative defenses when the downside of not doing so rests solely with the company.

If the company feels that it will be able to prove adequately that it obtained valid oral consent, there is no reason it should not be allowed to make this showing. This is especially true given that the written consent requirement also increases the burden on the consumer who must now take the time to document her desire to receive telephone calls and is no longer permitted to simply communicate her intention verbally.

Third, the revised regulation comes with a new definition that appears to defeat an important defense that parties in TCPA class actions had occasionally raised. The new regulation defines “prior express written consent” in 47 C.F.R. § 64.1200(f)(8), as follows:

(8) The term prior express written consent means an agreement, in writing, bearing the signature of the person called that clearly authorizes the seller to deliver or cause to be delivered to the person called advertisements or telemarketing messages using an automatic telephone dialing system or an artificial or prerecorded voice, and the telephone number to which the signatory authorizes such advertisements or telemarketing messages to be delivered.

(i) The written agreement shall include a clear and conspicuous disclosure informing the person signing that: (A) By executing the agreement, such person authorizes the seller to deliver or cause to be delivered to the signatory telemarketing calls using an automatic telephone dialing system or an artificial or prerecorded voice; and (B) The person is not required to sign the agreement (directly or indirectly) or agree to enter into such an agreement as a condition of purchasing any property, goods, or services.

(ii) The term “signature” shall include an electronic or digital form of signature to the extent that such form of signature is recognized as a valid signature under applicable federal law or state contract law. (47 C.F.R § 64.1200(f)(8))

The act of turning over one's phone number, while arguably (and logically) evidencing consent to be called at that number, will not satisfy the FCC's new rule.

On its face, the FCC's inclusion of a definition provides some clarity, as the prior version of the regulations provided no definition of prior express consent.

But the new definition comes with a heavy price. It appears to destroy an important defense that some courts had accepted — that a plaintiff “consents” to receiving calls by voluntarily providing her phone number during a business transaction. Because of the new definition, and depending on the exact circumstances, as of Oct. 16 this argument may no longer present a viable defense. The mere act of turning over one's phone number, while arguably (and logically) evidencing consent to be called at that number, will not satisfy the new definition of prior express written consent. And that will make an already demanding statute even more challenging for businesses.

The End of Established Business Relationship Defense
The FCC's new regulations will also make life more difficult for businesses that seek nothing more than to contact current customers with whom they already have an established business relationship. As of Oct. 16, 2013, the new regulations delete the “established business relationship” (“EBR”) exception for artificial or prerecorded voice calls to residential lines. (47 C.F.R. § 64.1200(a)(3)).

The prior version of the regulations included an exception for calls to residential lines using an artificial or prerecorded voice without prior express consent where the call was “made to any person with whom the caller has an established business relationship at the time the call is made.” (See 47 C.F.R. § 64.1200(2), effective until Oct. 16).

Beginning next month, companies will no longer be able to rely on the EBR exception. Instead, when making calls using an artificial or prerecorded voice to residential subscribers, businesses will now need to obtain customers' prior express written consent for all such calls, irrespective of any established business relationship. As with the prior express written consent requirement, elimination of the EBR exception creates more stringent requirements for businesses and tilts the playing field ever more in favor of consumers and their lawyers.

More Arrows in the FCC Quiver
By way of its July 11, 2012, revisions to the TCPA regulations, the FCC has added additional arrows to the class action plaintiffs bar's already formidable TCPA quiver.

Effective Oct. 16, businesses must obtain the prior express written consent, as defined in 47 C.F.R. § 64.1200(f)(8), of residential subscribers prior to making telemarketing calls using an artificial or prerecorded voice. This is the case regardless of whether the businesses have an established business relationship with the residential subscriber to be called. Businesses must also obtain the prior express written consent of mobile phone users prior to making telemarketing calls using either an ATDS or an artificial or prerecorded voice.

Failing properly to follow the regulations could expose businesses to massive potential liability.

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