On July 10, 2015, the Federal Communications Commission (FCC) issued its omnibus Declaratory Ruling and Order (Ruling) addressing 21 petitions filed with the agency by various companies and trade associations seeking relief or clarification regarding the Telephone Consumer Protection Act of 1991 (TCPA). The Ruling was adopted almost a month earlier on June 18, 2015, by a 3-2 vote.

The Ruling, which became effective upon issuance, addresses several issues, the most concerning of which is a broader definition of "autodialer" and liability for calls that are made to recipients of telephone numbers that have been reassigned. Despite the Ruling being generally unfavorable to industry, there are some positive rulings for healthcare and financial companies, service providers and platforms that do not themselves initiate calls and messages, and companies providing on-demand text messages.

1. Definition of "Autodialer"

Of all issues covered by the Ruling, the definition of an "automatic telephone dialing system" (ATDS or autodialer) is of the greatest concern to industry, as it applies to all entities that use an automated system to place calls and transmit text messages.

First, the Ruling states that all predictive dialers (however named) constitute autodialers under the TCPA, given their "capacity" to autodial, and are "not limited to any specific piece of equipment and [are] without regard to the name given the equipment for marketing purposes."

Second, the Ruling provides that any dialing equipment that "has the capacity to store or produce, and dial random or sequential numbers" or to call from a list of phone numbers is an ATDS, even if calls are not presently being made using autodialing functions. If a system could be made to autodial through a software fix, then it is an autodialer. However, the Ruling leaves open the possibility that not all dialers with the capacity to autodial are necessarily covered, noting that "there must be more than a theoretical potential that the equipment could be modified" into an autodialer.

Third, the Ruling declares that parties cannot circumvent the TCPA by dividing ownership or functions of equipment among multiple entities. In other words, companies may not avoid liability when one piece of equipment used to dial numbers that is owned or operated by one party is connected to and used in concert with another device that only stores numbers to be called that is owned or operated by another party.

Unfortunately, the Ruling does not provide specific guidance as to what types of systems are covered by the definition (other than to note that it does not consider speed dialing and rotary phones to be autodialers). Key issues in determining whether a system is an autodialer under the Ruling will be its potential functionality and how easily it could be made to function as an autodialer.

The basic definition of autodialer still remains the same—the capacity to make calls without human intervention. But whether a piece of equipment that requires some element of human intervention can be found to be an autodialer will be "specific to each individual piece of equipment, based on how the equipment functions and depends on human intervention," and determinations will need to be made on a case-by-case basis. Perhaps most troubling is that the Ruling suggests rather inconsistently that calls that are manually dialed from equipment that has the capacity to autodial might still be considered to be autodialed calls, even though a manual call would—by definition—require some type of human intervention. The clear import of this Ruling is that the autodialer issue will continue to be vigorously litigated in the courts, and to what extent courts will afford the Ruling deference.

2. Reassigned Calls to Wireless Numbers

The FCC made clear that parties are liable for making calls to reassigned wireless numbers. Rejecting arguments that "called party" means the intended recipient of the call, the Ruling clarifies that the definition of a "called party" means "the [current] subscriber, i.e., the consumer assigned the telephone number dialed and billed for the call, or the non-subscriber customary user of a telephone number included in a family or business calling plan." However, the Ruling allows callers one free pass to make a call to a reassigned number before liability will attach under the TCPA (but no free pass is permitted for wrong or misdialed phone numbers). To qualify for the one free pass exemption, callers have the burden of showing that they reasonably believed they had consent to call and did not have actual or constructive knowledge of reassignment.

The one free call is to allow callers the opportunity to receive actual or constructive knowledge of reassignment before assuming liability. However, the Ruling states that even if the one call does not connect to a live person or voicemail or yield information regarding a reassignment, the caller will be deemed to have constructive knowledge of the reassignment. Even more, only a "single caller" gets a free pass, which is defined as "any company affiliates, including subsidiaries." In other words, affiliated entities get one call total, not one call each.

Despite the apparent absurdity of this position, the FCC provided various measures that it believes "make compliance feasible," most of which are wholly impractical and "demand the impossible." For example, callers may subscribe to one or more databases that monitor and compile mobile reassignments, though even the FCC acknowledges that these solutions are imperfect. Additional suggestions include market solutions that attempt to verify a telephone number's current subscriber, automated solutions that can identify disconnected numbers (e.g., triple-tones), carrier solutions that may be developed in identifying reassigned numbers, and implementing very tight policies and procedures across various platforms (and entities) to address and handle reassigned phone numbers. Perhaps the most absurd and offensive suggestion was for callers to contractually require customers to update their contact information and sue for breach of contract should they fail to do so.

Particularly disappointing was the FCC's rejection of any "bad faith" defense. The FCC places sole responsibility on identifying reassigned telephone numbers on the called party and none on the current subscriber, such that a subscriber who receives a reassigned telephone number may knowingly continue to receive violative calls or text messages—thereby accruing statutory damages of at least $500 a call/text—without having any burden or obligation to inform the caller that they are calling the wrong number. Reassigned wireless telephone numbers will continue to be a going concern for companies, promulgate TCPA litigation and will undoubtedly be challenged in the courts.

3. Maker of a Call/Text Messaging Platforms

The Ruling addresses petitions filed by messaging app providers YouMail, Glide, TextMe in regard to determining who makes a call or sends a text message. In one of the more favorable rulings, the Ruling makes clear that under a variety of circumstances it is the user and not the provider of a messaging app that makes the call for TCPA purposes. The FCC addressed three different scenarios presented by the petitions.

First, the Ruling clarified that a messaging app provider does not make or initiate a text message when it merely provides its users with the ability to set up auto-replies to incoming voicemails. In granting YouMail's petition, the FCC noted that the system was "reactive" and "tailored" in that it was the user who elected when and how reply messages were sent in addition to their content.

Second, the Ruling clarified when an app provider would be deemed to be the initiator of a text message. In denying Glide's petition, the FCC addressed a scenario in which Glide automatically sent invitation texts of its own choosing to every contact in the app user's contact list with little or no obvious control by the user.

Third, the Ruling suggests that an app provider does not make or initiate a call when one of the app users sends an invitational message to contacts, even though the app provider may control its content. In granting TextMe's petition, the FCC found TextMe's control over the invitational message to be "a reason for concern" but was ultimately persuaded that TextMe was not the initiator of the text message because the app user must affirmatively decide whether, when and to whom the user will send invitational messages.

In determining who is responsible for making a call, the FCC emphasized the importance of "some 'direct connection between a person or entity and the making of a call'" either by (1) taking steps necessary to physically place a call or (2) being "so involved in the placing of a specific telephone call as to be deemed to have initiated it." However, persons and entities "that might merely have some role, however minor, in the causal chain that results in the making of a telephone call" will not be found to have made or initiated the call.

In addition, the FCC indicated that other issues will be taken into consideration when determining who makes or initiates a call. For example, the agency will consider factors such as whether the platform provider willfully enables fraudulent spoofing of telephone numbers, assists callers in blocking caller ID, or knowingly allows its clients to use the platform for unlawful purposes.

Also of importance in addressing these petitions, the FCC made clear that "the fact that a consumer's wireless number is in the contact list on another person's wireless phone, standing alone, does not demonstrate consent to autodialed or prerecorded-calls, including texts."

4. Revocation of Consent

The Ruling declared that a called party may revoke consent at any time and through any "reasonable means," and callers may not limit the manner in which revocation may occur. The FCC, however, did make clear that porting a telephone number from wireline to wireless does not revoke prior express consent and that it is the consumer's "responsibility to revoke consent." Also, there is no TCPA violation when an individual who is not the subscriber or customary user of a phone answers it due to his or her proximity to the subscriber or customary user (e.g., passengers, houseguests).

In addressing what methods of revocation may be "reasonable," the FCC offered three examples: a consumer-initiated call, a response to a caller-initiated call, and "at an in-store bill payment location." The FCC will consider "the totality of the facts and circumstances," including whether the consumer could reasonably expect to "effectively communicate" his or her request via that method, and whether the caller could implement mechanisms to effectuate the request "without incurring undue burdens."

Importantly, the FCC will expect companies to implement and maintain "proper business records tracking consent," so good compliance policies and recordkeeping will be essential.

5. Exemptions for Particular Time-Sensitive Financial and Healthcare Messages

The FCC granted petitions submitted by various financial and healthcare trade associations regarding the ability of their members to transmit beneficial and time-sensitive non-marketing information to consumers without first obtaining their consent, subject to certain conditions. This ruling is consistent with other rulings issued by the FCC in recent years for messages and calls that are "expected and desired" by consumers, such as delayed package deliveries.

With respect to time-sensitive financial communications, the FCC exempts from the TCPA consent requirements calls or messages concerning (1) fraud and identity theft, (2) data security breaches of consumers' personal information, (3) steps taken to prevent or remedy the harm of identity theft or a data breach, and (4) money transfers. The FCC ruled that these communications present exigent circumstances in which a quick, timely message to a consumer is required to mitigate or prevent significant harm.

Similarly, the Ruling exempts various healthcare-related communications where there is an "exigency" and the message has a "healthcare treatment purpose," including appointment and exam confirmations and reminders, wellness checkups, hospital preregistration instructions, preoperative instructions, lab results, post discharge follow-up intended to prevent readmission, prescription notifications, and home healthcare instructions.

The Ruling exempts these communications from the TCPA's consent requirements, provided they meet the following conditions:

  • They must be "free-to-end-user," which means that the calling party must ensure that consumers are not charged in any way for the communication (including counting towards plan limits);
  • They are sent only to the wireless telephone number that the customer provided to the calling party;
  • They state the name and contact information of the caller (these disclosures must be made at the beginning of a voice call) and the purpose of the communication;
  • They do not contain any telemarketing, cross-marketing, solicitation, debt collection or advertising content;
  • They are short (one minute or less for voice calls and 160 characters or less for text messages);
  • They provide customers with an "easy" means to opt-out of receiving the communication (i.e., an interactive voice or key press-activated opt-out mechanism for voice calls); and
  • The calling party must immediately honor opt-out requests.

The Ruling also places limits on the number and frequency of these communications. No more than three financial communications (voice calls or text messages) may be made per event over a three-day period and only one healthcare communication may be sent per day, with a maximum of three communications per week per healthcare provider.

In addition, the Ruling notes that the exemption does not extend to healthcare communications pertaining to account communications, payment notifications or Social Security disability eligibility and further clarifies the interplay between the TCPA and the HIPAA Privacy Rules, stating that prior express consent can be given to a HIPAA-covered entity or business associate acting on the covered entity's behalf without running afoul of the TCPA, so long as calls are made within the scope of the consent granted. Consent may also be provided by a third party in cases where a patient is medically incapacitated (as that term is legally defined).

6. Text Messages and Internet-to-Phone Technology

The Ruling reiterates prior FCC interpretations that a text message is a "call" for purposes of the TCPA. The FCC also addressed the issue of Internet-to-phone text messages, which are typically sent first as emails with a combination of the recipient's telephone number and wireless provider's domain name or from a carrier's web portal and are then converted by the wireless carrier to text messages (e.g., 5555551111@sprint.messaging.net). The FCC found that such equipment used to send Internet-to-phone text messages qualifies as an autodialer under the TCPA and requires consumer consent. Similarly, other types of text messages sent from interconnected text messaging services also require consumer consent.

7. On-Demand Text Messages

A big win for retailers and others, the Ruling permits companies to respond to consumer-initiated text messages (e.g., text "discount" to shortcode to receive a coupon) without liability, holding that these are "fulfillment messages, not telemarketing." These messages may be sent in response to a consumer request pursuant to a call to action, provided the reply text (1) was requested by the consumer, (2) is sent one-time only, (3) is sent immediately in response to the consumer's request, and (4) contains only the information requested by the consumer, with no other marketing or advertising information.

8. Prior Express Written Consent

In 2012 the FCC adopted amended regulations to its rules, which require "prior express written consent" to use an ATDS or prerecorded voice to make telemarketing calls to consumers' cell phones or place prerecorded telemarketing messages to landlines. To obtain this consent under the amended regulations, a caller must obtain a written agreement from the called party that discloses that the telemarketing calls will be made with an ATDS (for cell phones) and that providing consent is not a condition of purchase, among other requirements. These rules went into effect on October 16, 2013.

Several petitioners requested clarification that any written consent received prior to October 16, 2013, should remain valid even if the mandatory disclosures were not provided when the consent was obtained. The FCC denied this request, but granted the petitioners and their members (1) a retroactive waiver from October 16, 2013, to the date of the Ruling (July 10, 2015), and (2) a waiver for 89 days following the release of the Ruling. After that date, any call made without the appropriate consent—as defined in the amended regulations—will be deemed a TCPA violation.

No waiver was provided for entities that did not petition the FCC on this issue (except to the extent that such entities were members of a petitioning association on the date the Ruling was released).

9. Call Blocking Technology

Lastly, the FCC clarified that there is no legal barrier prohibiting carriers or VoIP providers from implementing call-blocking technology that consumers and businesses can use to block individual calls or categories of incoming calls. However, carriers that offer this service must adequately disclose the risk of inadvertently blocking desired calls, including the approximate magnitude of the risk, where ascertainable. The FCC encourages carriers to provide features that will allow customers to check what calls have been blocked and to easily report and correct blocking errors.

Why it matters: Given the drastic nature of certain aspects of the Ruling, there will likely be significant confusion and uncertainty by businesses seeking to comply with its terms. We also anticipate industry challenges to the Ruling, which has already begun in the form of several trade associations and companies filing Petitions for Review in various appellate courts, including the Seventh and D.C. Circuits of Appeal. Until the dust settles, businesses that communicate with customers and prospects by telephone and/or text message or have vendors that do so on their behalf should consider how the Ruling impacts their consumer outreach.