Home security and telemarketing company Versatile Marketing Solutions, Inc. (“VMS”) recently entered into a $3.4 million settlement agreement with the Federal Trade Commission (“FTC”) to resolve a complaint filed against it in the United States District Court for the District of Massachusetts alleging violations of the Telemarketing and Consumer Fraud and Abuse Prevention Act.  Pursuant to the terms of the settlement, VMS and its principal are enjoined from placing any telemarketing calls to consumers whose telephone numbers appear on the Do Not Call Registry (the “DNC Registry”) unless VMS obtains express written permission from the consumers to do so.  The settlement is particularly damaging in light of the fact that VMS relied on its lead generator’s representations that the consumers that received the calls at issue in the complaint consented to receive such calls.  In effect, VMS is now paying the penalty for blindly relying on its lead generator.

The Allegations

In its complaint, the FTC alleges that VMS initiated more than 2 million outbound telephone calls to consumers between November 2011 and July 2012, 1 million of whom were already on the DNC Registry.  VMS obtained its consumer information from a lead generator that used a telephone “safety survey” to obtain consumer contact information.  The complaint alleges that the lead generator itself did not obtain consumer consent to place the initial “safety survey” calls and, moreover, that the lead generator did not obtain consent from the consumers during the calls to receive future telemarketing calls from VMS.  The complaint further alleges that “[t]he ‘safety survey’ was not a bona fide survey.  Rather, the lead generator used [the] ‘safety survey’ as a pretext to identify consumers who might be interested in purchasing a home security system or home security monitoring services and receive calls regarding such interest.”  Despite the actions of the lead generator, the FTC alleged that VMS was culpable, in part because “many consumers complained to VMS that they had received a robocall and/or that they had been called despite the fact that their phone numbers were on the [DNC] Registry.”  According to the FTC, VMS continued placing telemarketing calls despite these clear warning signs that its lead generator had not obtained from consumers the requisite consent to do so.

The Settlement

In addition to an injunction preventing VMS from calling consumers in the future unless they first obtain express written consent, VMS also agreed to strict restrictions on its ability to obtain and use lead generators on a prospective basis.  Specifically, within 90 days of signing the settlement agreement, VMS must review all of its leads, and if those leads were obtained in violation of state or federal law, VMS must immediately cease purchasing leads from such lead generator(s).  Additionally, VMS must provide a copy of its settlement agreement to its lead generators and obtain from them an electronic acknowledgement of receipt of the agreement.

Despite the $3.4 million agreement, VMS will only have to pay $320,000.00 to the FTC due to representations that it made concerning its financial condition.  However, if those representations prove untrue, the full amount shall become due and owing.

Protect Yourself

In this instance, VMS took the full brunt of its lead generator’s unlawful actions.  VMS trusted that its lead generator had obtained for it the right to telemarket to the consumer information provided to VMS and turned a blind eye to warning signs that its belief may have been untrue.

The Bottom Line

Telemarketers and advertisers should take caution and safeguard against any third-party non-compliant lead generator practices that they will ultimately pay the price for.  This can be done through carefully worded lead generation agreements and ongoing monitoring/auditing of marketing partner practices and procedures.