If you communicate with consumers but have yet to come across the Telephone Consumer Protection Act of 1991, 47 U.S.C. § 227, et seq. (“TCPA”), an enterprising plaintiffs’ lawyer somewhere has substantial incentives to see that you do. Originally passed in 1991 to address telemarketing practices deemed to be an invasion of consumer privacy, the TCPA principally restricts certain types of calls, texts, and faxes made without the prior express consent of the called party (except in limited circumstances) using an automatic telephone dialing system (“ATDS”) and/or an artificial or prerecorded voice. It includes a robust private right of action accompanied by draconian statutory penalties for non-compliance—statutory damages of at least$500 and up to $1,500 per violation (i.e., each call, text, or fax).
These suits typically arise in the context of broad-based customer outreach or marketing programs or debt collection efforts, meaning that when those statutory damages are aggregated as part of a purported class action, defendants can find themselves facing tens of millions to potentially billions of dollars in exposure. The pressure to settle when faced with potentially crushing exposure is therefore enormous, and plaintiffs’ counsel knows it, making the settlements enormous, too: in two of many recent examples, Bank of America and Capital One agreed to pay roughly $32 million and $75 million, respectively, to settle TCPA suits. These lucrative settlements have attracted increasing numbers of plaintiffs’ attorneys, and dozens of new TCPA suits are filed every week. No industry segment is immune.
When Congress passed the TCPA, it directed the Federal Communications Commission (“FCC”) to prescribe rules implementing the statute. Since that time, the FCC has issued several Reports and Orders and Declaratory Rulings prescribing, modifying, and providing its interpretation of the meaning of such rules. Following the last major changes in the FCC’s TCPA rules in 2012, a number of petitions were filed seeking clarification of these rules or FCC statutory interpretations.
Following a contentious opening meeting on June 18, 2015 of the five FCC Commissioners, the FCC, after a sharply divided vote, disposed of twenty one pending TCPA petitions, issuing its much anticipated new Declaratory Ruling and Order (the “Declaratory Ruling”) late on Friday, July 10, 2015, setting forth a range of new statutory and policy pronouncements that have broad implications for businesses of all types that call or text consumers for informational or telemarketing purposes. While some of the FCC’s statements raise interesting questions and practical challenges, this summary analysis captures the FCC’s actions in key areas where many petitioners sought clarification or relief. Certainly there will be more to say about these key areas and other matters as analysis of the Declaratory Ruling and consideration of options begins in earnest. There will undoubtedly be appeals and petitions for reconsideration filed in the coming weeks—indeed, one petition for review of certain of portions of the Declaratory Ruling was already filed in the United States Court of Appeals for the District of Columbia Circuit. Notably, except for some limited relief to some callers to come into compliance on the form or content of prior written consents, these new interpretations of the TCPA are effective upon the release date of the Declaratory Ruling. Requests may be lodged, however, to stay its enforcement pending review.
Scope and Definition of an Autodialer
An important threshold question that various petitioners had asked the FCC to clarify was what equipment falls within the definition of an “automatic telephone dialing system” or “ATDS.” The TCPA defines an ATDS as:
equipment which has the capacity—
- to store or produce telephone numbers to be called, using a random or sequential number generator; and
- to dial such numbers. 47 U.S.C. § 227(a)(1) (emphasis added).
Two recurring points of disagreement have been: (1) whether “capacity” refers to present or potential capacity, i.e., whether it refers to what equipment can do today, or what some modified version of that equipment could conceivably do tomorrow; and (2) whether “using a random or sequential number generator” should be read to limit the definition in any meaningful way.
Stating that a broad definition would be consistent with Congressional intent and would help “ensure that the restriction on autodialed calls not be circumvented,” the FCC concluded that “the TCPA’s use of ‘capacity’ does not exempt equipment that lacks the ‘present ability’ to dial randomly or sequentially.” Rather, “the capacity of an autodialer is not limited to its current configuration but also includes its potential functionalities.”
The Declaratory Ruling stated that “little or no modern dialing equipment would fit the statutory definition of an autodialer” if it adopted a less expansive reading of the word “capacity.” But as for whether any “modern dialing equipment” does not have the requisite “capacity,” the agency declined to say:
[W]e do not at this time address the exact contours of the “autodialer” definition or seek to determine comprehensively each type of equipment that falls within that definition that would be administrable industry-wide…. How the human intervention element applies to a particular piece of equipment is specific to each individual piece of equipment, based on how the equipment functions and depends on human intervention, and is therefore a case-by-case determination.
Indeed, although the Declaratory Ruling insisted that this interpretation has “outer limits” and does not “extend to every piece of malleable and modifiable dialing equipment,” the only example that that Declaratory Ruling offered was anything but “modern”:
[F]or example, it might be theoretically possible to modify a rotary-dial phone to such an extreme that it would satisfy the definition of “autodialer,” but such a possibility is too attenuated for us to find that a rotary-dial phone has the requisite “capacity” and therefore is an autodialer.
Finally, the FCC majority rejected petitioners’ concerns that such a broad definition would apply to smartphones—not because it would be impossible to read that way, but because “there is no evidence in the record that individual consumers have been sued….”
Commissioner Pai’s dissent expressed concern that the FCC’s interpretation of the ATDS definition “transforms the TCPA from a statutory rifle-shot targeting specific companies that market their services through automated random or sequential dialing into an unpredictable shotgun blast covering virtually all communications devices.” He also noted that even if smartphone owners have yet to be sued, such suits “are sure to follow…. Having opened the door wide, the agency cannot then stipulate restraint among those who would have a financial incentive to walk through it.”
Commissioner O’Rielly took issue with the FCC’s “refusal to acknowledge” the other half of the statutory definition, specifically that equipment “store or produce telephone numbers to be called, using a random or sequential number generator.” 47 U.S.C. § 227(a)(1). “Calling off a list or from a database of customers … does not fit the definition,” he explained. And as for the reading of the word “capacity,” the Commissioner stated that the FCC majority’s “real concern seems to be that … companies would game the system” by “claim[ing] that they aren’t using the equipment as an autodialer” but “secretly flipping a switch to convert it into one for purposes of making the calls.” He explained that even if there had been examples of this in the regulatory record, “this could be handled as an evidentiary matter. If a company can provide evidence that the equipment was not functioning as an autodialer at the time a call was made, then that should end the matter.”
Given the breadth of the FCC’s purported interpretation of ATDS, which clashes with the views of a number of courts in recent litigation and introduces significant ambiguity, this portion of the Declaratory Ruling will most certainly be challenged.
Consent and Revocation of Consent
The Declaratory Ruling addressed the question of whether a person who has previously given consent to be called may revoke that consent and indicated that consumers have the ability to revoke consent in any “reasonable manner.” As dissenting Commissioner Pai noted, this can lead to absurd results if consumers are entirely free to individually and idiosyncratically select their mode and manner of revocation, particularly for any such oral, in-store communication. The Commissioner’s dissent asked ruefully whether the new regime would cause businesses to “have to record and review every single conversation between customers and employees….Would a harried cashier at McDonald’s have to be trained in the nuances of customer consent for TCPA purposes?……the prospects make one grimace.”
FCC Petitioner Santander had sought clarification of the ability of a consumer to revoke consent and, alternatively, to allow the calling party to designate the methods to be used by a consumer to revoke previously provided consent. In considering the TCPA’s overall purpose as a consumer protection statute, the FCC determined that the silence in the statute on the issue of revocation is most reasonably interpreted in favor of allowing consumers to revoke their consent to receive covered calls or texts. The Declaratory Ruling found comfort both in other FCC decisions and in the common law right to revoke consent, which is not overridden by the TCPA. The Declaratory Ruling stated that this interpretation imposes no new restriction on speech and established no new law.
The FCC noted that its prior precedent on the question of revocation was in favor of allowing consumer revocation “in any manner that clearly expresses a desire not to receive further messages, and that callers may not infringe on that ability by designating an exclusive means to revoke.” Stating that consumers can revoke consent by “using any reasonable method,” the FCC determined that a caller seeking to provide exclusive means to register revocation requests would “place a significant burden on the called party.” The Declaratory Ruling largely ignores the burdens placed on businesses by one-off individual revocations. The FCC majority also rejected the argument that oral revocation would unnecessarily create many avoidable factual disputes, instead stating that “the well-established evidentiary value of business records means that callers have reasonable ways to carry their burden of proving consent.”
Reassigned Number “Safe Harbor”
There is perhaps no issue that garners more frustration among parties engaged in calling activities than potential TCPA liability for calls to reassigned numbers. No matter how vigilant a caller is with respect to compliance, under the FCC’s preexisting and now expanded statements, it is impossible to eliminate the risk of exposure, short of not calling anyone. As explained in Commissioner O’Rielly’s Separate Statement: “numerous companies, acting in good faith to contact consumers that have consented to receive calls or texts, are exposed to liability when it turns out that numbers have been reassigned without their knowledge.” This portion of the Declaratory Ruling will also most certainly be subject to challenges.
In sum, the FCC: (1) rejected the “intended recipient” interpretation of “called party”; (2) was unswayed by the fact that comprehensive solutions to addressing reassigned numbers do not exist; (3) adopted what appears to be an unworkable “one-call exemption” for determining if a wireless number has been reassigned (a rule that constitutes “fake relief instead of a solution,” as explained by Commissioner O’Rielly); and (4) encouraged companies to include certain language in their agreements with consumers so that they can take legal action against consumers if they do not notify the companies when they relinquish their wireless phone numbers.
First, the FCC purported to clarify that the TCPA requires the consent of the “current subscriber” or “the non-subscriber customary user of the phone.” It found that consent provided by the customary user of a cell phone may bind the subscriber. The FCC declined to interpret “called party” as the “intended recipient,” as urged by a number of petitioners and commenters and held by some courts.
Second, the FCC quickly acknowledged and then set aside the significant fact that there exists no comprehensive public directory of reassigned number data provided by the carriers. Instead, it seemed flummoxed by the purported scope of information accessible to companies to address the reassigned number issue. The FCC suggested that companies could improvise ways to screen for reassigned numbers (e.g., by manually dialing numbers and listening to voicemail messages to confirm identities or by emailing consumers first to confirm their current wireless phone numbers) and explained that “caller best practices can facilitate detection of reassignment before calls.” Ignoring the reality of TCPA liability, the FCC explained that “[c]allers have a number of options available to them that, over time, may permit them to learn of reassigned numbers.” (emphasis added).
Third, the FCC purported to create an untenable “one-call exemption.” The Declaratory Ruling explained “that callers who make calls without knowledge of reassignment and with a reasonable basis to believe they have valid consent to make the call should be able to initiate one call after reassignment as an additional opportunity to gain actual or constructive knowledge of the reassignment and cease future calls to the new subscriber. If this one additional call does not yield actual knowledge of reassignment, we deem the caller to have constructive knowledge of such.”
One potentially helpful clarification made was the determination that porting a number from wireline to a wireless service is not to be treated as an action that revokes prior express consent, and thus the FCC stated that that prior consent may continue to be relied upon so long it is the same type of call for which consent was initially given. The FCC agreed with commenters who had observed that if a consumer no longer wishes to get calls, then it is her right and responsibility to revoke that consent. Unless and until that happens, however, the FCC stated that a caller may rely on previously provided consent to continue to make that same type of call. Valid consent to be called as to a specified type of call continues, “absent indication from the consumer that he wishes to revoke consent.” As wireline callers need not provide express consent to be autodialed, any party calling consumers would have to still be aware of the nature of the called number to determine whether appropriate consent to be called was present.
Finally, the FCC makes the suggestion that companies should require customers, through agreement, to notify them when they relinquish their wireless phone numbers and then initiate legal action against the prior holders of reassigned numbers if they fail to do so. “Nothing in the TCPA or our rules prevents parties from creating, through a contract or other private agreement, an obligation for the person giving consent to notify the caller when the number has been relinquished. The failure of the original consenting party to satisfy a contractual obligation to notify a caller about such a change [of a cell phone number] does not preserve the previously existing consent to call that number, but instead creates a situation in which the caller may wish to seek legal remedies for violation of that agreement.”
Treatment of Text Messaging and Internet-to-Phone Messaging
The Declaratory Ruling also addressed a number of issues that specifically affect text messaging under the TCPA. First, the FCC addressed the status of SMS text messages in response to a petition that asked the FCC to make a distinction between text messages and voice calls. The FCC reiterated that SMS text messages are subject to the same consumer protections under the TCPA as voice calls and rejected the argument that they are more akin to instant messages or emails.
Second, the FCC addressed the treatment of Internet-to-phone text messages under the TCPA. These messages differ from phone-to-phone SMS messages in that they originate as e-mails and are sent to an e-mail address composed of the recipient’s wireless number and the carrier’s domain name. The FCC explained that Internet-to-phone text messaging is the functional equivalent of phone-to-phone SMS text messaging and is therefore covered by the TCPA. The FCC also found that the equipment used to send Internet-to-phone text messages is an automatic telephone dialing system for purposes of the TCPA. In so doing, the FCC expressly rejected the notion that only the CAN-SPAM Act applies to these messages to the exclusion of the TCPA.
Finally, the FCC did provide some clarity as to one issue that had created significant confusion since the adoption of the current TCPA rules in 2012: whether a one-time text message sent in response to a consumer’s specific request for information constitutes a telemarketing message under the TCPA. The specific scenario that was presented to the FCC is one confronted by many businesses: they display or publish a call-to-action, they receive a specific request from a consumer in response to that call-to-action, and they wish to send a text message to the consumer with the information requested without violating the TCPA and the FCC’s rules.
The FCC brought clarity to this question by finding that a one-time text message does not violate the TCPA or the FCC’s rules as long as it is sent immediately to a consumer in response to a specific request and contains only the information requested by the consumer without any other marketing or advertising information. The FCC explained that such messages were not telemarketing, but “instead fulfillment of the consumer’s request to receive the text.” Businesses may voluntarily provide the TCPA disclosures in their calls-to-action, as the FCC noted in the Declaratory Ruling, but a single text message to consumers who responded to the call-to-action or otherwise requested that specific information be sent to them would not be considered a telemarketing message and, as such, would not require the advance procurement of express written consent.
Limited Exemptions for Bank Fraud and Exigent Healthcare Calls and Texts
The TCPA empowers the agency to “exempt . . . calls to a telephone number assigned to a cellular telephone service that are not charged to the called party, subject to such conditions as the Commission may prescribe as necessary in the interest of the privacy rights [the TCPA] is intended to protect.” 47 U.S.C. § 227(b)(2)(C). In March 2014, the FCC invoked this authority to grant an exemption from the TCPA’s prior express consent requirement for certain package-delivery related communications to cellular phones, requiring that for such communications to be exempt, they must (among other things) be free to the end user.
The Declaratory Ruling invoked that same provision and followed that same framework in granting exemptions for “messages about time-sensitive financial and healthcare issues” so long as the messages (whether voice calls or texts) are, among other things discussed below, free to the end user. The Declaratory Ruling referred to these two types of messages as “pro-consumer messages.”
The FCC first addressed a petition from the American Bankers Association (“ABA”), seeking an exemption for four types of financial-related calls: messages about (1) potential fraud or identity theft, (2) data security breaches, (3) steps to take to prevent identity theft following a data breach, and (4) money transfers. After analyzing the record before it regarding the exigency and consumer interest in receiving these types of communications, and finding that “the requirement to obtain prior express consent could make it impossible for effective communications of this sort to take place,” the FCC imposed the following very specific requirements in addition to the requirement that the messages be free to the end user: (1) the messages must be sent only to the number provided by the consumer to the financial institution; (2) the messages must state the name and contact information for the financial institution (for calls, at the outset); (3) the messages must be strictly limited in purpose to the four exempted types of messages and not contain any “telemarketing, cross-marketing, solicitation, debt collection, or advertising content;” (4) the messages must be concise (for calls, generally one minute or less, “unless more time is needed to obtain customer responses or answer customer questions,” and for texts, 160 characters or less); (5) the messages must be limited to three per event over a three-day period for an affected account; (6) the messages must include “an easy means to opt out” (an interactive voice and/or key-press activated option for answered calls, a toll-free number for voicemail, and instructions to use “STOP” for texts); and (7) the opt-out requests must be honored “immediately.”
The FCC then addressed a petition from the American Association of Healthcare Administrative Management (“AAHAM”) seeking similar relief for healthcare messages. Relying on its prior rulings regarding the scope of consent and the ability to provide consent via an intermediary, the FCC stated that (1) the “provision of a phone number to a healthcare provider constitutes prior express consent for healthcare calls subject to HIPAA by a HIPAA-covered entity and business associates acting on its behalf, as defined by HIPAA, if the covered entities and business associates are making calls within the scope of the consent given, and absent instructions to the contrary”; and, (2) such consent may be obtained through a third-party when the patient is medically incapacitated, but that “ just as a third party’s ability to consent to medical treatment on behalf of another ends at the time the patient is capable of consenting on his own behalf, the prior express consent provided by the third party is no longer valid once the period of incapacity ends.”
The FCC also granted a free-to-end-user exemption for certain calls “for which there is exigency and that have a healthcare treatment purpose”: (1) appointment and exam confirmations and reminders; (2) wellness checkups; (3) hospital pre-registration instructions; (4) pre-operative instructions; (5) lab results; (6) post-discharge follow-up intended to prevent readmission; (7) prescription notifications; and (8) home healthcare instructions. The FCC specifically excluded from the exemption messages regarding “account communications and payment notifications, or Social Security disability eligibility.”
The Declaratory Ruling imposed mostly the same additional restrictions on free-to-end-user health-care related calls as it did with free-to-end-user financial calls: (1) the messages must be sent only to the number provided by the patient; (2) the messages must state the name and contact information for the healthcare provider (for calls, at the outset); (3) the messages must be strictly limited in purpose to the eight exempted types of messages, be HIPAA-compliant, and may not include “telemarketing, solicitation, or advertising content, or . . . billing, debt-collection, or other financial content”; (4) the messages must be concise (for calls generally one minute or less, and for texts, 160 characters or less); (5) the messages must be limited to one per day and three per week from a specific healthcare provider; (6) the messages must include “an easy means to opt out” (an interactive voice and/or key-press activated option for answered calls, a toll-free number for voicemail, and instructions to use “STOP” for texts); and (7) the opt-out requests must be honored “immediately.”
Service Provider Offering of Call Blocking Technology
A number of state Attorneys General had sought clarification on the legal or regulatory prohibitions on carriers and VoIP providers to implement call blocking technologies. While declining to specifically analyze in detail the capabilities and functions of particular call blocking technologies, the FCC nevertheless granted the request for clarification and stated that there is no legal barrier to service providers offering consumers the ability to block calls – using an “informed opt-in process” at the individual consumer’s direction. Blocking categories of calls or individual calls was seen as providing consumers with enhanced tools to stop unwanted robocalls.
Service provider groups, which expressed concern that any blocking technology could be either over or under-inclusive from an individual consumer’s perspective, were provided the assurance that while both the FCC and the FTC recognize that no technology is “perfect,” accurate disclosures to consumers at the time they opt-in for these services should suffice to allay these concerns. The Declaratory Ruling also noted that consumers are free to drop these services if they wish, and encouraged providers to offer technologies that have features that allow solicited mass calling, such as a municipal or school alerts, to not be blocked, as well as to develop protocols to ensure public safety calls or other emergency calls are not blocked.