Mobile Communications Marketing: Effective Compliance Strategies to Avoid Penalties and Lawsuits Under the TCPA

Mobile Communications Marketing: Effective Compliance Strategies to Avoid Penalties and

Lawsuits Under the TCPA

Christine M. Reilly

Partner, Loeb & Loeb LLP

David J. Kaminski

Partner, Carlson & Messer LLP

December 3, 2014

11:00 – 12:30 p.m.1

Today’s Discussion Leaders

Christine M. Reilly is a partner in Loeb & Loeb’s Consumer Class Action and Regulatory Department in Los Angeles. She represents clients in consumer protection class actions, including those alleging violations of the Telephone Consumer Protection Act, as well as in investigations and proceedings initiated by the Federal Trade Commission, Federal Communications Commission, and other federal and state regulatory agencies. Ms. Reilly regularly counsels clients on compliance issues and hosts the TCPA Defense Forum on LinkedIn. www.loeb.com/tcpa-defense-forum/

David Kaminski is a Partner at Carlson & Messer LLP, a Los Angeles defense firm which focuses its practice in creditor’s rights and financial services litigation. For years, he has been a tireless advocate in defending the banking and credit industries in individual and class action claims brought under the TCPA as well as all consumer protection statutes. He has extensive experience in multi-district (“MDL”) and class action litigation. He is also a recognized authority and speaker on such topics.

David serves as outside compliance counsel to banks and creditors and has developed policies, procedures, and compliance/training programs to minimize their risks of liability. He regularly defends clients in investigations and proceedings initiated by the CFPB, FTC, FCC, and other federal and state government and regulatory agencies. http://cmtlaw.com/cm/

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Tread Carefully, Piranhas Ahead!

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Today’s Mobile Society

Technology and the rise of the mobile society • Approx. 4 billion mobile phones in use in the world • More than 3 billion are SMS text message enabled • Mobile is primary means of contact for many consumers • Companies are embracing mobile marketing• Mobile is immediate, effective and fairly inexpensive • 95-98% of text messages are opened within minutes

Privacy is a hot topic• President Obama and Congress’ agenda includes privacy• FTC has made consumer privacy a focus • FCC strengthened TCPA opt-out and consent requirements applicable to

telemarketing

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Today’s Mobile Society

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Today’s Mobile Society

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The Telephone Consumer Protection Act

• Regulates and restricts the use of automated technology to initiate outbound telephone calls

• Automated technology includes: artificial voices, prerecorded voice messages and autodialers

• Applies to voice calls, voice messages, SMS text messages, and faxes

• Provides for national and internal Do-Not-Call lists

• The Federal Communications Commission (FCC) has authority to regulate under the TCPA

• Sources of Authority• 47 U.S.C. § 227• 47 C.F.R. § 64.1200 et seq.

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Popularity of TCPA Class Actions

• Statutory Damages: $500 per call or actual damages, whichever is greater.

• Up to $1,500 per call for willful or knowing violations.

• Potential for significant damages.

• 1,000 x $500 = $500,000

• 10,000 x $500 = $5 million

• 50,000 x $500 = $25 million

• 100,000 x $500 = $50 million

• 500,000 x $500 = $250 million

• 1,000,000 x $500 = $500 million

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TCPA Overview

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What Does the TCPA Cover?

Residential

• Only covers telephone calls that are initiated using an artificial voice or prerecorded voice message

• Can initiate calls using live operators or autodialers without triggering the TCPA

Mobile—covers telephone calls that are initiated using an artificial voice or prerecorded voice message OR an “automatic telephone dialing system” (i.e., autodialer)

Note: Do-Not-Call requirements apply to both mobile and residential phone calls regardless of method of initiation!

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What is an Autodialer?

“Automatic telephone dialing system” means equipment that has the capacity:

(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and

(B) to dial such numbers.

47 U.S.C. §227(b)(1)(A)

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The FCC says…

• The “basic function” of an autodialer is the “capacity to dial numbers without human intervention.” (See In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02–278, 23 FCC Rcd. 559, 566, ¶ 13 n.48 (2008) (“2008 Order”) citing 2003 TCPA Order, 18 FCC Rcd at 14091-2, para. 132.

• An ATDS encompasses hardware that “when paired with certain software, has the capacity to store or produce numbers and dial those numbers at random, in sequential order, or from a database of numbers.” 2008 Order citing 2003 TCPA Order, 18 FCC Rcd at 14091, para. 131.

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The ATDS Defense

Dominguez v. Yahoo, Inc., 2014 U.S. Dist. LEXIS 36542 (E.D. Pa. March 20, 2014) (appeal pending; submitted after oral argument)

• Prior mobile subscriber had signed up to receive mobile alerts alerting user that email received to Yahoo account.

• In granting motion for summary judgment in favor of Yahoo, court held there was no ATDS because service did not randomly or sequentially generate numbers, but only sent messages using a queue system when a user received a Yahoo email.

• Since statutory definition was clear, court refused to rely on broader interpretation of ATDS by FCC (i.e., calling telephone numbers from a calling list is sufficient for ATDS purposes).

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The ATDS Defense

Sherman v. Yahoo, Inc., 2014 U.S. District LEXIS 13286 (S.D. Cal. Feb. 3, 2014)

• Plaintiff received notification from Yahoo on his mobile phone that a third party was sending him an instant message via Yahoo’s Messenger service.

• Yahoo argued that its equipment did not have the capacity to send messages to random or sequential numbers.

• Plaintiff argued that the system could dial all phone numbers by writing new software code, and therefore had the capacity to dial telephone numbers sequentially from a list of numbers.

• Yahoo’s motion for summary judgment denied due to genuine issue of material fact.

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The ATDS Defense

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Marks v. Crunch San Diego, LLC, No. 14-CV-00348-BAS-BLM, 2014 WL 5422976 (S.D. Cal. Oct. 23, 2014) • Granted summary judgment on ATDS issue• Held third party platform used to send text messages did not contain

random or sequential number generator• Held reference to 2008 ruling on ATDS definition violated Chevron

deference and read “random or sequential number generator” out of statute

• Regardless, held that equipment required human intervention as third party dialing platform explicitly banned inputting numbers into its system without either a response to a call to action or “written consent.”

• Implied that only present, not potential capacity is relevant

TCPA Requirements for

Mobile Marketers

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Consent for Mobile Calls

Customer service/ informational calls:

• Prior express consent required

Debt collection calls/Informational Calls:

• Prior express consent required

Marketing calls:

• Prior express written consent required (effective October 16, 2013)

You ALWAYS need some kind of consent when dialing mobile phones

using an automated dialing equipment, artificial voices or prerecorded

voice messages!

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The “TCPA Wireless Cliff” – October 16, 2013

Game changer for mobile marketing!

The FCC changed the rules. As of October 16, 2013, verbal consent to initiate mobile telemarketing telephone calls (including text messages) through automated technology (prerecorded voices or autodialers) is no longer sufficient. “Prior express written consent” is now required prior to initiating such calls. See In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Report and Order, 27 F.C.C.R. 1830, 1831 (F.C.C. Feb. 15, 2012).

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Prior Express Written Consent

For Telemarketing Calls Only:

Identify each specific seller to whom consent is being provided

Identify the consumer’s phone number

Indicate an affirmative agreement (i.e., I agree/ consent)

Disclose that the consumer is authorizing the seller to engage in advertising or telemarketing (i.e., offers for products/services)

Disclose that the calls will be made using automated technology

Disclose that the consumer is not required to provide consent as a condition of purchasing goods or services

Obtain a written signature from the consumer (either electronically through E-SIGN or handwritten)

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What is Telemarketing?

• “Advertisement” means any material advertising the commercial availability or quality of any property, goods or services.

• “Telemarketing” means the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person.

• As a general rule, calls that are not purely informational in purpose and message constitute telemarketing.

• Dual-purpose calls (calls that have both an informational and a telemarketing purpose) are considered telemarketing. See Chesbro v. Best Buy Stores, L.P., 705 F.3d 913, 918 (9th Cir. 2012)

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What is Telemarketing?

Telemarketing does not include:

• Debt collection calls

• Calls for political purposes

• Calls made by loan servicers regarding the servicing of a consumer loan, home loan modification

• Airline notification calls

• Bank and credit card balance and fraud alerts

• School and university notifications

• Research or survey calls

• Package deliveries

• Wireless usage notifications

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The “TCPA Wireless Cliff” – The Aftermath

• What about legacy or existing customer lists prior to October 16, 2013? Do they need to comply with the new requirements?

• Are some of the new disclosure requirements merely “technical” in nature?

• Is the “consent not required for purchase” disclosure required in all cases?

• Who is a “specific seller” that must be named in a disclosure?

• What do these changes mean for lead generation or affiliate marketing?

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Other TCPA Requirements

for Mobile Marketers

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Other Telemarketing Requirements

Interactive Opt-Out Mechanism (effective January 14, 2013):

• Any artificial or prerecorded message that could be answered by the consumer must provide an interactive opt-out mechanism announced at the outset and available throughout the call.

• If the consumer opts out, the number must be automatically added to the company’s Do-Not-Call list and the call must immediately disconnect.

• If the call could be answered by voicemail or an answering machine, the message must include a toll-free number that will allow consumers to call and opt out.

See 34 C.F.R. 64.1200(b)

Abandoned Calls (effective November 15, 2012):

• Number of dropped or abandoned calls must be no more than 3% of calls per campaignmeasured over a 30-day period.

See 34 C.F.R. 64.1200(a)(7)

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Do Not Call Rules

•DNC rules prohibit telemarketing calls or telephone solicitations to telephone numbers registered with the National DNC registry.•DNC Rules do not apply to informational or non-telemarketing calls.•Both residential and mobile phone numbers can be registered on the

National DNC Registry.•Business telephone numbers cannot be registered.

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Do Not Call Rules

• Do Not Call Lists:

• FTC National Registry

• State registries

• Company-specific

• DNC violations require a minimum of two calls

within a 12-month period.

• Several exemptions may apply:

• Written signed agreement

• Established business relationship

• Inquiry-based—three months

• Transactional—eighteen months

• Safe harbor

• Time of day restrictions (8am-9pm)

• State telemarketing restrictions

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Special Issues

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Revocation of Consent

Diamonds are forever, but is consent?

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Revocation of Consent

Gager v. Dell Financial Services LLC, 2013 U.S. App. LEXIS 17579 (3rd Cir. Aug. 22, 2013)

• Plaintiff provided cell number on application for credit to purchase computer equipment. Dell left prerecorded collection messages on her cell phone, continuing to call after plaintiff sent a letter requesting that the calls stop.

• In a case of first impression for a federal appellate court, the Third Circuit held that consumers have the right to revoke consent and that there is no temporal restriction on that right.

• Third Circuit reasoned:

• Consent can be revoked under common law.

• Any ambiguity should be resolved in favor of the consumer.

• FCC’s Soundbite advisory ruling suggests that consent under the TCPA can be revoked.

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Reassigned Mobile Numbers Consent of prior subscriber does not serve as “the prior express consent of the called party” required by the TCPA for autodialed calls to cell phone numbers. “Consent to call a given number must come from its current subscriber.”

Court ruling:

• Language of the statute: “called party” means current subscriber

• “The phrase ‘intended recipient’ does not appear anywhere in Section 227, so what justification could there be for equating ‘called party’ with ‘intended recipient of the call’?”

• Rejects argument that consent for telephone number is effective until revoked

Soppet v. Enhanced Recovery Systems, 2012 U.S. App. LEXIS 9560 (7th Cir. May 11, 2012); see also Osorio v. State Farm Bank, F.S.B., 2014 U.S. App. LEXIS 5709 (11th Cir. March 28, 2014)

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Vicarious Liability

• Sellers can be held liable for TCPA violations committed by third-party telemarketers making calls on the seller’s behalf.

• Two theories of liability: • Direct liability—seller has “initiated” the call given

its very direct involvement (e.g., giving the third party specific and comprehensive instructions as to timing and manner of the calls) or

• Vicarious liability—seller may be held vicariously liable for the acts of third party telemarketers under federal common law principles of agency (agency, apparent authority and ratification).

DISH Network Petition, FCC Declaratory Ruling issued on May 9, 2013.

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Vicarious Liability

• Plaintiff brought suit against Taco Bell alleging that text message marketing campaign by group of Chicago-area Taco Bell franchise owners violated the TCPA.

• Actual sender of the message was a third-party service provider, which acted at the direction of the Chicago owners’ advertising agency. Court found no evidence that Taco Bell controlled or had the right to control the company or the manner and means of the text message campaign, and therefore the third-party agency was not an agent of Taco Bell.

Thomas v. Taco Bell Corp., 2014 U.S. App. LEXIS 12547 (9th Cir. July 2, 2014) (unpublished)

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User-Initiated Texts

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Business-to-Business Marketing

• When it comes to the mobile provisions, there is no distinction between business to consumer calls and B2B calls.

• But many reasons why B2B calls should not be required to comply:

• Possible statutory argument.

• TCPA not designed to protect these types of calls.

• Businesses more savvy and sophisticated.

• Businesses are increasingly going mobile.

• Businesses are typically unaware that the business line they are calling is mobile.

• Businesses hold the number out as a business line and invite the contact.

• There is no compelling reason to distinguish between business landlines and business mobile phones.

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Best Practices

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Best Practices

• Vendor Agreements• Supplier Terms & Conditions/Indemnification• Brokered Lists• TCPA Disclosures• Scrubbing and Opt-Outs• Recordkeeping• TCPA For Your Business

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Brokered Lists

“Let’s buy a list!”

• Common practice in the advertising and marketing industry

• Demand proof from vendor of consumer opt-ins/consent

• How was the mobile phone number obtained?

• Business Reply Card• Telephone• Application• Online registration

• Was there a TCPA compliant disclosure?

• Double-opt ins are preferred – must be reliable

• If a lawsuit is filed, will the vendor provide you with a list of numbers and documentation regarding how consent was obtained?

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Brokered Lists

"Companies that use lead generators must exercise due diligence when they buy lists of phone numbers or else they can be on the hook for illegal telemarketing. Relying on a say-so that the numbers were obtained legally, or that the consumers have agreed to be called, even if their numbers are on the Do Not Call Registry, isn’t enough."

Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.

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TCPA Disclosures

Telephone

Text Message

Website Email

U.S. Mail

Paper Form

Mobile App

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TCPA Disclosures

Website Sign-Up

Consent: By checking this box and clicking the “I agree” button below, I verify this is my mobile number and consent to receive text messages via automated technology to this number regarding product offers by or on behalf of [name of seller(s)]. I understand that consent is not required to make a purchase. I also agree to the Terms and Conditions and the Privacy Policy. Message and Data rates may apply.

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TCPA Disclosures

SignageSIGN UP FOR OFFERS! Interested in receiving offers via text message to your mobile phone? Text “Join” to 78391 to sign up today! By texting “Join” from your mobile number, you agree to receive marketing messages generated by an automated dialer from ABC Company to your mobile number. Consent not required to make a purchase. Limit 5 txts/mth. Message and Data rates may apply.

Text Message[Company Name]: U r signing up 4 mobile offers via automated technology. Reply YES to confirm, NO to stop.

Confirmatory Text Message[Company Name]: Congrats! U r now signed up 4 mobile txt offers! Reply STOP to cancel, reply HELP for help.

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Scrubbing and Opt-Outs

Opt-Outs: Honor opt-outs immediately, whether verbal

or in writing.

DNC: Have a DNC policy, which includes regularly

scrubbing phone numbers against the federal DNC, state

and internal DNC lists.

Suppression Policy: Have a suppression policy and

procedure in place, which includes immediately

blacklisting and/or blocking phone numbers that

complain about the receipt of unauthorized calls.

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Recordkeeping• Maintain consent records for 4 years

• Carefully document the date and substance of changes, such as changes to any registration or opt-in process

• Maintain organized and detailed records so you can easily access, search, and retrieve relevant data

• Document the process and technology used to send text messages and/or make calls

• Create snapshots of information at static points in time

• Use Camtasia to record registration or opt-in processes

• Use templates to populate data

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TCPA For Your Business

Compliance Readiness Program

• Understand the law as applied to your business• Prepare appropriate policies and procedures• Train your employees• Create a consumer complaint “feedback loop”• Maintain good records• Monitor and test your policies

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THANK YOU

QUESTIONS?

David J. Kaminski, Partner

CARLSON & MESSER LLP

5959 W. Century Blvd., Suite 1214

Los Angeles, California 90045

Dir: (310) 242–2204

E-mail: [email protected]

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THANK YOU

QUESTIONS?

Christine M. Reilly, Partner

LOEB & LOEB LLP

10100 Santa Monica Blvd., Suite 2200

Los Angeles, California 90049

Dir: (310) 282–2361

E-mail: [email protected]

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Ryan Thurman

Contact Center Compliance

DNC.com

866-DNC-LIST (362-5478) x 116

[email protected]

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