TCPA guidelines can be tricky. Here's what you need to know to follow the guidelines and keep your customers happy.
If you want to strike fear into the heart of any business that calls customers or sales leads, just say "TCPA." Cases involving the TCPA, which stands for the Telephone Consumer Protection Act, represent the second highest filing in U.S. federal courts in 2016. These lawsuits have resulted in millions of dollars in judgments and settlements, with an average settlement of approximately $5 million. Add to that number the likelihood of hundreds of thousands of dollars in legal fees to defend against such an action and "TCPA" quickly begins to mean "Threatens Company's Perpetuity Act," because such expenses, fines and damages can be the end of a small business. Now, I bet most of you reading this article are thinking, "She's gotta be kidding. How can phone calls mean the end of my business?" Well, read on to find out exactly how that happens.
HISTORY OF THE TCPA
The TCPA was passed by Congress in 1991. It restricts telephone solicitations (telemarketing) as well as the use of automatic telephone dialing systems (ATDS) to call or text telephone numbers for which the called party is charged for the call. This includes calls to cell phones. The only relevant exception is if the calling party has the consent of the called party to make the call. Until the TCPA was amended on October 16, 2013, a company could call a cell phone based on having an established business relationship (EBR) with a customer. The TCPA also prohibits sending faxes unless several requirements are met. The fine for violation of the TCPA is $500 PER CALL, which is tripled to $1,500 for willful violations. Because fines are a set amount and do not rely on specific harm to the consumer, TCPA lawsuits have become a very attractive venture for class action attorneys who generally retain fifty percent or more of any judgment.
There are several complicating factors to complying with the TCPA. First, the definition of ATDS is not clear. The TCPA defines ATDS as "equipment which 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." However, this definition, especially as it relates to the meaning of "capacity," has never been interpreted clearly and coherently. The TCPA enforcement agency, the Federal Communications Commission (FCC), and numerous federal courts have issued conflicting opinions related to the definition of ATDS. Despite the statutory definition of ATDS, which requires the capacity to "store or produce telephone numbers to be called, using a random or sequential number generator", the FCC has held that a predictive dialer is an ATDS because it has the capacity to dial numbers without human intervention. Further, while the term "capacity" is not defined in the TCPA, the FCC has interpreted capacity to include not only the current capacity of the dialer but also the future capacity. This means that if the dialing system can be modified to dial in an automated fashion – even with the addition of software that is not currently owned by the calling party – the system is an ATDS. The FCC has even speculated that a cell phone can be considered an ATDS, because a cell phone has the capacity to automatically dial without human intervention through various apps that are available.
Before calling a cell phone, a dealer must either: 1) have consent to call the number; or 2) use a manual dialing system to call.
Dealers can place a call using an ATDS if they have proper consent. Depending on the reason for the call, they will need either prior express written consent or just prior express consent. If the call is for telemarketing purposes, the consent must be written consent. (The term "telemarketing" is broadly defined as "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.") If the call is transactional and not related to the sale of a product or service, the consent need not be in writing. The TCPA requires that the following elements be present to obtain written consent:
Consent must be obtained in a written agreement, which includes the signature of the person providing consent. An electronic signature or voice recording is sufficient to effectuate a written agreement pursuant to the E-SIGN Act.
Identity of the Seller
The consent must specifically indicate the seller(s) to whom consent is being provided.
The agreement must include the cellular telephone number to which the person consents to receive calls. If the written agreement includes more than one number, it must be clear to which number(s) the person is consenting to receive calls.
The consumer must take some affirmative action to indicate his/her assent.
The agreement must clearly and conspicuously disclose:
- That the person is authorizing the seller to make telemarketing calls;
- That calls will be made using an ATDS (or prerecorded message, if applicable); and
- The person is not required to provide consent as a condition of purchasing any good/services.
The seller has the burden of proof to show that consumers provided written consent to be called. All records should be kept for at least five years from the last date the consent is relied upon to make a call.
Typical disclosure language may look something like this: "By signing this form you authorize [dealership name] to contact you at [number provided] using an automated dialing system for telemarketing purposes. Your consent is not required as a condition of purchase."
If the call is transactional, such as an appointment reminder, collection call, or other non-marketing call, the dealer will only need prior express consent to place the call to a cell phone. The term "prior express consent" is not defined under the TCPA or FCC regulations. The FCC has, however, provided guidance regarding how this term is to be interpreted: "Persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary." In other words, if the customer provides the dealer his or her telephone number as a means of being contacted and does not revoke that consent, the dealer can contact the customer.
Once the dealer has consent, the dealer needs to have procedures in place to make sure that it honors all revocations of consent. If a consumer revokes consent, all calls placed after the revocation are a violation of the TCPA.
If the dealer does not have consent, it may only call a cell phone using a manual dialing system. As mentioned earlier, the FCC has refused to give clear guidance on what constitutes an ATDS. In its July 2015 Ruling, the FCC refused to "address the exact contours of the autodialer definition." The ruling solidified the FCC's very expansive stance that dialing equipment generally meets the TCPA definition of an ATDS, even if it is not presently using auto dialer functions. This expansive view means that potentially every telemarketing device on the market is an ATDS. Therefore, before relying on the fact that a system is a manual dialing system, the system should be reviewed by an expert to confirm that it does not have the capacity to function as an ATDS. Generally, the experts will want to ensure that the dialing equipment does not have the present or future ability to call a cell phone without human intervention being involved to place the call.
It is important to realize that the TCPA prohibitions against calls to cell phones also apply to text messages. Because text messages are very effective - studies show that 97% of text messages are opened and read within 3 minutes compared to 22% of emails – it is tempting to text without regard for the TCPA or its consent requirements. The FCC has ruled that a text is a call to a cellphone; therefore, all of the same rules that apply to calls to cellphones apply to texts. Before sending a text, the dealer must ensure that either it has consent or is using a manual texting platform. A dealer should have its system reviewed before relying on the fact that it is a manual system.
REASSIGNED OR WRONG NUMBER CALLS
To make matters more complicated, the FCC has ruled that if a company uses an ATDS to call a number for which it has consent but dials the wrong number or the number called has been reassigned, it is a violation of the TCPA. The FCC's logic is that the company placing the call does not have consent for calling the wrong number or for the person that assumes a reassigned number. For reassigned numbers, the FCC further ruled that it would allow only one call (regardless of whether the call is answered or provides notice that the number has been reassigned) before liability can be imposed. There is currently no comprehensive list for reassigned numbers (although some vendors sell lists that claim 80 percent accuracy for scrubbing reassigned numbers), making compliance impossible.
RECENT AUTO RELATED CLASS ACTION SETTLEMENTS
Still wondering how these cases can sink dealers' businesses? To further illustrate the potential risk, consider the following recent TCPA class action settlements:
- Interstate National Dealer Service - $4.2 million
- Sirius XM – proposed $35 million settlement
- Heartland Automotive Services (Jiffy Lube) - $47 million
- Chase Auto Finance - $10.2 million
- Lithia Motors - $2.5 million
The class action formula is fairly simple and likely one you have seen in some form before. Find one person with a complaint, determine if there is an opportunity to apply the facts of that complaint onto other customers, then file a class action and work the case for a large settlement before trial.
Dealers may think the statute does not apply to them – rest assured, it does. Before initiating any calling campaign, dealers need to make sure they understand the rules that apply to calls and texts to cell phone or consult with competent legal or compliance counsel. Calling cell phones using an ATDS and without the appropriate consent can be a very costly mistake.
Dealers can also reduce TCPA exposure with proper training, policies, and procedures. The best defense is a good offense through simplified compliance. Having focused for years on suing Fortune 500 companies, plaintiffs' attorneys are shifting their crosshairs onto small and medium businesses that are often unprepared to defend TCPA claims. Dealerships are no exception to this trend.
Reprinted by the NHADA with permission from Michele Shuster, a Partner at Mac Murray & Shuster LLP, where she brings extensive experience working with businesses of all sizes involved in highly regulated industries. A former Chief of the Ohio Attorney General's Consumer Protection Section, she now represents clients in consumer protection matters before the FTC, FCC, and state attorneys general, in addition to conducting regulatory compliance audits and providing counsel on advertising and privacy issues.