Under the TCPA, prior express consent is required for any non-telemarketing call – such as a debt collection call – made to a mobile phone using an ATDS and/or an artificial prerecorded voice. (A higher standard – prior WRITTEN express consent – is required to make calls to cell phones using an ATDS or a prerecorded voice for any telemarketing).

In addition to alleging that the companies never received prior express consent, certain plaintiffs alleged that (1) their cell phone was called concerning another person’s Capitol One account; (2) Capitol One was repeatedly asked to stop calling, but calls continued nonetheless; and (3) Capitol One obtained plaintiffs’ cell number from a third party via skip tracing.

The settlement is a good reminder of the repercussions that may follow when a company has not closely reviewed and ascertained the sources from which it obtains phone numbers, whether any are cellular phone numbers and the likelihood that such numbers still belong to the customer (or have since been disconnected and reassigned), and are matched with the correct type of consent to be called. Even slight oversights in this area are exposing a number of companies to claims of potential violations (and massive financial exposure) under the TCPA.

With the rise in class action cases for alleged TCPA violations, businesses engaging in telemarketing should review their practices for obtaining customer consent prior to implementation of the new rules on October 16, 2013.

For more information, click to read our client advisory.

In addition, the FTC proposes to amend the Rule to explicitly state the following requirements, which it also believes are consistent with current enforcement policy. These proposed amendments would:

1. Modify the prohibition against sellers sharing the cost of Do Not Call Registry fees to emphasize that the prohibition is absolute;
2. Illustrate the types of impermissible burdens on consumers that deny or interfere with their right to be placed on a seller’s or telemarketer’s entity-specific do-not-call list (such as requiring the person to listen to a sales pitch before accepting the Do Not Call request or assessing a charge or fee for honoring the request); and
3. Clarify that the recording memorializing the express verifiable authorization required before a seller or telemarketer bills a customer or donor (unless payment is made by debit or credit card) must include an accurate description, clearly and conspicuously stated, of the goods or services or charitable contribution for which the payment authorization is sought.

The FTC has also proposed to prohibit sellers or telemarketers from requesting or receiving payment for recovery services for losses incurred in any prior transaction, regardless of whether that loss occurred via telemarketing, the Internet, or another means or medium, until seven business days after the consumer received the recovered money or merchandise. The prohibition currently is limited to services for the recovery of money lost through telemarketing fraud only. However, the Commission notes that consumer complaints and the FTC’s regulatory efforts reveal that consumers are susceptible to the same type of fraud over the Internet, and are therefore equally susceptible to pitches for telemarketing services promising to recover, in exchange for an advance fee, the money or merchandise lost as a result of such Internet fraud.

Finally, the FTC has also proposed to bar sellers and telemarketers from accepting remotely created checks, remotely created payment orders, cash-to-cash money transfers, and cash reload mechanisms (collectively defined as “novel payment methods”) as payment during inbound or outbound telemarketing transactions. The Commission’s rationale for the proposed changes is, in part, that the consumer protections typically associated with traditional payment methods, such as credit cards, debit cards, and electronic fund transfers are not present with novel payment methods. Further, the Commission expresses concern that the “express verifiable authorization” provision currently in the TSR, which requires telemarketers to obtain a consumer’s express verifiable authorization for all telemarketing transactions where payment is made by a method other than a credit or debit card, does not adequately protect consumers against fraud, as evidenced by the law enforcement actions discussed in the NPRM.

The comment period will remain open until July 29, 2013.

This Attorney General action should serve as a reminder that do-not-call compliance is not only being monitored and enforced by the Federal Trade Commission, but states, too, are active in the area.

The Declaratory Ruling thus resolves a central question that is raised in a number of TCPA lawsuits: sellers may only be held liable for actions of those third party telemarketers that are determined to be agents, applying the federal common law of agency. Moreover, a manufacturer that simply puts a product in the chain of commerce that is later resold by a seller is not likely to be affected by this Ruling, provided that it does not otherwise trigger the TCPA’s seller definition.

With respect to how and under what circumstances the federal common law of agency will be applied to find a seller vicariously liable for the acts of third parties, the future is unclear – particularly with respect to claims based on alleged apparent authority and whether the FCC’s “illustrative examples” of such apparent authority set forth in the Ruling will influence courts in interpreting how the federal common law of agency should apply to the specific facts of a particular case.

For more on this decision, please reference the Kelley Drye client advisory.

The new substantive provisions relate to express written consent requirements and heightened opt-out mechanisms. Under the new law, telemarketers may not deliver a pre-recorded message without the express written agreement of the consumer that (1) was obtained only after the telemarketer’s clear and conspicuous disclosure that the purpose of the agreement is to authorize telemarketing calls to that customer; (2) was not executed as a condition of purchasing any goods or service; (3) evidences the willingness of the consumer to receive telemarketing sales calls from a specific seller; and (4) includes the consumer’s telephone number and signature.

In addition, the new law requires that telemarketers provide customers with more opt-out mechanisms then currently are mandated. Under existing law, a telemarketer delivering a pre-recorded message to a live customer must offer an automated interactive voice and/or keypress activated opt-out mechanism to assert a do-not-call request. The new law, however, further requires that the call also include a mechanism to allow the consumer to automatically add the number called to the seller’s entity-specific do-not-call list. Once this option is invoked, the telemarketer must immediately end the call. Further, if the call is answered by a consumer’s voicemail, the new law requires that the telemarketer’s message include a toll-free number at which the consumer may add the number called to the seller’s entity-specific do-not-call request. Again, once this option is invoked, the telemarketer must immediately end the call.

In addition, the new law requires that all telemarketers doing business in New York register with the Department of State, which will now have the authority to revoke or suspend the registration of non-compliant telemarketing companies and impose fines and/or misdemeanor charges. According to a press release from Governor Cuomo’s office, fewer than 30 telemarketers are currently registered in New York. In contrast, neighboring New Jersey has over 500 out-of-state telemarketers registered to do business in that state.

The legislation enacts substantial changes to telemarketing activities conducted in the State of New York, and all affected companies should familiarize themselves accordingly.

The company asked consumers to provide their numbers on sweepstakes entry forms so that the company could contact them if they won. According to the FTC, however, the company also contacted non-winners with sales calls. Although the Telemarketing Sales Rule generally allows a company to call a consumer on the Do Not Call Registry for up to 18 months if it has an “established business relationship” with the consumer, the FTC has warned that companies may not rely on a sweepstakes entry form as the basis for that exception.

This case serves as a reminder that companies cannot misrepresent the reason for collecting phone numbers or assume that just because a consumer gives the company a phone number, the company can place a sales call to the consumer.