On October 16, 2013, new Federal Communications Commission (FCC) rules regarding promotional calls and text messages take effect. These regulations amend the Telephone Consumer Protection Act (TCPA) and bring the FCC’s notice requirements into conformity with the FTC’s prior express written consent standards under the Telephone Consumer Fraud and Abuse Prevention Act (TCFAP). Although these changes increase consistency across federal regulations, they also present new compliance challenges and regulatory risks for companies with established calling lists and practices.

Two significant changes

The FCC’s new rules make two significant, substantive changes to autodialed and prerecorded calling and text messaging that constitutes “telemarketing” or contains an “advertisement”. The TCPA, which was originally enacted to limit intrusive robocalls to consumers, distinguishes telemarketing messages from purely informational communications. Telemarketing calls are initiated “for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services” and are more strictly regulated. An “advertisement” is defined as “any material advertising the commercial availability or quality of any property, goods or services.” Calls that serve dual marketing and informational purposes will need to be evaluated individually by regulators to determine the primary purpose of the communication.

The first substantive change imposes a new, higher consent requirement on automated telemarketing to mobile phone numbers. Currently, businesses must obtain a caller’s prior express consent to send automated telemarketing messages to cell phones. Going forward, they will be required to obtain “prior express written consent” in order to continue automated advertising to mobile devices. Calls to hospital emergency lines, health care facilities, and other first responders are subject to the same rules.

Automated calls and texts to mobile phone numbers that are purely informational in nature will remain subject to the current “prior express consent” requirement. While companies may continue to collect oral consents prior to making informational calls, such consent is an affirmative defense and the burden of proof falls on the advertiser.

The second substantive change is the repeal of the “established business relationship” exemption for prerecorded telemarketing calls and texts to residential phone numbers. Prior to the implementation of the new rules, the FCC permitted prerecorded calls to residential lines without signed, written consent; provided there was an “established business relationship” between the advertiser and the consumer. Pursuant to the change, advertisers will have to obtain written consent even if they previously had a business relationship with the consumer. The elimination of this exception subjects all automated telemarketing calls to the heightened “prior express written consent” requirement, harmonizing the standard with the FTC 2008 rules under the TCFAPA, which apply strictly to interstate prerecorded telemarketing calls.

To satisfy the “prior express written consent” requirement, companies will need to obtain an affirmative, signed writing from every consumer authorizing automated telemarketing messages to his or her mobile or residential phone number. “Prior express written consent” constitutes an agreement in writing that bears the signature of the consumer; clearly authorizes the delivery of marketing text messages or telemarketing calls using an autodialer or prerecorded voice; includes the phone number to which the consumer authorizes such delivery; and clearly and conspicuously discloses that the consumer is not required to sign the agreement as a condition of a purchase. Electronic signatures are permissible, including “signing” a consent form via an email, text message, website form, telephone keypress, or voice recording. Advertisers must keep records of written consent for a period no shorter than four years.

Compliance concerns

Although the new rule becomes effective on October 16, 2013, there will be a twelve-month implementation period for the written consent requirement and phasing out of the established business relationship exemption. In that time, however, significant compliance questions will need to be addressed.

The FCC’s Report & Order does not clearly indicate whether oral consents obtained prior to October 16, 2013, will be considered sufficient going forward. This uncertainty leaves open the possibility that companies may need to re-solicit their existing call lists to obtain new written consents (“re-opt-in”) from each consumer before resuming telemarketing activities. Another open question is whether callers are permitted to send an automated telemarketing message to solicit a consumer’s written consent to being sent automated telemarketing messages.

Sanctions

However difficult the TCPA compliance task appears, the risk in getting it wrong may be even greater. The TCPA provides a private right of action and an array of remedies, including injunctive relief, statutory damages, and regulatory fines. Successful plaintiffs may recover their actual monetary losses or $500 per violation, whichever is greater, and up to $1,500 per willful or knowing violation. Regulatory forfeitures may reach up to $16,000 per violation for unlicensed callers.

The TCPA has been the subject of a large volume of litigation, both in terms of the numbers of cases brought and monetary awards at stake. A recent report by Megan Gajewski & David Zetoony of Bryan Cave LLP focusing on TCPA litigation trends indicates that 40 class action suits were brought in the first half of 2013. Of those, 88% alleged a failure to obtain consent as the primary cause of action.

The full impact of the FCC’s new order will not be evident until after its provisions are implemented and challenged in practice and in courts. Given the broad swath of companies and individuals implicated by these new requirements, both of the regulatory amendments are likely to receive significant public scrutiny in the near future.

For additional insights see this presentation from the recent IAPP Privacy Academy by Yaron Dori of Covington & Burling and Nancy Thomas and Julie O’Neill of Morrison & Foerster.