May-June 2010 - Call Compliance News

In this issue:

• The FTC has obtained an injunction halting three companies’ allegedly deceptive telemarketing calls.
• An Illinois federal court has ruled that a debt collector did not have consent to place prerecorded calls to a consumer that provided his telephone number to the original creditor.
• Heartland Payment Systems has entered into a settlement with MasterCard following one of the largest customer data breaches in history.

Commentary on this month's news.

FTC

The FTC has announced the settlement of an enforcement action against a telemarketer and its client for alleged violations of the Telemarketing Sales Rule’s opt-out disclosure requirement for prerecorded telephone calls.  The rule requires that the opt-out disclosure be made promptly after only disclosure of the name of the caller and the purpose of the call. The rule also requires that a consumer who opts out be added immediately to the caller’s internal “do-not-call” list and the call then disconnected.

The FTC has settled charges against an Arizona-based telemarketer after alleging that the company falsely represented that purchase of household items such as light bulbs and trash bags would benefit charities or other persons.  The order imposes a judgment of $26.3 million against the defendants.

The FTC has issued an opinion letter considering prerecorded messages to cable subscribers regarding additional foreign language channels included in the customer’s existing subscription.  Because the messages were intended to notify the customers of temporary access to the expanded channels, which would later be available for purchase, the FTC concluded that the calls were telemarketing and thus the prerecorded messages could only be sent with express written consent and if the message contains certain disclosures.  Letter to Jean L. Kiddoo, February 4, 2010. Generally, even if a call involves a free item or no sales attempt, if it is intended to result in a later sale of goods or services it is “telemarketing” and subject to the TSR and other federal and state restrictions.

The FTC has issued another opinion letter holding that inbound calls transferred to a prerecorded message are not subject to the FTC’s restriction on outbound telephone calls containing prerecorded messages.  Letter to Mullen, February 4, 2010.

The FTC Red Flag Rule which requires covered organizations to implement a written identity theft prevention program is slated to go into effect on June 1, 2010.  Covered organizations include most creditors and other financial organizations.  The compliance deadline has already been delayed several times, and the FTC may not delay it again.

The FTC has obtained an injunction halting three companies’ allegedly deceptive telemarketing calls including prerecorded calls offering to reduce consumers’ credit card interest rates.  Among the allegations were that the companies delivered prerecorded calls from “Card Services” or “Financial Services” thus implying that a relationship existed between the caller and the recipient of the call.  The complaint also alleged that the companies violated the Telemarketing Sales Rule by misleading consumers about the companies’ refund policies, calling numbers on the national “do-not-call” registry, failing to honor company-specific “do-not-call” requests and making deceptive representations regarding credit card interest rates.  A United States district judge appointed a receiver to take over the assets of the businesses.

Consumer Privacy Data Breach

Heartland Payment Systems has entered into a settlement with MasterCard following one of the largest customer data breaches in history.  After all settlements, the company likely will pay more than $100 million in damages based on the breach.

TCPA

A class action settlement regarding prerecorded calls allegedly illegal pursuant to the TCPA has been reached for $750,000.  Class members will receive between $100 and $500 for each call received but must complete forms saying they received unwanted calls from the company.  Plaintiff’s attorney’s fees amounted to $245,000, or nearly a third of the total settlement.

Illinois
An Illinois federal court has ruled that a debt collector did not have consent to place prerecorded calls to a consumer even though the consumer provided his telephone number to the original creditor.  The court also ruled that failure to include the legal name of the caller in the call was a violation of the TCPA for which the plaintiff was entitled to sue.  The court also ruled that although the TCPA required the telephone number to be disclosed, it did not require it be disclosed at any given point in the script (i.e. it could be done at the end of the presentation).  Sengenberger v. Credit Control Services, Inc., 2010 U.S. Dist. LEXIS 43874. It is very important that you comply with this restriction when the TCPA requires the name of the caller to be disclosed. Although you may use a d/b/a you must disclose the legal name of the business, or be subject to potential TCPA liability.

Maine

Maine has begun requiring applicants for registration as a transient seller for consumer merchandise to obtain a letter from state taxation regulators stating that the applicant is exempt from sales tax in Maine. Generally, tax authorities are loath to make such a ruling and it may be that additional legal action is required if the state tax authorities won’t issue the required letters (and registration becomes impossible in the state).

Michigan

A Michigan court ruled that it did not have jurisdiction over a “do-not-call” claim because TCPA claims did not present federal questions.  Bridging Communities, Inc. v. Top Flite Financial, Inc., 2010 U.S. Dist LEXIS 42838.

Texas
I recently obtained a list of registered telemarketers in the State of Texas (a publicly available document) and learned that 35 companies were registered as telemarketers in that state. Texas’ registration statute is similar to many other states in that it exempts many types of business (e.g. publicly traded companies, regulated banks etc.) but I was still surprised to learn how few companies were registered there.

Virginia

Virginia has passed revisions to its computer crime statute (VA HB 1) banning intentionally falsifying electronic mail routing information or falsifying electronic mail transmission information.

Washington
A federal court heard oral argument with regard to whether the TCPA preempts Washington’s state law regarding prerecorded messages for interstate calls in early April then ruled in favor of the plaintiff- i.e. state law could apply to interstate calls.  A plaintiffs’ firm has brought several actions against businesses which placed calls compliant with federal law claiming those calls violated state law.  The court’s ruling will affect numerous such actions. You should be aware that your calls can be regulated by both federal and state law- a call can sometimes be legal under one but not the other regime.

Commentary

FTC Kicks Down Door of Auto Warranty Lead Company

FCC Rule Change Would Ban Many Political Prerecorded Calls

TCPA Case Considered by the United States Supreme Court