Insights

The new Telephone Consumer Protection Act's consent standard is garnering controversy in the telemarketing industry. New consent rules became effective on October 16, 2013, and two associations have filed petitions with the Federal Communications Commission seeking relief from retroactive application of the new rules to old consents.

The FCC has requested public comment on the two petitions regarding the TCPA's new "prior express written consent" standard. A petition filed by the Coalition of Mobile Engagement Providers seeks a declaratory ruling from the FCC that the new consent standard does not apply to written consents that callers obtained prior to this effective date. The Direct Marketing Association's petition approaches the issue slightly differently, requesting that the FCC forbear from enforcement of the new disclosure requirements regarding previously obtained written consents.

The new "prior express written consent" standard replaces the old "prior express consent" standard for sales contacts. These standards act as exceptions to TCPA prohibitions against telemarketing calls to residential and cell lines. The consent standard applies to (1) sales calls to cell phones that are placed using an automatic telephone dialing system or a prerecorded message as well as (2) sales calls to residential lines that are placed using a prerecorded message.

In addition to phone calls, because the FCC regulates text messages as telephone calls, sales texts that use equipment that satisfies the TCPA's "automatic telephone dialing system" definition are also subject to this new consent standard. An "automatic telephone dialing system" is a system that is capable of storing and dialing numbers using a number generator and is synonymous with "autodialing."

Prior to October 16, 2013, many autodialer and prerecorded calls, whether or not they had a sales purpose, were subject to the "prior express consent" standard. A 2008 FCC declaratory ruling had relaxed the consent standard, allowing callers to consider consent having been granted when a consumer volunteers their cell number to the caller. And while "prior express consent" was never defined, the new "prior express written consent" standard is defined, and it includes the requirement of a "clear and conspicuous disclosure" that has become the subject of controversy.

The FCC Report and Order announcing the new, heightened standard was released on February 15, 2012, and the FCC gave callers well over one year to implement whatever changes were necessary to comply with the new standard. However, the Direct Marketing Association argues that the cost of returning to consumers who have already provided written consent would be exorbitant and the result would confuse consumers.

Michael Goodman provided a more detailed overview of the new rules in the October 2013 edition of Basis Points. He noted four main changes: (1) the consent must be in the form of a writing signed by the consumer that includes the phone number (E-SIGN would comply); (2) a purchase cannot be conditioned on the consumer providing the consent; (3) the "clear and conspicuous" disclosure cannot be hidden in other content; and (4) callers must affirmatively disclose that the consent is for an autodialer or prerecorded message and that they aren't allowed to condition a purchase on providing this consent.

Because of the nature of the last change, the affirmative disclosure, the consents that callers had been relying on would not satisfy the new standard. Prior to October 16, 2013, callers were not making these specific disclosures to consumers in obtaining their consent.

Neither petitioner is seeking a change to the FCC's "prior express written consent" standard on a prospective, going-forward basis. Rather, the Coalition of Mobile Engagement Providers is seeking a ruling that callers who obtained valid consents from consumers in writing prior to the effective date can continue to rely on them without obtaining new consent and providing the "magic words" disclosures. The Coalition of Mobile Engagement Providers argues that, because the Commission stated telemarketers would be liable for relying on previously obtained non-written consents, telemarketers should be able to rely on all previously obtained valid written consents without having to re-obtain those consents with the new disclosures. Furthermore, the FCC is only allowed to apply its rules prospectively, so there is no basis to nullify those contents.

The Direct Marketing Association's petition is even narrower. It is requesting that the FCC forbear from enforcement of the new disclosure requirement regarding existing written consents. Despite the fact that the FCC has confirmed that previously obtained written consents constitute valid written agreements under the new rule, marketers will be subject to increased regulatory and class action litigation risk even if the FCC does not take formal action because existing consents do not include the new disclosures. Additionally, despite the fact that a goal of the changes was regulatory alignment with the FTC, previously obtained written consents would not violate the FTC companion rule because that rule does not require the "magic words" to be affirmatively disclosed.

It is not clear whether or to what extent the FCC might shield previously obtained valid consents from retroactive application under the new rules, but unless and until the FCC provides assurances, whether in the form of a declaratory ruling, forbearance from enforcement, or some other action, callers should be aware of the new TCPA consent requirements with regard to all consents.

The FCC provided the public notices by CG Docket No. 02-278. Electronic comments may be submitted via the Electronic Comment Filing System at http://fjallfoss.fcc.gov/ecfs2/. Comments are due on December 2, 2013 and reply comments are due on December 17, 2013.

One final note: the FCC requested public comment on November 19 on a petition on a related issue. The petition was filed by the Professional Association for Customer Engagement ("PACE") and seeks an expedited declaratory ruling or rulemaking that, under the TCPA, a dialing system is not an "automatic telephone dialing system" unless it has the capacity to dial numbers without human intervention, regardless of whether a call is initiated by entering 10 digits of a telephone number or by a one-click dialing method. PACE also seeks clarification that, for TCPA purposes, a dialing system's "capacity" is limited to what it is capable of doing, without further modification, at the time the call is placed. Comments on this petition must be received by December 19, 2013.

Webb McArthur is an associate in the Hanover, MD office of Hudson Cook, LLP. Webb can be reached at 410-865-5424 or wmcarthur@hudco.com.