June 17, 2015

The FCC is Getting it Wrong

The Telephone Consumer Protection Act is stuck in the 1990’s. If a Federal Communications Committee vote on Thursday goes as expected, the TCPA is going to stay there—and at a huge cost to businesses and consumers.

The TCPA was enacted in 1991, when most individuals did not own a cell phone and text messaging did not exist. The law’s intent is a good one: to protect consumers from pesky automatic telemarketer calls. The TCPA penalizes companies for making “robocalls,” which it considers to be unsolicited calls to landlines or autodialed calls or messages to a wireless number. At the time this was not a big issue for businesses, as they interacted with their customers almost exclusively through landlines.

Fast forward two and a half decades later, where technology has changed the way businesses communicate with their customers, but the TCPA has not.

A landline is now akin to a prehistoric artifact in our cell phone obsessed culture. And those regulations intended to keep telemarketers from interrupting family dinner, are now a favorite tool of plaintiffs’ attorneys to eat businesses’ lunch by filing frivolous lawsuits.

The TCPA opens up businesses to a lawsuit for autodialed calls or messages they send to a customer’s cell phone, regardless of the purpose. This could be a low balance notification, a savings offer, or even a fraud alert. Each one of those calls or text messages can cost a company between $500 – $1,500 per call or message.

While insignificant individually, collectively through class action lawsuits, these penalties add up to tens of millions of dollars. This is possible because of the vague “auto dialing” language in the TCPA. The law intended to prevent telemarketers from using random number generators to call up unknown individuals. However, technology that allows for automated dialing now sits in virtually every cell phone. According to the FCC’s proposed rule, this is enough to qualify as an “auto dialer,” even though the technology has not been accessed to place a call. Virtually every business uses a modern system to communicate with their own customers, whether by text or by phone. So every business is at risk of violating the law, though virtually none are randomly making telemarketing calls.

The Federal Communications Commission is the agency that should be bringing common sense to the TCPA madness. But instead, the FCC is on the cusp of deepening the problem.

Dozens of petitions have been filed with the FCC asking to clarify the rules and to distinguish between legitimate business calls to customers and telemarketing calls.

But it appears the FCC has conflated the issues and companies may be subject to litigation for making calls from any equipment capable of dialing sequential random numbers.

In a case against Walgreens settled in March, the company agreed to pay $11 million to settle a TCPA class action suit. The suit accused Walgreens of using an automated dialer to call their customers’ cell phones to remind them to refill their prescriptions. These were customers who currently had prescriptions with Walgreens and had given their phone number to the company—not randomly generated numbers.

The nature of the prerecorded prescription message and automatic dialing to each customer’s cell phone number allowed this to be considered a violation of the TCPA. The class counsel now stands to make over $3 million from the case. It is easy to see who is really benefitting from these TCPA lawsuits.

What the FCC is missing here is that the TCPA was intended to protect consumers and that is no longer its purpose. Now it is being used to benefit the trial bar, and it is only going to get worse for business.

The FCC’s declaratory ruling under consideration will also hold companies responsible for any calls or messages to a phone number that has been reassigned. While the FCC has proposed a one call safe harbor for businesses, the agency has not yet released the details of what this proposal may entail. Will the individual in possession of the reassigned number have to notify the company of the reassignment? Will companies be granted a reasonable amount of time to remove the number from their systems? What if the number was not reassigned, but given incorrectly by the consumer to the company? The devil will be in the details of the proposal.

This is not just an issue for big business. Rubio’s, a California Mexican food chain, sent important food safety related text messages to its employees. Rubio’s did not know one of its employees lost his phone and that number had been reassigned. The individual using the new number never amassed over 800 text message alerts before letting the restaurant know and filing suit under the TCPA.

Companies are left without a way to protect themselves from reassigned phone numbers. No foolproof technology is available for businesses ensure the phone numbers provided by their customers have been reassigned. Further, there is nothing to stop a cell phone user from purposefully not informing the company that a number has switched in order to collect a payout. Some are even making careers out of TCPA litigation, with online guides instructing on how to maximize payouts. A simple Google search for “TCPA violation” brings up ads for plaintiffs’ lawyers who want to help you review your claim, and potentially join a class action that they can settle for millions.

Far from protecting consumers from unwanted telemarketers, today’s TCPA may do the opposite: limit or eliminate the wanted and needed information that businesses can give to their own customers in real time via a smart phone. If the FCC passes these proposals, they will be giving the plaintiffs’ bar more muscle to bring unreasonable TCPA lawsuits.

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