As previously reported, the Federal Communications Commission recently approved a Declaratory Ruling and Order (the Order) addressing a number of petitions that requested the FCC clarify its interpretations of the Telephone Consumer Protection Act (TCPA). The FCC finally released the text of the Order late on July 10, 2015. The Order creates new challenges for businesses to comply with the TCPA and avoid liability from consumers’ private right of action. Because the Order took immediate effect upon its release, businesses should scrutinize how they communicate with consumers to avoid liability under the TCPA. 

While the Order provides targeted relief for certain industries, the FCC’s interpretations create significant new TCPA risks for businesses that contact consumers via telephone. The Order faced immediate industry backlash in the form of a lawsuit filed by ACA International, the national association representing credit and collection professionals, seeking judicial review of the Order. In the meantime, companies should evaluate how to comply with the following new interpretations of the TCPA:.

Defining Autodialers. The Order “clarifies” that automatic telephone dialing systems (autodialers) are to be broadly interpreted to include a wide array of calling equipment and software. The TCPA defines an autodialer as “equipment which has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator, and to dial such numbers.” 

The Order interprets “capacity” broadly to include equipment that “lacks the ‘present ability’ to dial randomly or sequentially” but can be modified to provide those capabilities. Companies must now consider how easily their dialing equipment could be modified so that it could dial randomly or sequentially. The Order explains that equipment that could be easily modified through software changes has the capacity to dial randomly or sequentially. Apparently recognizing the almost limitless possibilities of this interpretation as to what could be considered an autodialer, the Order states, “[T]here must be more than a theoretical potential that the equipment could be modified to satisfy the ‘autodialer’ definition,” and somewhat unhelpfully explains that while in theory a rotary-dial phone could be modified to be an autodialer, that possibility is too attenuated for the FCC to find that such a phone has the requisite “capacity.”

While the FCC recognized that its previous interpretations of autodialers required the equipment to dial numbers without human intervention, the Order complicates this issue by making it a case-by-case analysis as to how much human intervention is required for a specific piece of equipment to function as an autodialer. Given the broad interpretation of autodialer, companies using point- or click-to-dial systems—or any phone system connected to a database of phone numbers—may need to evaluate whether their system now constitutes an autodialer under the TCPA.

Finally, the Order clarifies that companies may not divide the ownership of dialing equipment to circumvent the TCPA. For example, if companies contractually divide the storage of consumer information and the actual calling function, a voluntary combination of the two may be considered an autodialer if the net results enables the combined equipment to have the capacity to store or produce telephone numbers and to call those numbers randomly or sequentially. Companies using such a model should review their agreements to reassess their TCPA risks.

Making or Initiating Autodialed Calls. Several companies requested the FCC clarify that text messages sent by certain mobile app group text messaging functions were not calls initiated by the company that provided the app, but rather were calls initiated by the user. Noting that the TCPA does not define how a party “makes” or “initiates” an autodialed call, the FCC determined that this is a factual question. The Order creates a two-question test for determining who makes or initiates an autodialed call:

  1. Who took the steps necessary to physically place the call; and
  2. Whether another person or entity was so involved in placing the call as to be deemed to have initiated it, considering the goals and purposes of the TCPA.

A company that “makes” or “initiates” an autodialed or prerecorded call must comply with the TCPA.

Further, with regards to mobile app text messaging features, the Order clarifies that the fact that a consumer’s wireless number is in the contact list on another person’s wireless phone, by itself, does not demonstrate consent to receive autodialed or prerecorded calls or text messages. This “presumed” consent is insufficient for TCPA purposes.

Porting Phone Numbers. Porting a telephone number from a residential or business wireline phone to a mobile phone number does not revoke a consumer’s prior express consent for autodialed calls to that number. If the consent obtained for the wireline number satisfies the prior express consent requirements for wireless phones (i.e., prior express written consent for telemarketing calls), then the caller may continue to rely on that consent to make autodialed or prerecorded calls to the ported number.

Revoking Consent. Consumers may revoke their prior express consent to receive autodialed and prerecorded calls through “any reasonable means.” Because the TCPA itself is silent on whether or how consumers may revoke their prior express consent, the FCC found that “consumers may revoke consent in any manner that clearly express[es] a desire not to receive further messages, and that callers may not infringe on that ability by designating an exclusive means to revoke.”

The Order prohibits companies from controlling how consumers may revoke their prior express consent. Consent to receive autodialed and prerecorded calls may be revoked either orally or in writing. The Order notes through examples that a consumer could revoke consent in response to an autodialed call or “at an in-store bill payment location, among other possibilities.” The question of whether a consumer’s revocation is reasonable is a factual question. The Order states that reasonableness can be determined by asking:

  1. Whether the consumer had a reasonable expectation that he or she could effectively communicate his or her revocation in that circumstance; and
  2. Whether the caller could have implemented mechanisms to effectuate a requested revocation without incurring undue burdens.

Companies will need to assess their procedures to ensure they have mechanisms in place to handle the multiple ways through which consumers could revoke their consent for autodialed and prerecorded calls. At a minimum, companies will have to honor consumers’ written, oral, and in-person revocation requests.

Calls to Reassigned Phone Numbers. The actual receiving party’s consent is required to make an autodialed call. The Order states that the caller must have the prior express consent of the current subscriber or the phone’s customary user. If a phone number is reassigned to a new consumer, a company cannot rely on the prior owner’s consent to avoid TCPA liability.

The Order permits a company to make a single call to the reassigned number to obtain “actual or constructive knowledge” of the reassignment. This single call exemption extends to an entire corporate family, including all affiliates and subsidiaries. However, if a company has actual knowledge of the reassignment, it may not make this single call. This single call exemption is limited to one call—whether the new consumer answers or not. Companies must look for signs of a phone number’s reassignment, such as tones indicating a number is no longer in service or hearing a new name in a voicemail greeting. 

The Order suggests companies adopt best practices to identify reassigned phone numbers. For example, it suggests using a private commercial database that tracks reassigned wireless numbers, even though the database only claims to be accurate 80 percent of the time. It also suggests companies e-mail consumers to update their contact information, or as highlighted by the dissenting commissioners, to require consumers by contract to notify a company if their phone number has changed, thereby recommending that companies should sue consumers who fail to meet a contractual requirement to update their contact information.

Companies will need to quickly develop procedures to avoid strict liability for contacting reassigned numbers.

Prior Express Written Consent for Telemarketing Calls. The Order clarifies that to obtain a consumer’s prior express written consent for telemarketing calls, telemarketers must disclose to consumers that they will receive telemarketing calls using an autodialer and that consent is not a condition of purchase. Companies may not rely on oral or unwritten prior express consent obtained before the Commission implemented the prior express written consent rule in 2012.

On Demand Text Message Offers. A company may immediately respond to a consumer-initiated request for a text message with a single text message response. On demand text message offers present a call to action that suggest a consumer send a text message to a retailer for a special discount or other offer; for example, “Text COUPON to 12345 to receive a 10 percent discount.” The Order confirms that a company may respond to the consumer with an immediate one-time text message that fulfills the consumer’s request. The Order states that these one-time responses are not telemarketing calls, and therefore do not require prior express written consent. This one-time reply may only contain the information requested by the consumer, and may not contain any marketing messages.

Internet-to-Phone Text Messaging. The Order finds that Internet-to-phone text messages sent through an e-mail or a web portal system are sent using an autodialer and are subject to the TCPA. The Order also confirms that text messages are “calls” under the TCPA.

Free to End User Calls by Financial Institutions. The Order grants an exemption requested by the American Bankers Association for certain free to-the-consumer autodialed calls by financial institutions. The TCPA permits the FCC to exempt autodialed informational calls if the recipient is not charged for the call (i.e., the calling party pays for the call or text message). Using this authority, the Order newly exempts four types of free-to-the-consumer calls from financial institutions:

  • Calls intended to prevent fraudulent transactions or identity theft;
  • Data security breach notifications;
  • Measures consumers may take to prevent identity theft following a data breach; and
  • Money transfer notifications.

In addition to being free to the recipient, the Order places seven additional requirements on these exempt calls, which we will detail in our July 23 webinar.

Free to End User Calls by Healthcare Providers. The Order confirms that a consumer consents to autodialed health care-related calls subject to HIPAA from a health care provider and business associates acting on its behalf when the consumer provides their phone number to the HIPAA-covered provider. The Order also finds that when a consumer is unable to provide prior express consent because of a medical incapacity, prior express consent for health care calls may be obtained from a third party. The Order exempts, subject to certain requirements, autodialed calls that are free to the consumer and made for a health care treatment purpose. These include:

  • Appointment and exam confirmations and reminders;
  • Hospital pre-registration instructions;
  • Pre- and post-operative care instructions;
  • Prescription notifications; and
  • Home health care instructions.

Like the free-to-the-consumer exempt calls for financial institutions, these health care-related exempt calls must be free to the end user and are subject to seven additional requirements.

Call Blocking Technology. Phone carriers may offer consumers the option to block the receipt of autodialed and prerecorded calls to their residential and wireless phones. Carriers offering blocking services must make clear to consumers that blocking technology may block calls the consumer actually wishes to receive. The clarification, requested by 39 state attorneys general, affirms that such call-blocking technology is pro-consumer and does not conflict with the FCC’s rules prohibiting carriers from restricting telecommunications traffic.

Companies should work with counsel to review the architecture of their dialing hardware and software systems and take stock of their policies and procedures for contacting consumers by telephone. In light of the Order, companies will almost certainly need to revise their systems architecture and develop new policies and procedures to avoid exposure to class actions for violating the TCPA. The TCPA is a gold mine for plaintiffs’ counsel, as it provides for a private right of action, statutory damages of $500 per violation, and treble damages for willful violations. As pointed out by the dissenting Commissioners, there were almost 2,000 TCPA class action cases filed in 2014. Regrettably, the FCC’s Order will only result in further abuse of the TCPA by plaintiffs’ counsel.

On July 23, 2015, Ballard Spahr attorneys will hold a webinar, “Avoiding Liability After the FCC’s New TCPA Rulings,” from 12 p.m. to 1 p.m. ET to discuss how companies can comply with the Order. The webinar registration form is available here.

Members of Ballard Spahr’s Consumer Financial Services Group and Privacy and Data Security Group regularly advise financial institutions on compliance with consumer financial services laws related to data security and privacy issues.

Copyright © 2015 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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