All the Telemarketing Enforcement Enlightenment Three-Quarters of a Million Dollars Can Buy
Posted by Ronald London
Earlier this week, the Federal Communications Commission issued a Forfeiture Order that, in fining Dynasty Mortgage, L.L.C., $748,000 for violations of the National Do-Not-Call Registry (NDNCR), instantly became one of the more notable decision in the FCC’s relatively limited body of telemarketing enforcement case law. The decision’s importance lies primarily in the fact that it is one of the few times the FCC pursued an alleged violator all the way through the four phases of pursuing complaints against it (i.e., citation, letter of inquiry investigation, notice of apparent liability for post-citation violations and, finally, forfeiture order), and consequently issued legal findings and factual conclusions that offer insight on how the do-not-call rules are intended to operate in real-world practice. This is significant, because many of the FCC’s rules (and the parallel rules of the FTC) are in the form of generalized prohibitions and obligations that state what telemarketers are supposed to do, but not how to go about doing so.
Dynasty's specific violations - e.g., number of noncompliant calls, period over which they occurred, fact that the FCC reversed itself on proposed fines against two calls, etc. – are not terribly significant (in sum, though, the Forfeiture Order imposes penalties for 68 calls to 50 recipients over 10- month period), but rather what is significant is what other entities subject to the do-not-call rules can take away from the decision to impose the maximum $11,000 penalty per call. In particular, on the mechanisms telemarketers must have in place to be in compliance and to avail themselves, if necessary, of the safe harbor in the FCC rules for violations that are the result of error, the Forfeiture Order offers important guidance. For example, the safe harbor will not be available if there is any shortcoming on any of the five elements that must be part of a telemarketer's routine business practices, specifically, (1) establishing and implementing written procedures to comply with the rules; (2) training its personnel and those of any entity assisting its compliance in the company's do-not-call procedures; (3) keeping a company-specific do-not-call list; (4) avoiding telemarketing to any number on any do-not-call list, including a version of the NDNCR for which the company downloads monthly (every 31 days or less), updates and maintains records documenting its downloads, and incorporates the updated data; and (5) using a process to ensure it properly acquires and uses the NDNCR data, including not sharing it with others required to purchase it or acquiring it from others without accessing (including paying the required costs of ) the NDNCR. Moreover, the requirement to access and implement NDNCR data has three separate elements, as to which the FCC held the safe harbor affords no discretion or variation: (a) accessing the NDNCR at least monthly; (b) having a routine process in place for incorporating the data to prevent delivery of impermissible calls, i.e., scrubbing all telemarketing lists against the data; and (c) maintaining records that document the company's access to and use of the data. In furtherance of these obligations, telemarketers must keep records establishing that they actually access and used the registry data at the required intervals.
In addition, while the FCC noted that written do-not-call policies, training techniques, manners of recording company-specific do-not-call requests, and actual scrubbing of call lists may differ from seller to seller, it also held however well-conceived and expressed these steps are, they are “meaningless if…not fully implemented.” Accordingly, telemarketers must follow their own procedures and maintain records to verify that training called for in the written policy in fact occurs. The Forfeiture Order further suggests the FCC relies on a presumption of validity regarding complaints it receives, for which it has complainants sign sworn statements, so it appears telemarketers ought maintain records that are to the fullest extent possible indisputable regarding the calls they place (and, by negative implication, those they do not). The Forfeiture Order also holds that a company placing telemarketing calls or having them placed on their behalf cannot rely solely on receipt of already “scrubbed” call lists to demonstrate compliance (or to invoke the safe harbor).
The Forfeiture Order also illuminates somewhat how the FCC intends to apply the safe harbor’s “result of error” standard. Companies invoking the safe harbor must be able to point to “specific identifiable errors” that happened notwithstanding compliance with each of the enumerated compliance requirements. The party invoking the safe harbor must be able to explain the error and show why its routine compliance measures did not prevent it from occurring. Errors cannot be those a properly functioning compliance program that satisfies the five-part safe harbor would/should have caught. The FCC also marginalized somewhat the issue of the telemarketer’s intent, holding that “a call is not made in error simply because a telemarketer did not intend to violate [NDNCR] requirements or … to call numbers” on the NDNCR, and that “[w]hatever a seller’s specific intent in making a particular telemarketing call, calling a number on the [NDNCR] cannot be deemed unintentional when a seller has failed to implement basic threshold procedures.” The FCC additionally reinforced its approach, found in a few prior cases, of rejecting comparisons of the number of violations committed to the company's total number of calls placed as evidence of overall compliance and/or the efficacy of its practices.
Finally, with respect to whether a forfeiture should be mitigated due to financial hardship, the FCC not only rejected Dynasty's plea for leniency that claimed increased costs the company incurred to come into do-not-call compliance threatened its financial solvency, the FCC also held that “national do-not-call compliance costs do not appropriately factor into a financial hardship analysis” In this regard, the FCC warns, somewhat ominously, that “entities that cannot afford full do-not-call compliance should not be engaged in telemarketing.”