Privacy and Security Law Blog

Posted by Ronald G. London

The Federal Trade Commission announced a $50,000 settlement with Executive Financial Home Loan Corp., d/b/a Executive Home Loan, and its principals, arising out of the company’s use of “lead lists” purchased from third-party brokers that Executive believed had been “scrubbed” of phone numbers on the National Do-Not-Call Registry (“NDNCR”). The FTC alleged that use of the lists in reliance solely on a vendor’s claims that they had been scrubbed against the NDNCR, allegedly resulting in calls to “tens of thousands of consumers” registered with the NDNCR, and the company’s failure to pay NDNCR fees, resulted in the violation of FTC telemarketing rules. In announcing the settlement, the FTC stated that its “bottom line” is that “telemarketers are responsible for complying with the Do Not Call provisions of the Telemarketing Sales Rule, and cannot hide behind the claims of their service providers,” such that if they “purchase a scrubbed list, they better make sure that it is current and squeaky clean or else they may be violating the law and subject to penalties.” Significantly, the actual monetary judgment entered against the company was $1,138,551, but all but $50,000 was suspended due to an inability to pay.

In defending its actions, Executive had claimed it relied on teleservices providers for NDNCR compliance, in that the company purchased leads from lists brokers such as title companies, which were represented as having been scrubbed, i.e., subjected to the removal of telephone numbers registered on the NDNCR more than 30 days before use of the list. The representations, however, appear to have been in error, as use of the lists resulted in Executive impermissibly calling numbers on the NDNCR. In addition, the FTC alleged, the company’s placement of telemarketing calls without paying NDNCR fees to the FTC, notwithstanding the purchase of lists assumed to have been scrubbed, violated separate provisions in the rules that bar sharing NDNCR data with entities required to pay for NDNCR access but have not done so, as well as the requirement that, even if a company does not place calls itself and/or relies on others to ensure it does not call NDNCR registrants, it still must pay NDNCR fees.

The FTC’s announcement underscores some important points for entities that telemarket or that have telemarketing conducted on their behalf. First, regardless whether a company places calls itself or employs others to do so, and/or whether it uses its own customer lists or acquires them from a third party, the company must pay for access to NDNCR data, unless it falls within one of a few, narrow exemptions (e.g., calls placed to five area codes or fewer, or calls placed solely to consumers with whom the company has an established business relationship). Second, the FTC announcement highlights the importance of dealing only with reputable list brokers and/or teleservices providers that can be trusted to accurately scrub and/or characterize the telephone numbers to which calls are to be placed. Perhaps more importantly, it emphasizes the need for companies to build into their relationships with outside teleservices vendors procedures by which the can assure itself the compliance with NDNCR rules is assured.