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Posts Tagged ‘Capital One’
Apr 05
2016

Wells Fargo Learns That Recording Calls In California Can Be Costly

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In the past few years, many organizations such as Capital One, Bass Pro Outdoor, and the Cosmopolitan Hotel have faced class actions alleging violations of California’s call recording law.  This week, California’s Attorney General demonstrated that her office, working with state prosecutors, will also vigorously enforce the law under the state’s criminal statutes.  Attorney General Harris announced an $8.5 million dollar settlement with Wells Fargo Bank, N.A. over the alleged failure to provide call recording announcements to California consumers.

The complaint alleged violations of Sections 632 and 632.7 of California’s Penal Code, including the purported failure of Wells Fargo’s employees to “timely and adequately disclose the recording of communications with members of the public.”  These laws form part of California’s Invasion of Privacy Act. Section 632 makes it illegal to eavesdrop (monitor) or record a “confidential communication” without the consent of all parties. The statute defines a “confidential communication” as including “any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto.“ The law specifically excludes communications in circumstances “in which the parties to the communication may reasonably expect that the communication may be overheard or recorded. “ Section 632.7 bars the recording of cell phone conversations, without the consent of all parties.

Wells Fargo Bank settled the case, agreeing in a stipulated judgment to the $8.5 million settlement and certain compliance requirements.  Specifically, Wells Fargo must make a “clear, conspicuous, and accurate disclosure” to any consumer in California of the fact that Wells Fargo is recording the call.  The settlement requires that this disclosure occur “immediately at the beginning” of the call, but allows Wells Fargo to precede the disclosure with an introductory greeting identifying the customer service representative and the entity on whose behalf the call is made (presumably, a Wells Fargo-affiliated entity). Wells Fargo also committed to a compliance program for one year and periodic internal testing of its employees’ and agents’ compliance with the call disclosure requirement.  The bank agreed to appoint an officer or supervisor with specific oversight responsibility for compliance with the settlement obligations.  Within a year following the stipulated judgment, Wells Fargo must provide the Attorney General with a report summarizing the testing.

Interestingly, the Attorney General previously pursued a similar action against home improvement platform Houzz Inc. for allegedly failing to notify all parties of its recording of incoming and outgoing telephone calls.  In that case, Houzz agreed to appoint a Chief Privacy Officer to oversee Houzz’s compliance, a first for a California Department of Justice settlement.

As we have advised before, all organizations recording calls – whether inbound or outbound – should immediately disclose to called parties that the call is being recorded.  The disclosure should occur at the outset of the call.  One type of introduction could be, “This is Michelle, calling on behalf of XYZ Company. This call is being recorded and/or monitored.”  Some companies may wish to announce the option of a non-recorded line, available via a key press. It is also important to time the recording to begin after the announcement, to avoid potential liability based on even a few seconds of a recorded call before an announcement is given.

A few important reminders are worth repeating:

  • The announcement requirement applies to inbound and outbound calls, including requested return calls.
  • Recording announcements apply to all types of calls – not just sales calls.
  • Maintain proof of the announcement.
  • Implement a short, written call recording policy.
  • Train customer service representatives to understand the call recording policies.
  • Periodically “test” call recording procedures.
  • Promptly investigate any call recording complaints and take appropriate corrective action.
  • Have customer service representatives sign an acknowledgment that they understand they are being monitored and/or recorded.

The recording of customer service and other calls is an important component to prevent fraud, fulfill legal requirements and augment customer service, among other reasons. Companies can implement call recording effectively, but must comply with announcement requirements and should take proactive measures, such as training and testing, to protect against civil and criminal liability and to safeguard consumer goodwill.

Aug 18
2014

Recording Calls? Five Things You Can Do to Avoid the Litigation Frenzy

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Restaurant chain Applebee’s has joined other businesses such as Overstock.com, Hilton, Capitol One, and Bass Pro Shops as defendants in purported class action lawsuits alleging that they illegally recorded calls to or from California residents.  In fact, plaintiffs have filed hundreds of individual and class actions in California courts under California’s various eavesdropping/call recording laws. Potential damages can include an award of $ 5,000 per violation – thus the damages in class actions could lead to multi-million dollar judgments and settlements.  Capitol One recently settled a purported class action involving residents in California and several other states for $ 3 million dollars.  Bass Pro Shops settled for $ 6 million, and Shell Oil forked out $ 2 million to resolve recent claims.

California is one of 12 states that require “two party” or “all party” consent to call recording.  The majority of states (and the federal standard) only require that one party consent.  So, in other words, if the recording party consents, that generally constitutes sufficient consent in most states.  Further, in most states, if companies announce at the outset that the call is being monitored or recorded, that announcement has been sufficient to provide at least implicit consent where the parties continue with the call following the announcement.  In the Appleee’s case, however, the plaintiff contends that she (and others) never received a notification that her call was recorded.

Applebee’s Suit Alleges Recording on Wireless Phone

Plaintiff Joneeta Byrd contends that in November 2013, she called Applebee’s customer service number from a wireless telephone. She alleges she was not aware that Applebee’s recorded the call, and that the customer service representative did not inform her that the call was being recorded.  At some point after the call, Byrd claims she learned that Applebee’s records all incoming calls.  Byrd contends that Applebee’s does not always disclose the recording to every caller. According to the complaint, “Plaintiff believes that the total number of Class members is at least in the tens of thousands and members of the Class are numerous and geographically dispersed across California.”

Byrd’s lawsuit is based on California’s Penal Code, Section 632.7, which prohibits the intentional recording of any telephone communication without the consent of all parties where at least one party is using a cordless or cellular phone.  It also provides for criminal fines and imprisonment.  It differs from, and has arguably broader coverage than another section of California’s law, Section 632, which bars the eavesdropping or recording of confidential communications (i.e., where the caller had a reasonable expectation of privacy), without the consent of all parties to the confidential communication.  While some courts have dismissed claims under Section 632, they have allowed claims under Section 632.7 to go forward – often reasoning that the California legislature intended more stringent protections for mobile phone conversations.

Hilton Hotels Decision Holds the Law Not Intended to Cover Parties

A recent decision involving Hilton Hotels may provide some relief for companies in California Section 622.7 call recording suits.  The district court (on remand) held that Section 632.7 only applies to third party recording of a wireless telephone conversation – and does not include recording by a party to the call.  The order is available here.  Specifically, the district court concluded that “[t]he statutory scheme makes it clear that these sections refer to the actual interception or reception of these radio signals by third parties and do not restrict the parties to a call from recording those calls.”  The court further ruled that Hilton had consent and that California’s legislature “did not limit the service observing monitoring of calls that it is alleged in this case.”  The plaintiff has appealed this decision.

Top “5” Recommendations When Recording Customer Service Calls

Applebee’s case and the other call recording cases serve as useful reminders on call recording.  As counsel to many companies and call centers utilizing call recording for quality control and service monitoring, we generally recommend this top 5 list:

  1. Announce/Maintain —  At the outset of a call, announce the call is being monitored and/or recorded.  Maintain proof of the announcement in the event of litigation.
  2. Incoming & Outgoing Covered — Remember, both incoming and outgoing calls are covered, so make sure you inform all parties – whether they have called in or your company has called them – that the calls are recorded and/or monitored.
  3. Objections —  If there is an objection, consider offering a non-monitored line.  In any event, do not continue the call with the objecting party.
  4. Customer Service Rep Consent Form — Upon hire, consider having customer service representatives sign an acknowledgement and agreement that their calls may be monitored or recorded. Maintain copies of these consent forms in employee files.
  5. Train customer service representatives – Make sure customer service representatives can explain the call recording policy if asked.  A consistent organization-wide message that accurately states the standard procedure helps ameliorate consumer concerns, and in the event of litigation, can bolster a defense.
Aug 08
2014

Capital One Gets an Unwanted Wake Up Call

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In what could become the largest ever settlement in a case brought in the 22 year history of the Telephone Consumer Protection Act (“TCPA”), Capital One and three collection agencies agreed to pay over $75 million into a settlement fund to settle a consolidated class action lawsuit alleging that the companies used an automatic telephone dialing system (“ATDS”) or prerecorded voices to call more than 21 million consumers’ cell phones without their consent. 

Although the settlement covers several different lawsuits that were consolidated, the allegations in those suits are largely the same.  The plaintiffs alleged that Capital One and the other defendants violated the TCPA by using an ATDS or prerecorded voices to call the plaintiffs about debt collection.  Debt collection calls are treated differently than other telemarketing calls under the TCPA, but still require a prior express consent from the consumer.  The plaintiffs alleged that no consent was ever obtained by the defendants. 

Capital One and the three collection agencies are not admitting any liability in the litigation. The settlement agreement also requires the defendants to conform their telemarketing practices and procedures to comply with the TCPA.  Capital One has already developed and implemented changes to its calling systems designed to prevent future violations of the TCPA.

The U.S. District Court for the Northern District of Illinois offered its preliminary approval of the settlement last week and it must still be given final approval.  The final approval hearing is scheduled for December 2, 2014.  Opposition to the settlement terms and size could emerge in the meantime.

This settlement is a valuable reminder of the expensive consequences that can occur if a company’s marketing practices are not closely monitored for compliance with applicable laws.  TCPA litigation has been increasing significantly in the past few years.  Settlements like the one in this case will further encourage plaintiff’s attorneys to bring additional cases.  All companies should review their calling campaigns – whether telemarketing, appointment setting, customer service, debt collection, or otherwise to ensure RCPA compliance.  With more and more consumers opting to rely on mobile phone over residential lines, it is increasingly important to obtain prior consent for autodialed or prerecorded calls to mobile lines.   

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About Ifrah Law

FTC Beat is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, health care, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen and George Calhoun, counsels Jeff Hamlin and Drew Barnholtz, and associates Rachel Hirsch, Nicole Kardell, Steven Eichorn, David Yellin, and Jessica Feil. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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