TCPA Trouble Continues: FCC Slams Lyft and First National Bank for Terms of Service Requiring Consent
Most of the attention involving the Telephone Consumer Protection Act (“TCPA”) has centered on the stream of class actions around the country. It is important to remember that the Federal Communications Commission (“FCC”) and state attorney generals can, and do, enforce the TCPA. In fact, the FCC recently issued citations to Lyft, the ride-sharing service, and First National Bank (“FNB”). Under the Communications Act, before the FCC may issue monetary penalties against a company or person that does not hold an FCC license or authorization, it must first issue a citation warning the company or person.
The TCPA requires prior express written consent for telemarketing calls/texts to mobile phones utilizing an autodialer or prerecorded call and for prerecorded telemarketing calls to residential lines. FCC rules mandate that the “prior written consent” contain certain key features. Among these requirements is the disclosure informing the consenting person that “the person is not required to sign the agreement – directly or indirectly – or agree to enter into an agreement as a condition of purchasing any property, goods, or services.”
For years, the FCC focused on actual consumer complaints of having received telemarketing calls/texts without the required prior express written consent. Interestingly, here, the FCC did not allege that either Lyft or FNB sent texts/robocalls without the required consent. The FCC’s accompanying press release indicates that its Enforcement Bureau initiated the two investigations after becoming aware of “violative provisions in those companies’ service agreements.” The citations issued to Lyft and FNB, along with recent correspondence by the FCC to Paypal concerning similar issues, represent new FCC attention on terms/conditions of service in the TCPA context, particularly on “blanket take it or leave it” agreements. The FCC Enforcement Bureau Chief, Travis LeBlanc, put all companies on notice, urging “any company that unlawfully conditions its service on consent to unwanted marketing calls and texts to act swiftly to change its policies.” The FCC directed Lyft and FNB to take “immediate steps” to comply with FCC rules and the TCPA – presumably meaning that the companies should immediately revise their terms and practices.
According to the FCC, Lyft’s terms require customers to expressly consent to receive communications from Lyft to customer’s mobile numbers, including text messages, calls, and push notifications. The messages could include Lyft-provided promotions and those of third party partners. The terms advise customers that they can opt-out by following the “unsubscribe” option, and that customers are not required to consent to receive promotional messages as a condition of using the Lyft platform or the services.
However, the FCC found that contrary to Lyft’s terms of service, Lyft does not actually provide “unsubscribe options” for consumers. If a consumer independently searches and gets to Lyft’s “help center,” the only option to opt-out subsequently prevents consumers from using Lyft’s service. Thus, per the FCC, “Lyft effectively requires all consumers to agree to receive marketing text messages and calls on their mobile phones in order to use services.”
The FCC concluded that while Lyft’s terms of service stated that consumers were not required to consent as a condition to using Lyft, in actuality, consumers could not refuse consent and remain Lyft users. Thus, the FCC cited Lyft, warning that it would be liable for any advertising text messages for which it did not collect proper, prior express written consent. The agency further stated that it would continue to monitor Lyft’s practices.
In FNB’s investigation, the FCC noted that consumers wishing to use FNB’s online banking services are required to agree to receive text messages and emails for marketing purposes at consumer-provided phone numbers. FNB customers wishing to enroll in the Apply Pay service are similarly required to consent to receive marketing-related text messages and emails. The FCC objected to FNB requiring consumers to agree to receive marketing text messages in order to use the online banking and Apple Pay services, and failing to inform consumers that they have the option to refuse consent. The agency reiterated that under FCC rules, prior express written consent to receive telemarketing messages requires that, among other things, consumers receive a clear and conspicuous disclosure informing the consumer of his or her right to refuse to provide consent.
When it comes to autodialed/prerecorded telemarketing calls and texts to mobile phones and prerecorded telemarketing calls to residential lines, companies need to be diligent in ensuring they have proper, defensible prior express written consent. The FCC’s citations to Lyft and FNB make clear that organizations may not rely on blanket mandatory opt-in agreements. While it may be acceptable to seek consent in terms of service, consumers must be informed of their opt-out abilities, and must be able to access the opt-out and still use the service or make the purchase.
Companies should review their service agreements and the operational mechanisms to make sure consumers have information on opting-out. Further, any opt-out mechanisms must work as promised. A user’s opt-out should not block services/purchases. Of course, the best way to obtain consent is to seek a separate, prior express written consent in an agreement that contains all the required elements, as follows:
- Is in writing (can be electronic);
- Has the signature (can be electronic) of the person who will receive the advertisement/telemarketing calls or texts;
- Authorizes the caller to deliver advertisements or telemarketing messages via autodialed calls, texts, or robocalls;
- Includes the telephone number to which the person signing authorizes advertisements or telemarketing messages to be delivered;
- Contains a clear and conspicuous disclosure informing the person signing that:
- By executing the agreement, the person signing authorizes the caller to deliver ads or telemarketing messages via autodialed calls, texts or robocalls; and
- The person signing the agreement is not required to sign the agreement (directly or indirectly) or agree to enter into such an agreement as a condition of purchasing any property, goods, or services.
As a reminder, the FCC repeatedly takes the position that the company claiming prior express written consent will bear the burden of providing that consent.
The FTC’s “Do Not Call” and “robocall” rules do not apply to political survey calls. So, if Hillary Clinton sought to “voice blast” a survey about international issues, she could do so without violating the Telemarketing Sales Rule (“TSR”). (Though under FCC rules she would have an issue calling wireless numbers). However, companies may not telemarket under the guise of exempt political calls. Caribbean Cruise Lines (CCL) and several other companies working with CCL recently learned this lesson the hard way. The FTC and a dozen state attorneys general sued CCL and others for offering cruises and vacation “add ons” following purported political calls. CCL settled, agreeing to pay $500,000 of a $7.2 million dollar penalty, and to comply with multiple compliance mechanisms.
CCL and the other defendants implemented an extensive calling campaign involving 12 to 15 million calls per day for approximately ten months offering a political survey. However, the survey calls invited consumers to “press one” to receive a “free” two-day cruise to the Bahamas (port taxes would apply). A live telemarketer working on behalf of CCL then offered consumers pre-cruise hotels, excursions, and other value packages.
While political calls remain exempt under the TSR’s robocall and Do Not Call provisions, if a caller offers a good, product or service during an otherwise exempt call, an “upsell” has occurred and the call is now telemarketing. FTC rules prohibit robocalls to telemarket except with prior express consent. Thus, the FTC asserted that CCL violated the TSR’s robocall provision since the called parties had not consented to the recorded sales calls. While the calls started as political survey calls, they were actually standard telemarketing, subject to all TSR telemarketing rules. The FTC also alleged violations of the Do Not Call rules, the caller identification rules, and the “company-specific Do Not Call requirements,” among other violations.
In addition to the reminder about “upsells” or “mixed messages,” this action highlights several important TSR enforcement lessons:
The TSR also bars third parties from providing “substantial assistance” to others who violate the rule. Here, the FTC’s complaint charged a group of five companies and their individual owner with assisting and facilitating the illegal cruise calls, by providing robocallers with telephone numbers to use in the caller ID field, to hide the robocallers’ identities.
The FTC will carefully review, and proceed against companies who violate other TSR provisions, including caller ID requirements, scrubbing of the federal Do Not Call database, and the company-specific Do Not Call list.
A settlement often requires ongoing recordkeeping. Here, the FTC required CCL to create records for ten years (and retain each one for 5 years), including records of consumer complaints and documentation of all lead generators.
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While it should not come as a surprise that a “mixed message” call must comply with the TSR, the recent joint case against CCL and others serves as a potent reminder that the FTC and state attorneys general continue to monitor robocalling and other mass telemarketing campaigns. Further, the enforcers will use the full panoply of legal requirements and enforcement mechanisms to address telemarketing violations. The seller, the telemarketer, the lead generator, the caller ID provider, and any other party providing substantial assistance may find themselves at the receiving end of a call from the FTC if they fail to follow each of the TSR’s obligations or engage in activities that the TSR prohibits.