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What businesses need to know about the Telephone Consumer Protection Act

Businesses in the digital age are increasingly turning to new telecommunications technologies to connect and interact with consumers. But many businesses do not realize that these new technologies are governed by an old law that, if ignored, could doom the business.

The Telephone Consumer Protection Act (TCPA) is a federal statute created to protect consumers against invasions into their private lives by businesses using mass telemarketing technologies.

When it was enacted in 1991, those technologies included autodialers, which allow computers to place thousands of calls in rapid succession and fax machines that permit mass delivery of print advertisements over telephone wires.

With today’s focus on mobile and cloud-based technologies, businesses now regularly send text and instant messages to interact with consumers. The TCPA and its regulatory regime forbid the intrusive use of all of these technologies absent an applicable exception or consent of the receiving party. 

Perhaps the most important part of the TCPA is the enforcement provision. The statute empowers consumers to bring lawsuits seeking injunctive relief and automatic damages of $500 for each violation — that is, for each call made or message sent. Damages awards can be tripled if there is a finding that the violations were “willful.”

Both the Federal Communications Commission and state regulators may bring enforcement litigation.

The TCPA is a favorite of class action plaintiffs’ lawyers because the claims are relatively easy to establish and the potential rewards are lucrative.

Because the statute provides for automatic damages, the plaintiff does not need to prove he suffered any actual injury. This makes it easier both to prove the individual claim and to convince a court that the case is suitable to bring as a class action. Consequently, when a mass marketing campaign causes hundreds or thousands of calls, faxes or text messages to be sent in violation of the TCPA, a class action lawsuit can quickly aggregate those claims into a case worth tens or even hundreds of millions of dollars.

For example, a Georgia court awarded a verdict of $459 million in a “junk fax” case against a window installation company. Faced with such staggering liability, businesses are often eager to settle TCPA class actions in the early stages, even at great cost.

Avoiding liability

But businesses can still use telecommunications technologies so long as they proceed with caution.

First, all businesses that communicate with consumers (whether current customers, prospective customers or even debtors) must understand the statute, the FCC’s rules and the many exceptions. Generally, the TCPA restricts the use of autodialers, artificial or prerecorded voice messages, automated text messaging and unsolicited fax advertisements. TCPA also forbids calls of any kind to phone numbers registered on the national Do-Not-Call Registry and requires businesses to maintain and honor their own internal Do-Not-Call lists of persons who have requested to not be contacted again.

Therefore, unless the consumer’s number is on a Do-Not-Call list, non-automated calls or texts made by a human are not covered by the statute. Additionally, the statute does not forbid calls to a residential landline phone that are not made for a commercial purpose. The rules also include emergency exceptions. 

Perhaps the most significant exception to the statute is the consent of the called party. The rules are complex and the form of consent required can depend on the type of call made. For example, to make non-telemarketing informational calls (for example, calls regarding account status), a business need only obtain “prior express consent.”

The FCC has ruled that a consumer gives “prior express consent” by simply providing his phone number to the business. On the other hand, a business that wishes to send telemarketing calls or messages must obtain “prior express written consent,” which the FCC defines as a signed written agreement expressly authorizing the receipt of automated or prerecorded telemarketing calls or messages to the phone number provided. Even when consent is obtained, the business must provide an automated way for the consumer to “opt out” of receiving future calls or messages.

Businesses can also protect themselves by hiring third-party service providers that specialize in telemarketing. While courts have found businesses vicariously liable for the TCPA violations committed by their third-party telemarketer, good telemarketing firms should know how to comply with the TCPA and any contract can include indemnification language.

Businesses should also review their insurance policies to determine whether a TCPA claim would be covered under the traditional comprehensive general liability policy or the “advertising injury” provision of the general liability policy.  

Dan Deane and Troy Lieberman, litigation attorneys at Nixon Peabody, are the chief editors of the firm’s blog TCPA Info, News & Insights, available at tcpa.nixonpeabody.com.