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Thursday, December 15, 2016

Do Not Call for Multiplatform Institutions

QUESTION
We are a large mortgage banker with several origination platforms, a servicing entity, and a few affiliates. Recently, we were cited for a violation of the Telemarketing Sales Rule as a result of not complying with the Do Not Call rules. How do these rules apply across our origination platforms?

ANSWER
Financial institutions with multiple origination platforms, including their servicing units, are particularly vulnerable to Do Not Call violations. Years ago, in 1995, the original Telemarketing Sales Rule (“TSR”) contained a provision that prohibited calls to any consumer who previously asked not to get calls from or on behalf of a particular seller. Amendments to the TSR since then retain that provision, but now also prohibit calls to any numbers consumers have placed on the National Do Not Call Registry maintained by the Federal Trade Commission (FTC).

The FTC amended the TSR in 2003, 2008, 2010 and 2015. Like the original TSR issued in 1995, the amended Rule gives effect to the Telemarketing and Consumer Fraud and Abuse Prevention Act (TCFPA).

The multiplatform vulnerability to TSR violations often occurs due to violations of the so-called “Entity-Specific Do Not Call Provision.” According to this provision, it is a TSR violation to call any consumer who has asked not to be called again. This means that a telemarketer may not call a consumer who previously has asked not to receive any more calls from or on behalf of a particular seller (or charitable organization). It also is a TSR violation for a seller that has been asked by a consumer not to call again to cause a telemarketer to call that consumer.

Sellers and telemarketers are responsible for maintaining their own individual Do Not Call lists of consumers who have asked not to receive calls placed by, or on behalf of, a particular seller. Calling a consumer who has asked not to be called potentially exposes a seller and telemarketer to a civil penalty of $40,000 for each violation.

But what if a consumer asks a specific division of a corporation not to call?

Does a call from a different division violate the TSR?

Distinct corporate divisions generally are considered separate sellers under the TSR. Factors relevant to determining whether distinct divisions of a single corporation are treated as separate sellers include, but are not limited to, whether there is substantial diversity between the operational structure of the divisions and whether the goods or services sold by the divisions are substantially different from each other.

If a consumer tells one division of a company not to call again, a distinct corporate division of the same company may make another telemarketing call to that consumer. Nevertheless, a single seller without distinct corporate divisions may not call again, even if the seller is offering a different good or service for sale. For a multiplatform institution, it is necessary to have clear, distinct, and separate demarcations between its corporate divisions, units and affiliates in order to avoid violations of the TSR.

Jonathan Foxx
Managing Director 
Lenders Compliance Group