Telemarketing Guidelines

QUESTION 

We just acquired a telemarketing company. First of all, we do not know anything about telemarketing. And, in my opinion, the telemarketing company doesn’t know anything about telemarketing laws. 

My company is a mortgage lender, and I am on its Board. I was against this purchase, but I was outvoted. Not only do the telemarketing people not know about telemarketing laws, but our own compliance department knows nothing about these laws. Now, they’re scrambling to understand our compliance risk exposure. 

I was told recently that Lenders Compliance Group is a highly respected compliance firm with a broad knowledge of mortgage banking. So, I’m writing you for assistance. I will ask senior management to get in touch with you, too. We will need help getting our compliance department a checklist, policies, procedures, and other guidance to monitor the telemarketing activities. My regret is that I did not contact you sooner. 

I would like you to publish my question in your FAQ newsletter because I want others to know some of the basics of telemarketing laws, in particular, a list of guidelines. 

What are some compliance guidelines for telemarketing? 

ANSWER 

Thank you for contacting us. Ask your senior management to postpone launching the new telemarketing activities until you have ratified and implemented compliance procedures. We’ll work directly with your compliance personnel to provide the appropriate policies and procedures. If you or anyone else wants to contact me to discuss this area of compliance, please get in touch with me here. 

The foundational requirements for telemarketing is the Telemarketing Sales Rule (TSR, hereinafter “Rule”).[i] The Federal Trade Commission (FTC) and state attorneys general have enforcement tools to combat telemarketing fraud. 

A quick outline of the Rule’s purview[ii] would 

·     require disclosures of specific information, 

·     prohibit misrepresentations, 

·     limit when telemarketers may call consumers, 

·     mandate transmission of Caller ID information, 

·     prohibit abandoned outbound calls, subject to a safe harbor, 

·     prohibit unauthorized billing, 

·     apply to all upsells, even in unsolicited calls from a consumer, 

·     set payment restrictions for the sale of certain goods and services, 

·     require that specific business records be kept for two years, 

·     address the use of prerecorded messages, 

·     prohibit deceptive and abusive practices associated with debt relief services, and 

·     prohibit using remotely created payment orders and checks, cash-to-money transfers, and cash reload mechanisms in outbound and inbound telemarketing. 

If your telemarketing campaigns involve any calls across state lines, like many mortgage-related originations and servicing – and whether you make outbound calls or receive calls in response to advertising – you’re likely subject to the Rule’s provisions. 

The Federal Communications Commission (FCC) enforces telephonic communications pursuant to the Telephone Consumer Protection Act (TCPA), which also regulates telemarketing. 

The very act of contact with the public by means of telemarketing sets in motion a vast range of regulatory compliance requirements and multiple regulatory frameworks. Just considering a generic description of telemarketing should give you an idea of the risk exposure. The Rule describes telemarketing as “a plan, program, or campaign . . . to induce the purchase of goods or services or a charitable contribution” involving more than one interstate telephone call.[iii] With some important exceptions, any businesses or individuals participating in “telemarketing” must comply with the Rule. 

This is true whether, as “telemarketers,” they initiate or receive phone calls to or from consumers, or as “sellers,” they provide, offer to provide or arrange to provide goods or services to consumers in exchange for payment. Whether a company makes or receives calls using low-tech equipment or the newest technology makes no difference. Those making the calls, unless otherwise exempt,[iv] must comply with the Rule’s provisions. If the calls are made to induce the purchase of goods, services, or a charitable contribution, the company is engaging in “telemarketing.” 

Indeed, certain sections of the Rule apply to individuals or companies other than “sellers” or “telemarketers” if these individuals or companies provide substantial assistance or support to sellers or telemarketers. The Rule also applies to individuals or companies that help telemarketers gain unauthorized access to the credit card system by using another merchant’s account to charge consumers, a practice known as credit card laundering. 

There is considerable litigation in telemarketing violations. The FTC, states, and private citizens may bring civil actions in federal district courts to enforce the Rule. State attorneys general or any other officer authorized by the state to bring actions on behalf of its residents may bring actions by the states. Private citizens may bring an action to enforce the Rule if they have suffered $50,000 or more in actual damages. 

Furthermore, anyone who violates the Rule is subject to civil penalties of up to $50,120 for each violation. In addition, violators may be subject to nationwide injunctions prohibiting certain conduct and may be required to pay redress to injured consumers. 

Certain guidelines should be part of every telemarketing program. Telemarketing platforms and programs should be tested and monitored continuously, with reports provided monthly to the Senior Management and the Board. Here’s a brief list of policy statements that must be elaborated on procedurally. The list is not comprehensive; however, it may help you develop a sensitivity to the overall demands of telemarketing compliance.[v] Each item on the list should have a procedural element subject to testing and monitoring. 

Partial List of Telemarketing Procedural Requirements 

Permissible hours 

Procedure: Do not make telephone calls to consumers before 8 A.M. or after 9 P.M. local time at the call’s destination unless the person being called has specifically agreed to a call at another time. 

Do-Not-Call Lists 

Procedure: Maintain a list of consumers who ask not to receive telemarketing solicitations and those whose names appear on the national do-not-call list.

• Honor the requests of consumers who ask not to receive telemarketing solicitations.
• Maintain a process to prevent telephone solicitations to any telephone number on the do-not-call list or the national do-not-call list.
• Maintain appropriate procedures and written policies to comply with the national do-not-call rules.
• Regularly conduct employee compliance training.
• Implement a version of the national do-not-call registry obtained from the administrator of the registry no more than three months prior to the date any call is made and maintain records documenting this process.
• Use a process to not sell, rent, lease, purchase, or use the national do-not-call database or any part of it for any purpose except compliance with the rules and to prevent telephone solicitations to telephone numbers registered on the national database. 

Oral Disclosures for Outbound Telephone Calls 

Procedure: Disclose the following information truthfully, promptly, clearly, and conspicuously in any outbound telephone call to a potential new customer:

• Institution’s identity.
• The purpose of the call is to sell loans.
• That the caller makes mortgage loans. 

Artificial or Prerecorded Voice Calls 

Procedure:

• Do not use an artificial or prerecorded voice call to a consumer’s home unless there is an existing business relationship with the person being called (in which case, identify as such).
• Any artificial or prerecorded voice message releases the line of the person being called within five seconds of notice that the called party has hung up.
• The beginning of any prerecorded message clearly states the caller's identity.
• During or after any prerecorded message, state the caller’s telephone number. 

Call Abandonment

Procedure:

• Do not abandon more than 3 percent of calls answered by a person.
• Deliver a prerecorded identification message when abandoning a call. 

Caller Identification 

Procedure:

• Transmit caller identification (caller ID) information when available, and do not block this information. 

Facsimile Machines 

Procedures:

• Do not send unsolicited advertisements to facsimile machines.
• On any fax, identify the sender.

Online Group’s S.A.F.E Act Violations

QUESTION
In our recent examination, the banking department cited us for S.A.F.E. Act violations. The worst offenders were in our online group. 

The way we’re set up, the online loan officers separate between those who take an application and those who just answer phones and direct the applicants to loan officers. 

It became a licensing issue based on the definition of “taking an application” and whether anyone who spoke to the applicant was licensed in the property’s state. 

Some of the things we now have to do are install a call recording service, monitor all the calls, additional training, quarterly review of all loan officer licenses, complete description of the “hand-off” procedures, and compliance with the S.A.F.E. Act’s definition of originating mortgage loans. 

The biggest problem we face is defining what the banking department calls “mortgage loan originator activities.” We want to revamp the online group, beginning with a new definition. 

What are “mortgage loan originator activities” according to the S.A.F.E. Act?

ANSWER
There are several aspects of your inquiry leading up to the question itself. I have repeatedly said that a financial institution should not go online unless it has the appropriate policies and procedures in place. It appears that your company did exactly what I have argued against doing! I understand the need to get into online sales, but it should not be at the expense of courting regulatory violations. 

If you had come to us to build an online platform, we would have had you work with our checklist and document review that guide you in establishing an online sales group. We would be interacting every step of the way until you launch the platform. 

Such requirements would include not only the items you mention but also many more features that standardize and stabilize the interaction with consumers and ensure federal and, where applicable, state banking law compliance. 

Our firm already has the policies and procedures to conform to your business model. There are several necessary policy documents. But that’s just one feature of the build. 

You need periodic call calibration. Call calibration, which we offer, is an oversight process to monitor, rate, and report on call compliance by listening to recorded calls. Ideally, this should be done by a compliance professional. 

There are numerous disclosure requirements, both oral and written. 

And the threat of being trapped in a licensing violation is real. We have worked with clients that fell into multistate licensing violations and paid millions of dollars in civil monetary penalties. When you say “hand-off procedures,” I say be careful! 

And, most important, you need to understand what constitutes “mortgage loan originator activities” as defined by the S.A.F.E. Act (“Act”),[i] whose implementing Regulation H describes specific requirements for S.A.F.E. Act-compliant state mortgage loan originator licenses and the Nationwide Mortgage Licensing System and Registry.[ii] 

To answer your question, I will treat three fundamental elements that constitute mortgage loan originator activities. The three components are (1) taking an application, (2) offering or negotiating loan terms, and (3) compensation or gain for rendering such services. 

These are not all the possible scenarios but about as comprehensive as I can provide in the space available for this article. If you want more information, please get in touch with me HERE. 

I will base my response on an appendix to the Act.[iii] This appendix is best understood as providing possible examples to aid in understanding activities that would cause an individual to fall within or outside the definition of a mortgage loan originator. Even then, they illustrate only the issue described and do not illustrate any other issues that may arise. 

Let’s begin by describing a residential mortgage loan as any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling[iv] or residential real estate upon which is constructed or intended to be constructed a dwelling.[v] 

And, broadly, a loan application is a request, in any form, for an offer (or a response to a solicitation of an offer) of residential mortgage loan terms, and the information about the borrower or prospective borrower that is customary or necessary in a decision on whether to make such an offer. I know this language seems legalistic – and I guess I can’t help myself! – but in this case, every single word counts. Read it again! 

Taking an Application 

The act of taking a residential mortgage loan application means receipt by an individual for the purpose of facilitating a decision whether to extend an offer of loan terms to a borrower or prospective borrower.[vi]

Here are some examples of taking or not taking an application. 

An individual “takes a residential mortgage loan application” even if the individual: 

·    Has received the borrower or prospective borrower’s request or information indirectly, which means an individual takes an application whether they receive it “directly or indirectly” from the borrower or prospective borrower.[vii] It also means that an individual who offers or negotiates residential mortgage loan terms for compensation or gain cannot avoid licensing requirements simply by having another person physically receive the application from the prospective borrower and then pass the application to the individual; 

·    Is not responsible for verifying information. The fact that an individual who takes application information from a borrower or prospective borrower is not responsible for verifying that information – for example, the individual is a mortgage broker who collects and sends that information to a lender – does not mean that the individual is not taking an application; 

·    Only inputs the information into an online application or other automated system; or 

·    Is not involved in the approval of the loan, including determining whether the consumer qualifies for the loan. Similar to an individual who is not responsible for verification, an individual can still “take a residential mortgage loan application” even if they are not ultimately responsible for approving the loan. For instance, a mortgage broker can take a residential mortgage loan application even though it is passed on to a lender to decide whether the borrower qualifies for the loan and the ultimate loan approval. 

An individual does not take a loan application merely because the individual performs any of the following actions: 

·    Receives a loan application through the mail and forwards it, without review, to loan approval personnel. The Bureau interpreted the term “takes a residential mortgage loan application” to exclude an individual whose only role with respect to the application is physically handling a completed application form or transmitting a completed form to a lender on behalf of a borrower or prospective borrower.[viii] 

·    Assists a borrower or prospective borrower who is filling out an application by explaining the contents of the application and where particular borrower information is to be provided on the application; 

·    Generally describes for a borrower or prospective borrower the loan application process without a discussion of particular loan products; or 

·    In response to an inquiry regarding a prequalified offer that a borrower or prospective borrower has received from a lender, collects only basic identifying information about the borrower or prospective borrower on behalf of that lender. 

Offering or Negotiating Terms of a Loan 

The following examples illustrate when an individual offers or negotiates terms of a loan[ix] and, conversely, what does not constitute an offering or negotiating terms of a loan: 

Offering or negotiating the terms of a loan includes: 

·    Presenting for consideration by a borrower or prospective borrower particular loan terms, whether verbally, in writing, or otherwise, even if:

o   Further verification of information is necessary;

o   The offer is conditional;

o   Other individuals must complete the loan process;

o   The individual lacks authority to negotiate the interest rate or other loan terms; or

o   The individual lacks the authority to bind the person that is the source of the prospective financing. 

·    Communicating directly or indirectly with a borrower or prospective borrower to reach a mutual understanding about prospective residential mortgage loan terms, including responding to a borrower or prospective borrower’s request for a different rate or different fees on a pending loan application by presenting to the borrower or prospective borrower a revised loan offer, even if a mutual understanding is not subsequently achieved. 

Offering or negotiating terms of a loan does not include any of the following activities: 

·    Providing general explanations or descriptions in response to consumer queries, such as explaining loan terminology (i.e., debt-to-income ratio) or lending policies (i.e., the loan-to-value ratio policy of the lender), or describing product-related services; 

·    Arranging the loan closing or other aspects of the loan process, including by communicating with a borrower or prospective borrower about those arrangements, provided that any communication that includes a discussion about loan terms only verifies terms already agreed to by the borrower or prospective borrower; 

·    Providing a borrower or prospective borrower with information unrelated to loan terms, such as the best days of the month for scheduling loan closings at the bank; 

·    Making an underwriting decision about whether the borrower or prospective borrower qualifies for a loan; 

·    Explaining or describing the steps that a borrower or prospective borrower would need to take to obtain a loan offer, including providing general guidance about qualifications or criteria that would need to be met that is not specific to that borrower or prospective borrower’s circumstances; 

·    Communicating on behalf of a mortgage loan originator that a written offer has been sent to a borrower or prospective borrower without providing any details of that offer; or 

·    Offering or negotiating loan terms solely through a third-party licensed loan originator, so long as the non-licensed individual does not represent to the public that they can or will perform covered activities and does not communicate with the borrower or potential borrower. 

Examples:

-    A seller who provides financing to a purchaser of a dwelling owned by that seller where the offer and negotiation of loan terms with the borrower or prospective borrower are conducted exclusively by a third-party licensed loan originator.

-    An individual who works solely for a lender, when the individual offers loan terms exclusively to third-party licensed loan originators and not to borrowers or potential borrowers. 

Compensation or Gain 

An individual acts “for compensation or gain”[x] if the individual receives or expects to receive, in connection with the individual’s activities, anything of value, including, but not limited to, payment of a salary, bonus, or commission. 

Note: The concept “anything of value” is interpreted broadly and is not limited only to payments contingent upon the closing of a loan. 

An individual does not act “for compensation or gain” if the individual acts as a volunteer without receiving or expecting to receive anything of value in connection with the individual’s activities. 

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group
_____________________________
[i] 12 CFR Part 1008 – S.A.F.E. Mortgage Licensing Act – State Compliance and Bureau Registration System (Regulation H)
[ii] Regulation H was issued by the Consumer Financial Protection Bureau to implement the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, title V of the Housing and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-289, 122 Stat. 2654, 12 U.S.C. 5101 et seq.)
[iii] See Appendix A to Part 1008
[iv] As defined in section 103(w) of the Truth in Lending Act
[v] Ibid, as defined
[vi] See § 1008.103(c)(1)
[vii] Ibid
[viii] This interpretation is consistent with the definition of “loan originator” in section 1503(3) of the S.A.F.E. Act.
[ix] See § 1008.103(c)(2)
[x] See § 1008.103(c)(2)(ii)

Debt Collection Technology

QUESTION
We are a servicer in the northwest with a large portfolio. Our debt collection procedures were recently cited by our state banking department for violations of the FDCPA.

To find out more about what happened, we arranged for call calibration to be done. This review resulted in revisions to our policies and procedures. We now periodically use call calibration as part of our monitoring procedures for communications with borrowers.

In revising our policies, it was clear that we had not taken into consideration a number of scenarios involving collection communications with borrowers. We have hired a consultant to tell us about interactive technology.

So, we are writing you for further guidance. What are the important communication provisions that we should consider regarding technology with respect to debt collection?

ANSWER
Your question touches on two significant factors involving procedures relating to the Fair Dept Collection Practices Act (FDCPA). First, how to monitor communications with debtors? Second, what are significant provisions involving technological requirements with respect to communicating with debtors?

Most communications – for instance oral, written, online, email, and text messages – between a financial institution and the public is a highly regulated activity. With regard to oral communications, a good way to monitor such interactions is through call calibration, which is the tracking and compliance evaluation of calls. We offer quality assurance Call Calibration in various settings, such as between online platforms and consumers, telemarketing initiatives, and call center marketing. We also provide a Call Center Manual and a plan for Call Calibration Methodologies. For information about Call Calibration compliance, click HERE.

With respect to the FDCPA and technology, examiners have been taking an active interest in technological advances as these relate to contact with the public. Since October 30, 2020, regulators have been particularly focused on how to ensure that technology does not get in the way of complying with the FDCPA mandates.[i] This is because on October 30, 2020 the CFPB issued a final rule to restate and clarify prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt.

The compliance effective date is November 30, 2021.

The rule focuses on debt collection communications and gives consumers more control over how often and through what means debt collectors can communicate with them regarding their debts. 

The rule also clarifies how the protections of the FDCPA apply to newer communication technologies, such as email and text messages.

The final rule has four subparts:

Subpart A contains generally applicable provisions, such as definitions that apply throughout the regulation;

Subpart B contains rules for FDCPA debt collectors;

Subpart C is reserved for any future debt collection rulemakings; and

Subpart D contains certain miscellaneous provisions.

I will provide a high-level overview. However, I urge you to review this regulatory framework in detail. Also, it is a good idea to seek guidance from a competent compliance professional, because the subject regulation is complex and nuanced, and knowing how to appropriately apply its many requirements entails a thorough knowledge of regulatory compliance.

Set forth here are the CFPB’s concerns about debt collection communications, along with a brief clarification of the application of the FDCPA to newer communication technologies that have developed since the FDCPA’s passage way back in 1977.

Generally, the final rule:

• Clarifies restrictions on the times and places at which a debt collector may communicate with a consumer, including by clarifying that a consumer need not use specific words to assert that a time or place is inconvenient for debt collection communications.
• Clarifies that a consumer may restrict the media through which a debt collector communicates by designating a particular medium, such as email, as one that cannot be used for debt collection communications.
• Clarifies that a debt collector is presumed to violate the FDCPA’s prohibition on repeated or continuous telephone calls if the debt collector places a telephone call to a person more than seven times within a seven-day period or within seven days after engaging in a telephone conversation with the person. It also clarifies that a debt collector is presumed to comply with that prohibition if the debt collector places a telephone call not in excess of either of those telephone call frequencies. The final rule also provides non-exhaustive lists of factors that may be used to rebut the presumption of compliance or a violation.
• Clarifies that newer communication technologies, such as emails and text messages, may be used in debt collection, with certain limitations to protect consumer privacy and to protect consumers from harassment or abuse, false or misleading representations, or unfair practices. For example, the final rule requires that each of a debt collector’s emails and text messages must include instructions for a reasonable and simple method by which a consumer can opt out of receiving further emails or text messages. The final rule also provides that a debt collector may obtain a safe harbor from civil liability for an unintentional third-party disclosure if the debt collector follows the procedures identified in the rule when communicating with a consumer by email or text message.
• Defines a new term related to debt collection communications: limited-content message. This definition identifies the information that a debt collector must and may include in a voicemail message for consumers (with the inclusion of no other information permitted) for the message to be deemed not to be a communication under the FDCPA. This definition permits a debt collector to leave a voicemail message for a consumer that is not a communication under the FDCPA or the final rule and therefore is not subject to certain requirements or restrictions.

A word about consumer disclosures. The FDCPA requires that a debt collector provide certain disclosures to the consumer. The final rule clarifies the standards that a debt collector must meet when sending the required disclosures in writing or electronically.

On December 18, 2020, the CFPB issued further guidelines to the final rule that, among other things, clarifies the information that a debt collector must provide to a consumer at the outset of debt collection communications.[ii] As stated, the final rule’s compliance effective date is November 30, 2021. 

Among other things, as amended, it provides a model notice containing such information, prohibits debt collectors from bringing or threatening to bring a legal action against a consumer to collect a time-barred debt, and requires debt collectors to take certain actions before furnishing information about a consumer’s debt to a consumer reporting agency.

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director 

Lenders Compliance Group

---

[i] Debt Collection Practices (Regulation F), Final rule; official interpretation, Bureau of Consumer Financial Protection, PDF

[ii] Amendment to Regulation F, issued December 18, 2020. This rule amends Regulation F, 12 CFR part 1006, which implements the Fair Debt Collection Practices Act (FDCPA). CFPB page: HERE

Essentials of Telemarketing Policy

QUESTION 
You recently answered a question about a company not having a Do Not Call list. The answer you gave became the basis of a meeting about how to manage our telemarketing procedures. We have updated our policies and procedures and commenced the training of our internal sales force and external telemarketing firm. I can’t thank you enough for your timely advice.

But a subject came up in our meeting that I would like to discuss. In updating our policies and procedures, we could not find a list of chapter and section titles. We want to list them and then provide our requirements in the procedures. So, we decided to send this question to you with the hope that you will provide some of the elements needed in policy and procedures on telemarketing.

Our question is, then, what are some essential elements of the telemarketing policy and procedures?

ANSWER 
I wrote about telemarketing violations last week in connection with the Do Not Call Registry and procedures as these relate to the Telemarketing Sales Rule. Given that you are currently following up on your telemarketing strategies and updating your policy document, I will offer some elements that should go into it.

You should contact us for a Telemarketing Tune-up, because a policy approach is only a foundational framework. Our audit is quick and cost-effective. It provides findings, recommendations, and a risk rating. Your telemarketing procedures should be evaluated for regulatory compliance. That is what the Telemarketing Tune-up does. If you are actively involved in telemarketing initiatives, you should get this audit done as soon as possible.

With respect to essential elements of a telemarketing policy, I would recommend that you have chapters and sections for the following subjects. My suggestions are not comprehensive because telemarketing strategies vary, and your policy should adequately reflect the variance. However, as a serviceable set of guidelines, I think you should consider these outlined elements fundamental to a solid telemarketing policy.

Permissible Hours
You should not be making telephone calls to consumers before 8 A.M. or after 9 P.M. local time at the call’s destination, unless the person being called has specifically agreed to let you call at another time.

Do Not Call Lists
This section would require on-going training and monitoring. For instance, among other things, you need to maintain a list of consumers who ask not to receive telemarketing solicitations, consumers whose names appear on the national Do Not Call list, tracking for honoring the requests of consumers who ask not to receive telemarketing solicitations, implementing a process to prevent telephone solicitations to any telephone number on your Do Not Call list or the national Do Not Call list, training, and keeping a version of the national Do Not Call Registry, obtained from the Registry no more than three months prior to the date any call is made, and maintain records documenting this process. Furthermore, you should be auditing contact with consumers to ensure you do not sell, rent, lease, purchase, or use the national Do Not Call database, or any part of it, for any purpose except compliance with the rules and to prevent telephone solicitations to telephone numbers registered on the national database.

Oral disclosures for Outbound Telephone Calls
Make it a requirement to disclose the following information truthfully, promptly, and in a clear and conspicuous manner, in any outbound telephone call to a potential new customer: your institution’s identity, the purpose of the call (viz., to originate mortgage loans), and that you originate mortgage loans. I suggest you contact us for compliance support in this area, as we are one of the few compliance firms in the country that provides Call Calibration, which is a methodology to audit and report on calls between a financial institution and consumers.

Artificial or Prerecorded Voice Calls
Be very careful in using this telemarketing strategy! You should not use artificial or prerecorded voice calls to a consumers’ homes (or business) unless you already have a business relationship with the persons being called. Be sure that any artificial or prerecorded voice message releases the line of the person being called within five seconds of notice that the called party has hung up. Your call should have a call identifier. Also, the beginning of any prerecorded message must clearly state your identity, and during or after any prerecorded message, you must state your telephone number.

Call Abandonment
You should not abandon more than 3 percent of calls answered by a person. Additionally, you must deliver a prerecorded identification message when abandoning a call.

Caller Identification
Always transmit caller identification (i.e., caller ID) information, when available, and do not block this information ever.

Facsimile Machines
Do not send unsolicited advertisements to facsimile machines. If you do send any fax, be sure to identify your institution as the sender.

Disclosures for Telephone and Direct Mail Solicitations
Yet another area that calls for Call Calibration! This is an area fraught with litigious minefields. Be sure to disclose the following information, orally or in writing, before a customer pays for any services offered in a telephone or direct mail solicitation: the total costs to receive the services offered; all conditions that must be satisfied to receive the services offered; if you have a policy of not making refunds, provide a statement of your policy; if you mention a refund policy, provide a statement of the key terms and conditions of the policy.

Misrepresentations
You should not misrepresent, directly or by implication, many forms of information, such as the total costs to receive any services offered; all conditions that must be satisfied to receive the services being offered; any features of your services; and any aspect of your refund policies. Steer away from ever saying that you are affiliated with, or endorsed by, any government or other organization. Be careful, too, about misrepresenting prize promotions, such as not disclosing any aspect of a prize promotion, not including (among other things) the odds of being able to receive a prize, misleading about the nature or value of the prize, or misstating that a purchase or payment is required to win a prize or to participate in a prize promotion. Consider Call Calibration when conducting telemarketing campaigns involved prize promotions.

Verifiable Authorization
You should obtain express verifiable authorization before submitting a check, draft, or other form of payment from a person’s account as the result of your telemarketing efforts in one of three ways: in writing; by tape-recording an oral authorization that contains references to the date of the draft or other form of payment, its amount, your name, your telephone number for consumer inquiries, and the date of the authorization; and by providing written confirmation of the transaction, including the date of the draft or other form of payment, its amount, your institution’s name and telephone number for consumer inquiries, and the date of the customer’s oral authorization

False or Misleading Statements
I would insert a separate section for this policy element, even though it includes aspects of the section on Misrepresentation outlined above. Use this section to set forth definitions of false and misleading statements and provide examples of each.

Assisting in Violations
Include a section that states how your institution will not assist anyone else in deceptive or abusive telemarketing acts or practices when you know or should know the other person is violating the FTC or FCC rules. Such an affirmation is important, and will be looked upon favorably by regulators during an audit.

Abusive Acts or Practices
This is a thorny area filled with problematic pitfalls and potential litigation. Threats, intimidation, or the use of profane or obscene language is only the start. It may seem obvious that you should not request or receive payment of any fee before a loan is originated if you have guaranteed or represented a high likelihood of success in obtaining the loan. But there is far more involved in these telemarketing hurdles. For instance, you should not initiate a telephone call, other than a call for emergency purposes or with the prior express consent of the called party, using an automatic dialing system or an artificial or recorded voice, to emergency lines, health care facilities, radio common carriers, or any number for which the called party is charged for the call. Expanding abusive acts further, you should not (1) use an automatic dialing system to make calls that simultaneously engage two or more lines of a multi-line business; (2) disconnect an unanswered telemarketing call prior to at least 15 seconds or four rings; (3) guarantee or assure customers regarding the likelihood of loan approval; (4) cause any telephone to ring or engage any person in telephone conversation repeatedly or continuously with the intent to annoy, abuse, or harass; and (5) initiate an outbound telephone call to a person when that person previously has stated he or she does not wish to receive an outbound telephone call from your institution. Use Call Calibration to monitor for abusive acts or practices.

Recordkeeping (24 Months)
Be sure to include a section on recordkeeping. All substantially different advertising materials must be kept for 24 months. Keep the name and last known address of each customer, the loan made, the date the loan was closed, and the amount paid by the customer in connection with the loan. Keep also the name, any fictitious name used, the last known home address and telephone number, and the job title(s) for all current and former employees directly involved in telephone sales. If you permit employees to use fictitious names, you must be able to trace each fictitious name to only one employee. And, maintain all verifiable authorizations required under the rules. With respect to prize offers, keep the name and last known address of each prize recipient and the prize awarded for prizes having a value of $25 or more.

Recordkeeping (60 Months)
Keep all Do Not Call requests for 60 months, including any consumer requests to not receive solicitations.

Jonathan Foxx, Ph.D., MBA

Chairman & Managing Director

Lenders Compliance Group

Telemarketing Violations

QUESTION
We received today a notice from the FTC that says we are in violation of the Telemarketing Sales Rule. They cite us for not complying with the Do Not Call requirements. We do most of our loan originations online, and we use telemarketers to create business leads for us. 

One glaring problem is that we did not maintain a Do Not Call list. But there are other issues, too. 

Now we have 30 days to respond to the FTC or face penalties. We’re now scrambling to show that our telemarketing complies with the FTC’s guidelines. 

I know you get a lot of mail, but time is running out. We need your help. 

What should we be doing to comply with the Do Not Call requirement? 

Should we be monitoring the Do Not Call Registry? 

What happens if we have telemarketing procedures but still make a mistake by calling somebody on the Do Not Call list?

ANSWER
I have prioritized your question. Although we do receive a great deal of mail, some questions are more time-sensitive than others, and yours needs an immediate response. 

I urge you to contact my firm to do a Telemarketing Tune-up soon, so that (1) you get a due diligence review with a risk rating, showing strengths and weaknesses in your telemarketing program, and (2) you can show your regulator that you are taking affirmative steps toward conducting an independent review.

The Telemarketing Sales Rule (“TSR”) has a Do Not Call Safe Harbor. However, to use it, you need to comply with a set of guidelines. If you or your telemarketer can establish that, as part of its routine business practice, you meet certain requirements, you will not be subject to civil penalties or sanctions for erroneously calling a consumer who has asked not to be called, or for calling a number on the National Registry.

The following is a list of those requirements.

-You or the telemarketer has established and implemented written procedures to honor consumers’ requests that they not be called.

-You or the telemarketer has trained its personnel, and any entity assisting in its compliance, in these procedures.

-You, the telemarketer, or someone else acting on your behalf (or a charitable organization) has maintained and recorded an entity-specific Do Not Call list.

-You or the telemarketer uses and maintains records documenting a process to prevent calls to any telephone number on an entity-specific Do Not Call list or the National Do Not Call Registry, provided that the process involves using a version of the National Registry downloaded no more than 31 days before the date any call is made.

-You, the telemarketer, or someone else acting on your behalf (or a charitable organization) monitors and enforces compliance with the entity’s written Do Not Call procedures.

-The call is a result of an error. (For the meaning of “error,” see below.)

You should continually monitor the Do Not Call Registry! You should not call consumers if, among other things, they have placed their number on the National Registry, or not given written and signed permission to call, or you have no established business relationship with the consumers, or if they have asked to get no more calls from you or the telemarketer contacting them on your behalf.

If you don’t constantly monitor and comply with the National Registry, you and the telemarketer may be liable for a TSR violation. If an investigation reveals that neither you nor the telemarketer had written Do Not Call procedures in place, both of you will be liable for the TSR violation. If you had written Do Not Call procedures, but the telemarketer ignored them, the telemarketer will be liable for the TSR violation. Still, you also might be liable, unless you could demonstrate that you actively monitored and enforced Do Not Call compliance and otherwise implemented your written procedures. Ultimately, you are responsible for keeping a current entity-specific Do Not Call list, either through a telemarketing service you hire or your own efforts.

With respect to your question about what would happen if you have procedures but still make a mistake by calling somebody on the Do Not Call list, the Federal Trade Commission might view it as an “error,” if and only if you or the telemarketer has and implements written Do Not Call procedures. Generally, this action will not be liable for a TSR violation if a subsequent call is the result of an error.

But – and this is important – you may be subject to an enforcement investigation, which would focus on the effectiveness of the procedures in place, how they are implemented, and if all personnel are trained in Do Not Call procedures. If there is a high incidence of “errors,” it may be determined that the procedures are inadequate to comply with the TSR’s Do Not Call requirements, the Safe Harbor is not fulfilled, and the calls violate the TSR. On the other hand, if there is a low incidence of “errors,” there may not be a TSR violation. The determination of whether an excusable “error” occurs is based on the facts of each case.

Here’s a rule of thumb: to ensure that adequate Do Not Call procedures are implemented, test periodically for quality control and effectiveness.

Your situation is not unique. Many financial institutions regularly face the prospect of telemarketing violations. Indeed, any company that engages in telemarketing or uses a telemarketer should get the Telemarketing Tune-up done as soon as possible. 

You might also want to require your telemarketer to do the Telemarketing Tune-up as a condition for doing business with you.

Jonathan Foxx, Ph.D., MBA

Chairman & Managing Director

Lenders Compliance Group

Employee Surveillance

QUESTION

I am the Assistant General Counsel for a large mortgage lender. We are licensed in all states and have several origination platforms. Your weekly FAQs are often used as topics of discussion in our compliance meetings. Thank you for providing this fine service!

Recently, we undertook a review of the expectation of privacy relating to our employees, especially those working in our online and call platforms. I know that you are one of the few compliance companies that provide Call Calibration reviews, so you may know the ins-and-outs of employee privacy.

We want to add a brief outline to our employee privacy policy, supported by case law, that sets forth our guidelines.

In general, what is a reasonable expectation of privacy for employees?

In particular, given our extensive branch structure and multiple platforms, what are some protected employee privacy interests with respect to an employee’s physical person and electronic locations?

ANSWER

Thank you for reading our FAQs and using them in your compliance commitments. Your questions require an extensive response; however, due to the constraints of the FAQ format, I will only provide a brief response. Hopefully, my response will help to contribute to your deliberations. Given the implications of your inquiry, I will write more about this subject from time to time.

Yes, we provide Call Calibration reviews, which is the tracking and compliance evaluation of calls. We offer quality assurance Call Calibration in various settings, such as between online platforms and consumers, telemarketing initiatives, and call center marketing. We also provide a Call Center Manual and a plan for Call Calibration Methodologies. To receive a presentation for Call Calibration, Click Here.

Let’s be clear, privacy is, to some extent, the “right to be left alone.” That said, no one living in our society today can be left entirely alone. It is important to balance the interest of society and that of the individual using some objective standard to determine whether an intrusion on privacy is actionable.

Maybe “intrusion” seems like a harsh word. Some people would find any intrusion to be objectionable even if it is not outrageous to a person of ordinary sensibilities.[i] Many courts have found that persistent attempts to interview and photograph a plaintiff, soliciting sex under non-aggravated circumstances, using harsh names and insulting gestures, are intrusions that may invoke a feeling of being highly offensive to a reasonable person, but may not be actionable under an “intrusion upon seclusion cause of action.” In general, courts have held that conduct that is merely offensive, insensitive or intrusive is non-actionable if it does not involve outrageously unreasonable conduct. Defining the word “outrageous” is what lawsuits are supposed to determine.

You likely know about the tort of intrusion, which could be brought against those parties who assist in, cooperate in, instigate, command, encourage, ratify, condone, aid, assist or advise in the intrusion.[ii] This might infer that a systems operator or network service provider could also be liable under the tort of intrusion because these may furnish the means and opportunities for the intrusion and have some knowledge or intention to cooperate in that manner.

Obviously, this is not the place to discuss the extensive features and elaborations of the tort of intrusion, but a majority of the applicable cases require that the defendant must have acted with knowledge or the intention to create the tortious intrusion. Most case law has recognized that the intrusion tort does not depend upon any publicity given to the person whose interest is ‘invaded’ or to his or her affairs but consists solely of an intentional interference with his or her interest in solitude or seclusion. It is may not be necessary that the defendant has disclosed the fact of the interference or the contents of any information contained in any of the communications. However, in some cases, the invasion of privacy may not have occurred unless the information was disclosed to a third party and that the disclosure represents the invasion of privacy.

You mention “physical person” and “electronic locations.” Cases dealing with the tort of intrusion have determined that it is not necessary for there to have been a trespass or physical intrusion. This view is true in cases of the installation of wiretaps or monitoring devices that do not involve an actual trespass onto the plaintiff’s property, or in cases of publicity that brings the plaintiff into a position of having many strangers intrude into the life of the plaintiff or concerning telephone or mail collection tactics. In most cases, there has not been a physical intrusion or trespass though there is an intrusion for purposes of this tort on the privacy of the plaintiff.