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.

Imposter Robocalls

QUESTION

Our regulator has referred our company to the FTC. The problem began with a consumer complaint about the telemarketer. We had unwittingly hired a company that does robocalls. We didn’t even know they did robocalls. We thought they were doing live telemarketing for us. 

That company is now facing FTC action because they impersonated themselves as providing debt reduction. We are now apparently swept up in this situation, even though we did not hire the company for debt reduction marketing. 

We just terminated the robocall company. But the damage is done. Now our regulator and the FTC are doing an investigation. They are digging into every marketing program, complaint, telemarketing strategy, marketing script, policy, procedure, and media initiative. 

If we had known how much of this impersonating is going on, we could have avoided this robocall company or at least made sure our third-party vendor approval process would have included procedures to evaluate such risks. 

Maybe you could share some information about these impersonators so that others do not fall into a mess like ours. 

How much impersonation is happening by marketers?

What can my institution do to protect itself? 

ANSWER

Impersonation is amongst the highest complaints to the Federal Trade Commission (FTC). Technically, this type of contact with the public is called “imposter calls.” One of the access points the FTC utilizes for collecting data on imposter calls is the National Do Not Call Registry, known by its acronym “DNC.” 

The DNC, active for fourteen years, lets the public add their phone number to their database, thereby choosing not to receive telemarketing calls. It has nearly 250 million phone numbers registered.[i] You might be interested to know that complaints relating to imposter calls top the list, weighing in at almost 287,000 complaints in FY 2022.[ii] 

The imposters run the gamut, from posing as Social Security Administration representatives to the IRS, to legitimate business entities and their affiliates. As to robocalls, which are prerecorded messages, the FTC received 1.8 million complaints in FY 2022. Complaints older than five years are purged biannually. The five states with the most complaints are Delaware, Ohio, Arizona, Maryland, and Virginia.[iii] 

Drilling down a bit, imposter robocalls constituted 209,000 complaints. The scammers take advantage of Voice over Internet Protocol (VoIP), a technology more and more in use these days, because VoIP allows them to make a high volume of calls. 

Since you had retained a telemarketing firm, you should know that telemarketers and sellers must remove numbers added to the DNC Registry from their call lists at least every 31 days.[iv] But how does your institution know that this is being done? My guess is that you simply do not know if the telemarketer is complying with the requirement to remove numbers. However, there are means and methods available to determine if a certain level of compliance is taking place. 

Now, as to the broader question of your predicament, if a company violates the Do Not Call rules, consumers can report the call to the FTC online or by calling a toll-free number.[v] Law enforcement officials review these complaints, as well as consumer registration and telemarketer access information, through a resource called the Consumer Sentinel Network[vi], which is an online database maintained by the FTC.[vii] 

Unfortunately for your institution, your regulator has brought its concerns to the FTC, and the FTC is currently working to investigate. Ultimately, as you surmise, you should have due diligence protocol to ensure vendor management includes a thorough review of the risks associated with using telemarketers. Get your vendor management policies and procedures in shape, and keep them current with cites to the FTC’s daily complaint data. 

In the situation you find yourself in, those imposter robocalls are impersonating debt reduction enterprises. But you can’t wiggle away from the investigation because your firm has actually retained the telemarketers, albeit for a different purpose. 

You do not say if there was a consumer complaint to the FTC about your institution itself. However, if you have a record of using telemarketers, or even if you have used the telemarketer just once, part of the FTC investigation might include a probe into how pervasive the telemarketer has conducted illicit activity. You are likely not the only institution caught up in the investigation. Implementing strong vendor management compliance is possibly the best way to avoid this debacle from happening again.

Jonathan Foxx, Ph.D., MBA

Chairman & Managing Director
Lenders Compliance Group

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[i] Do Not Call, Data Book 2022, Federal Trade Commission, November 2022.

[ii] Ibid. FY 2022 Complaints by Topic, National Do Not Call Registry, Compliant Figures for the Year

[iii] The FTC offers interactive data dashboards and data files. These can be accessed online at www.ftc.gov/reports/national-do-not-call-registry-data-book-fiscal-year-2022.  

[iv] Organizations can access the DNC Registry at www.telemarketing.donotcall.gov.  

[v]  For the online consumer complaint line, visit www.donotcall.gov. Consumer calls are handled at 888-382-1222.

[vi] Daily complaint data is available at www.ftc.gov/data.

[vii] About Sentinel, visit www.ftc.gov/sentinel. Law enforcement personnel may join Sentinel at www.register.consumersentinel.gov.

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

Collection Calls and Portfolio Retention

QUESTION

We service loans on our own portfolio and want to expand. Our Collection Department needs advice regarding collection call restrictions. When borrower’s do not have “optimal” loans, we are concerned they may seek better refinancing elsewhere. We want to keep these customers in-house, so we leave auto-dialer collection messages when loans are 15-45 days past due, offering potentially better refinancing.

We have been advised we cannot leave such information on an answering machine because of 3^rd party disclosure. So, we changed the recording to “…. we have important business to discuss, including potential refinance.”

But now we have been advised that we should not use collection call recordings for this information.

We think our borrowers may respond quicker if they receive this information early on and will possibly refinance past due loans if they can qualify. 

Can you provide guidance on the regulatory compliance requirements?

Also, what are some restrictions?

ANSWER

Direct answer: No. The company may not leave prerecorded messages that offer potential refinances during a collection call attempt.

Although other regulations are applicable within your stated scenario, this particular issue is regulated under the Telephone Consumer Protection Act (“TCPA”). This Act governs telemarketing calls, auto-dialed calls, prerecorded call, text messages, unsolicited faxes and the National Do-Not-Call-List. The Federal Communications Commission (“FCC”), its parallel, Federal Trade Commission (“FTC”) and other multi-state laws have a complex set of compliance regulations that covers this broad area. These rules result in steep penalties imposed on a “per violation” basis, even if there is no actual injury to a consumer.

Restrictions apply to collection calls that may include no overt telemarketing. This scenario appears to be a combination of both a collection call and a telemarketing call. To combine calls with these two purposes is prohibited by law.

"Direct Drop” Voicemails and the TCPA

QUESTION

We are interested in rolling out “direct drop” voicemails to people who have already called us and have expressed an interest in getting approved. We would like to do the same for our previous clients. None of the clients are on the “Do Not Call” list nor are any the target of debt collection. All intended recipients are past leads and clients. What guidance can you provide for this initiative?

ANSWER

A very interesting scenario! And one for which, unless you are lending in the Western District of Michigan, there is no clear-cut answer.

“Direct drop” voicemail is a method by which a third-party vendor utilizes technology to reach the consumer’s voicemail through a “back door”. Essentially, the technology allows a company to deliver a prerecorded message to a consumer’s voicemail without actually calling the consumer’s phone number.  Whether “direct drop” voicemail is subject to the Telephone Consumer Protection Act (TCPA) has been an issue for years. In 2014 and 2017, companies petitioned the Federal Communications Commission (FCC) for guidance on this issue; however, the FCC has yet to provide same.

Until this past year, we had very little guidance on this issue. In July, 2018, the District Court for the Western District of Michigan issued a seminal opinion on the issue finding that a company’s use of “direct drop” voicemail constituted calls under the TCPA, thus requiring the called party’s consent. [Saunders v. Dyck O’Neal, Inc., 319 F. Supp. 3d 907 (W.D. Mich., July 16, 2018)]  As to the binding effect of the opinion, note that a Federal District Court opinion does not serve as binding precedent on other District Courts, and, arguably, does not even serve as binding precedent in that District (although it is considered “persuasive”).

Under the TCPA, it is unlawful to “initiate any telephone call to any residential line using an artificial or prerecorded voice to deliver a message without the express prior consent of the called party unless . . . exempted by rule or order of the Commission under paragraph 2(B)”. [47 U.S.C.  s. 227(b)(1)(B)] There is no exception for “established business relationships” nor is the restriction limited to debt collection efforts. 

The ­Saunders case involved the use of direct drop voicemail in connection with debt collection. The key issue in the case was whether the company needed the consumer’s “prior express consent” to utilize the direct drop voicemail system. In order to address this issue, the Court needed to determine if the direct drop voicemail constituted a “telephone call” as defined under the TCPA.

Relying upon prior decisions in which the courts have found that voicemail and text messages are subject to the same TCPA restrictions as traditional telephone calls, the Court found that the term “call” includes direct drop voicemail. The Court stated that “the statue itself casts a broad net – it regulates any call, and a “call” includes communication, or an attempt to communicate, via telephone. Both the FCC and the courts have recognized that the scope of the TCPA naturally evolves in parallel with telecommunications technology as it evolves . . . “ [Saunders at 911] The Court further noted that “voicemails are arguably more of a nuisance of consumers than text messages” and that limiting the TCPA to instances wherein a company specifically dialed the consumer’s number and then left a voicemail but to exclude a company’s “back door” ability to reach the consumer’s voice mailbox would be an “absurd result”, as the TCPA “was created to limit the harassment and nuisance that automated calls and messages place on consumers . .. “. [Saunders at 911]

Thus, if you contemplate using direct drop voicemail to reach consumers in the Western District of Michigan, you should obtain the consumer’s prior consent. Outside of the District, it is still a grey area. However, there is no doubt that other Districts will consider the Saunders opinion in addressing the issued. 

Joyce Wilkins Pollison, Esq.
Executive Director &
Director/Legal & Regulatory Compliance

Recording Calls

QUESTION

We are a lender with a home office in the state of Virginia. We had thought that anyone could record a conversation with a borrower without notice or consent at any point in time. Recently, we heard that there are laws, either state or Federal, that do speak to this sort of thing.

There was an incident where one of our loan officers recorded a borrower call unbeknownst to the borrower, a call that became somewhat unfavorable in nature, containing some harsh language, and now we are concerned that we may have done something that we should not have done.

Do you have any basic information that might help us, particularly referencing the state of Virginia, where we are located?    

ANSWER

Although you did not state which party may have used the “harsh language,” we would always caution anyone on staff in your own organization to use the utmost care and respect when conversing with any actual or potential borrower. There are many laws, both state and Federal, that prohibit the use of certain language or the use of language that could be construed by a borrower or applicant as “threatening” or “abusive.”

   

Thinking in broadest terms regarding the recording of calls, there are state-specific laws that apply here, states being where the majority of such laws apply. There are also some Federal laws, regulations, and rules that can apply too.

With the understanding that the majority of governing laws are state-specific for recording calls, many states have what is known as a “One Party Consent Law,” which means that if one party consents to the recording of the conversation, it is permissible. So, if the borrower was a party to the conversation, he or she can record the conversation without the loan officer’s consent, and the opposite is true as well.  

Other states have what is known as a “Two Party Consent Law,” in which all parties must be made aware of and consent to the call recording. An exception to this law is generally where there is no expectation of privacy, such as in a restaurant or a store. 

Some examples of Federal laws, regulations, and rules that would be applicable have more to do with the content of the conversation within the recorded calls, ensuring that there are no violations of certain regulations, rules, and Acts, such as:

• Graham-Leach-Bliley Act (GLBA);
• Unfair, Deceptive, or Abusive Acts or Practices (UDAAP);
• Fair Lending rules and the Equal Credit Opportunity “ECOA,” or the Unfair, Deceptive Treatment & Practices Act “UDTPA” (i.e., anything that may be construed as potentially discriminatory in nature or disparate treatment to a consumer).

In speaking specifically to the state in question, which is Virginia, there is guidance found within the state itself. Under Virginia law, an individual who is a party to either an in-person conversation or electronic communication, or an individual who has the consent of one of the parties to the communication, can lawfully record it or disclose its contents. Please see the guidance below:

In a section of the Code of Virginia, entitled “Interception, disclosure, etc., of wire, electronic or oral communications unlawful; penalties; exceptions,” the following requirements are set forth:

A. Except as otherwise specifically provided in this chapter any person who:

1. Intentionally intercepts, endeavors to intercept or procures any other person to intercept or endeavor to intercept, any wire, electronic or oral communication;

2. Intentionally uses, endeavors to use, or procures any other person to use or endeavor to use any electronic, mechanical or other device to intercept any oral communication;

3. Intentionally discloses, or endeavors to disclose, to any other person the contents of any wire, electronic or oral communication knowing or having reason to know that the information was obtained through the interception of a wire, electronic or oral communication; or

4. Intentionally uses, or endeavors to use, the contents of any wire, electronic or oral communication, knowing or having reason to know that the information was obtained through the interception of a wire, electronic or oral communication; shall be guilty of a Class 6 felony.

[Code of Virginia, Title 19.2. Criminal Procedure, Chapter 6. Interception of Wire, Electronic or Oral Communications, § 19.2-62, A.1-4.]

Note, also, that the subject section states:

It shall not be a criminal offense under this chapter for a person to intercept a wire, electronic or oral communication, where such person is a party to the communication or one of the parties to the communication has given prior consent to such interception. [§ 19.2-62. Interception, disclosure, etc., of wire, electronic or oral communications unlawful; penalties; exceptions. B.2. Emphasis added.]

Michelle Leigh

Director/Internal Audits and Controls

Lenders Compliance Group

Executive Director/Servicers Compliance Group

Restricting Contact with Consumers

QUESTION

I have heard that there are only certain times of the day or evenings when a lender or servicer can contact a borrower. Additionally, I have also heard that there are certain things that must be communicated and certain things that cannot be communicated. This is confusing because I do not know what those things are and why they are necessary. Can you help me to understand this better? Also, can you tell me if this applies to anyone that is not a borrower, and who may just be loan shopping?

ANSWER

The questions posed here are directly part of multiple Consumer Protection Laws. Historically, consumers have dealt with much abuse in these areas, where some lenders and servicers have contacted them by telephone, unauthorized at times, calling at inappropriate hours, and the callers not truthfully identifying themselves, making serious threats to consumers or speaking to them in an abusive and/or profane manner. Through the years, there have been a tremendous number of lawsuits against lenders and servicers because of these abuses.

Many states have written laws which prohibit lenders and servicers from violating consumers in these ways. Federal laws have been written by all of the regulating entities, GSE’s and HUD to further afford protection to consumers in the areas where these abuses have taken place. Some of the regulating entities would include the Federal Reserve (FRB), Office of the Comptroller of the Currency (OCC), Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC), and the Federal Deposit Insurance Corporation (FDIC). There are other agencies who concur with protecting the consumers in this same manner, and the specific laws usually contain verbiage stating “the consumer;” therefore, this would apply to all consumers, whether or not they are your company’s borrower or a consumer who happens to be shopping for a loan.  

While an exhaustive list would be difficult to compile in its entirety, please find a short list of the highest risk areas and the most commonly cited in lawsuits and regulatory examination results. I am providing a list, not meant to be comprehensive, based on the following topics: Restrictions on Communications; Abuse/Harassment; False, Deceptive, or Misleading; and Unfair and Unconscionable Actions.       

RESTRICTIONS ON COMMUNICATIONS

• Prohibits the making of any calls being made prior to 8:00 a.m. or after 9:00 p.m. in Potential Customers Time Zone, or at other inconvenient times to a consumer;
• Prohibits repeated calls to third parties in connection to a consumer regarding any loan product;
• Prohibits repeated calls to consumers;
• Prohibits improper calls to a consumer at their place of business, if applicable;
• Prohibits revealing a consumer’s personal information to any third parties;
• Prohibits the continued calling of a consumer after receiving a “Cease Communication” Notice from Potential Customer, either verbally or in writing;
• Prohibits contacting a consumer directly if known to be represented by any Attorney in any connection with the financial institution;
• Prohibits making telemarketing calls using an artificial or prerecorded voice to residential telephones without prior express consent.
• Prohibits making any non-emergency call to a consumer, using an automatic telephone dialing system (“auto-dialer”), or an artificial or prerecorded voice to a wireless telephone number without prior express consent.  (If the call to a consumer includes or introduces an advertisement or constitutes telemarketing, consent must be in writing. If an auto-dialed or prerecorded call to a wireless number is not for such purposes, consent may be oral or written. The FCC has concluded that the Telephone Consumer Protection Act (TCPA), which restricts telephone solicitations (i.e., telemarketing) and the use of automated telephone equipment, includes protections against unwanted calls to wireless numbers, thus encompassing both voice calls and text messages, including short message service (SMS) texts, if the call is made to a telephone number assigned to such service.
• Prohibits the sending of unsolicited advertisements to telephone facsimile machines. The requirement for prior express consent and the facsimile must contain specific “opt out” instructions.

ABUSE/HARASSMENT

• Prohibits falsely threatening illegal or unintended acts to a consumer;
• Prohibits the use of any harassing, abusive and/or oppressive conduct to a consumer;
• Prohibits utilizing obscene, profane, or abusive language to a consumer;
• Prohibits any threats or violence to a consumer under any circumstance;
• Prohibits the use of any language or action that materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; and
• Prohibits the use of language or action that takes unreasonable advantage of:

• a consumer’s lack of understanding of the material risks, costs, or conditions of the product or service; 

• a consumer’s inability to protect his or her interests in selecting or using a consumer financial product or service; and 

• a consumer’s reasonable reliance on a covered person (i.e., the consumer, themselves”) to act in his or her own and best interests.

FALSE, DECEPTIVE OR MISLEADING

• Prohibits failing to Identify yourselves to a consumer as company employees;
• Prohibits misrepresentation of loan character, amount, or status to a consumer;
• Prohibits falsifying any information of any kind to a consumer;
• Prohibits the act or practice which Misleads or is likely to mislead a consumer;
• Prohibits the use of any language or action that may cause a consumer’s interpretation that is reasonable under the circumstances to become confusing and/or unclear; and
• Prohibits the use of language or action that is misleading to a consumer, and results in a practice that is material. 

UNFAIR AND UNCONSCIONABLE ACTIONS

• Prohibits any discussion involving unauthorized fees, interest and expenses to a consumer;
• Prohibits the use of any language that would pressure or steer a consumer into a loan. 
• Prohibits any unfair language or action to a consumer that causes, or is likely to cause, substantial injury to him/her;
• Prohibits any unfair language or action to a consumer that results in the Injury that is not reasonably avoidable by him/her; and
• Prohibits any unfair language or action where injury to a consumer has been sustained and is not outweighed by countervailing benefits to them.  

Michelle Leigh, CRCM, MBA

Director/Internal Audits and Controls

Executive Director/Servicers Compliance Group