June is proving to be a very active month for the US Federal Communications Commission (FCC) in construing the Telephone Consumer Protection Act, including what sorts of consumer interactions are sufficient to meet the requirements for consent to receive marketing or other messages. This post reports on an extraordinary warning letter issued to PayPal, criticizing a user-agreement based approach to collecting consent. Next week, we will report on a series of TCPA interpretative guidance which was adopted yesterday by a vote of 3 to 2.

On June 11, the FCC publicly released a warning letter sent to PayPal, Inc., by the FCC’s Enforcement Bureau, stating that PayPal’s new user agreement “may violate” a federal law called the Telephone Consumer Protection Act, or TCPA. The TCPA requires a consumer’s consent before a business may make certain types of phone calls or send automated text messages. PayPal had released a modification of its existing user agreement (set to go into effect on July 1) that would authorize the company to make “autodialed or prerecorded calls and text messages” for a variety of purposes and at any telephone number PayPal associates with the customer.

The Enforcement Bureau’s activist approach is without recent precedent and should serve as a warning to many businesses that the FCC staff is willing to act aggressively in response to media reports or advocacy by public interest groups to name and shame corporate telemarketing, or perhaps other practices which do not comport with the rules. In this instance, the National Consumer Law Center and media reports apparently directed the Enforcement Bureau’s attention to the pending changes to PayPal’s agreement, triggering the extraordinary “warning”  that future actions taken in reliance on the new language “may violate federal laws.”

eBay and PayPal separated into two companies, effective June 15. Customers therefore were advised on the websites and by email of various changes and what this would mean for them.  (eBay customers received an email directly highlighting the proposed changes to permissioning for marketing calls.) For PayPal, the new user agreement (to which all new members would click and agree at sign-up, but which would also become effective against existing members) stated:

1.10 Calls to You; Mobile Telephone Numbers. By providing PayPal a telephone number (including a mobile telephone number), you agree to receive autodialed and prerecorded message calls at that number. The ways in which you provide us a telephone number include, but are not limited to, providing a telephone number at Account opening, adding a telephone number to your Account at a later time, providing it to one of our employees, or by contacting us from that phone number. If a telephone number provided to us is a mobile telephone number, you consent to receive SMS or text messages at that number. We won’t share your phone number with non-affiliated third parties for their purposes without your consent, but may share your phone numbers with our Family of Companies or with our service providers, such as billing or collections companies, who may contact you using autodialed or prerecorded message calls or text messages. Standard telephone minute and text charges may apply if we contact you.

The Enforcement Bureau letter stated that burying this provision within a User Agreement “raise[d] serious concerns” about the company’s compliance with the TCPA’s requirements.  The letter should serve as an important guide for all companies into how the “prior express written consent” requirement is being interpreted at the FCC.

  • First, the FCC emphasizes that its rules require “prior express written consent” from consumers to receive automated calls, and clarifies the requirements of the “clear and conspicuous” disclosures required by the TCPA. Consistent with FTC enforcement patterns and guidance, burying terms in a user agreement – potentially even where click-through consent is occurring – is not adequate.
  • Second, the FCC reminds businesses that consenting to autodialed or prerecorded telemarketing or advertising calls cannot be a requirement to conduct other business with the company. That is, consumers must be able to independently opt out of receiving such calls, while still agreeing to other terms the company sets out. Whether this fact must be called specifically to the consumers’ attention is a subject of litigation debate.
  • Third, the TCPA requires businesses to get consent from consumers for specific phone numbers. The PayPal agreement attempted to collect consent in bulk for each and any  phone number that PayPal associates with the account.
  • Finally, to drive home the point, the FCC reminds businesses that the caller bears the burden of proving that the consumer gave “unambiguous consent” to receive the calls.

In another TCPA development, the FCC voted on a series of rulings that, when released, are expected to further “crack down on robocalls, robotexts, and telemarketing calls.”  Two TCPA developments at the FCC in the course of two weeks send a clear message: businesses that make these calls should carefully review the new rules once they are published and ensure careful compliance. We will report fully on these interpretations next week when the complete regulatory proceedings and decisions are published, but the FCC press release is available herein the meantime.

Remember, both the FTC and the FCC are watching and the penalties can reach $16,000 … per phone call! And of course, these interpretations have consequences for the tsunami of class actions being threatened and filed against companies and the vendors who facilitate the transmission of automated messages in particular.