September 10, 2001 16:23:08
As New Privacy Laws Take Affect, Dealership Telephone Solicitations Are Getting More Attention
Whann and Associates
Over the past several years motor vehicle dealers have begun to embrace new technology to improve their communication with existing and potential customers. Electronic communications via the Internet and automated telephone systems can reach potential customers quicker and with less expense than employing additional dealership personnel to make telephone calls. Dealers have used electronic communication systems to obtain and verify credit information, conduct consumer satisfaction inquires, schedule service appointments, and advertise new products and services and special promotions. While most dealers are aware of the new federal privacy laws that became effective in July, 2001 and protect individuals from having their nonpublic personal information shared without proper authorization, we have found that few dealers are aware of the federal and state laws that impose restrictions on telephone solicitations.
The Telephone Consumer Protection Act and the Federal Communications Commission's (FCC) Restrictions on Telephone Solicitations, the implementing regulations, restrict the initiation of telephone calls for the purpose of making “telephone solicitations”. The term “telephone solicitation” has been broadly defined to include the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person. The purpose of the Act was to place restrictions on telemarketing practices that could be intrusive, a nuisance and an invasion of privacy. The restrictions on telephone solicitations apply to live communications as well as pre-recorded messages via the telephone and the use of a machine, computer or other device to send an unsolicited advertisement to another fax machine. While there are restrictions on the use of telephone solicitations, they are permitted if you fall under an exception set forth in the Act and you implement the practices and procedures required thereunder.
Three of the exceptions that may apply to motor vehicle dealerships state that a telephone solicitation does not include a call or message: (i) to any person with that person's prior express invitation or permission; (ii) to any person with whom the caller has an established business relationship; and (iii) that is made for a commercial purpose but does not include the transmission of any unsolicited advertisement. These exceptions provide dealers with a window of opportunity to utilize telephone solicitations.
For example, the term “unsolicited advertisement” means any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission. “Established business relationship”, on the other hand, means a prior or existing relationship formed by voluntary two-way communication with or without an exchange of consideration, on the basis of an inquiry, application, purchase or transaction involving products or services, which has not been previously terminated by either party. Therefore, when a customer purchases or orders a vehicle, fills out a credit application, has his vehicle serviced, or merely visits your dealership to test drive a vehicle or shop around, you may have established a business relationship and have a valid basis for initiating a “telephone solicitation” in the future.
If a dealer is permitted to make a telephone solicitation, there are still a number of restrictions on when a telephone call can be made and certain practices and procedures that must be implemented and followed. For example, any prerecorded telephone messages delivered by an automatic telephone dialing system must state clearly at the beginning of the message the identity of the business, individual, or other entity initiating the call and, during or after the message, state clearly the telephone number (other than that of the autodialer or prerecorded message player which placed the call) or address of such business, other entity, or individual. A telephone solicitation may not be initiated to a residential telephone subscriber before 8 a.m. or after 9 p.m. (local time at the called party's location), and the entity initiating the solicitation must have procedures for maintaining a list of persons who do not wish to receive telephone solicitations made by or on its behalf. The procedures instituted must meet the following minimum standards:
- Written policy. Persons or entities making telephone solicitations must have a written policy, available upon demand, for maintaining a do-not-call list.
- Training or personnel engaged in telephone solicitation. Personnel engaged in any aspect of telephone solicitations must be informed and trained in the existence and use of the do-not-call list.
- Recording, disclosure of do-not-call requests. If a person or entity who makes a telephone solicitation (or on whose behalf a solicitation is made) receives a request from a residential telephone subscriber not to receive calls from that person or entity, the person or entity must record the request and place the subscriber's name and telephone number on the do-not-call list at the time the request is made. If such requests are recorded or maintained by a party other than the person or entity on whose behalf the solicitation is made, the person or entity on whose behalf the solicitation is made will be liable for any failures to honor the do-not-call request. In order to protect the consumer's privacy, persons or entities must obtain a consumer's prior express consent to share or forward the consumer's request not to be called to a party other than the person or entity on whose behalf a solicitation is made or an affiliated entity.
- Identification of the telephone solicitor. A person or entity making a telephone solicitation must provide the called party with the name of the individual caller, the name of the person or entity on whose behalf the call is made, and a telephone number or address at which the person or entity may be contacted. If a person or entity makes a solicitation using an artificial or prerecorded voice message transmitted by an autodialer, the person or entity must provide a telephone number other than that of the autodialer or prerecorded message player which placed the call. The telephone number provided may not be a 900 number or any other number for which charges exceed local or long distance transmission charges.
- Affiliated persons or entities. In the absence of a specific request by the subscriber to the contrary, a residential subscriber's do-not-call request shall apply to the particular business entity making the call (or on whose behalf a call is made), and will not apply to affiliated entities unless the consumer reasonably would expect them to be included given the identification of the caller and the product being advertised.
- Maintenance of do-not-call lists. A person or entity making telephone solicitations must maintain a record of a caller's request not to receive future telephone solicitations. Any no call request must be honored for 10 years from the time the request is made.
A person who has received more than one telephone call within a twelve month period by or on behalf of the same person in violation of the Telephone Consumer Protection Act may bring an action in a state court to enjoin the violation, an action to recover the greater of the actual monetary loss or $500 in damages, or both. If a court finds that the violation was done willfully or knowingly, the individual may be awarded treble damages as well.
In addition to the remedies afforded under the Federal Act, a number of states have enacted laws that prescribe additional requirements and procedures for telephone solicitors and permit additional penalties and enforcement actions. The Telephone Consumer Protection Act does not preempt a state law that imposes more restrictive requirements or regulations on telephone solicitation activities that take place within a state. States often have more restrictive provisions which govern “telephone solicitors”. Telephone solicitors that do not fall under any of the exemptions under a state statute are often required, among other things, to obtain a certificate of registration from a state agency or the Attorney General prior to engaging in telephone solicitation activities as defined under the Statute. Fortunately, most motor vehicle dealers will fall under an exemption for those who (1) have been operating a retail business for at least one year under the same name that is used in connection with the telephone solicitation; (2) display goods and offer goods and services for retail sale; and (3) provide those goods and services at the business premises. A violation of the Statute may result in enforcement actions by the Attorney General and a dealer may be required to pay civil penalties, costs and expenses, and attorney's fees. A violation may also constitute a deceptive act or practice in violation of the State Unfair and Deceptive Acts and Practices (UDAP) Statute and may result in a private cause of action by the purchaser in which case the court may award treble damages, reasonable attorney's fees, court costs, punitive and treble damages.
For many individuals, filing lawsuits under the Telephone Consumer Protection Act and similar state laws has become a part-time job they can do from home. The good news is there is an affirmative defense under the Federal Act, similar to the Bona Fide Error Defense under State UDAP Statutes, if the entity accused of a violation can demonstrate that it has established and implemented with due care, reasonable practices and procedures to effectively prevent telephone solicitations in violation of the Act. If your dealership is currently implementing procedures to protect “nonpublic personal information” and track the distribution of Privacy Policies and customer opt out decisions, it would be a good time to establish your telephone solicitation policies and procedures as well.
The information contained herein has been provided by Keith E. Whann of the law firm Whann & Associates and is for general information purposes only. You should contact legal counsel for specific application.