FTC Remains Tough on ‘Robocalls’ with New Enforcement Case

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Once again, the FTC has completed a major enforcement action against the illegal use of robocalls, a form of prerecorded, computerized telemarketing calls. This time, the action resulted in a $1.1 million civil penalty against Roy M. Cox, an individual whom the FTC considered to be the architect of an illegal robocall operation. The FTC alleged that Cox and several companies he controlled were using robocalls to market credit card interest-rate reduction programs, extended automobile warranties, and home security systems. Due to Cox’s inability to pay, the dollar penalty has been waived and Cox has been permanently banned from participating in any telemarketing activities.

According to the December 2011 complaint, Cox and his co-defendants were not only making prerecorded sales calls to consumers without their consent, in violation of the Telemarketing Sales Rule, but they were also illegally disguising their identity on customers’ caller ID displays. Instead of displaying the companies’ actual name and contact information, generic names such as “CARD SERVICES,” “CREDIT SERVICES,” or “PRIVATE OFFICE” would appear on a recipient’s caller ID. This tactic, known as “caller ID Spoofing,” is also prohibited by law.

As we reported in October, the FTC has been struggling to keep pace with these technological advancements, so it called on the public to come up with a solution. The commission offered a $50,000 prize to whoever could design a program to screen out illegal robocalls. The challenge was open to the public for three months and garnered nearly 800 submissions. The agency expects to announce a winner in early April.

The case against Cox and many of the FTC’s previous enforcement actions indicate that the FTC may be most concerned with robocalls that use patently deceptive advertising to lure in vulnerable, unsuspecting customers. Companies offering fraudulent credit card services, auto-warranty protection, and medical plans have made themselves an easy mark for the FTC, because of the likelihood that they will be reported by recipients or advocacy groups. However, companies interested in using computerized telemarketing must remember that even innocuous content can violate the Telemarketing Sales Rule (and the Telephone Consumer Protection Act) if recipients have not given prior written consent to receive such calls. Also, any company engaging in telemarketing should be subscribing to the federal “do not call” list and scrubbing its calling lists against the federal list. Some states still maintain their own lists as well. In addition to FTC or FCC enforcement, illegal robocalling can result in costly civil litigation, including class actions.