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Ohio AG, FCC take action against robocall operation
On July 7, the Ohio attorney general filed a complaint against multiple companies for participating in an alleged unwanted car warranty call operation. The complaint, filed in the U.S. District Court for Southern District of Ohio, alleged that the 22 named defendants “participated in an unlawful robocall operation that bombarded American consumers with billions of robocalls.” Specifically, the complaint alleged that the defendants “initiated over 77 million robocalls per day for the purpose of generating sales leads, many times in relation to the sale of Vehicle Service Contracts (‘VSCs’) that are deceptively marketed as ‘car warranty’ plans,” totaling at least 800 million call attempts. The defendants allegedly violated the TSR, the Ohio Consumer Sales Practices Act, and the Ohio Telephone Solicitation Sales Act by, among other things: (i) deceptively representing the subject of the call; (ii) misrepresenting caller IDs, or “spoofing”; and (iii) acting as telephone solicitors without having registered as telephone solicitors with the Ohio AG’s Office, as required by law, and without having obtained and filed the required surety bond. The lawsuit coincided with the FCC’s announcement of actions taken to decrease robocalls, including sending cease and desist letters to several carriers in an attempt “to cut off a flood of possibly illegal robocalls marketing auto warranties targeting billions of consumers.” The announcement also noted that the FCC has authorized “all U.S.-based voice service providers to cease carrying any traffic originating from the [named] operation consistent with FCC regulations,” as detailed in a public notice to all U.S.-based voice service providers.
FTC settles with VoIP service provider for TSR violations
On April 26, the FTC announced the filing of a proposed consent order with a Voice over Internet Protocol (VoIP) service provider, a related company, and the company’s owner (collectively, “defendants”) for allegedly “help[ing] scammers blast millions of illegal robocalls.” In the complaint the FTC claims that the defendants violated Section 5(a) of the FTC Act, the Telemarketing Act, and the TSR by continuing to provide VoIP services to customers despite “knowing or consciously avoiding knowing” the customers were: (i) using the services to place calls to numbers on the FTC’s Do Not Call (DNC) Registry; (ii) delivering prerecorded messages; and (iii) displaying spoofed caller ID services to callers involved in scams related to credit card interest rate reduction, tech support, and the Covid-19 pandemic.
According to the announcement, this is the third such action by the FTC against VoIP service providers during the past two years. Under the terms of the consent order, the defendants are (i) banned from assisting and facilitating abusive telemarketing practices, including the use of VoIP services; (ii) prohibited from further violations of the TSR or assisting others in doing so; (iii) banned from providing services or assigning telephone numbers without employing automated procedures to block calls from unassigned or invalid numbers; and (iv) required to ensure that they do not provide VoIP to suspected telemarketers. The proposed order also provides for a $3 million civil money penalty that is suspended due the company’s inability to pay.
FTC settles first consumer protection case against a VoIP service provider
On September 22, the FTC and the Ohio attorney general announced several proposed stipulated final orders against a Voice over Internet Protocol (VoIP) service provider, along with an affiliated company, the VoIP service provider’s former CEO and president, and a number of other subsidiaries and individuals, to settle allegations concerning their facilitation of a credit card interest rate reduction scheme. This marks the FTC’s first consumer protection case against a VoIP service provider. According to the FTC and the AG, the VoIP service provider provided one of the defendants with the ability to place illegal robocalls in order to market “phony credit card interest rate reduction services.” Both of these defendants were controlled by the VoIP service provider’s former CEO who was also named in the lawsuit. In addition, the defendant that placed the illegal calls, along with four additional defendants, are accused of managing the overseas call centers and other components used in the credit card interest rate reduction scheme.
One of the settlements will prohibit the former CEO, along with two corporations under his control, from (i) participating in any telemarketing in the U.S.; (ii) marketing any debt relief products or services; and (iii) making misrepresentations when selling or marketing any products or services. These defendants will collectively be subject to a $7.5 million judgment, which is mostly suspended due to their inability to pay.
The settlement with the VoIP service provider and the affiliated company will require a payment of $1.95 million. The VoIP service provider and its U.S.-based subsidiaries will also be prohibited from hiring the former CEO or any of his immediate family members, as well as from hiring two of the other defendants. These defendants will also be required to follow client screening and monitoring provisions, and are prohibited from providing VoIP and related services to clients who pay with stored value cards or cryptocurrency, or to clients who do not maintain public-facing websites or a social media presence. Additionally, the defendants will be required to block calls that may appear to come from certain suspicious phone numbers, block calls that use spoofing technology, and terminate certain high-risk relationships.
The settlements (see here, here, and here) reached with the defendant that placed the illegal calls and four additional defendants include prohibitions similar to those issued against the former CEO, and will require the payment of a total combined judgment of $10.3 million, which will be largely suspended due to their inability to pay.
All settlements are subject to court approval.