InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
FCC Adopts Rules Allowing Voice Service Providers to Block Illegal Robocalls
On November 16, the FCC approved new rules allowing phone companies to proactively block illegal robocalls originating from certain types of phone numbers.
Pursuant to the report and order released on November 17, providers may block calls that: (i) are made from telephone numbers that are not designed to make outgoing calls; (ii) originate from telephone numbers listed on a subscriber’s “do not originate” list; or (iii) originate from telephone numbers with non-existent area codes, no provider assignment, or that are not currently in use. The FCC is seeking public comments from phone service providers by January 23, 2018, to minimize the possibility of blocking “lawful calls” by establishing procedures for identifying and fixing erroneous blocks.
FTC Staff Supports FCC’s Proposal to Reverse Broadband Enforcement Authority
On July 17, FTC staff submitted its comments to the FCC in response to the FCC’s Notice of Proposed Rulemaking on Restoring Internet Freedom (NPRM), in favor of returning broadband enforcement authority to FTC. (See previous InfoBytes coverage here.) The NPRM would reverse a 2015 FCC decision, which changed the classification of broadband internet access service from an “information service to a common carrier service,” and resulted in a loss to the FTC’s authority. Currently, the FTC cannot regulate common carrier activities. FTC staff argued that with the exception of broadband providers, FTC jurisdiction covers virtually all other internet entities. Having one agency with enforcement authority over all internet entities would allow for “consistent standards and consistent application of those standards.” The result, the staff encouraged, would be the creation of a “level playing field for all companies operating in the Internet ecosystem.”
Acting FTC Chairman Maureen K. Ohlhausen endorsed the staff comments and offered support for the NPRM to reverse the 2015 Title II classification of broadband internet access service as a way to “restore the FTC’s ability to protect broadband consumers under its general consumer protection and competition authority.” However, FTC Commissioner Terrell McSweeny dissented, stating that “[u]nless Congress repeals the common carrier exemption in the FTC Act, the FTC could continue to face challenges to its authority over common carriers.” Consequently, “[r]epealing these rules would be harmful for consumers and the marketplace . . . . Rather than roll[ing] back protections, we should augment them with renewed FCC vigor and a change to anachronistic barriers to FTC enforcement.”
Second Circuit Affirms No Unilateral Revocation Under TCPA
On June 22, the Second Circuit held in Reyes v. Lincoln Automotive Financial Services, No. 16-2014-cv, 2017 WL 2675363 (2nd Cir. June 22, 2017), that the Telephone Consumer Protection Act (TCPA) does not permit a consumer to unilaterally revoke his or her consent to be contacted by telephone when that consent was given as a “bargained-for consideration in a bilateral contract.” The defendant had leased an automobile from the plaintiff. As a condition of that lease agreement, the plaintiff consented to receive automated or manual telephone calls from the defendant. After the plaintiff defaulted, the defendant regularly called the plaintiff and continued to do so even after the plaintiff allegedly revoked his consent. To support his argument that the TCPA permits him to revoke his consent, the plaintiff relied on prior case law and a recent ruling from the FCC that stated that under the TCPA, “prior express consent” can be revoked. The Second Circuit, however, distinguished this case from those relied on by the plaintiff on the grounds that the prior cases and the FCC’s ruling support the proposition that consent not given in exchange for consideration, and which is not part of a binding legal agreement, can be revoked. The Court further stated that where the consent is not provided gratuitously but is instead an express provision of a contract, the TCPA does not allow such consent to be unilaterally revoked.
FCC Proposes $120 Million Fine for Spoofed Robocalls
On June 22, the Federal Communications Commission (FCC) announced a proposed fine of $120 million against a telemarketer for violating the Truth in Caller ID Act. The agency claims that the individual made nearly 100 million calls in which he falsified caller ID information in order to display incorrectly the same area code and first three digits as the consumer he was calling. “Neighbor spoofing,” according to the FCC, is an illegal technique used to appear to be calling from the recipient’s own area. If the recipient answered the call, the caller would then offer travel packages falsely claiming to represent well-known hotel and travel companies. The citation and order provides the telemarketer with 30 days to respond to the FCC.
Acting FTC Chairman Ohlhausen Welcomes New FCC Approach to Internet Openness
On May 18, Acting FTC Chairman Maureen Ohlhausen issued a statement on the FCC’s publication of a Notice of Proposed Rulemaking (NPRM) to “reinstate a light-touch regulatory approach protecting Internet openness.” The Notice proposes the following actions: (i) returning to the framework under Title I of the Communications Act instead of following Title II regulatory guidance; (ii) classifying mobile broadband Internet access service as “private mobile service”; and (iii) eliminating Title II’s “vague and expansive” Internet conduct standard, thus eliminating regulatory uncertainty. “I welcome the adoption of this NPRM as further progress toward restoring the FTC’s ability to protect broadband subscribers from unfair and deceptive practices, including violations of their privacy. Those consumer protections were an unfortunate casualty of the FCC’s 2015 decision to subject broadband to utility-style regulation. This new proceeding offers an opportunity to undo that decision and thereby return broadband consumers to the expert protection of the FTC,” stated Chairman Ohlhausen.
D.C. Circuit Rules FCC Lacks Authority Under TCPA to Regulate Faxes Sent with Recipient’s Consent
In a 2-1 split decision, the U.S. Court of Appeals for the District of Columbia Circuit recently ruled that the Federal Communications Commission (FCC) lacks authority under the Telephone Consumer Protection Act (TCPA) to regulate facsimiles sent with the recipient’s consent. Bais Yaakov of Spring Valley et al. v. F.C.C. et al., No. 14-1234 (D.C. Cir. Mar. 31, 2017) (Dkt. No. 1668739). Specifically, the court found that a 2006 FCC Rule (the “Solicited Fax Rule”) that required a sender to include an opt-out notice on faxes sent with the “recipient’s prior express permission”—and which has formed the basis for countless putative TCPA class actions—exceeds the scope of authority given to the FCC under the TCPA. Based on this finding, the court vacated the 2006 FCC Order implementing the rule. Ultimately, the majority was not persuaded by the FCC’s argument that agency action—in this case, the FCC’s requiring opt-out notices on solicited fax advertisements—is permissible so long as Congress had not prohibited the agency action in question.
Shortly after ruling was handed down, FCC Chairman Ajit Pai issued a statement expressing support for the court’s ruling, which he said emphasized “the importance of the FCC adhering to the rule of law.” The recently-appointed Chairman explained further that he had, in fact, “dissented from the FCC decision that the court has now overturned because, as [he] stated at the time, the agency’s approach to interpreting the law reflected ‘convoluted gymnastics.’” Chairman Pai continued, “[g]oing forward, the Commission will strive to follow the law and exercise only the authority that has been granted to us by Congress.”
Congress Approves Joint Resolution to Repeal FCC’s Broadband Privacy Rules, Signed into Law by President Trump
On April 3, President Trump signed into law a measure (S.J.Res. 34) rescinding the new Federal Communications Commission (FCC) broadband privacy rules related to Internet service providers (ISPs). As previously covered on InfoBytes, the privacy rules—passed last year in a 3-2 party-line vote under former Democratic FCC Chairman Tom Wheeler—require, among other things, that ISPs receive express consent from users concerning the use of their personal data for marketing purposes. FCC Chairman Ajit Pai has taken the position that the new FCC regulations are inconsistent with the Federal Trade Commission’s (FTC) framework. The rules had been partially stayed by the FCC in response to multiple reconsideration petitions. Approved last week in the Senate by a 50-48 margin, and subsequently passed by a 215-205 House vote, S.J.Res. 34 was sent to President Trump on Friday for his signature. The President signed the joint resolution into law on Monday evening, thereby repealing the FCC regulations pursuant to the Congressional Review Act, 5 U.S.C. §§ 801-808. Notably, per the language of the resolution—which was originally introduced by Sen. Jeff Flake (R-AZ) in early March—the FCC is also prohibited from re-issuing new rules without the passage of a new law authorizing them.
FCC, FTC Issue Joint Statement on Broadband Data Security Regulation; Senate Resolution Introduced to Repeal FCC Privacy Rules
On March 1, FCC Chairman Ajit Pai and acting FTC Chairman Maureen K. Ohlhausen issued a Joint Statement announcing an FCC Order (Stay Order) staying the enactment of certain data security provisions (§ 64.2005) adopted by the Commission late last year as part of its Broadband Privacy Order while the Commission and Congress consider an appropriate resolution of the broader Net Neutrality proceeding. Absent a stay, the rule was set to go into effect on March 2. Separate and apart from explaining the Stay Order, the Joint Statement effectively serves as a commitment by both the FCC and FTC to return “jurisdiction over broadband providers’ privacy and data security practices … to the FTC, the nation’s expert agency with respect to these important subjects.” Moreover, the statement also highlights what might be considered a guiding principle behind the new leadership at both the FCC and the FTC – namely, that “[a]ll actors . . . should be subject to the same rules” and “[t]he federal government shouldn’t favor one set of companies over another.”
The Stay Order arose out of an October 2016 decision to amend the Broadband Privacy Order to include new “sector-specific privacy rules” that the FCC determined were “necessary to address the distinct characteristics of telecommunications services.” This final version, the Broadband Privacy Order – was published in the Federal Register (81 Fed. Reg. 87,274) on December 2, 2016.
This amendment marked a substantial change from the original language included in the order as proposed back in March 2016, where the Commission “propose[d] to apply the traditional privacy requirements of the Communications Act to . . . broadband Internet access service (BIAS).” Then-commissioner and current FCC Chairman Pai strongly disagreed with the amendment at the time, filing a dissenting statement in which he argued, that “it makes no sense” for the FCC to enact “rules that apply very different regulatory regimes based on the identity of the online actor” because, among other reasons, it will inhibit competition in the online advertising market and also “lead to consumer confusion about which online companies can and cannot use their data.” Thereafter, eleven separate timely petitions to reconsider the October 2016 Order were filed, along with a petition requesting that the Commission stay the effective date of the Order.
The decision to delay the enactment of the new privacy regulations relied on Chairman Pai’s earlier argument that the data security rule as amended is not consistent with current FTC privacy standards, and thus found the March 2 effective date to be based on the incorrect underlying assumption that “carriers should already be largely in compliance with these requirements because the reasonableness standard adopted in [the] Order . . . resemble[] the obligation to which they were previously subject pursuant to Section 5 of the FTC Act.” As made clear by Chairman Pai in the Joint Statement, “[t]he stay will remain in place only until the FCC is able to rule on a petition for reconsideration of its privacy rule.”
Notably, shortly after the release of the Joint Statement, on March 7, Sen. Jeff Flake (R-Ariz), chairman of the Senate Judiciary Subcommittee on Privacy, Technology and the Law, introduced a joint resolution to formally provide for “congressional disapproval” of 81 Fed. Reg. 87,274, i.e., the Broadband Privacy Order referenced above, under the Congressional Review Act (CRA). The CRA is a 1996 law that empowers Congress to repeal federal regulations. According to a statement released by his office, Sen. Flake—who has long opposed the privacy regulations at issue—sent a letter back in January of last year to FCC Chairman Tom Wheeler expressing concerns that the FCC is “overreaching its authority” with its planned broadband regulations. The Arizona Senator thereafter, on May 11, 2016, chaired a Privacy, Technology and the Law Subcommittee hearing seeking “answers on the legality of the proposed FCC rules and the consequences for consumers and the future of the internet.” And, most recently, on March 1, Sen. Flake wrote a Wall Street Journal op-ed laying out his position on the matter.
Ajit Pai Nominated to a Second Term as FCC Chairman
On March 7, President Trump announced his intent to nominate Ajit V. Pai for a second five-year term as Chairman of the Federal Communications Commission (FCC). The five-year appointment would span from July 1, 2016, when Pai’s first term officially ended, to 2021. FCC commissioners are able to stay on at the agency for an additional year, but Pai would have to secure confirmation from the Senate to continue beyond that time. At present, two spots still remain left to be filled in order for the Commission to get it back to full capacity. Democratic Commissioner Mignon Clyburn and Republican Commissioner Michael O’Rielly are the other two current commissioners.
Mr. Pai was designated acting Chairman of the FCC by President Trump in January 2017. He had previously served as Commissioner at the FCC, appointed by then-President Barack Obama and confirmed unanimously by the Senate in May 2012. Before this, Mr. Pai was a Partner at Jenner & Block, LLP from 2011 until 2012, and Deputy General Counsel, Associate General Counsel, and Special Advisor to the General Counsel at the FCC from 2007 until 2011. In a statement released by the FCC, Pai affirmed his commitment to “work[ing] with [his] colleagues to connect all Americans with digital opportunity, foster innovation, protect consumers, promote public safety, and make the FCC more open and transparent to the American people.” In a separate statement, Chairman Pai also announced the appointment of two staff members to the Office of the Chairman—Nathan Leamer, who will serve as the Chairman’s Policy Advisor, and Carlos Minnix, who will serve as a Staff Assistant.
Chairman Pai’s FCC website bio can be accessed here.
FCC Denies Petition by MBA to Exempt Certain Mortgage Servicing Calls from Prior Express Consent Requirement
In an order dated November 15, the FCC’s Consumer and Governmental Affairs Bureau denied a petition by the Mortgage Bankers Association (MBA) that sought an exemption from the FCC’s prior express consent requirement for non-telemarketing residential mortgage servicing auto-dialer calls to wireless numbers. In its order, the Bureau concluded that MBA had failed to show (1) that the calls in question would be free of charge to consumers; and (2) that the parties seeking relief should be able to send non-time-sensitive calls to consumers without their consent.
Among other things, the Order explained that the Telephone Consumer Protection Act (TCPA) “reflects Congress’ recognition of the potential costs and privacy risks imposed on wireless consumers from the use of auto-dialer equipment, which can generate large numbers of unwanted calls” and accordingly, the FCC has generally attempted to balance and accommodate the legitimate business interests of callers in addition to recognized consumer privacy interests.