InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
D.C. Circuit upholds majority of FCC order overturning net neutrality rules
On October 1, the U.S. Court of Appeals for the D.C. Circuit issued a decision, which mostly ratifies the FCC’s 2017 reversal of the net neutrality rules barring internet service providers (ISPs) from slowing down or speeding up web traffic based on business relationships. (See previous InfoBytes coverage here.) Notably, however, the decision vacates a portion of the FCC’s 2018 Restoring Internet Freedom Order (Order), which preempted states from issuing their own net neutrality rules on requirements that the FCC “‘repealed or decided to refrain from imposing’ in the Order or that [are] ‘more stringent’ than the Order.”
The D.C. Circuit held that the FCC’s decision to reclassify broadband internet access as a Title I service under the Telecommunications Act—allowing for a “light-touch” regulatory framework for ISPs instead of the more heavily regulated Title II—deserves Chevron deference. The appellate court also noted that while “[p]etitioners dispute that the transparency rule, market forces, or existing antitrust and consumer protection laws can adequately protect internet openness. . . . [we] are ultimately unpersuaded.”
The D.C. Circuit also concluded that the FCC failed to adequately address how the reversal of the net neutrality rules could affect public safety issues, holding that the FCC must address this issue. The appellate court stressed that “[u]nlike most harms to edge providers incurred because of discriminatory practices by broadband providers, the harms from blocking and throttling during a public safety emergency are irreparable.” Additionally, the appellate court instructed the FCC to revisit its analysis on how the reversal will affect the regulation of pole attachments as well as low-income households that receive the internet through an FCC subsidy program. Furthermore, while the appellate court concluded that the FCC overreached its authority in prohibiting states from passing their own net neutrality rules, Judge Williams—who concurred in part and dissented in parted—reasoned that the internet cannot be divided into state markets, and that state actions “would frustrate an agency’s authorized policy.”
State AGs and VSPs to collaborate on robocalls
On August 22, North Carolina Attorney General Josh Stein announced a bipartisan agreement between 51 state attorneys general and 12 voice service providers, adopting eight principles for fighting illegal robocalls and preventing consumer fraud. Under the principles, the voice providers will: (i) offer no-cost call-blocking technology, including easy-to-use call blocking and labeling tools; (ii) implement STIR/SHAKEN call authentication (as previously covered by InfoBytes, in June the FCC adopted a Notice of Proposed Rulemaking requiring voice providers to implement the caller ID authentication framework); (iii) analyze and monitor high-volume voice network traffic for robocall patterns; (iv) investigate suspicious calls and calling patterns and take appropriate action; (v) confirm identities of new commercial customers; (vi) require traceback cooperation in new and renegotiated contracts; (vii) provide for timely and comprehensive law enforcement efforts through cooperation in traceback investigations; and (viii) communicate with state attorneys general about recognized robocall scams and trends and potential solutions. AG Stein noted that the principles will also “make it easier for attorneys general to investigate and prosecute bad actors.”
District Court upholds $925 million TCPA jury verdict against direct sales company
On August 21, the U.S. District Court for the District of Oregon upheld a $925 million jury verdict against a direct sales company in a TCPA class action lawsuit, denying the company’s motion to decertify the class. According to the opinion, the named plaintiff brought the 2015 class action lawsuit alleging the company violated the TCPA by calling consumers using an artificial or prerecorded voice without their consent. In April 2019, a jury concluded that a total of 1,850,436 calls were made using an artificial or prerecorded voice to either cell phones or landlines. However, in June 2019, the FCC granted a request made by the company in September 2017 for a retroactive waiver of the agency’s 2012 new written consent requirements for telemarketing robocalls, but only as it applied to “calls for which the petitioner had obtained some form of written consent.” Based on the newly-obtained waiver from the FCC, the company moved to decertify the class arguing that, among other things, (i) the named plaintiff lacked standing, and (ii) consent is now an individualized issue that “predominates” over the class issues. The court rejected these arguments, concluding that the company waived the affirmative defense of consent by not raising the defense earlier in the litigation when it knew its FCC waiver was pending. Specifically, the court reasoned that the failure to raise the issue “given the likelihood that the FCC would grant its waiver petition was unreasonable.” The court also rejected the company’s predominance arguments, concluding that whether the calls were made to a landline or cellphone is irrelevant as TCPA liability “attaches to any call made [to] either” type. The court concluded that class certification was proper, upholding the jury’s verdict.
FCC adopts rules addressing spoofed texts and international robocalls
On August 1, the FCC announced the adoption of new rules that will extend the Truth in Caller ID’s prohibitions against robocalls to caller ID spoofing of text messages and international calls, and implement measures passed last year in the RAY BAUM’s Act. As previously covered by InfoBytes, the rules are supported by a bipartisan group of more than 40 state attorneys general, and will allow the FCC to bring enforcement actions and assess fines on international players who try to defraud U.S. residents. However, while Commissioner Michael O’Rielly voted in favor of the measure, he raised concerns that the FCC may encounter problems when trying to enforce the rules across international borders. “As I expressed before, the expanded extraterritorial jurisdiction may prove difficult to execute in uncooperative nations and come back to bite us in other contexts,” O’Rielly stated. “In addition, the definitions of text messaging and voice services are broader than my liking and may cause future unintended consequences.” However, his statement did not specify what these unintended consequences might be.
FCC Chairman proposes rules addressing spoofed texts and international robocalls
On July 8, FCC Chairman Ajit Pai proposed rules supported by a bipartisan group of more than 40 state attorneys general that would extend prohibitions against robocalls to caller ID spoofing of text messages and international calls, implementing measures passed last year in the RAY BAUM’s Act. Previously, anti-spoofing prohibitions applied only to domestic robocalls. According to Pai, “Scammers often robocall us from overseas, and when they do, they typically spoof their numbers to try and trick consumers. . . . With these new rules, we’ll close the loopholes that hamstring law enforcement when they try to pursue international scammers and scammers using text messaging.” The FCC will vote on the proposed rules at its August 1 meeting.
As previously covered by InfoBytes, the FCC authorized voice service providers last month to automatically identify and block unwanted robocalls “based on reasonable call analytics, as long as their customers are informed and have the opportunity to opt out of the blocking.”
FCC approves robocall blocking
On June 6, the FCC approved a Declaratory Ruling and Notice of Proposed Rulemaking to address unwanted robocalls to consumers. The Declaratory Ruling affirms that voice service providers may block unwanted robocalls “based on reasonable call analytics, as long as their customers are informed and have the opportunity to opt out of the blocking.” Among other things, the Declaratory Ruling clarifies that voice providers (i) may offer call blocking tools to their customers as a default, as opposed to an opt-in basis; and (ii) may offer customers tools that would allow customers to block calls from any number that is not listed in the customer’s contact list or other “white lists.” The FCC notes that a “white list” could be based on a customer’s contact list and would be updated as customers add and remove contacts from their phone. According to reports, the FCC also adopted language that was added to the May proposal, which encourages voice providers to devise a system for addressing complaints made by legitimate companies whose calls to customers are being blocked. The final Declaratory Ruling is effective upon its publication on the FCC’s website.
The FCC also adopted a Notice of Proposed Rulemaking (NPRM) (available in the May proposal) requiring voice providers to implement the “STIR/SHAKEN” caller ID authentication framework—an “industry-developed system to authenticate Caller ID and address unlawful spoofing by confirming that a call actually comes from the number indicated in the Caller ID, or at least that the call entered the US network through a particular voice service provider or gateway.” The FCC asserts that once the “STIR/SHAKEN” is implemented, it would “reduce the effectiveness of illegal spoofing and allow bad actors to be identified more easily.” The deadline for comments in response to the NPRM will be established upon publication in the Federal Register.
4th Circuit: TCPA debt collection exemption is unconstitutional
On April 24, the U.S. Court of Appeals for the 4th Circuit vacated a district court’s decision to grant summary judgment in favor of the FCC, concluding that an exemption under the TCPA that allows debt collectors to use an autodialer to contact individuals on their cell phones when collecting debts guaranteed by the federal government violates the First Amendment’s Free Speech Clause. According to the opinion, several political consultant groups (plaintiffs) argued that a statutory exemption enacted by Congress as a means of allowing automated calls to be placed to individuals’ cell phones “that relate to the collection of debts owed to or guaranteed by the federal government” is “facially unconstitutional under the Free Speech Clause” of the First Amendment. The plaintiffs argued that the debt-collection exemption to the automated call ban contravenes their free speech rights. Moreover, the plaintiffs claimed that “the free speech infirmity of the debt-collection exemption is not severable from the automated call ban and renders the entire ban unconstitutional.” The FCC, however, argued that the applicability of the exemption depended on the relationship between the government and the debtor and not on the content. The district court awarded summary judgment in favor of the FCC after applying a “strict scrutiny review,” ruling that the exemption does not violate the Free Speech Clause.
On appeal the 4th Circuit agreed with the plaintiffs that the exemption contravenes the Free Speech Clause, and found that the challenged exemption was a content-based restriction on free speech that did not hold up to strict scrutiny review. “Under the debt-collection exemption, the relationship between the federal government and the debtor is only relevant to the subject matter of the call. In other words, the debt-collection exemption applies to a phone call made to the debtor because the call is about the debt, not because of any relationship between the federal government and the debtor.” And because the exemption is a content-based restriction on speech, it must satisfy strict scrutiny review to be constitutional, which it fails to do, the 4th Circuit opined. “The exemption thus cannot be said to advance the purpose of privacy protection, in that it actually authorizes a broad swath of intrusive calls. . . [and] therefore erodes the privacy protections that the automated call ban was intended to further.” However, the appellate court sided with the FCC to sever the debt collection exemption from the automated call ban. “First and foremost, the explicit directives of the Supreme Court and Congress strongly support a severance of the debt-collection exemption from the automated call ban,” the panel stated. “Furthermore, the ban can operate effectively in the absence of the debt-collection exemption, which is clearly an outlier among the statutory exemptions.”
State AGs support bipartisan bill to combat illegal robocalls
On March 5, Attorneys General from all 50 states, as well as from the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands, sent a letter to the Senate Committee on Commerce, Science, and Transportation supporting a recently introduced bipartisan bill to combat illegal robocalls. Among other things, S. 151, the Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act), would: (i) grant the FCC three years to take action against robocall violations, instead of the current one-year window; (ii) authorize the agency to issue penalties of up to $10,000 per robocall; and (iii) require service providers to implement the FCC’s new call authentication framework. The AGs state that they “are encouraged that the TRACED Act prioritizes timely, industrywide implementation of call authentication protocols,” and note their support for an interagency working group that the bill would establish consisting of members from the DOJ, FCC, FTC, CFPB, other relevant federal agencies, state AGs, and non-federal stakeholders.
FCC proposes to strengthen enforcement of caller ID spoofing
On February 14, the FCC released a notice of proposed rulemaking intended to strengthen its rules against caller ID spoofing and expand the agency’s enforcement efforts against illegal spoofed text messages and phone calls, including those from overseas. The proposed rules would enact requirements in the recently passed RAY BAUM’S Act of 2018, and expand Truth in Caller ID Act prohibitions against the transmittal of “misleading or inaccurate caller ID information (‘spoofing’) with the intent to defraud, cause harm, or wrongfully obtain anything of value” to text messages and calls to U.S. residents originating from outside the U.S.
The FCC seeks comments on the proposed rules—adopted unanimously at the agency’s February 14 meeting—on, among other things, what changes to the Truth in Caller ID rules can be made “to better prevent inaccurate or misleading caller ID information from harming consumers.” Comments will be due 60 days after publication in the Federal Register.
District Court concludes communications transmitter can be liable under the TCPA
On February 13, the U.S. District Court for the District of Nevada rejected a cloud communication company’s motion to dismiss a TCPA class action. According to the opinion, the plaintiffs’ alleged the company “collaborated as to the development, implementation, and maintenance of [a] telemarketing text message program,” which was used by a theater production company to send text messages without prior consent in violation of the TCPA and the Nevada Deceptive Trade Practices Act (NDTPA). The company moved to dismiss the claims, arguing, among other things, that it was not liable under the TCPA because it was a “transmitter” and not an “initiator” of communications. Citing the FCC’s previous determination that, under certain circumstances transmitters may be held liable under the TCPA, the court rejected this argument, concluding that the company took steps necessary to send the automated messages and that its “alleged involvement was to an extent that [it] could be considered to have initiated the contact.” Moreover, the court determined the plaintiff sufficiently alleged injury under the TCPA, concluding that violations of privacy and injury to the “quiet use and enjoyment of [a] cellular telephone” are consistent with the purpose of the TCPA. The court did dismiss the plaintiff’s NDTPA claims, however, holding that the transaction did not involve the sale or lease of goods or services as the law requires.