Last December, State Farm became the most recent company to settle a multimillion-dollar class action lawsuit alleging violations of the Federal Communications Commission's (FCC) Telephone Consumer Protection Act (TCPA). This follows a massive settlement by Wells Fargo in the summer of 2016 for various alleged TCPA violations for its mortgage loan practices.
Not only is this settlement a huge hit, it should be considered a warning to businesses about the risk of using phone-based lead generation practices — including those performed via text messaging.
When it comes to smartphones, texting as a communication channel is growing. According to the Pew Research Center, 97% of smartphone owners text, and in a recent internal survey of more than 1,700 financial advisers, nearly 30% reported texting for business purposes.
The increasing scrutiny on telemarketing activities is putting the pressure on financial firms to protect themselves and their advisers against exposure to regulatory violations, including the TCPA.
RISKS OF TEXTING CLIENTS
Intended to protect consumers, the TCPA prohibits a caller from using an auto-dialer or prerecorded message to make a business solicitation by phone or text message, unless the caller has obtained consent from the recipient. The rule contains various consent standards depending on what type of call or text message the caller is to place.
In July 2016, the FCC suggested that even the simple use of a smartphone might someday fall under the definition of an "auto-dialer" for the purposes of the TCPA. Indeed, an FCC commissioner warned that "under the Order's reading of the TCPA, each and every smartphone, tablet, VoIP phone, calling app, texting app — pretty much any calling device or software-enabled feature that's not a 'rotary-dial phone' — is an automatic telephone dialing system."
While most, if not all, firms have policies to ensure TCPA compliance at the corporate level, most are not thinking about the TCPA when they contemplate enabling business-to-customer texting programs that would allow advisers to send texts to consumers. Companies must require prior written consent to be captured before any representatives — including advisers — text a customer for business purposes.
HOW TO PROTECT ADVISERS
When reviewing or updating your texting policy, make sure your advisers understand:
• The difference between personal and business communications. If advisers are soliciting business in any capacity or engaging with customers or prospects for business-related reasons, this activity and content must be supervised, captured and archived. Consider requiring a new number to be issued for a mobile line to create a clear distinction between personal and professional texting.
• The difference between one-to-one versus one-to-many communication. There are differing consent requirements when sending messages via an auto-dialer at the corporate level versus engaging in dynamic, one-on-one conversations with customers at the individual adviser level. The broader the audience, the more legal requirements and restrictions must be considered.
• The different types of text messages. A good policy ensures advisers understand how a company defines the difference between advertising messages (an invitation to purchase a product or service) and informational or transactional messages (setting up a date to meet, for example).
• The different forms of consent. Legally, the level of consent required depends on how an adviser acquired a contact. Customers who have a prior business relationship with an adviser may require a different level of consent versus a prospect with no communication history. However, regardless of how contacts are acquired, a good policy ensures that an adviser secures the highest level of consent before engaging with a contact.
If recent events are any indication, we can expect even greater scrutiny from regulators over what's considered within and outside the law when it comes to communicating via text messaging and other digital channels. As a result, it's now more critical than ever for firms to review their compliance policies and systems to ensure the proper protections are in place for not just the company, but also their field force.
Yasmin Zarabi is vice president of legal and compliance at Hearsay Systems.