Regulations On Methods For Contacting Donors Getting Tougher, More Expensive

Exemptions for tax-exempts might be targeted

One would be hard pressed to wander into any hotel conference room during a fundraising or marketing forum without being bombarded with vague promises of the importance of buzzwords such as “lists” and “engagement” and “messaging.” Such depictions tell only half the story, however.

When it comes to calling and texting, knowing who is calling on behalf of your organization, the technologies they are using, the messaging they are asserting, and who — exactly — they are calling can mean the difference between Easy Street and a highsum lawsuit under the Telephone Consumer Protection Act (TCPA).

Adopted in 1991, the TCPA claims remain popular, despite the evolving means by which individuals communicate because the act uniquely provides a private right of action and statutory damages. That means that plaintiffs do not have to prove actual harm, according to John Verdi, vice president of policy for the Future of Privacy Forum (FPF), a Washington, D.C.-based nonprofit think tank focused on privacy protections.

Nonprofits are cut some slack in the TCPA. For instance, the term “telephone solicitation” under the act “does not include a call or message … By a tax-exempt nonprofit organization.” For-profit entities are also prohibited from making calls and texts to those on do-not-call lists, but such regulation is not applicable for tax-exempt entities making communications for charitable purposes, said Verdi. From a reputational standpoint, nonprofits have abided by restrictions made on the hours during a day that calls can be made, though such restrictions technically do not apply to them.

Things get a little more interesting with cell-phone numbers, autodialer and soundboard technologies, and questions of consent. Just last year, the United States Court of Appeals for the Eighth Circuit in St. Louis, Mo., heard a TCPA case involving a nonprofit corporation operating health clinics and hospitals in Minnesota. Before finding for the nonprofit, the court noted that Federal Communications Commission (FCC) regulations “provide that a nonprofit organization such as Fairview may not ‘[i] nitiate … Any telephone call that … Constitutes telemarketing … To any [cellular telephone number] other than a call made with … The prior express consent of the called party.’”

Tracy L. Boak, a partner at Perlman + Perlman, a New York City-based law firm focused on nonprofits, said that nonprofits are permitted to autodial cellphone numbers, but they need to gain oral consent from the recipient and maintain a do-notcall list. These requirements are in effect whether the call or text is made by the nonprofit’s staff or a third-party agent. Boak added that while oral consent will suffice, best practice is to either get written consent or record calls to gain recorded oral consent.

Many third-party telemarketers do record calls, Boak said. As many nonprofits outsource telemarketing activities to third parties, it is incumbent on organization leaders to do their research and condition business with the telemarketer on complying with federal, state, and local rules — something that might be easier said than done depending on the nonprofit’s size and relative bargaining power, she said.

Boak advises, in addition to ensuring regulation compliance, for nonprofit leaders to ensure that telemarketer contracts retain ownership in donor lists for the nonprofit. After getting established, Boak also recommends winding telemarketing down to acquisition only, as that is generally associated with the highest cost for organizations.

Finally, there needs to be continued attention on messaging as there are legal and ethical obligations in accuracy. For instance, if a university is campaigning to build a new library and places that in telemarketing scripts, but then a few months later that plan gets placed on the backburner, the script needs to be updated for accuracy.

Federal Trade Commission (FTC) defi- nitions and regulations related to soundboard technology will be a topic to keep mindful of in the near future, Boak advised. Soundboard Association v. United States Federal Trade Commission is currently working its way up the federal courts in Washington, D.C., and seeks, in part, to distinguish between advancing call technologies and robocalls. The FCC standards for autodialers have also been a topic of debate, according to Senny Boone, general counsel for the Data & Marketing Association (DMA).

The FCC was receiving complaints about robocalls promising free vacations a few years back, cruises, and the like. Motivated by consumer protection, the commission came out with broad language that effectively states that anything that is not somebody at a desk hunting and pecking at the keys is autodialing.

ACA Int’l v. FCC, currently pending before the United States Court of Appeals for the District of Columbia Circuit seeks to clarify the commission’s standards, Boone said. In the meantime, nonprofit leaders need to keep abreast of and follow commission rules while the case is pending.

New standards such as the European Union’s General Data Protection Regulation (EU GDPR), which deals with recipient consent, data storage, and limits on how long entities can hold on to consumer data, is raising the bar for others, Boone said. California is exploring a ballot initiative that focuses on individuals’ right to opt out of communications and new data-security penalties.

Verdi called the EU GDPR a “game changer for global companies and charities.”

Many larger nonprofits with offices in Europe are carrying over EU GDPR practices throughout the entire organization.

Dan Deane

Verdi expects the TCPA to stay the same in the years to come. What might change, driven by new standards and big court settlements, is a baseline national privacy law that would fill in gaps currently existing in health, finance, child, and other privacy contexts. Such a law has percolated in Washington, D.C., and would likely encompass nonprofits and hold organizations liable in ways that they haven’t been in the past.

“If that happens, that is a very different conversation,” Verdi said. “There is no principled reason in 2018 for nonprofits to be exempt. It’s historical. The new law is not about looping nonprofits in. It’s more about correcting that while you’re at it with this new law.”

The tea leaves relating to the TCPA, specifically, indicate that there will be a relaxing of regulations by the FCC, according to Dan Deane, partner at Nixon Peabody LLP. The biggest general shift recently has been the change in administration. The FCC is now led by Ajit Pai, a Republican, and seems likely to take a more business-friendly approach after years of leaning toward consumer protection.

A D.C. Circuit Court ruling, which is expected in the near future, constraining the definition of autodialers would be very favorable to nonprofits as autodialing cell numbers is one of the few areas in which nonprofits have responsibilities, but not much guidance, under the TCPA. Clarity in this area would enable nonprofit callers to know for sure whether their activities fit the definition of autodialing and, if so, how they might tweak practices to not be labeled as an autodialer if they so choose.

Troy K. Lieberman, an associate at Nixon Peabody, added that in addition to scrutiny of autodialers, revocation of consent and number reassignments are major considerations in the TCPA space. The number-reassignment issue is one that keeps him and clients up at night, he said. Upwards of 100,000 numbers can change every day, meaning that a telemarketer can be fine one day and not so fine the next as different individuals are assigned different numbers.

This is another area in which the FCC might provide some relief, Deane added. The rule, as of now, is that a caller has one freebie — one opportunity to call a number that has been reassigned and correct the mistake before being liable. But what happens if the call is made, goes straight to voicemail, and the caller tries again at a later date being none the wiser?

There has been chatter, for instance, about the FCC developing a centralized list of reassigned numbers — similar to the National Do Not Call Registry — that would provide a safe harbor to callers that often cross-reference lists.

Lieberman said that even if telemarketer- friendly rulings start rolling in, the TCPA will still be around, just with more leeway. There will always be compliance issues and it will always be better to lean toward playing it safe. Avoiding pre-generated lists, sticking with only calling donors, volunteers, and other supporters that your organization already has a relationship with, and clearly distinguishing third-party vendors as agents of the nonprofit in contracts so that they can be afforded the same leeway as the nonprofit are all best practices.

Deane anticipates that the FCC will head back to the drawing point in the future and carve out ways to penalize poor actors

    • like the offshore calls many receive about the “free” Caribbean cruise that they won
    • without roping in entities that make honest mistakes.

“It is still a bipartisan issue in that everybody hates telemarketing calls,” Deane said. “You don’t see calls to repeal the TCPA wholesale. There are sometimes proposals to cut it back a little and get the FCC to cut it back, but I think that the TCPA will stick around.”

William E. Raney, a partner specializing in telemarketing compliance at Copilevitz & Canter LLC. In Kansas City, Mo., said that he describes telemarketing law to others as a pyramid. The base of the pyramid is business-to-consumer outgoing cold calls.Any element that changes that foundation encompasses a smaller group of callers. Nonprofits have an advantage in that many laws do not apply because there is no business element, but there still needs to be consent and an internal do-not-call list (as opposed to the National Do Not Call Registry, which does not apply to nonprofits).

Further complexity with TCPA compliance stems from laws and regulations by individual states, FTC, and FCC. If a nonprofit’s compliance officer simply takes the time to check four boxes: federal and state rules on calling landlines and federal and state rules on calling cell phones, compliance would be at about 99 percent. It’s just that not many organizations do that, he said.

It is not necessary for nonprofits to rely on the much more restrictive National Do Not Call Registry. Instead, it is more effective to build in related responses to callers’ scripts and set up a mechanism to move individuals into the organization’s internal do-not-call list. So, if a recipient complains about being called when on the national registry, the caller can respond by apologizing for the confusion, noting that nonprofits are exempt from that list, promising to place the recipient on the organization’s list, and doing so.

Plaintiff attorneys filing more and more class action suits is what’s driving continued interest in the TCPA, Raney said. Liability is $500 per call and that can be trebled to $1,500 per call. Damages can quickly become catastrophic, leading most companies to settle.

Nonprofits seldom have the deep pockets that plaintiff attorneys look for, but Raney noted that the Donald J. Trump presidential campaign was hit with a class action suit under the TCPA for texting, which functions under the same rules, and settled for an undisclosed amount. Raney said that he was not aware of any giant nonprofit settlements, but knows from experience that organizations have been targeted in class actions. “Once you make a million calls, that’s a lot of money,” Raney said. “It’s an easy target. Five-hundred times any big number is a big number.”

Raney’s message to nonprofit clients has been that they’re in pretty good shape so long as they take minimum preventative efforts. Where there are some restrictions, in dialing and texting cell phones, nonprofit leaders need to know and understand how their organization is making contact, where and how numbers were obtained (they must come directly from the consumer, third-party lists and caller ID capture do not count), and take the conservative route if there are any doubts.

Like Boak and Boone, Raney is looking at greater regulatory clarity in the future, joking that — as currently stated — FCC regulations could label his oak desk an autodialing technology with enough wires.

“Clients can comply with these laws, it’s just a matter of knowledge,” Raney said. “I’m fairly optimistic that the courts and/or the FCC is going to give legitimate charities and political organizations and businesses some relief in this area.”

‘‘It is still a bipartisan issue in that everybody hates telemarketing calls.

    • Dan Deane, Nixon Peabody LLP