Author Archive for Chloe Maurice

FTC’s Big Data Report Provides Recommendations, Raises Compliance Issues

The Federal Trade Commission has released a report examining the benefits, potential risks, and legality of the use of big data in business.

Big Data: A Tool for Inclusion or Exclusion? Understanding the Issues focuses on how big data is used after it is collected and how that information could result in discrimination against consumers.

The primary goal of the report is to provide businesses with important information on the relevant laws to big data analytics, as well as guidelines on how to use big data effectively while remaining compliant and non-discriminatory, according to the FTC.

“Big data’s role is growing in nearly every area of business … The potential benefits to consumers are significant, but businesses must ensure that their big data use does not lead to harmful exclusion or discrimination,” said FTC Chairwoman Edith Ramirez.

Some of the potential beneficial uses include providing access to credit through non-traditional methods, better access to employment to underserved populations, increased educational attainment and specialized healthcare.

However, the report also emphasizes how big data use could yield biases or inaccuracies about certain groups. Discrimination from data usage could result in assisting in the targeting of vulnerable consumers for fraud, creating higher prices for goods and services in lower-income communities and weakening the effectiveness of consumer choice.

Laws pertaining to the use of big data include the Fair Credit Reporting Act, the Equal Credit Opportunity Act and the Federal Trade Commission Act. The report provides guidance for each.

Fair Credit Reporting Act

The Fair Credit Reporting Act applies to consumer reporting agencies that compile and sell consumer reports containing consumers’ information intended to be used to determine consumers’ eligibility for credit, employment, insurance and housing, among others.

As of late, there has been a trend toward using predictive analysis to determine eligibility, rather than the traditional credit scoring method. The traditional method compares known credit characteristics of a consumer to historical data that shows how people with the same characteristics met their credit responsibilities.

However, while predictive analysis includes measures of credit characteristics, non-traditional characteristics such as zip code, shopping history and social media use may also be used to make decisions about a consumer’s eligibility. As of the report, the FTC has established that “only a fact specific analysis” will be able to determine if a practice is subject to or violates the FCRA.

Thus, companies should be aware of the FCRA when using predictive analysis or other methods that use big data, especially non-traditional characteristics, when making eligibility determinations that might be subject to the FCRA.

Equal Opportunity Laws

While there are many equal opportunity laws that prohibit discrimination based on protected characteristics such as race, color, sex or gender, religion and more, the law most relevant to this report is the Equal Credit Opportunity Act, which the FTC enforces. ECOA prohibits credit discrimination against protected characteristics, and a violation can arise when a plaintiff can show that there was disparate treatment or impact; either the lender treated an applicant differently based on a protected characteristic or the company employs “factually neutral” characteristics that have a disproportionate or adverse impact on a protected class.

The report expresses concerns that advertising and marketing practices could produce problematic lending patterns that could be subject to action. More specifically, the report points to Regulation B, the implementing regulation for ECOA that is in part concerned with what criteria creditors use to select potential recipients for prescreened solicitations.

With regard to big data, if it is being used to determine advertising or marketing, or other practices that could result in disparate impact, lenders using big-data, non-traditional characteristics should be mindful of their relationship to equal opportunity laws. While determination of the lawfulness of a practice is currently case specific, according to the FTC, in some cases the Department of Justice has pointed to a creditor’s advertising choices as evidence of discrimination.

The Federal Trade Commission Act

The report is also concerned with the use of big data analytics in relation to Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices. The report recommends that companies should consider:

  • whether they are violating any material promises to consumers
  • whether they have failed to disclose material information to consumers

It is also recommends that companies should “take care to reasonably secure consumers’ data,” and at a minimum, companies “must not sell their big data analytics products to customers if they know or have reason to know that those customers will use the products for fraudulent or discriminatory purposes.”

In possible instances of alleged violation, cases will be fact specific, and will be concerned with whether the company engaged with big data in a deceptive or unfair way.

Four Questions Companies Should Consider

The report recommends that companies using big data consider the following four questions to help efforts to maximize the benefits and limit the harms of big data analytics:

  • How representative is your data set?
  • Does your data model account for biases?
  • How accurate are your predictions based on big data?
  • Does your reliance on big data raise ethical or fairness concerns?

In a separate statement accompanying the release of the report, Commissioner Maureen Ohlhausen’s spoke to the issues raised by the report in the context of free-market competition:

“Concerns about the effects of inaccurate data are certainly legitimate, but policymakers must evaluate such concerns in the larger context of the market and economic forces companies face … to the extent that companies today misunderstand members of low-income, disadvantaged, or vulnerable populations, big data analytics combined with a competitive market may well resolve these misunderstandings rather than perpetuate them.”

The Commission voted to issue the report 4-0.

FCC Ruling: E-Faxes Now Subject to Consumer Protections Under TCPA

FCClogoUnsolicited e-faxes — documents converted to an email or attachment between the faxer and a recipient — are subject to the same consumer protections as unsolicited conventional faxes, according to a recent Federal Communications Commission declaratory ruling.

The ruling built upon certain provisions of the Telephone Consumer Protection Act and the Junk Fax Protection Act, establishing that unsolicited communications that begin as faxes, including those converted to an electronic format after they are sent, justify consumer protection because e-faxes can cause some of the same issues and costs for businesses as conventional faxes.

E-faxes “can increase labor costs for businesses, whose employees must monitor faxes to separate unwanted from desired faxes,” the ruling said, making unwanted electronic faxes harmful to businesses even though they result in different costs than traditional faxes, such as paper, ink, and toner.

Furthermore, the FCC clarified that the TCPA “applies to a fax that is sent as a fax over a telephone line to a device that meets the statutory definition of ‘telephone facsimile machine.’” The ruling also elaborated that an e-fax is described as “an end-to-end communication that starts when the faxed document is sent over a telephone line and ends when the converted document is received on a computer.”

The agency determined that because of these reasons “it would make little sense” to not use the rules pertaining to faxes already in place.

The order addresses more than 100 waiver requests regarding e-faxes, which the FCC deemed to be an “easy, cost-free” way for fax recipients to avoid faxes they may have previously wanted but no longer want to receive.

Additionally, the agency refused to provide specific guidelines for opt out language for e-faxes, noting, “fax opt-out notice requirements have been in place for more than seven years and we have no evidence that other fax senders have struggled with finding language that would satisfy those requirements.”

FTC Bans Scammers Who Targeted Spanish-Speaking Consumers

FTC LogoThe operators of a fraudulent debt collecting scheme have settled Federal Trade Commission charges against them by agreeing to be banned from the debt collection business and telemarketing.

The defendants were named in an FTC complaint last year, which alleged that they collected millions of dollars from Spanish-speaking consumers throughout the country by demanding they pay non-existent debts. The various companies and individuals were said to have been threatening their victims with lawsuits and arrest and immigration status investigations if they did not agree to make payments on the falsified debts.

The settlement orders that the fraudulent company and related defendants are permanently prohibited from making the alleged misrepresentations as well as any material representations about any product or service. The defendants are also barred from selling or benefiting from their customer’s personal information, and banned from collecting debts or telemarketing.

Judgments against the defendants total almost $6.8 million, which are suspended upon the transfer of approximately $776,000 in assets. However, if the defendants are found to have misrepresented their financial situations, the judgment will immediately become due in full. One corporation, named a relief dependent that profited from the scheme, was given a judgment of $172,000.

The Commission voted unanimously, 5-0 to file the orders for permanent injunction. The final orders will have the force of law when signed by the District Court judge where they were filed, the U.S. District Court for the Southern District of Florida.

FCC Approves TCPA Declaratory Ruling Amidst Dissent

The FCC voted a 3-2 majority ‘yes’ today on a TCPA declaratory ruling to expand the law in an attempt to prevent unwanted robocalls and “robotexts,” as well as spam and telemarketing calls to wireless phones. The package of rulings also included the approval of robocalling technologies, oral revocation of consent, redefinition of autodialers, as well as other stipulations and exemptions. The rulings addressed 19 petitions for declaratory rulings, one petition for rulemaking and one request for clarification.

The rulings, as of this writing, have not been released. The commissioners’ discussions indicate they will address “autodialers,” and some emerging technologies. Exceptions to TCPA liability may include forgiveness of one unsolicited robocall to a reassigned number if the former owner of that number had given prior consent, as well as carveouts for robocalls that can be made without consent if they are ones that are free or are alerting consumers about financial or medication reminders. And who may provide prior express consent to receive such calls also appears to be addressed in the rulings.

Strong Dissents Signal Rulings May Compound TCPA Issues

The discussion was plagued with dissent, among the Chairman and the commissioners, and even among the commissioners who voted to pass the rulings. Commissioner Jessica Rosenworcel, who voted for the rulings, dissented on the limited carveouts made for certain calls by financial institutions and healthcare providers. She argued that no matter the nature of the call, robocalls are all the same under the TCPA, saying, “I do not understand why for some sectors…this Commission gives the green light for more robocalls when consumers want a red one. The [TCPA] is straightforward: it requires a company to get a consumer’s prior express consent before making robocalls.”

However, Commissioner Rosenworcel did express concern that school calls regarding attendance would be entangled in the robocall issue, a concern Chairman Tom Wheeler shared. The risk that actors such as schools may be violating the TCPA under the new rules was one that dissenting Commissioner Pai raised in his opinion.

Rulings will Likely Expand Autodialer Definition

Commissioner Migon Clyburn also voted to approve the proposal, saying that the declaratory rulings will “maintain the consumer protections the Act intended.” Furthermore, by “reaffirming the broad interpretation of the definition of an autodialer…we will further incentivize businesses to take the necessary steps to obtain prior consent when it comes to these communications.”

Alison Kutler, chief of the FCC’s Consumer and Governmental Affairs Bureau, added that the rulings state that autodialers will include “equipment [that] has the capacity even with some modification to dial random or sequential numbers . . “ She added that the rulings will expand to even include technology not “currently or presently dialing random or sequential phone numbers but is instead calling a set list of numbers.”

Commissioner O’Rielly had harsh words for this expansive move, saying, “Equipment that could conceivably function as an auto dialer in the future becomes an autodialer today. Indeed the new definition is so expansive that the FCC has to use a rotary phone as an example of technology that would not be covered because the modification needed to make an autodialer would be too extensive.”

Revocation of Consent

The discussion also brought out that the rulings will not provide an “exhaustive set” of reasonable means to revoke prior express consent. Instead, the rulings will “mention things that seem fairly common sense.” Commissioner O’Rielly criticized the revocation of consent for non-telemarketing calls, noting that the right nowhere appears in the statute and instead “turns to common law principles to read in the statute a right to revoke consent.”

Expansive Reach of Rulings Draw Criticism

The rulings “dramatically expanded the reach of the TCPA,” which will “open the floodgates to more TCPA litigation against good faith actors,” said Commissioner Pai. He also said the order does not focus on illegal telemarketing calls, but instead targets communications between legitimate businesses and their customers, making abuse of the TCPA much easier, and benefiting trial lawyers; not American consumers.

Commissioner Pai added that the forthcoming rulings redefine an autodialer to include almost all phone calls under the TCPA, not just fraudulent telemarketers, subjecting almost anyone to a TCPA lawsuit under the new rules. He posed an example of “Jim,” who meets “Jane” at a party; he acquires her number through a mutual friend and calls her for lunch from his smartphone and sends her a text message; violating the TCPA twice, and risking $1,000 in statutory damages if “Jane” chooses to sue.

The new order, according to Commissioner Pai, also contains a carveout for the prison payphone industry, which would allow prison payphone providers to make prerecorded calls to consumers “to set up a billing relationship to pay for future services,” which would only “open the door to more actual robocalls,” he said.

Rulings Bad for Businesses and Consumers, Says FCC Commissioner

Commissioner Michael O’Rielly agreed with Commissioner Pai that the new rules only penalize “businesses acting in good faith to reach their customers using modern technology.” The Commissioner also criticized the process that led to the new rulings, saying “we [were] deceived to produce one of the most slanted documents I have ever seen…today’s order has been held as protecting Americans from harassing robocalls and texts. It’s a farce.” He described the rulings as “a new way for consumers acting in bad faith to entrap legitimate companies.”

Commissioner O’Rielly clarified that he does not condone abusive calling practices, but that the balance in the TCPA between protecting consumers and legitimate businesses while preventing unwanted calls has been overturned by the expansion and large scope of current TCPA rules, including today’s proposed rulings, which could prevent consumer access to valuable information companies and businesses are trying to provide.

Arguing that there is evidence that there are benefits to informational calls and texts, such as those that the Department of Health and Human Services promotes to benefit Americans, Commissioner O’Rielly said companies must face “potentially crushing damages,” or deliver “desired communication.” Some of these communications, he said, include school alerts, product recall and safety notifications, and notifications of utility outages.

“Appropriate Applications for Automatic Calling Technology”

However, Chairman Tom Wheeler disagreed with the dissent, saying that he is with the “215,000 individuals that took the time to write us…about the annoyance of robocalls.” Asserting that robocalls are a bipartisan issue, he referenced 39 state attorneys general of both parties who have requested measures that the FCC voted on today.

The Chairman, who voted yes, said the rulings are necessary, because “technology has outpaced the implementation of the TCPA…that technology [resulted in an] explosion in the number of calls….aided by exploiting the wording of our rules.” Acknowledging that there are “sensible” exceptions and “appropriate applications for automatic calling technology,” such as package delivery notifications, banking alerts and health emergencies, he said “these legitimate purposes should not be a smokescreen that allows the opening of the door to unwanted calls.”

The official FCC press release is available here.

Webinar Will Examine the New Rules

Maurice Wutscher will examine the rulings in our July 17 webinar, A First Look at the FCC’s TCPA Declaratory Rulings. For more information about the webinar and to register, click here.


Lawmakers, Chamber: TCPA Proposal May Not Reduce Unwanted Sales Calls, Could Lead to Increased Litigation

US Capitol Dome Houses of Congress Washington DCU.S. lawmakers urged the Federal Communications Commission and the Federal Trade Commission to reconsider exemptions to the FCC’s new proposal to update rules that protect Americans from unwanted sales calls, saying that the reforms may not be effective in reducing TCPA violations.

In advance of the FCC meeting to vote on Chairman Tom Wheeler’s proposal, U.S. Rep. Tony Cardenas, D-Calif., and fellow members of the House Committee on Energy and Commerce Reps. Jerry McNerney, D-Calif., Leonard Lance, R-N.J., and Gus Bilirakis R-Fla. said the increased TCPA rules in the FCC’s proposal may in fact make it easier for companies to target consumers, rather than protecting them.

The representatives’ letter to Wheeler and FTC Chairwoman Edith Ramirez notes that when the TCPA was enacted in 1991, cell phone proliferation was around three percent. Today, 44 percent of American homes have only wireless phones. The increase of mobile phones over the past two decades has exposed the weaknesses in the current TCPA rules, as the FTC and FCC received nearly a combined two million consumer complaints regarding the TCPA and unwanted calls in 2014.

The new rule proposal, set to be voted on at the FCC Open Meeting on June 18, may not be effective, assert the congressmen. The yet unseen proposed rule is suspected to open several exceptions to the TCPA, including banking alert and prescription reminders. However, the representatives are concerned that the exemptions “could weaken the effectiveness of the current prohibitions on unwanted calls and the current statutory limits on fines and damages may not sufficiently deter bad actors, regardless of the rules.”

The U.S. Chamber of Commerce also criticized the proposal last week, according to Law360. The Chamber’s executive vice president of legal reform, Harold Kim, and senior vice president of regulatory affairs, William Kovacs, say the proposal’s new restrictions are too favorable toward consumers. Furthermore, the new rules will lump “legitimate” businesses together with “abusive” telemarketers, according to their letter to FCC officials. “[The TCPA] was not intended to be enforced in such a manner against businesses calling their own customers,” said the chamber’s letter.

In its letter, the Chamber expressed concern over the reforms being issued through a declaratory ruling, saying:

The primary danger in issuing directives in a declaratory ruling (i.e., companies must do this with reassigned number notifications, and do that with revocation notifications) is that the very active TCPA Plaintiffs’ bar is likely to argue that anything in that ruling merely clarifies what was always true for the TCPA, so that any deviation from what is set forth in the declaratory ruling in the past four years would form the basis of new litigation. Indeed, the Chamber is concerned that the onslaught of TCPA litigation in recent years will be eclipsed by new litigations brought with arguments that a company did not comply with requirements “made clear” by this declaratory ruling.


CFPB to Supervise Nonbank Auto Finance Companies

Large non-bank auto financers will now be supervised by the Consumer Financial Protection Bureau, according to a final rule released June 10, that also outlines the examination procedures that will be used to evaluate said companies.

Citing that auto loans are the third largest category of household debt in America, and the automobile leasing market continues to grow, the CFBP says the rule “will help ensure that larger auto finance companies treat consumers fairly.” The rule change may affect approximately 6.8 million customers of 34 of the largest nonbank auto finance lenders, according to the CFBP.

The CFPB’s auto lending supervision will now include the largest banks, credit unions, and any nonbank auto finance company that makes, acquires, or refinances 10,000 or more loans or leases in a year. The bureau may oversee the activity of these companies to ensure they are complying with consumer financial laws such as the Equal Credit Opportunity Act, the Truth in Lending Act, the Consumer Leasing Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank Act) prohibition on unfair, deceptive, or abusive acts or practices.

The rule also broadens the category of transactions involving asset-backed securities that are not counted toward the 10,000 transaction threshold that qualifies a nonbank auto lender for supervision, as well as slightly modifying the definition of “refinancing” as it relates to the threshold.

The CFPB also updated its Supervisory and Examination Manual to guide how the nonbank auto lenders will be examined. In addition to monitoring for compliance with federal consumer financial law, potential risks to customers, and other factors, the bureau also listed its four main evaluation factors. These include ensuring that the companies are fairly marketing and disclosing auto financing terms, providing accurate information to credit bureaus, treating consumers fairly when collecting debts, and lending fairly.

The rule was proposed in September 2014, and will take effect 60 days after publication in the Federal Register.



FTC, NY Attorney General to Host ‘Debt Collection Dialogue’

Microphone at conference hall.The FTC and the Office of the New York State Attorney General will host a “Debt Collection Dialogue,” aimed to be a conversation between government and business regarding consumer protection issues within the debt collection industry, in Buffalo, NY, on June 15. FTC Bureau of Consumer Protection Director Jessica Rich and New York State Attorney General Eric Schneiderman will deliver opening remarks.

The afternoon program will be held at SUNY Buffalo State and will include a break and a Q&A period. Topics for discussion include recent enforcement actions, compliance issues, and consumer complaints regarding debt collection practices.

The event will be the first of a series of Debt Collection Dialogues that will be held over the summer. Dallas and Atlanta have already been released as locations for the upcoming talks. Each program will include speakers from the FTC and its state and federal law enforcement partners, who are to be announced.

The Buffalo discussion will also include speakers James Morrissey, assistant attorney general of New York State, Christopher Koegel, assistant director in the FTC Division of Financial Practices, Greg Nodler, senior counsel for Enforcement Policy and Strategy at the CFPB, and Joy Feigenbaum, executive deputy superintendent, Financial Frauds & Consumer Protection, New York State Department of Financial Services.

All events will be free and open to the public. More information is available at

FCC to Strengthen TCPA Rules in One of Biggest Actions Since Do-Not-Call List

FCClogoFCC Chairman Tom Wheeler announced Wednesday that the FCC will move to protect consumers from unwanted robocalls and texts like never before by proposing new standards for TCPA regulation that will be voted on next month.

Establishing new rules, closing loopholes, and simplifying the opt-out process for consumers are the three main goals of the proposal, which Wheeler calls “yet another win for consumers.” The FCC considers this proposal to be one of the most significant consumer protection actions since it helped to establish the Do-Not-Call Registry in 2003.

The crackdown on robocalls, texts, and telemarketer calls; the number one source of consumer complaints at the FCC, according to the chairman; was motivated in part by the increasing number and severity of complaints regarding unwanted and intrusive calls and texts. In 2014, the FCC saw complaints that detailed offences such as one consumer receiving 4,700 unsolicited texts over a six-month period, while another receiving 27,809 unwanted texts over 17 months, despite requests for the sender to cease.

The proposal will also seek to bring clarity to the numerous companies and businesses who petition the commission over confusion regarding the rules on consumers. If the proposal takes effect, the Commission will rule on over 20 pending petitions related to the TCPA and consumer protection. Wheeler hopes the move will send one message, “consumers have the right to control the calls and texts they receive, and the FCC is moving to enforce those rights.”

One of the biggest changes the FCC proposes would be allowing robocall-blocking technology, which may have previously violated their own call-completion rules. Not only will this solution be available to consumers, the commission urges telephone companies to offer blocking tools.

Loopholes in policy that have been previously exploited by robocallers will close with the clarification in the definition of “autodialers” to include “any technology with the potential to dial random or sequential numbers” according to the FCC. This will prevent solicitors from ignoring consent requirements due to changes in technology design. Furthermore, consumer consent will be better protected by the proposed closing of the “reassigned number” loophole. This will protect consumers who receive a phone number from robocalls or texts that may have been previously consented to by the number’s former owner.

Opt out requirements will also decrease according to the new proposal. Any “reasonable way of saying no” will be allowed and sufficient to opt out of calls and texts, rather than the consumer having to fill out a form and send it through the physical mail to cease unwanted digital communications.

Some “very limited and specific exceptions” will be allowed, according to the FCC, including banking alerts or reminders to refill medications. However, practices such as debt collection and marketing are not included in these exceptions.

The Commission will vote on the proposal at its Open Meeting on June 18.

TCPA Roundup: As Big Data Grows, So Does Scale of TCPA Violations

Bit data flow - Big data conceptAs big data grows, so does the scale of TCPA violations, and with that the settlements; one of the largest in TCPA history was in the news last week.

In a California district court, attorneys who guided consumers in suing a bank for a $32 million settlement were denied a bid to increase their fees to $8 million.

The settlement was the largest TCPA deal to be approved at the time, settling the case in which the plaintiffs claimed they had received automated phone calls from the defendants without their consent. However, this past July saw a $75.5 million settlement granted preliminary approval in another case involving a financial institution and two other defendants accused of “cold calling” cellphones.

The plaintiffs, whose fees were reduced to $2.4 million at the time of the settlement, were “disappointed,” as they told legal news publication Law360, following the court’s denial of their motion for increased compensation. Plaintiffs’ attorneys argued that their litigation strategy saved the class millions of dollars. They are considering an appeal.

FCC Issues Citations

On May 4, the Federal Communications Commission issued citations to three companies it alleged were engaged in robocalling. The companies were accused by the FCC of using auto dialers to call cellphones with prerecorded messages without obtaining the prior consent of the called party. (In the Matter of Call-Em-All LLC, EB-TCD-12-00002355), (In the Matter of Ifonoclast Inc. d/b/a Phonevite, EB-TCD-12-00002528), (In the Matter of M.J. Ross Group Inc. d/b/a, EB-TCD-12-00004353).

In November 2012, one of the defendant’s call records revealed 3,500 unsolicited calls regarding political campaigns, and another company made close to 300 unprompted calls between September 2012 and March 2013. According to the FCC, if the companies fail to comply to cease calling without prior consent, they may be subject to heavy fines of up to $16,000 per call. The companies each have 30 days to respond to the FCC’s citations.

Cruise Line Suits Consolidated

Robocalls and text messages advertising free cruises sent to consumers’ cellphones by one cruise line triggered TCPA law suits by four separate plaintiffs. Last week the plaintiffs asked the U.S. Judicial Panel on Multidistrict Litigation to merge their cases in Florida.

The plaintiff’s attorneys claim consolidation will prevent inconsistencies in pre-trial rulings and duplicative discovery. The four cases are currently filed in the Central District of California, the Southern District of Florida, the District of New Jersey, and the Northern District of Illinois. Although the cases are filed in different states, they all have the same basic allegations, and would logically consolidate in Florida, where the company is headquartered and the district is the least busy.

Faxing Prompts Class Actions

Earlier this month, a wholesale retailer was faced with two proposed class actions regarding unsolicited advertisements faxed to consumers. A company  is suing the retailer over faxes it alleges it received inviting the company to join the business’s membership club. The company alleges the retailer violated the TCPA by failing to include an “opt-out notice” in its faxes and costing the plaintiffs monetary damage though the use of their paper, ink, toner, and lawsuit costs.

In a Missouri class action involving companies who also received the faxes, a law firm alleges that the retailer tampered with their fax machine in efforts to send the ad, not only violating the TCPA but the Missouri Computer Tampering Act. The firm represents multiple Missouri companies who received faxes between April 10, 2011, and April 10, 2015.