CBA Publications >> CBA Regulatory Compliance Bulletin >> Vol 2005 No.5 October 19, 2005

Vol 2005 No.5 October 19, 2005

State Passes Junk Fax Law

A new state law, 1 effective January 1, 2006, bans unsolicited faxes in the state of California, if either the sender or the recipient is located in California. The bill also requires all senders to include identifying information on the headers of sent faxes. SB 833 comes several months after Congress passed the Junk Fax Prevention Act (S. 714), enacted on July 9th, which reinstated the existing business relationship exception ("EBR") to the federal Telephone Consumer Protection Act do not fax rule. It is likely that the Federal Communications Commission will issue new rules under S. 714. (See CBA Regulatory Compliance Bulletin No. 8 dated August 8, 2003 for an analysis of the FCC's 2003 amended rule. For your convenience, the bulletin has been posted at CBA's website at www.calbankers.com, click here).

In that 2003 rulemaking, the FCC eliminated the EBR exception for unsolicited faxes, but has since delayed the effective date of the phase out, most recently to January 9, 2006. The agency took this action partly because of anticipated Congressional action. Because the federal Junk Fax Prevention Act does not preempt state laws, enactment of SB 833 in this state means the federal law's EBR exception will not be available in California (except for non-profit associations, discussed below).

SB 833 is not effective until January 1, 2006, 2 while the federal act became effective when enacted on July 9th. Thus, until January 1 next year, under either the federal act or the FCC's existing rule, unsolicited faxes may continue to be delivered to persons with whom the sender has an existing business relationship.

Definitions Used in SB 833
Telephone facsimile machine: means equipment that can perform either or both of the following:

• "transcribe text or images, or both, from paper into an electronic signal and to transmit that signal over a regular telephone line"
• "transcribe text or images, or both, from an electronic signal received over a regular telephone line onto paper."

Unsolicited advertisement: means "any material advertising the commercial availability or quality of any property, goods, or services that is transmitted to any person or entity without that person's or entity's prior express invitation or permission."

The bill clarifies that invitation or permission may be obtained for a specific or unlimited number of advertisements, and for a specific or unlimited period of time. No further details are provided describing how permission may be obtained. 3

Coverage
The bill potentially covers senders located both in and outside California. All persons or entities located in California are prohibited from sending an unsolicited advertisement to a telephone facsimile machine regardless of where the recipient is located. Also, persons or entities located anywhere-in California or any other state-are prohibited from sending an unsolicited advertisement to a telephone facsimile machine if the recipient is located in California. No distinction is made between senders and recipients that are natural persons or business entities. The bill also precludes a sender from causing another person or entity to fax an unsolicited advertisement, such as a third party service provider.

Note that the prohibition applies to the use of any "device" that may be used to send an unsolicited advertisement to a telephone facsimile machine. This includes, in addition to a traditional fax machine, a computer with fax capability, or any device that can transcribe paper images over a regular telephone line. A normal electronic mail transmission with an attached advertisement would not be covered even if the advertisement is scanned from a paper document because the message is sent to an electronic mail address rather than to a telephone facsimile machine. The fact that the electronic mail recipient may have the capacity to print the advertisement onto paper should be of no consequence since the bill is specifically intended to cover faxes.

Nevertheless, the pace of technological change could result in inadvertent coverage under (or exceptions from) the bill. Already the line between electronic mail and faxes is blurred with software programs that allow users to receive faxed documents (transmitted to regular fax telephone numbers) that appear as attachments to electronic mail. The recipient receives and opens the faxed document in the same way as any other scanned image file, such as a popular Adobe Acrobat file, and could print the document if a printer is attached to the computer.

Is such a program, along with the computer, a piece of equipment capable of "transcribing text or images, or both, from an electronic signal received over a regular telephone line onto paper"? Does the answer depend on whether the sender or recipient relies on dial-up service (a "normal telephone line") to use electronic mail rather than cable? The restrictions created by this bill may prompt more marketers to abandon faxes altogether and use electronic mail, though electronic mail is also regulated by state and federal laws.

The bill permits an aggrieved recipient of an unsolicited advertisement to bring an action for injunctive relief from further violations, together with actual damages, or statutory damages of $500 per violation, whichever amount is greater. For a willful or knowing violation, the sender may be liable for three times the amount otherwise allowed. These remedies are available in addition to remedies that may be provided by other laws, including a the Telephone Consumer Protection Act, which are roughly parallel to those of SB 833. 4

Margin Information
The bill also requires all senders to include identifying information on the margin of sent faxes. The bill makes it "unlawful" for a sender of any "communication" using a telephone facsimile machine, computer, or other device to fail to clearly mark in a margin at the top or bottom of each transmitted page or on the first page of each transmission, the date and time sent, identification of the sender, and the telephone number of the sending machine or of the sender. This restriction applies to any communication, not just an unsolicited advertisement, and on its face applies to any fax transmission without regard to its purpose or the parties involved. This means that the prohibition applies to all faxes sent to or from the state of California.

It is unclear whether the penalty provisions apply to violations of the margin requirement. The placement of the penalty provision in the same paragraph as the unsolicited advertisement provision, and before the margin provision suggests that the answer is no. Also, the preamble to the bill (see below) states that the penalty provision applies to the sending of unsolicited advertisements. Yet, the bill clearly states that failure to include the identifying information is "unlawful." This may be a drafting error, but it would behoove all users of fax machines to program the identifying information on the margin of sent faxes.

Exceptions
SB 833 does not provide an existing business relationship exception. The only exception recognized is one for a "professional or trade association" that is a tax-exempt nonprofit organization if the fax was sent in furtherance of the association's tax-exempt purpose to a member of the association, if certain conditions are met.

Alex Alanis was the lead lobbyist on this bill. If you have any questions, you may direct them to Alex at aalanis@calbankers.com or Leland Chan at lchan@calbankers.com.

Leland Chan

The information contained in this CBA Regulatory Compliance Bulletin is not intended to constitute, and should not be received as, legal advice. Please consult with your counsel for more detailed information applicable to your institution.

Full Text of SB 833, including preamble language:

SB 833, Bowen Unsolicited advertising faxes.
Existing state law imposes various requirements and prohibitions on different forms of advertising. A violation of the provisions governing advertising is a crime.
This bill would make it unlawful for a person or entity, if located in California or if the recipient is located in California, to use any device to send, or cause any other person or entity to use a device to send, an unsolicited advertisement to a telephone facsimile machine, except as specified. The bill would authorize the recipient of an unsolicited advertising fax to bring an action for a violation of these provisions for injunctive relief, actual damages or statutory damages of $500 per violation, whichever is greater, or both injunctive relief and damages, and, if the violation was willful, would authorize a court to award treble damages. The bill would also make it unlawful for a person or entity, if located in California or the recipient is located in California, to initiate a facsimile communication using a machine that does not provide specified identification, or to use a device to send a message via a telephone facsimile machine unless the message is clearly marked with certain identifying information.
Because a violation of the bill would be a crime, it would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 17538.43 is added to the Business and Professions Code, to read:
17538.43. (a) As used in this section, the following terms have the following meanings:
(1) "Telephone facsimile machine" means equipment that has the capacity to do either or both of the following:
(A) Transcribe text or images, or both, from paper into an electronic signal and to transmit that signal over a regular telephone line.
(B) Transcribe text or images, or both, from an electronic signal received over a regular telephone line onto paper.
(2) "Unsolicited advertisement" means any material advertising the commercial availability or quality of any property, goods, or services that is transmitted to any person or entity without that person's or entity's prior express invitation or permission. Prior express invitation or permission may be obtained for a specific or unlimited number of advertisements and may be obtained for a specific or unlimited period of time.
(b) (1) It is unlawful for a person or entity, if either the person or entity or the recipient is located within California, to use any telephone facsimile machine, computer, or other device to send, or cause another person or entity to use such a device to send, an unsolicited advertisement to a telephone facsimile machine.
(2) In addition to any other remedy provided by law, including a remedy provided by the Telephone Consumer Act (47 U.S.C. Sec. 227 and following), a person or entity may bring an action for a violation
of this subdivision seeking the following relief:
(A) Injunctive relief against further violations.
(B) Actual damages or statutory damages of five hundred dollars ($500) per violation, whichever amount is greater.
(C) Both injunctive relief and damages as set forth in
subparagraphs (A) and (B).
If the court finds that the defendant willfully or knowingly violated this subdivision, the court may, in its discretion, increase the amount of the award to an amount equal to not more than three times the amount otherwise available under subparagraph (B).
(c) It is unlawful for a person or entity, if either the person or entity or the recipient is located in California, to do either of the following:
(1) Initiate any communication using a telephone facsimile machine that does not clearly mark, in a margin at the top or bottom of each transmitted page or on the first page of each transmission, the date
and time sent, an identification of the business, other entity, or individual sending the message, and the telephone number of the sending machine or of the business, other entity, or individual.
(2) Use a computer or other electronic device to send any message via a telephone facsimile machine unless it is clearly marked, in a margin at the top or bottom of each transmitted page of the message
or on the first page of the transmission, the date and time it is sent and the identification of the business, other entity, or individual sending the message and the telephone number of the sending machine or of the business, other entity, or individual.
(d) This section shall not apply to a facsimile sent by or on behalf of a professional or trade association that is a tax-exempt nonprofit organization and in furtherance of the association's tax-exempt purpose to a member of the association, provided that all of the following conditions are met:
(1) The member voluntarily provided the association the facsimile number to which the facsimile was sent.
(2) The facsimile is not primarily for the purpose of advertising the commercial availability or quality of any property, goods, or services of one or more third parties.
(3) The member who is sent the facsimile has not requested that the association stop sending facsimiles for the purpose of advertising the commercial availability or quality of any property, goods, or services of one or more third parties.
SEC. 2. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.