CBA Publications >> CBA Regulatory Compliance Bulletin >> Vol 2001 No. 16 November 20, 2001

Vol 2001 No. 16 November 20, 2001

California Bill Establishes a Statewide Do-Not-Call List

Governor Davis signed a bill (SB 771, Figueroa) establishing a statewide "do not call" list of telephone numbers and zip codes of those who wish to block unsolicited telephone calls from marketers. The list will be established by the State Attorney General's office by January 1, 2003. California residential and wireless telephone subscribers (hereafter, "subscribers") may place their phone numbers and zip codes on the list for a fee of no more than $1 in a manner to be prescribed by the Attorney General. The listing expires after three years, and subscribers may exclude from the list calls from identified entities. Unlike the federal Telemarketing and Consumer Fraud and Abuse Prevention Act ("Federal Telemarketing Act," at 15 U.S.C. 6101-6108, and regulations at 47 CFR 64.1200 and 16 CFR Part 310), SB 771 does not provide a means for consumers to request individual entities to place them on a do not call list.

Under the new state law, telephone solicitors are required to obtain copies of the state do not call list for a fee, and beginning on the 31st day after a current list is made available by the Attorney General, a telephone solicitor may not make a proscribed solicitation to a telephone number on that list. A telephone solicitor is defined as someone who makes a telephone call to a California telephone number to do any of the following: (1) offer a good or service; (2) offer to extend consumer credit; (3) seek marketing information in connection with a direct solicitation to the subscriber; (4) seek to promote or sell investment, insurance, or financial services; or (5) seek to do a number of other acts listed in existing Section 17511.1 of the Business & Profession Code.1

Exemptions. The bill exempts tax-exempt charitable organizations and certain small businesses with five or fewer employees, but only as to calls made by the principal of the business within a 50-mile radius. The other exemptions more relevant to banks are as follows:

Consent. The general rule is that, unless a telephone number appears on the state's do not call list, a marketing call is permissible. Nevertheless, even if a number were listed, a call may be made in response to a subscriber's prior express request, in response to a subscriber's advertisement, or with the subscriber's prior written permission. The bill specifically permits a solicitor to send a request by mail to a person whose number appears on the state list to seek a consumer's permission to make a marketing call.

No request or permission may be based on a "contract of adhesion," which is essentially an agreement that, because of the inequitable bargaining position of the parties, the terms cannot be individually negotiated. Thus, for example, an account agreement purporting to secure a customer's permission to receive sales calls from a third party (consent is a recognized exception to the Gramm- Leach-Bliley Act privacy provisions applicable to third parties) could be challenged under AB 771.

Note, however, that even where a subscriber has inquired about a purchase, has agreed to be contacted, or had expressed interest in a product or service that was unavailable, a follow up call may be made only within the 30 business days after the communication was made. After that period, while permission may be provable, no express request is presumed. Also, a call may not be made after a request by the consumer not to make further calls.

Established business relationship. A key exception to AB 771 secured by CBA is the ability of a telephone solicitor to make a call to a subscriber with whom the solicitor has an established business relationship.2 If a subscriber purchases or obtains a product or service through a "licensed agent or broker," presumably including a mortgage broker, an established business relationship exists between the subscriber and the agent or broker, and may exist between the subscriber and the entity on behalf of whom the agent is acting. The bill provides no further guidance on the conditions in which the principal will or will not be deemed to have such a relationship with a subscriber. Similarly, the bill states that a person does not necessarily become a covered solicitor by virtue of the marketing of its products or services by an independent contractor whose business practices are not "controlled" by the person.

Shared brand identity. Another key CBA- recommended exemption provides that an established business relationship is deemed to extend to associated but separate legal entities that share a brand identity. Thus, for example, ABC Bank could call the customers of ABC Insurance, a subsidiary of ABC Bank, but not the customers of XYZ Card even if XYZ Card is also a subsidiary. The bill's author was unwilling to allow an exemption based solely on a corporate relationship or the existence of a joint agreement. Note that this exemption does not affect the application of the Federal Telemarketing Act, which allows a consumer to require a business, including one that he is a customer of, to put the consumer on its do not call list.

If an entity calls a subscriber based on the shared brand identity exception and the subscriber requests to be placed on the entity's do not call list pursuant to the Federal Telemarketing Law, that instruction will apply to that entity, to all other entities that share a brand identity, and to the business that has the established business relationship.3

Debt collection. A telephone call made in connection with collecting a debt is exempted. The language of the bill does not distinguish between a call made by the creditor or by a collecting agent. Also exempted are calls by a creditor offering to extend credit to help pay a delinquency owed to that creditor.

Excluded subscribers. As indicated above, a subscriber may exclude from a do not call instruction a specific person or entity who, as a result of the instruction, is not proscribed from making a solicitation the subscriber.

Calls to confirm termination. A call may be made solely to verify that a subscriber, and not an unauthorized third party, has terminated an established business relationship.

Enforcement. The provisions of the bill are enforceable through a civil action by the Attorney General, a district attorney, or a city attorney. Violators are subject to injunction, civil penalty of up to$500 for the first violation and up to $1,000 for subsequent violations, and other relief determined by a court. It is unclear whether each inappropriately made call is an individual violation.

Any aggrieved person may also bring an action in a small claims court to obtain an order to prevent further violations. Violation of an order is subject to a penalty of up to $1,000 in favor of the aggrieved person. A call made accidentally or in violation of the solicitor's policies and procedures is an affirmative defense to a violation.

The lead CBA lobbyist on this bill is Jamie Clark, VP/State Government Relations, who can be reached at 916-441-7377 ext. 209.

1This section is part of a law that requires certain disclosures to consumers about telemarketed products and establishes safeguards against fraud. Section 17511.1 is an exhaustive list of activities that come within the definition of a "telephonic seller" within that law.

2Established business relationship is defined as "a relationship formed by a voluntary, two-way communication between a telephone solicitor and a subscriber with or without an exchange of consideration, on the basis of an application, purchase, rental, lease, or transaction if the relationship has not been terminated by the subscriber or the solicitor."

347 CFR 64.1200(e)(2)(v) of the federal telemarketing rules have a similar rule about the applicability of a do not call request on affiliated entities: "In the absence of a specific request by the subscriber to the contrary, a residential subscriber's do-not-call request shall apply to the particular business entity making the call (or on whose behalf a call is made), and will not apply to affiliated entities unless the consumer reasonably would expect them to be included given the identification of the caller and the product being advertised." [Emphasis added].