TCPA Compliance: How Dealers Can Avoid Costly Litigation - Greater Cincinnati Automobile Dealers Association

TCPA Compliance: How Dealers Can Avoid Costly Litigation

By Michele Schuster & Adam Todd

 Hearing “TCPA” can strike instant fear in the heart of business owners that call or text customers or sales leads.  Cases involving the TCPA, which stands for the Telephone Consumer Protection Act, represent the second highest filing in U.S. Federal Courts in 2016.  Lawsuits typically result in multi-million dollar judgments.  The average settlement of a TCPA lawsuit is approximately $5 million.  Add hundreds of thousands in legal fees to defend such an action and “TCPA” quickly becomes a very scary word.  Such expenses, fines, and damages can be the end of a small business.  

History of TCPA

The TCPA was passed by Congress in 1991. It restricts telephone solicitations (telemarketing) and the use of automatic telephone dialing systems (ATDS) to contact consumers. The only relevant exception is if the recipient gave prior consent.

The fine for violating the TCPA is $500 per call or text, which is tripled to $1,500 for willful violations.  Because a TCPA claim does not require any showing of actual harm to the consumer, but instead awards statutorily-prescribed damages, TCPA lawsuits are attractive to class action attorneys (who generally retain fifty percent or more of any judgement). 

Text Messages

Many dealerships use text messages to communicate with customers and prospective customers.  Text messages are very effective.  Studies show that consumers open 97% of text messages and read the message within 3 minutes.  Only 22% of emails are opened and read.  Text messages are considered calls under the TCPA; therefore, the TCPA applies equally to voice calls and texts.

TCPA Compliance

Several factors making complying with the TCPA difficult.  First, the definition an ATDS is not clear.  The Federal Communications Commission (FCC), the agency that enforces the TCPA, and federal courts have issued conflicting opinions about the definition of ATDS.  The FCC has held that a predictive dialer is an ATDS because it has the capacity to dial numbers without human intervention.  If the calling party can modify a dialing system to dial in an automated fashion – even by adding software that the calling party does not currently own – the system is an ATDS.  The FCC has even speculated that a smart phone could be considered an ATDS because it has the capacity to automatically dial without human intervention through various apps. 

This means that before calling or texting a customer or prospective customer’s cell phone, you must either:

1. have consent; or 
2. use a manual dialing system to call or text.  


You can place a call or text using an ATDS if you have proper consent.  The type of consent depends upon the nature of the communication.  If the call or text is for telemarketing or advertisement purposes, the consent must in writing. The TCPA defines “advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services.”  Telemarketing is “the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services….”

Calls  or texts made, that include any offer of goods or services, are advertisements or telemarketing calls (i.e. dual purpose).   For example, a recall notice that includes an oil change coupon is a dual purpose communication, for which written consent is required.The TCPA requires that the following to obtain written consent:

  • Written Agreement. Consent must be obtained in a written agreement, which includes the signature of the person providing consent.  An electronic signature or voice recording is sufficient to effectuate a written agreement pursuant to the E-SIGN Act.
  • Identity of the Seller.  The consent must specifically indicate the seller(s) to whom consent is being provided.
  • Telephone Number.  The agreement must include the cellular telephone number at which the person consents to receive calls.  If the written agreement includes more than one number, it must be clear which number(s) the person is consenting to receive calls at.
  • Affirmative Action.  The consumer must take some affirmative action to indicate his/her assent.• Mandatory Disclosures.  The agreement must clearly and conspicuously disclose:
    1. That the person is authorizing the seller to make telemarketing calls;
    2. That calls will be made using an ATDS (or prerecorded message, if applicable); and
    3. The person is not required to provide consent as a condition of purchasing any good/services.
  • Documentation.  The seller has the burden of proof to show that consumers provided written consent to be called.  All records should be kept for at least 5 years from the last date the consent is relied upon to make a call.

Before relying on any language to obtain written consent you should have the language approved by your legal cousel.

If the communication is purely informational or transactional, such as an appointment reminder, collection call, or other non-marketing communication, the consent need not be in writing.  In such a case, you only need prior express consent. The term “prior express consent” is not defined under the TCPA or FCC regulations.  The FCC has, however, provided guidance regarding how this term is to be interpreted:  “Persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary.”  If your customer provides you with his or her telephone number as a means of being contacted and does not revoke that consent, you can contact them.  Again, it is important that your obtain legal advice before relying on prior express consent.

Once you have consent, make sure that you honor all revocations of consent.  If a consumer revokes consent all calls placed after the revocation are a violation of the TCPA.

Manual Dialing

If you do not have consent you may only call a cell phone using a manual dialing system.  As stated above, potentially every telemarketing device on the market is an ATDS.  Before relying on the fact that a system is a manual dialing system, have an expert review it to confirm that it does not have the capacity to function as an ATDS.

Similarly, before sending a text message, ensure you use a manual texting platform.  Again, it is best to have your system reviewed before relying on the fact that it is a manual system.

Reassigned or Wrong Number Calls

To make matters worse, a company violates the TCPA if it uses an ATDS to call a number for which it has consent, but dials the wrong number or the number has been reassigned.  The FCC’s logic is that the company placing the call does not have consent for calling the wrong number or for the person that assumes a reassigned number.  For reassigned numbers, the FCC further ruled that it would allow only one call (regardless of whether the call is answered or provides notice that the number has been reassigned) before imposing liability.  There is currently no comprehensive list for reassigned numbers, making compliance impossible.

Recent Auto-Related Class Action Settlements

Still wondering how these cases can sink your business? To further illustrate the potential risk, consider the following recent TCPA class action settlements:

  • Interstate National Dealer Service – $4.2 million• Sirius XM – proposed $35 million settlement
  • Heartland Automotive Services (Jiffy Lube) – $47 million
  • Chase Auto Finance – $10.2 million
  • Lithia Motors – $2.5 million

Violating the TCPA is a costly mistake.  You can reduce TCPA exposure with proper training, policies, and procedures.  The best defense is a good offense through simplified compliance. Recently, Plaintiff’s attorneys target small and medium businesses that are often unprepared to defend TCPA claims.  Dealerships are no exception to this trend.  Before initiating any calling or texting campaign, make sure you understand the rules and consult with competent legal counsel.