Nov. 7, 2007 at 1:41 PM ET
With 150 million phone numbers now registered on the Federal Trade Commission’s Do Not Call list, it seems clear most consumers don’t want to receive unsolicited marketing phone calls. But apparently, it’s not clear to everyone.
The FTC on Wednesday announced multimillion-dollar penalties against three companies -- lender Ameriquest Mortgage Co., adjustable bed seller Craftmatic Industries Inc., and home alarm firm ADT Security Services -- for violations of the Do Not Call list rules.
Craftmatic and three of its subsidiaries agreed to pay $4.4 million -- the second largest Do Not Call penalty ever -- to settle various FTC telemarketing-related charges. The agency alleged that Craftmatic obtained consumers’ phone numbers through sweepstakes entries, then placed tens of thousands of calls to entrants who were on the Do Not Call list. Because the sweepstakes form did not expressly seek their assent to receive telemarketing calls, the calls violated federal regulations, the FTC said. The FTC also said Craftmatic placed millions of computer-generated "abandoned" calls by failing to connect customers to a live representative within two seconds as required.
ADT agreed to pay slightly more than $2 million to settle charges that two of its authorized dealers -- Alarm King and Direct Security Services -- placed telemarketing calls to consumers on the list. While ADT did not place the calls, the FTC held it responsible for the marketing tactics of its affiliates. A similar ruling last year held DirecTV responsible for phone calls placed by its affiliates, and that company agreed to pay a $5 million fine.
Ameriquest was fined $1 million after the FTC found the firm had purchased consumers' phone numbers from "lead generation" companies. Consumers had been enticed to provide their phone numbers and other personal information to Web sites offering various financial products. Because the consumers had not expressly given Ameriquest permission to call them, the calls were a Do Not Call violation, the FTC said.
The use of lead generation firms has created notoriety for Ameriquest before. A 2003 investigation by msnbc.com found that Ameriquest was purchasing leads from firms that sent spam e-mail to locate consumers interested in obtaining mortgages.
The FTC also announced Wednesday it is pursuing charges against a smaller company, Global Mortgage Funding, for allegedly making hundreds of thousands of calls to consumers on the Do Not call list in an attempt to sell them financial products. The FTC complaint also alleges the company failed to transmit required caller ID information when placing its calls.
"Consumers have made clear that they greatly value the Do Not Call Registry, and they must be able to depend on its privacy protection," FTC Chairwoman Deborah Platt Majoras said at a news conference announcing the enforcement action. "By bringing enforcement actions, like those announced today, we will ensure that the small number of bad actors pay a price for not adhering to the law and respecting consumers' privacy requests."
The Craftmatic sweepstakes finding is significant because it addresses one potential loophole in the Do Not Call list. The law authorizing the list makes several exceptions, including allowing companies with its "existing business relationships" with consumers to call them. There has been debate about the legality of calling consumers who had filled out sweepstakes entries or otherwise surrendered their phone numbers to companies in innocuous ways. The FTC finding shows the agency is taking a narrow interpretation of the law, requiring firms to obtain consumers’ permission to receive marketing calls at the time they surrender their phone numbers.
The FTC will not consider sweepstakes entries as "existing business relationships," Majoras said, when "they are really just an attempt to trick consumers into giving up their phone numbers." She said the FTC is investigating other sweepstakes-based telemarketing programs.
The Ameriquest case also suggests the FTC is taking a limited interpretation of affiliate marketing relationships, which could limit the usefulness of companies that generate leads for mortgage companies.
Since the advent of the Do Not Call list in 2003, the FTC and the Department of Justice have brought 34 law enforcement actions against violators and collected $16 million in penalties.
Last month, the FTC ruled that it would not allow phone numbers to expire from the list. Initially, phone numbers registered to the list were set to expire in five years, but the commission found that most consumers want their registrations to remain permanent.