Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991

Federal Communications Commission

DA 05-2293

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of

Rules and Regulations Implementing the

)

CG Docket No. 02-278

Telephone Consumer Protection Act of 1991

Request of State Farm Mutual Automobile

Insurance Company for Clarification and

Declaratory Ruling

DECLARATORY RULING

Adopted: August 16,2005

Released: August 17,2005

By the Acting Chief, Consumer &

Governmental Affairs Bureau:

I. INTRODUCTION

1. In this Declaratory Ruling, we grant a Request for Clarification and Declaratory Ruling filed

by State Farm.' Specifically, we clarify that State Farm's "exclusive agents" may rely on the

"established business relationship" (EBR)

exemption of the Telephone Consumer Protection Act

(TCPA)^ to make telephone solicitations on behalf of State Farm to consumers on the national do-not-call

list."' We reiterate, however, that once a consumer makes a company specific do-not-call request,

whether to State Farm or any of its agents telemarketing on behalf of State Farm, State Farm and all of its

' State Farm Mutual Automobile Insurance Company Request for Clarification and Declaratory Ruling filed May

13, 2005 (State Farm Petition).

^ Telephone Consumer Protection Act of 1991, Pub. L. No. 102-243, 105 Stat. 2394 (1991), codified at 47 U.S.C.

§ 227 (TCPA). The TCPA amended Title 11 of the Communications Act of 1934, 47 U.S.C. § 201 et seq. Section

227(a)(3) exempts from the term telephone solicitation a call "to any person with whom the caller has an

established business relationship." See 47 U.S.C. § 227(a)(3)

Farm Petition).

^ Telephone Consumer Protection Act of 1991, Pub. L. No. 102-243, 105 Stat. 2394 (1991), codified at 47 U.S.C.

§ 227 (TCPA). The TCPA amended Title 11 of the Communications Act of 1934, 47 U.S.C. § 201 et seq. Section

227(a)(3) exempts from the term telephone solicitation a call "to any person with whom the caller has an

established business relationship." See 47 U.S.C. § 227(a)(3).

'

Section 64.1200(0(3) of our rules defines the term "established business relationship" as:

a prior or existing relationship formed by a voluntary two-way communication between a person or

entity and a residential subscriber with or without an exchange of consideration, on the basis of the

subscriber's purchase or transaction with the entity within the eighteen (18) months immediately

preceding the date of the telephone call or on the basis of the subscriber's inquiry or application

regarding products or services offered by the entity within the three months immediately preceding

the date of the call, which relationship has not been previously terminated by either party.

5ee 47 C.F.R. §64.1200(f)(3)

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agents must honor that request and not call the consumer again to make a telephone solicitation.'*

II. BACKGROUND

A. Telephone Consumer Protection Act of 1991

2. On December 20, 1991, Congress enacted the TCPA, as codified in section 227 of the

Communications Act of 1934, as amended (the Act), in an effort to address a growing number of

telephone marketing calls and certain telemarketing practices Congress found to be an invasion of

consumer privacy.^ In relevant part, the TCPA required the Commission to "initiate a rulemaking

proceeding concerning the need to protect residential telephone subscribers' privacy rights"^ and

specifically authorized the Commission to consider "the establishment and operation of a single national

database to compile a list of telephone numbers of residential subscribers who object to receiving

telephone solicitations."^ Section 227(a)(3) of

required the Commission to "initiate a rulemaking

proceeding concerning the need to protect residential telephone subscribers' privacy rights"^ and

specifically authorized the Commission to consider "the establishment and operation of a single national

database to compile a list of telephone numbers of residential subscribers who object to receiving

telephone solicitations."^ Section 227(a)(3) of the Act expressly exempts from the definition of a

telephone solicitation calls made to persons with whom the caller has an "established business

relationship."* Congress determined that such an exemption was necessary to allow companies to

communicate by telephone with their existing customers.'

3. On July 3,2003, the Commission revised the TCPA rules and adopted new rules to provide

consumers with several options for avoiding unwanted telephone solicitations." In particular, the

Commission established a national do-not-call registry that would be Jointly administered by the Federal

Trade Commission (FTC) and this Commission." The national registry, which went into effect on

October 1, 2003, prohibits, with limited exceptions, the making of any telephone solicitation to a

residential subscriber that has registered his or her telephone number on the national do-not-call

registry.'^ Consistent with the FTC, the Commission adopted an established business relationship

exemption to the prohibition on making telephone solicitations to residential telephone subscribers on the

national do-not-call list, but limited the duration of that exemption to 18 months following a purchase or

* The Commission's rules require that a company specific do-not-call request "be honored for 5 years from the

time the request is made." See 47 C.F.R. § 64.1200(d)(6).

'

Telephone Consumer Protection Act of 1991, Pub. L. No. 102-243, 105 Stat. 2394 (1991), codified at

U.S.C.

§ 227 (TCPA). The TCPA amended Title 11 of the Communications Act of 1934,47 U.S.C. § 201 et seq.

® 47 U.S.C. § 227(c)(1).

'

47 U.S.C. § 227(c)(3).

* 47 U.S.C. § 227(a)(3)

ecific do-not-call request "be honored for 5 years from the

time the request is made." See 47 C.F.R. § 64.1200(d)(6).

'

Telephone Consumer Protection Act of 1991, Pub. L. No. 102-243, 105 Stat. 2394 (1991), codified at

U.S.C.

§ 227 (TCPA). The TCPA amended Title 11 of the Communications Act of 1934,47 U.S.C. § 201 et seq.

® 47 U.S.C. § 227(c)(1).

'

47 U.S.C. § 227(c)(3).

* 47 U.S.C. § 227(a)(3).

'

See H.R. Rep. No. 102-317 at 13-14.

"

Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278,

Report and Order, 18 FCC Red 14014 (2003) {2003 TCPA Order). On March 11,2003, the Do-Not-Call

Implementation Act was signed into law, requiring the Commission to issue a final rule in its ongoing TCPA

proceeding within 180 days of enactment, and to consult and coordinate with the Federal Trade Commission to

"maximize consistency" with the rules promulgated by the FTC. See Do-Not-Call Implementation Act, Pub. L.

No. 108-10, 117 Stat. 557 (2003), codified at 15 U.S.C. § 6101.

"

2003 TCPA Order, 18 FCC Red at 14034, para. 28.

'■ 47 C.F.R. § 64.1200(c)(2). See also Mainstream Marketing Services, Inc. v. Federal Trade Comm'n, 358 F.3d

1228 (10* Cir. 2004) (upholding the constitutionality of the national do-not-call registry), cert denied 2004 WL

2050134 (U.S. Oct. 4,2004) (No. 03-1552).

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Federal Communications Commission

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transaction and three months following an inquiry or application, unless the consumer terminates the

EBR by, for example, making a company specific do-not-call request.'^ The national do-not-call registry

supplemented existing rules that required entities making telephone solicitations to maintain company

specific do-not-call lists.'^

4. On February 18, 2005, the Commission released a Second Order on Reconsideration

addressing certain issues raised in petitions for reconsideration of the 2003 TCP A Order

for example, making a company specific do-not-call request.'^ The national do-not-call registry

supplemented existing rules that required entities making telephone solicitations to maintain company

specific do-not-call lists.'^

4. On February 18, 2005, the Commission released a Second Order on Reconsideration

addressing certain issues raised in petitions for reconsideration of the 2003 TCP A Order.

In relevant

part, the Commission clarified that; (1) the existence of a financial agreement, including bank accounts,

loans, insurance policies and mortgages, constitute ongoing business relationships that permit a company

to contact consumers for the duration of the financial agreement or contract (and for an additional 18

months following the termination of the financial agreement); and (2) intermediaries, such as insurance

agents and mortgage brokers, may call those consumers with whom they have arranged an insurance

policy or mortgage for a period of 18 months from the time the transaction is completed, i.e., the date that

the broker/agent arranged the mortgage or insurance deal." The Commission found that independent

brokers and agents often play an important role in these types of financial transactions and that, in many

circumstances, the consumer would expect to receive a call from them within a reasonable period of time

after the transaction.'^ The Commission noted, however, that unlike the bank or lender with which a

consumer has an ongoing relationship based on an account or loan, the mortgage broker or insurance

agent typically is only involved in the original transaction.'® Therefore, the Commission concluded that

to allow a broker or agent to make a telephone solicitation for the duration of a loan or term of the policy

based on the origination of the transaction would conflict with the underlying goal of the do-not-call

rules to protect consumer privacy rights."

B. State Farm Petition

5

er or insurance

agent typically is only involved in the original transaction.'® Therefore, the Commission concluded that

to allow a broker or agent to make a telephone solicitation for the duration of a loan or term of the policy

based on the origination of the transaction would conflict with the underlying goal of the do-not-call

rules to protect consumer privacy rights."

B. State Farm Petition

5. On May 13, 2005, State Farm sought clarification that State Farm's exclusive agents "are

permitted to telemarket to State Farm's customers on State Farm's behalf so long as State Farm otherwise

has a valid 'established business relationship' (EBR) with the customer."^" State Farm indicates that it

depends almost entirely on 16,000 independent contractor insurance agents - who have an exclusive

agency relationship with State Farm -

to both represent the company to consumers and provide service to

policyholders.^' As a result. State Farm contends that its agents are similarly situated to other parties that

are permitted by the Commission to make telephone solicitations pursuant to an ongoing EBR between a

2003 TCPA Order, 18 FCC Red at 14078-80, para. 112. See also 47 C.F.R. § 64.1200(f)(3).

'" See 47 C.F.R. § 64.1200(d)(6).

"

Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278,

Second Order on Reconsideration, 20 FCC Red 3788 (2005) {Second Order on Reconsideration).

Second Order on Reconsideration, 20 FCC Red at 3798, paras. 26-27. These restrictions apply when the agent

is not otherwise authorized to make telephone solicitations on behalf of the business entity.

Second Order on Reconsideration, 20 FCC Red at 3798, para. 27.

18

19

20

21

Second Order on Reconsideration, 20 FCC Red at 3798, n.77.

Second Order on Reconsideration, 20 FCC Red at 3798, para. 27.

State Farm Petition at 1.

State Farm Petition at 2.

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ras. 26-27. These restrictions apply when the agent

is not otherwise authorized to make telephone solicitations on behalf of the business entity.

Second Order on Reconsideration, 20 FCC Red at 3798, para. 27.

18

19

20

21

Second Order on Reconsideration, 20 FCC Red at 3798, n.77.

Second Order on Reconsideration, 20 FCC Red at 3798, para. 27.

State Farm Petition at 1.

State Farm Petition at 2.

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consumer and a financial service company.^^ No opposition was filed to State Farm's petition.^'

III. DISCUSSION

6. We clarify that State Farm's exclusive agents are permitted to rely on the EBR of State Farm

to make telephone solicitations on behalf of State Farm so long as State Farm has a valid EBR with the

customer.^'* State Farm's agents are authorized to perform almost all communications with the customers

of State Farm including telemarketing on behalf of State Faim.^' As State Farm notes, its agents are

responsible for answering policyholders' questions, providing updates to consumers when adjustments in

coverage may be appropriate, soliciting applications for coverage, submitting claims, and in some cases,

paying claims.^® Moreover, State Farm itself conducts no "in-house" telemarketing.^^ Thus, in contrast

to insurance agents or brokers that are involved only in the original transaction. State Farm's exclusive

agents perform the same services for State Farm as employees of companies that "in-source" customer

service functions.^^ As discussed in

Second Order on Reconsideration, in the case of an insurance

policy, the EBR may extend for the duration of the policy and for an additional 18 months following the

termination of that policy.^' In addition, we note that this clarification is consistent with the

Commission's prior conclusion that third party "telemarketers may rely on the seller's EBR to call an

individual consumer to market a seller's services and products."^"

7

in the case of an insurance

policy, the EBR may extend for the duration of the policy and for an additional 18 months following the

termination of that policy.^' In addition, we note that this clarification is consistent with the

Commission's prior conclusion that third party "telemarketers may rely on the seller's EBR to call an

individual consumer to market a seller's services and products."^"

7. We take this opportunity to reiterate that a company on whose behalf a telephone solicitation

is made bears the responsibility for any violation of our telemarketing rules and calls placed by a third

party on behalf of that company are treated as if the company itself placed the call.'' In addition, we note

that consumers may terminate the EBR for purposes of telemarketing calls at any time by making a

company specific do-not-call request." Once the consumer makes a company specific do-not-call

request, whether to the company or third party, the company and its third party telemarketer may not call

State Farm Petition at 2-3. In addition. State Farm notes that its agents make the same type of customer calls on

behalf of State Farm as third-party telemarketing agents hired by financial service companies to make calls under

the EBR exception State Farm Petition at 3. See also 2003 TCPA Order, 18 FCC Red at 14083, para. 118.

See Petitions for Clarification of Action in Rulemaking Proceeding, Public Notice, Report No. 2716 (rel. June

8, 2005).

See 2003 TCPA Order, 18 FCC Red at 14083, para. 118.

See State Farm Petition at 2.

State Farm Petition at 2.

State Farm Petition at 2.

State Farm Petition at 2-3.

29Second Order on Reconsideration, 20 FCC Red at 3798, para. 26.

30 2003 TCPA Order, 18 FCC Red at 14083, para. 118

.

See Petitions for Clarification of Action in Rulemaking Proceeding, Public Notice, Report No. 2716 (rel. June

8, 2005).

See 2003 TCPA Order, 18 FCC Red at 14083, para. 118.

See State Farm Petition at 2.

State Farm Petition at 2.

State Farm Petition at 2.

State Farm Petition at 2-3.

29Second Order on Reconsideration, 20 FCC Red at 3798, para. 26.

30 2003 TCPA Order, 18 FCC Red at 14083, para. 118. We also note that nothing we do herein negates the

Commission's conclusion in the Second Order on Reconsideration that independent agents or brokers involved

only in the original transaction are limited to an 18-month period following that transaction during which they may

rely upon an EBR to contact consumers on the national do-not-call list.

"

See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Memorandum

Opinion and Order, 10 FCC Red 12391 at 12397, para. 13 (1995).

"

See 41 C.F.R. § 64.l200(0(3)(i).

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the consumer again on behalf of that company to make a telephone solicitation regardless of whether the

consumer continues to do business with the company."

IV. PROCEDURAL ISSUES

A. Materials in Accessible Formats

8. To request materials in accessible formats (such as Braille, large print, electronic files, or

audio format), send an e-mail to fcc504@fcc.gov or call the Consumer &

Governmental Affairs Bureau

at 202-418-0530 (voice), 202-418-0432 (TTY). This Declaratory Ruling can also be downloaded in

Word and Portable Document Format at http://www.fcc.gov/cgb/Dolicv.

B. Ordering Clauses

9. Accordingly, IT IS ORDERED that, pursuant to Sections 1-4, 227, and 303(r) of the

Communications Act of 1934, as amended, 47 U.S.C. §§ 151-154, 227 and 303(r); and Section 64.1200

of the Commission's rules, 47 C.F.R. § 64.1200, this Declaratory Ruling in CO Docket No. 02-278 IS

ADOPTED as set forth herein.

10

ord and Portable Document Format at http://www.fcc.gov/cgb/Dolicv.

B. Ordering Clauses

9. Accordingly, IT IS ORDERED that, pursuant to Sections 1-4, 227, and 303(r) of the

Communications Act of 1934, as amended, 47 U.S.C. §§ 151-154, 227 and 303(r); and Section 64.1200

of the Commission's rules, 47 C.F.R. § 64.1200, this Declaratory Ruling in CO Docket No. 02-278 IS

ADOPTED as set forth herein.

10. IT IS FURTHER ORDERED, that the Request for Clarification and Declaratory Ruling filed

by State Farm Mutual Automobile Insurance Company in CO Docket 02-278 on May 13, 2005, IS

GRANTED to the extent stated herein.

L4i

FEDERAL COMMUNICATIONS COMMISSION

C

fonica Desai

Acting Chief

Consumer &

Governmental Affairs Bureau

"

See 2003 TCP A Order, 18 FCC Red at 14086-87, para. 124.

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