In advance of the FCC’s highly anticipated June 18 meeting, during which it is likely to vote on an omnibus order disposing of a wide range of pending petitions for declaratory ruling, the FCC’s Enforcement Bureau took an early shot across the bow at a proposed change to  PayPal Inc.’s User Agreement. In an unusual move, the Bureau sent a public letter to PayPal warning it that its new broad “consent to contact” provision may violate the TCPA.

The updates to the User Agreement authorize PayPal to contact a consumer by “autodialed or prerecorded calls and text messages … at any telephone number provided … or otherwise obtained” in order to notify the consumer about his or her account, to troubleshoot problems, or resolve a dispute, collect a debt, poll for opinions, to contact a consumer with promotions, or “as otherwise necessary.” The terms lack an opt-out mechanism for consumers who do not wish to receive these calls. Further, PayPal’s Policy Updates page uses bold and capital letters to make consent to contact a condition of use: “IF YOU DO NOT AGREE TO THE AMENDED USER AGREEMENT, PRIVACY POLICY OR ACCEPTABLE USE POLICY, YOU MAY CLOSE YOUR ACCOUNT BEFORE JULY 1, 2015 AND YOU WILL NOT BE BOUND BY THE AMENDED TERMS.”

The TCPA prohibits prerecorded or artificial voice telemarketing calls to residential numbers or autodialed, prerecorded, or artificial voice calls or texts to wireless numbers without first obtaining the prior express written consent of the recipient. See 47 C.F.R. § 64.1200(a)(2)-(3). Furthermore, a company must obtain prior express consent, whether oral or written, for calls to a wireless number if the call is not a telemarketing call. See id. § 64.1200(a)(1)(iii). FCC rules specify the manner in which a company must collect “prior express written consent” to include a signed “clear and conspicuous disclosure” authorizing a seller to deliver telemarketing messages by autodialed calls or texts at the phone number specified and that the person signing the agreement is not required to enter into such an agreement as a condition of purchasing any property, goods, or services. See id. § 64.1200(f)(8).

The FCC Chief of the Enforcement Bureau on June 11 sent PayPal a letter questioning whether the changes to the User Agreement are consistent with FCC rules. The letter notes “serious concerns” with PayPal’s User Agreement updates, including the apparent failure to comply with FCC rules that (1) prohibit requiring a consumer to consent to receive autodialed or prerecorded telemarketing messages as a condition of purchasing any goods or services and (2) require notification of a consumer’s right to refuse to consent. The letter states if PayPal “fails to include the required notice and/or fails to allow its users to refuse such consent,” then the company may be subject to penalties of up to $16,000 per call or text message. The letter also reminds PayPal that “should any question about the consent arise, the seller will bear the burden of demonstrating that a clear and conspicuous disclosure was provided and that unambiguous consent was obtained.”   Consent (which must be in writing if the call is a telemarketing call) must be obtained for the specific phone number dialed at any number; the letter observed that blanket consent to contact the consumer does not comply with FCC rules.

PayPal responded to the “confusion and concern” surrounding its User Agreement in a blog post, stating: “You can choose not to receive autodialed or prerecorded message calls by clicking” a link to contact customer service. In fact, use of this link takes a user to the PayPal home page, where the consumer must sign into his or her account before being routed to the “Contact PayPal” support page. It is reported that customers are told they cannot opt out when they contact customer service, which is consistent with the boldface statement that a consumer who does not consent to the change should close his or her account or will be deemed to have consented to the new contact policy.

Paypal’s actions also caught the attention of four United States Senators, who wrote their own letter to the company stating that the “new policy could adversely affect consumers by exposing them to a barrage of unwanted calls that are unstoppable unless consumers choose to discontinue using PayPal.” Democratic Senators Markey, Franken, Menendez, and Wyden are seeking information from PayPal about “whether Paypal is reexamining its User Agreement,” and if so, how the company will alter its User Agreement to address the stated FCC concerns.

eBay, PayPal’s parent company, also recently updated its user agreement (effective June 15), prompting the Office of the New York State Attorney General to send the company a letter similarly expressing concern regarding its compliance with the TCPA. The New York Attorney General questions “whether the customer actually consented to such calls in light of its inconspicuous disclosure in a dense 12-page user agreement.” Moreover, the letter states “without any way to opt-out of the communications, customers can either agree to the new policies in their entirety or stop using the service completely…. Given eBay’s dominant market position, it is unclear whether consumers really have a choice at all.” The Attorney General listed seven questions for eBay to answer regarding its new policies, including questions about the rationale and objective of the new policy, a comparison to the previous version, and whether customers may opt-out and that process.

This focus on consumer choice and consent in advance of the FCC June 18 meeting signals that the FCC, as well as state regulators, are increasingly sensitive to changes in contact policies by companies interacting on a large scale with consumers. How PayPal reacts before the July 1, 2015 slated effective date of its updated User Agreement will be quite interesting, as the FCC’s Enforcement Bureau has made plain its intent to make PayPal a target and legislators and state attorney generals are also watching. More broadly, these developments serve as a reminder to businesses everywhere of the need to review existing consent to contact policies and any revisions to ensure compliance. Certainly the FCC’s anticipated June 18 ruling will trigger a need for such a review.