March 27, 2006
Do you know what you are?
Odds are you are a telemarketer and you didn’t even know it. That’s right. According to the FCC, which recently crushed a mortgage brokerage for its failure to comply with the Do-Not-Call (DNC) laws, when it comes to DNC enforcement, the mortgage industry is sitting in the same boat as those selling Florida timeshares.[1] While the Dynasty Mortgage case was largely dealing with what happens to a mortgage company that fails to have a comprehensive system in place to comply with the DNC laws – the case was also a body blow to the overall ego of the mortgage industry. I’d be willing to bet that few if any of those working as or for a loan originator when asked last Thanksgiving by their relatives what they do responded “telemarketer.” More likely than not, the answer was more like “mortgage broker” or “mortgage professional” or “loan officer” or “banker” or something else that they could proudly and with their head held high tell their family all about. But, a telemarketer!? Never! That’s the guy your relatives love to tell you stories about in which they cursed the guy out or screamed in his ears or otherwise hung up on because he always seems to call just as they are about to sit down for dinner. We’ve made frustrating telemarketers a national pastime. So how can I dare label you a telemarketer? I do so, because the government beat me to the punch.
In the Dynasty case, the guys over at Dynasty Mortgage similarly didn’t feel that they were telemarketers. In fact, they believed that they were exempt from the DNC regulations since they were “a government-regulated business” — an “approved lending institution” with a license from HUD.[2] Why did Dynasty think that they weren’t subject to regulation? Was it that they couldn’t get their arms around the idea that the DNC laws were drafted so as to encompass almost every business out that that sells products directly to consumers? Or was it that they had heard that some banking entities weren’t subject to these regulations and naturally assumed that mortgage brokers and mortgage bankers were similarly exempt? Whatever they thought, the hard cold reality is that when it comes to calling consumers at their home mortgage companies are viewed in the eyes of the law in the same light as those calling at dinnertime to selling time-shares.
So what does all this mean? Well, the big mortgage companies, those that can afford to spend millions of dollars on sophisticated call-center operations have by and large accepted their lot as being telemarketers and have simply ponied up more money to add another layer to their operations whereby they insure that they do not go anywhere near calling someone on the DNC list. That’s great, but it doesn’t help the majority of guys out there who are working in small to mid-sized shops that, even with all the consolidation in the industry, are still originating a majority of all the mortgages in the country.
Further, the guys in these small to mid-sized shops get no relief when they opt to buy leads. As clearly spelled out in the Dynasty case, buying “scrubbed” leads does not mean that you are complying with the DNC laws – at best it’s the tip of the iceberg. Since even if you buy leads from a source that is actually scrubbing their leads to insure that they are filtering out all those individuals who’ve requested never to be called at home – an unlikely situation given that the lead aggregator business is largely unregulated and many turn a blind eye as to where much of the leads they are selling you are coming from – you the buyer of the leads need to independently comply with the DNC laws in order to not be liable for an extraordinary amount of damages (Dynasty Mortgage was found liable for $770,000 for making only 70 calls to people who had put their numbers on the DNC list).
So, in order to comply with the DNC laws originators need to highly proactive. First they must get a Subscription Account Number or SAN from the government. If you make outbound calls without a having a SAN, the government will assume that you are breaking the law even if you only call people who are not on the DNC list. Next, you must have a system in place that checks to make sure that the number you are about to call has not been added to the DNC list in the past month. And then you have to be able to show that in addition to having a SAN and a system in place that checks to insure that the folks you are calling are not on the DNC list, that you also have – in writing – a DNC compliance policy and that you’ve trained your employees on how to comply with these DNC laws.[3] Now if you unintentionally call someone that you shouldn’t have, you can back up your claim of “error” by documented “evidence” of your compliance system. At that point, you’ll in all likelihood fall within the government’s regulatory safe harbor and be in the clear.[4]
Sound like a time consuming pain in the you know where that will keep you tied up doing paperwork when you’d rather be out there selling and closing loans? You’re right, it is. And on top of being time consuming it’s a bit complicated — a nice recipe for disaster. Therefore, the best thing you can do for your bottom line is hire a company to help you get your business in compliance. No, you don’t need to drop the kind of money that the big guys are spending but yes, it will cost you to be compliant. But what’s it worth to you to not have to worry if the next time you call someone you really will be treated by the government like an unwanted telemarketer? Just go ask the guys at Dynasty Mortgage.
Barry Kaye, Esq. : Barry Kaye is based in Beverly Hills, California. He is licensed to practice law in California and New York and specializes in telecom, Internet, banking and real estate law. barry.kaye@kfinancialgroup.com
