Consumer Advocacy? Or Extortion?

Ryan Swanberg And The “Do Not Call” Rules

By Gregory F. Taylor, associate general counsel, American Bankers Association

His targets call it a scam. Others call it extortion, a perversion of the law. For one individual, however, it is a way of making a living.

Ryan A. Swanberg is a self-styled “consumer rights advocate” located in Apple Valley, Minn. He has been using the threat of litigation regarding alleged violations of the Federal Communication Commission’s “Do Not Call” regulations and the Telephone Consumer Protection Act to prompt financial “settlements” from his targets. The amounts demanded by Swanberg range between $1,500 and $5,000.

Swanberg’s latest targets: banks.

And who are the “consumers” that Swanberg represents?

Just himself, actually.

A professional plaintiff
Swanberg claims to make his entire living from being a professional plaintiff, with a specialty in threatening businesses with suit over alleged violations of the rules governing telemarketing and debt collection practices. For him, calls to his home from telemarketers are not an annoyance; they are an opportunity for litigation. Indeed, receiving phone calls from telemarketers is so important to his livelihood that Swanberg claims to have eight separate phone lines in his apartment.

Not content to sit back and wait for telemarketers to contact him, Swanberg helps the process along by proactively taking steps to ensure that his phone number appears on as many marketing lists as possible. He enters contests, signs up for promotions, does anything to get his number into the hands of telemarketers. And when that first call from a telemarketer eventually comes, he switches direction and asks to be placed on the firm’s “Do Not Call” list.

If the company makes the mistake of calling him a second time, he threatens litigation.

A shift in strategy
Swanberg’s latest strategy, however, does not rely upon something as unpredictable as receiving calls from a telemarketer. Beginning sometime this spring, Swanberg began e-mailing and faxing banks with requests that his phone number be placed on the institution’s internal “Do Not Call” database. Included in this request is a demand that the bank send him written verification that the number has been placed on the “Do Not Call” list, along with a copy of the institution’s “Do Not Call” policy, all to be provided to him via U.S. Mail within five days.

If the institution targeted by Swanberg does not comply with his requests within the five-day period, he sends a letter threatening to file suit in Minnesota if a settlement is not immediately forthcoming. His letter— on letterhead that looks like it came from a law firm, though Swanberg is not an attorney— is usually accompanied by a copy of the proposed complaint, along with other materials. The thrust of the letter and the complaint is an allegation that the targeted institution has violated FCC regulations by failing to provide a copy of its “Do Not Call” policy and the requested verification “on demand.”

Based upon information provided to the ABA via its members, Swanberg is not necessarily targeting institutions that have any telemarketing operations. Indeed, some of the institutions that he has contacted do not engage in telemarketing or phone sales at all. Most do not conduct any business in the state of Minnesota, nor have they had any prior contact with Swanberg.

Relying on pragmatism
Swanberg’s strategy is clearly based upon the assumption that his targets are more likely to give in to his settlement demands, rather than spend the money to litigate a relatively small claim, especially if his target is located outside of Minnesota. Defending against litigation, even if the claim is baseless, is expensive and time-consuming, and some institutions have settled with Mr. Swanberg rather than spend the money to vindicate their activities.

Of course, if an institution does not engage in telemarketing or telephone solicitations, it is not required to maintain a “Do Not Call” policy. If an institution does engage in telemarketing or phone selling — even on a very small or informal basis — it is (among other things) required to maintain an internal “Do Not Call” policy and produce it “on demand.” While the FCC has not formally opined on what constitutes “on demand,” orders issued by the Commission suggest that there is no bright line test regarding whether an institution has complied with the rule. Rather, the commission’s orders suggest that the answer to the question of how quickly a policy must be produced will depend upon the facts and circumstances of each particular case. There is no doubt, however, that a punctual response is required, and the institution’s policy should be produced with as little delay as possible.

Responses by banks receiving Swanberg’s threats have varied. For some, the decision whether to risk litigation by turning down Swanberg’s settlement demand comes down to a simple cost-benefit analysis. Several institutions contacted by Swanberg have concluded that the likely price of successfully litigating the issue outstrips the cost of a settlement, and have settled.

Oklahoma bank fights “blackmail”
For others, however, giving in to Swanberg’s demands is not an option. SpiritBank, a state-chartered bank located in Bristow, Okla., filed two lawsuits against Swanberg in mid-June.

The first suit, filed in U.S. District Court for the Northern District of Oklahoma, seeks a ruling from the court that SpiritBank does not engage in the business of “telephone solicitation” and does not have an obligation to maintain a “Do Not Call” policy. The second suit, lodged by SpiritBank with the Oklahoma District Court of Creek County, alleges that Swanberg’s actions “amount to nothing more thanÉblackmail” and violate Oklahoma’s criminal statutes outlawing extortion as well as the state’s Deceptive Trade Practices Act. SpiritBank suit asks the court for a monetary award against Swanberg “in excess of $10,000 but not to exceed $74,000” including attorney fees and costs.

SpiritBank’s legal counsel, Ken Wagner of the firm of Latham, Stall, Wagner, Steele & Lehman, PC, Tulsa, Okla., firmly believes that, after having investigated Swanberg’s activities and his claims against SpiritBank, the only option was to fight.

“After the investigation,” Wagner explained, “it was our opinion that Mr. Swanberg was not acting as an advocate for anyone other than himself, and that his activities and threats were nothing more than a commercial enterprise. My client, SpiritBank, felt an obligation to take action rather than allow Mr. Swanberg to do what, in our opinion, amounted to commercial extortion."

The Federal Communications Commission is aware of Swanberg’s aggressive use of the agency’s rules and his interpretation of the requirement that a “Do Not Call” policy must be received within five days of a consumer’s request to threaten banks and other businesses. The FCC is considering issuing “clarifications” to the existing rules to address the concerns raised by Swanberg’s activities, but to date no action has been taken.

What can you do? Pending action by the courts or FCC, what is your bank’s best defense in responding to Swanberg and others who may attempt to imitate his approach?

The answer is relatively simple: Be prepared to react to consumer requests.

Your institution should make the threshold determination of whether it is engaged in telemarketing or telephone solicitations as those terms are defined by the FCC: even small or informal sales calls may qualify. If you do telemarket or engage in telephone solicitation, your institution must develop and implement a telemarketing/”Do Not Call” policy. Each individual policy must be tailored to meet the specific practices of your institution. A thorough policy should cover:

• Training of personnel (and any entity assisting in its compliance) in procedures established pursuant to the national do-not-call rules;
• Recording and honoring of requests not to be contacted;
• Maintaining and updating “do not call” lists;
• Rules regarding the non-disclosure of do-not-call requests; and
• Rules regarding the identification of sellers and telemarketers.

And, of course, once that policy is in place, it must be promptly provided to any consumer requesting it. Placing your “Do Not Call” policy on your institution’s website is a good idea.

The ultimate solution is for Congress or the FCC to clarify the law to prevent Swanberg and others from turning a consumer protection statute into a money-spinner for professional litigants, but that takes time. In the short term, your best defense is advance preparation — identifying your obligations under the “Do Not Call” rules and implementing an appropriate policy where one is needed.

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