Class Actions

Is Your Loyalty Program Putting Your Restaurant at Risk for TCPA Liability?

TCPA litigation can cost companies, both big and small, millions of dollars.

Loyalty programs are a great way for restaurants to keep in contact with their existing customers and incentivize future purchases. In the modern age, the easiest and cheapest way for a restaurant to maintain this customer contact is through text messaging. Yet, text messaging or “text marketing” subjects your restaurant to potential litigation under the Telephone Consumer Protection Act (TCPA). TCPA litigation can cost companies, both big and small, millions of dollars in liability because the TCPA authorizes fines of $500 for every text message sent.

What Does TCPA Prohibit?

The TCPA prohibits the use of automatic telephone dialing systems (ATDS) or “auto-dialer” to contact consumers on their mobile phones, without the consumers’ express consent – this includes text messages. Text marketers in all industries should be very aware that they can be sued under the TCPA merely for marketing-based texts, even if the recipients of their marketing messages are members of a loyalty program. For example, Bloomingdales was sued in 2015 for texting members of its loyalty program the following message: “Reply Y now to confirm you want texts!” This singular text which was sent to numerous customers without their express consent resulted in a $1.4 million settlement. 

Even when a customer has joined your restaurant’s loyalty program, you must first get express written consent to send a text message before sending the first text. Square, Inc., the company responsible for the Square reader, was recently sued for sending text messages to consumers who did not opt into the Square loyalty program and only provided their number to get a receipt via text message.  The lawsuit claims that Square also violated the TCPA in instances where the consumer did opt in but was not made aware that they would receive loyalty text messages from business other than the business they visited.

The lesson from the Square lawsuit and others is to always get express written consent before sending any text message, even if your customer has agreed to be a member of your loyalty program. Simply because a customer has enrolled in a loyalty program does not mean that customer has consented to receiving text messages or consented to receiving all types of text messages from your restaurant. 

For example, Kohl’s was sued for violation of the TCPA even when the plaintiff consented to receiving text messages—the issue was the scope of her consent.  In that case, after reading an ad to receive a 15 percent off coupon and texting “SAVE” to a five-digit code, the plaintiff received three text messages. The texts (1) welcomed the user to Kohl’s Mobile Sales Alerts; (2) provided the 15 percent off coupon and (3) almost a month later, provided another coupon. The plaintiff claimed the third text message was outside the scope of the limited consent she provided when she texted a request for a single coupon. 

What Should Restaurants Do to Avoid Liability When Texting Customers?

If you would like to communicate with your customers via text messagespell it out!  Make sure the customer, when providing their telephone number, understands that they are consenting to receiving the type and number of text messages that you would like to send. It is important to remember that simply because a customer provides his or her phone number, that does not mean he or she has consented to receiving text messages. And, if your company owns or manages multiple restaurants, make sure the customer has consented to receiving text messages from all establishments. Otherwise, as the Square lawsuit indicates, there may be an argument that the customer only consented to receiving texts regarding a specific restaurant, not all restaurants.

After getting consent, send a confirmation text to the recipient giving them the option to opt-out from receiving future text messages. The confirmation text should contain your business name, a description of the types of message the recipient will receive (offers, coupons, etc.), that text messaging rates may apply, and how to opt-out from receiving texts in the future (example: “Text STOP to cancel.”)

Seek legal advice. If your company is using text messaging to market, consult an attorney before you send the first text. TCPA regulatory mandates are constantly changing and are very technical. To prevent financial exposure to your restaurant, it is imperative for company to work with legal counsel prior to engaging in any text message marketing campaign.

If your restaurant hires an outside firm to conduct your advertising and marketing, make sure that company is complying with the TCPA and other regulations. Your restaurant can be held liable for violations committed by a telemarketing firm working on your company’s behalf. The responsibility for ensuring and maintaining compliance is with the company that commissions the third party. Your business cannot contract away compliance responsibilities.

This article was published by QSR on April 22, 2020 and is republished here with permission.

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