Dealership Compliance in the Age of AI

Okay, well, thank you, everyone. Welcome to today's session. We have an excellent and timely topic lined up for you all. As you can see, there are three of us on the call here today, and neither Scott nor I are the experts. I won't be doing a ton of talking here, but I will be on and will field the questions that come in and, and make sure that everything is running smoothly. So with all of that said, thank you all so much for joining. This will be posted on the the volley YouTube and I'm sure shared on other socials once we're done. And then feel free to jump in with any questions down in the Q and A here on the zoom that come up for you. And with that said, I'm going to turn it over to Scott to introduce our guest and then we can dive right in.

Yeah.

Hello, everyone. Excited to be here. Want to introduce Josh Stevens, a partner at McMurray and Schuster out of Ohio. How you doing, Josh?

I'm doing well, doing well. How are you?

Good. So Josh is our compliance lawyer for Valley. We have our regular attorney still, my one from Iowa that we've had for a while. But as we volley grew and such and had questions in this, we knew we had to get an expert. Most of our customers have questions for us or they don't have an attorney like this as well. We're on today to talk about compliance with AI in the AI age, this is not legal advice. At the end, we will have some Q and A and if it's generic enough, Josh will be able to answer it. Jake has a QR code. If you guys have questions for him, they are truly the experts. Josh, how did we find you? Why did we hire you?

Yes, well, you hired me because as most businesses have realized over the past about 10, 12 years, the telephone Consumer Protection act is a major source of risk and potential liability for anyone engaged in telemarketing or other telephonic outreach, whether that's texting or calling. And our firm focuses exclusively in the areas of tcpa, telemarketing, privacy and consumer protection, compliance and defense. So that's our, that's our niche and that's how we, we got together.

These guys are the experts. I literally sought these guys out because it looked like they had a written a huge amount of the case law in this. They're great. Jake, why don't you flash up there, Josh, just to our QR code. We'll do it two or three times if you guys have questions. Like I said, most of our customers or industry allied People, their normal attorney. Normal attorney tries to field these things. This is truly a very specific, very specific field of study. Hey, Josh, one of the things you guys did is you co sponsored that famous Facebook case in 2021. Your lawsuit or your law firm, Right?

Yeah. So we represented the Professional association for Customer Engagement, which was a. Unfortunately, it kind of fell apart during the pandemic. But it was a trade organization that represented companies engaged in telephonic solicitation. And so on their behalf, we co third the amicus brief that was cited favorably by the court in the Facebook decision, which narrowed the scope of the definition of an automatic telephone dialing system. And that has really reduced risk for companies in this space and provided some much needed clarity as to what types of technology actually trigger the law.

All right, so Josh knows his stuff. Hopefully you guys can get that. And why are we here today?

Well.

Frankly, we have just had a ton of our customers and allied people in the industry asking us about this, asking us how to comply, how, you know, the TCPA is governed for outbound AI. We have, we have. There are a lot of companies selling it now, and there's just quite a few questions on that. So we're here today because you guys asked for it. And if you guys have other topics in the future that you want to talk about, let us know and we'll bring on people in the industry who can. Who can answer these things. The other thing I want to say is Volley Stance on AI. This train is rolling down the tracks and we're hopping on the train. So we. We have AI and Pulse. We've had AI for years in our product for how we. How we decide who to get next. We believe the technology will lead to productivity gains in the dealership. It won't eliminate humans, but. But it will help the humans that are there be much more productive. And, you know, it's very, very new to the space in some way, only. Only a few years old. And, you know, Volley, we want to be the layer in between the robots and the humans. So to make sure there's good handoffs, we have. We have certified integration standards that most of the AI companies are currently programming against to make sure there is a good handoff. And Volley's vision is to become the platform for dealer communication. And this is part of our strategy to work on our own AI products, but also work with the companies that you guys work with day to day. So that's our stance. We're not negative on it. It's coming, and we're hopping on the train. So, Josh, why don't we start with just the basics of TCPA compliance?

Sure. Yeah. So the Telephone Consumer Protection act is a federal law originally passed in 1992 that regulates the use of telephones in commerce. And it particularly regulates three facets of that. There are two relating to technology and one related to do not call. So the two related to technology are the use of an automatic telephone dialing system. Sometimes you might hear this referred to as an autodial or you'll hear me refer to it as an ATDS by its acronym. And that is a system that uses a random or sequential number generator to store produced telephone numbers. Prior to the Facebook case that was very widely that had grown. What fell within the parameters of that had really grown over time. Facebook really said if you're calling from a pre programmed list, it's not likely going to be an ATDS. And subsequent courts have 99% followed that. So that's the first piece. The second piece is the use of artificial or prerecorded voices in telemarketing or telephone solicitation. And that's what I think we're really going to focus on today is that component of it. The third is do not call. You know, everybody watching today's heard of do not call, right? There's the federal do not call registry. People can ask businesses to put them on their do not call us. So complying with that. Now, there are other regulations within tcpa, but those are the big three. And the reason that this matters from a business standpoint is the TCPA is a break it, you buy it statute. If you violate one of those requirements, intentional or not, doesn't matter if you violate it, you can be on the hook for up to $1,500 per call or text per violation. And we've all seen massive lawsuits filed under the tcpa because calls and texts, they add up quickly if you've got the same error that you're having for days or weeks at a time. And so making sure you comply with that is really critical.

So just a couple other clarifications on the tcpa. There are all sorts of rules for calling windows that you can call, establish business relationships which vary between states. But there's also federal guidelines as well. What about sms? It's governed exactly like phone calls, right?

Yeah. So what's really interesting about SMS is the FCC has said that text messages are treated the same as calls phone for purposes of the tcpa. However, the Supreme Court, in a couple recent cases that you may have seen, McKesson and Loper bright have said that courts don't have to defer to agency interpretations anymore. They can view them as persuasive, but they don't have to follow them like they used to. And in response to that, in July, in Jones v. Blackstone, a case out of Illinois, a court actually held that regardless of what the FCC says, text messages are not covered by the TCPA because they didn't exist at the time the TCPA was initiated. The first drafting of it was in 1991. It passed. It went into effect in 92. However, that same month, a different court held the complete opposite and said text messages are covered. So my recommendation to clients is until this get sorted out, it's very important that you still treat text messages as if they're calls because we don't know exactly where the law is going to land on that now that courts don't have to follow the FCC guidance.

So there is no ATDS standard for sms, but you can. But they are governed like calls. And you can. If you're Texting someone past 18 months who's on the federal do not contact list, that is a TCPA violation. And dealers are very nervous about SMS's. There's been a handful of famous cases here.

Yeah. And there are, there are different approaches with DNC compliance. If you have consent, written consent that meets certain standards, you don't have to worry about ebr. And that consent stays valid until revoked except under state law in Florida, where it's only 18 months. And we'll talk about states a little bit more as we go along because not only do we have the federal law, but every state has its own laws as well. And it's important to remember that with SMS you have a really solid paper trail. So if you have a violation, it's real easy for a defendant or a plaintiff rather to produce those records showing I got 15 texts and I owe and I'm owed 1500 bucks for each of them.

Yeah. So the documentation is better. Just a few more things before we're going to move on to AI compliance and such. The. When when you sign up for a software program, you sign a EULA user agreement and no one reads it right? Volley. We've always looked at this like we were going to try to make it easy for our customers to comply with the TCPA and not get themselves into trouble. All of you dealers need to realize that all of your vendors in their user agreements, you guys are taking on liability or you'd spend about 50 times more for every, every piece of software you bought. Is that, is that right, Josh?

I mean I can't tell you exactly 50 times more, but I will tell you out in the market, software as a service is priced based on the compliance risk resting with the client. And when we see vendors who are willing to take on some of that compliance risk, it's typically very narrow, it's very specific and it typically results in an increased price. And they don't take on everything. Right? They take on one specific facet. So yeah, if you're using different systems out there, probably you're bearing the compliance risk. If you go and you read those.

Eulas, it's not hard to comply. You just need to know the rules. Most of the vendors in auto are very good. It's just important that you guys, you dealers around know how to comply or your OEM folks. I see there's a few on that. You know how to best advise your dealers because it is, it's not hard to comply, but you have to do it. Now let's talk about pre recorded loss and, and I'm going to get to AI next but for everyone on, on the call, who's my agent or and such and remembers ringless voicemail, dealers used it all the time before they got sued and, and, and it just disappeared. So talk about ringless voicemail, what happened 15 or so years ago and why it's a walking class action lawsuit.

Yeah, ringless voicemail really took off a while back like you mentioned. And the argument that was made at the time was that you didn't have to comply with the TCPA because you weren't actually calling the person, you were just dropping a voicemail into their voicemail box through a back channel connection. Essentially what happened though is there was blowback. Companies used this, people saw these pre recorded messages popping up in their phones. They got irritated and ultimately in 2018 in a case, Saunders v. Dick O', Neill, a court held that ringless voicemail was in fact the use of an artificial or prerecorded voice under the TCPA and was subject to all the rules. And after that case we saw the use of ringless voicemail plummet. It just wasn't worth the risk anymore for businesses.

I, I had someone ask me this yesterday in, in before we're, we're on to AI after this question here. But I had someone ask me this, talk about class action lawsuits, you know, how a class is made, how the lawyers get paid, some of the damages that can, can happen. Just people. There's a lot of, of, of gray areas, or at least people inventing their answers. So I had someone in response to this asked me about a class action lawsuit thing and I told him I wasn't a lawyer, but I'll ask you tomorrow.

Yeah. One of the biggest misconceptions with the class action lawsuit is that the plaintiff's attorney has to go out and actually find all the people who were injured and bring them into the class. And that's not true. A class action lawsuit can be based on one person who was injured. And then they define a class of people around the injury that that one person experienced. So let's take as a hypothetical a consumer who was on the federal do not call registry and was called in violation of that registry by a dealer. What the plaintiff's attorney will do is they will say the class is every person in the last four years, because the statute of limitations is four years, who is on the national do not call registry and who received a call in violation of the TCPA by that dealer over that four years. And how many people, how many calls that ends up being gets determined during the course of discovery. But that can create now, without having to go out and find all these people, a very large pool of damages. If, say you had a thousand people that you called five times each at $1,500 a pop, $7.5 million. Thank you. That's math I can't do in my head. So you can see how this, how this builds up real quick. And that's the risk. That's what keeps people up at night. Another thing I'll point out is insurance companies got wise to TCPA liability risk. And for most businesses, if you go and you read your insurance policies, they don't cover you for TCPA in I would say 95% of cases with our clients who get sued, they have no insurance coverage. And that comes as a shock to many of them. There are some companies out there that will sell you TCPA insurance specifically, but it's very expensive and it's because of this issue.

So outbound AI is considered akin to ringless voicemail, correct?

Correct. The FCC last year issued an advisory opinion, but this has been adopted by courts that artificial intelligence in outbound AI is the use of an artificial or prerecorded voice. And if you sit and you think about it, that kind of makes sense, right? That it's just on the face of it, that makes sense that it's the use of artificial or pre recorded voice.

And this was, this was new or they determined that this was the statute or that that's how they were going to apply it in what, February of last year, is that?

Yeah, that was about the time.

Yep.

Okay, so the pre recorded laws are different than the normal TCPA or just the standards are different?

Yeah. So if you're going to use artificial pre recorded voice in outbound telemarketing and we're going to talk about cell phones because that's what everybody, that's what everybody calls these days or you know, they call people cell phones. You need prior express written consent as defined under the tcpa. And that is a very specific consent that authorizes the business to make marketing calls to a specific number using that type of technology. And there are a couple requirements of things that have to be said in that consent. And if you collect it electronically, it has to be collected in compliance with the E Sign act, that consent is required. EBR doesn't get you there. You got to have the consent.

So even if they were in last month and you're. And you're going to have the robot call them for a tire special, they have to have the consent to be legal.

Correct.

Can, what is that? Is it a separate AI consent? Can it be lumped with other, other consent they sign when, when filling out a lead or, or that type of thing.

It should be a standalone consent, but it can be lumped with other marketing calls. So you don't need one that's specifically for artificial prerecorded voices. What we'll usually see is clients get consent for marketing calls, including the use of an auto dialer and artificial or pre recorded voices. And they'll kind of lump those together, often with text messages as well, and kind of get that all, get that all in one.

Is it legal to put that as part of. When someone's submitting a lead on a website?

Yeah, you can include it as part of lead submission. You cannot require it for purchase and you can't bury it in terms and conditions. It needs to be up front to the consumer. We prefer, if you're going to use an online form, something like a checkbox, something that indicates the consumer is affirmatively agreeing to that consent. And there are now several cases saying that consent that's placed, say below a submit button, small font, gray font, hard to see. Things like that is not valid. It needs to be presented to the consumer in a clear and conspicuous way.

Separate form. When they're checking out for future communications with like an oil change. Okay.

Yeah.

Then they've got to make sure and store those and update their data.

Right, Store them, update the data, maintain the record of consent. And obviously if they're working with council, that council can advise them on the best way to present the consent and store the records.

So one of the things that is really interesting about this is first of all, no one has collected that consent at the moment. And I'm sure people will, the dealerships will change their opt ins for leads and such. Dealerships have to manage do not contact requests from their customers and they do across all their vendors. But it's much worse with, with the robot. Right. With outbound AI.

Or, or.

The rules are very specific, it's easy to opt out big, you know, et cetera.

Yeah.

Consent can be revoked by any reasonable means. The, the FCC a year or two ago in fact issued additional guidance that made it clear consumer, you can't tie them down to only being able to revoke by a particular method any reasonable means. They can revoke that consent when they make a do not call request that revokes any prior consent.

So when someone is even with consent, they're making an outbound AI call. Talk about how that call needs to be started.

Yeah. The TCP requires that all telemarketing calls begin with a standard disclosure that identifies who's calling on whose behalf they're calling, the marketing purpose of the call, and a brief description of the goods or services that are being offered. For example, if I were an employee of a dealership calling someone about a tire special, I might say, hi, this is Josh on behalf of Smith dealership calling with a new tire special I'd like to talk to you about. That sets up the start of the call when you use artificial or prerecorded voice. The rules say after you make that disclosure, you then have to disclose instructions for a key press or voice activated do not call system that's available for the duration of the call. And so let's take the same scenario, except now I'm a robot, I'm an AI, I don't have a name, so I won't use that when I call. But I might say, hi, I'm calling on behalf of Smith dealership and about an exciting new tire special. At any point during this call, if you'd like to be added to our do not call list, just press 1 and then get into the spiel.

And then voicemails also take compliance.

Right, Voicemails take compliance too. If the message can be can be left on a voicemail as part of that instruction, it has to include a toll free number that the consumer can call back to be connected directly to that key presser voice activated opt out mechanism. And it's for that reason that many of our clients, once they learn of that requirement, maybe backtrack a bit on their plan to use AI in outbound telephonic marketing because they don't want to drive up do not call requests and they have a fear that that will happen.

Yeah, I mean in Valley we won't re enroll someone who I do not contact. We pull it from the dms, the robots scarier because they can, they can opt out an extremely large portion of the database and the obligation is they've got to give it to the rest of the vendors. Is that right?

Yeah, once, once the consumer revokes that consent that can sent is revoked for that dealer. So if the dealer is using multiple systems, multiple vendors, that's going to opt out across them all.

And so all of your clients have abandoned outbound AI calls for the most.

Part because of that risk. They don't want to run that risk of driving up their do not call requests.

We actually have had heard of a dealer group that, that had that big issue. And you know the documentation under these is very good. Right. When they're establishing a class and it's scary. How do, how do these things vary by state?

Every state has its own telemarketing regulation and in many states there are what are called ad laws which stand for automatic dialing and announcing devices. Essentially when you have an auto dialer of some type that is paired with a pre recorded message communication. While we don't have clear guidance from the states yet or across all states yet, that AI will fall within that, it's very likely that they will for the exact same reasons that they have at the federal level. Those ADAD laws vary in their requirements, but common requirements are consent like you would see at the federal level. Some have disclosure requirements, some even have registration requirements. But there are also some oddball ones, like I was looking at one out of New Mexico the other day that requires that the system disconnect the line within two seconds of the consumer hanging up. And so making sure that your technology is being able to recognize that the consumer hung up and then be able to disconnect the line. That's kind of a weird random rule that's in this one state and, and maybe in a couple others. But that's, that's the kind of stuff you see at the state level with variation across the country.

Geez, I sure hope that we get some type of federal guidance that we have one thing to comply with. With it for these AI laws pretty much all the way around. I have.

People have been wanting that since the 90s.

Scott, I have four or five other questions here, but I've kind of, I've went through the outbound AI list of questions I had. Was there anything I didn't ask there?

Well, there are just a couple other things I'll mention. One is under the TCPA in any telemarketing communication, AI or not, the business does need to include a phone number that the consumer can call back during normal business hours. And we usually see clients fit that in at the end of the call. So that's one thing. Another thing is call recording disclosures. Remember, if you are recording a call, and with these AI calls, they're almost always recorded, you want to include a call recording disclosure at the start of the call to deal with states where you need to get consumers consent to record a call and then with regard to state law. And you know, Scott, we can talk about this in more detail if you want. There are a whole host of other telemarketing regulations at the state level that are not specific to AI but can impact any business that's doing telemarketing.

If we have time, we'll, we'll definitely get to it because I know people want to know. Jake, why don't you, why don't you get through a few of the questions now, show the QR code again in case people have questions. These guys truly are the experts. And.

So, yeah, for sure. And we have had a few questions come in. We'll definitely get to a few now and then we'll try to get to as many as we can before we wrap up here. I actually was wondering this too, when you mentioned that if a request comes in for a DNC and they need to share it across their multiple tools, someone asked if you have multiple rooftops, multiple stores, and a request to DNC comes in, in addition to sharing it across all of your various tools, do you need to share that and remove the customer from all rooftops that you own or is it isolated to that one business?

It depends on who. Which I know is the normal lawyer joke of an answer is it depends, right? But it depends on the outreach that was done and the consumer's expectation. If the consumer is being contacted by, let's say, Smith Honda, and there's also a Smith Hyundai and a Smith Kia in the consumer while they're on a call with Smith Honda says, I don't want to hear from you anymore. And their expectation is that they're DNC for Smith Honda, then you wouldn't necessarily need to carry that over to Smith Hyundai or Smith Kia. But if you're calling on behalf of Smith Auto Group and the consumer believes that now they're making that DNC request to the group as a whole, then that would need to be spread across those rooftops. So like I said, it depends kind of in the way that engagement happens with the consumer.

So a different way to state that would be really, who does the customer think is calling? Do they think that the store is calling or do they think that the auto group is calling?

Right.

So I think it's. I mean, our people are calling from the stores, but definitely a best practice. Or if you're one of the vendors calling for them, you should be calling at the store level.

Okay. What is the difference between telemarketing and just communication with a customer based on them doing business or attempting to do business with us?

Yeah, telemarketing or telephone solicitation under these statutes, it has somewhat varying definitions, but the crux of it is you're advertising the commercial availability of a good or service. You're trying to entice someone to purchase something. And so when you're calling about, oh, we've got this new tire special that we want to tell you about, that's telemarketing, you are trying to get that person to make a purchase of that tire, you know, or that oil change or whatever it is that you're doing. And in fact, there's a case involving Best Buy from a couple years ago that even says communications about how to use a rewards program could be telemarketing. Because the ultimate aim of that communication is to get the consumer to purchase something, to come into the store and purchase something with those reward points. And consumers never buy things for just the reward points. They always end up spending more than what the reward points cover. And so that makes it a telemarketing transaction. I like to think about it as if I'm calling to let someone know their vehicle's ready for pickup. You know, they've had service done, now it's ready for pickup, or they've scheduled an appointment. I'm calling to remind them about that service appointment coming up. Or they've got a contract, you know, we're in the midst of a sale, I need financial information to finish their contract or something like that. Those are probably not telemarketing communications. You're in the midst of an already agreed transaction. You're trying to just get it completed. Unless you pair them with something extra. And that's where we see companies get in trouble a lot is when they pair it with something extra.

If a lead comes in from an in person customer visit, should consent be sought for any follow up calls to the customer?

If you're going to, if you're going to use artificial or pre recorded voice or an ATDS or you want to make sure you don't have to scrub them out from a DNC perspective or worry about the established business relationship exemption, then yes, you should obtain prior express written consent. You could have a form, could be on an electronic pad at checkout or something. Right. They can, they can fill out and sign. But yeah, I would, I would encourage obtaining consent.

Just to jump in real quick because I was looking at the question. We've, we've said this in the, in the call today. Just to, just to clarify again, Josh, the robots and pre recorded laws, we're talking about voice, not sms. The robots can, can do sms, no problem as long as they don't violate TCPA or pass the EBR, etc.

So as long as they follow the other TCPA requirements around do not call and disclosures and ATDs. Right. The other facets of TCPA, you can use AI in connection with texting without having to follow the specific rules for artificial or pre recorded voice. Courts have now said those rules apply only to voice, not to text.

So the robots just, they just can't be texting a bunch of people who haven't been in for 30 months who are on the donut contact list.

Yeah, you're going to get into some trouble there.

Go ahead, Jacob.

Yep.

Let's get to just a couple more quick and then we'll, we'll get back. I think, I think we're, we're probably going to have more than we can get to that we can follow up or stay on longer if we can. But if a customer calls you and you text them back with is an inbound call considered consent?

No, an inbound call is not considered consent. An inbound call could be an inquiry EBR for purposes of do not call compliance at the, at the federal level and in states that recognize an inquiry ebr, but it's not going to count as consent. So that's not going to be that prior express written consent that you might want for certain circumstances.

Okay, and then let's get to two more right now. How does all this compliance and the DNC impact things like CSI follow up? Not a sales or marketing call, but a genuine looking for feedback on how.

Your visit was we have case law that a customer service customer satisfaction survey is not telemarketing so long as it isn't paired with, with marketing content.

And then lastly, for right now.

How.

Does they say do our prerecorded voicemails? I assume they're talking about how it works in Volley. Scott, can you speak to volume prerecorded voicemails for a moment? And then Josh, how does that affect compliance?

So Josh and I have had maybe 15 conversations about this. Um, the customers can record a voicemail message, but they manually place it on that. And in the past, Josh has, has, has said that that doesn't violate. But you want to, you want to.

Expand on that, Josh, from an ATDS perspective, that's fine from an art of. Right, because it's not using an atds, but there is risk that that is a prerecorded voice. And I would, so I would encourage businesses to still use that when they have consent because of that risk.

Okay. I tell you, we've been looking at this. The voice, the human voice ones are, I mean, they convert better anyway. People need more callbacks even though these are the case. So inbound AI compliance. Why don't you talk about that?

Yeah, inbound's easy.

Really.

There's, there's not much that governs that. The TCPA doesn't really regulate inbound. The main concerns we have with an inbound environment are a call recording disclosure. Again, if that call is being recorded, we want to make sure we're protected under the anti wiretapping laws. And both in an inbound and an outbound context, if the consumer would not know that they're speaking with an AI system as opposed to speaking with a human, it is advisable to make them aware of that fact. Utah passed a law requiring businesses that are regulated by the Department of Commerce to affirmatively disclose to consumers when they're engaging with an AI. When it wouldn't be obvious. California has something called the Bots act, which really regulates chatbots online. But it's the same principle and we're seeing regulators just under general prohibitions against unfair deceptive acts and practices starting now. To say if you're deceiving a consumer into believing that they're talking to a human, when really they're talking to an AI, that could be a violation of just those general prohibitions against deceptive practices.

I, I've gotten this question a ton by, by customers in Texas. Talk about registering TCPA at the state level. Texas just has a new law, right?

Yeah, yeah, I Don't know why this blew up, but it did. Texas Senate Bill 140 many of you have probably seen this law. To give you a little context, about 33 states, plus or minus one or two, depending on how you count them, have some sort of registration or licensing requirement for telemarketing. There are exemptions that vary from state to state. Common ones include consent, ebr, having a retail location and operating under the same name for a long time. Regardless, there are a bunch of states that have this. Texas is one of those states. Senate Bill 140 expanded Texas's registration requirement to cover text messages. And this caught people really I think by surprise and it created a lot of risk in Texas because Texas is one of the few states where calling someone when you should have been licensed and you're not licensed is a violation that a consumer can sue over. It's not just something that the state can enforce. And so there's really increased risk. In response, a lawsuit was filed by an organization called E Commerce Marketers association saying that if the business has consent for the text messages. Well, let me rephrase this. Essentially saying the law was unconstitutional. That was their argument and it was based around their members having consent to send texts. What ultimately happened is the state actually sort of agreed with them. They settled the case with the state saying that due to, and I will spare you the details because they're complicated legal minutia, but that essentially if all you do is is consent based text messaging, you would be exempt from having to register under the amended Texas law. However, risk still exists because while the state took that position, a court does not have to defer to the position that the state AG took. A court could take a different position. We haven't seen a case go all the way through yet for a court to validate or invalidate the state's position. Obviously a court is probably going to be highly deferential to the state's view, but there's still a risk. And so that means if you're. If all you do is consent based text message marketing, you could be exempt. If you do non consent based or you are doing telemarketing with calls voice or artificial prerecorded voice, you may still need to register if you don't fit within a different exemption.

Yeah, so I read it. It was really exciting reading. Generally the calls that the dealers are making is exempt though, right? With established business relationship or leads submitted.

Yeah. And every dealership is going to have to compare their exact use case to the list of exemptions in The Texas statute and in other state statutes if they're working in other states and do that registration analysis.

So like in most of the calls that you Texas dealers are making are due for service, are you submitted a lead? The calls that should be really scary are the ones of I bought this list of non customers and I'm going to call them and you could get in trouble.

Yeah. Or ones that come in off of multi party leads. Oh right. Somebody's saying oh I'm interested in X type of vehicle. And then it gets shot out to five dealers that those also have some risk with them as well.

So auto trader Cargurus, those type of leads.

It's really important to understand the way their leads work and your contractual rights with them because you can get into some hot water.

I thought that.

That'S brand new.

Right.

Last year that some of the those multi site opt ins that was, that was really defined.

There was. So last year the FCC passed what was called the one to one consent rule which said that getting TCPA consent had to be on a one to one basis, one consent per caller, essentially invalidating the ability to use multi party lead forms. After significant litigation earlier this year, that rule was thrown out by the courts. But we are still seeing plaintiffs argue that by using those multi party forms the consumer doesn't actually know who is going to call them and therefore it's invalid. Most of those cases have been settling because people don't want to, they don't want to risk taking that all the way in our experience. But that is a risk point that needs to be factored in if using lead sources like that.

Okay, my last question then. Jacob, you can open it up and we'll wrap this up on time. Colorado and California past new AI LLM laws, right?

Yep, yep.

Or and they defined things like new classes of people that you know, if you believe you're a cat and the AI hurts your feelings, you could be, you could get sued. Right. I mean tell me about these laws that got passed.

I don't know.

I don't know if I go as far as to. If you think you're a cat and you get your.

I don't know. I mean it seemed like they, they could created like hundreds of classes of new people who could have their feelings hurt. But that's not, I mean that's relatively new.

But the main point is yes, Colorado and California have both passed significant AI regulation over the past year. Not all of it's come into effect yet. The Colorado AI bill comes into effect in June. Much of California's regulations come into effect in 2027. But those laws do place a lot of rules around the use of AI disclosures that have to be given to consumers, opt out rights, things like that. Now for the most part, the onerous requirements of those laws come in if you're using a high risk, what they call a high risk AI system, which is one that makes a significant decision or substantially influences a significant decision. And significant decisions are considered things like lending, finance, health data, housing. Right, things that can have a significant impact on a person's life. And for an auto dealer, right. Lending and finance are one of those. And it's not just the LLMs that are engaging with a consumer up front. These can also be AIs that you're using on the back end. Say you're doing modeling or you are trying to determine who is going to get approved or not for a loan, things like that. So it's important to really take a more holistic view of the use of AI within the dealership context, especially in light of those two laws, and see what, you know, what needs to be done to comply. I think those two laws are just the start. We're going to see more AI regulation coming out unless the federal government steps in. And we know President Trump signed that executive order to try to clamp down on states passing AI regulation. But really until there is a federal law that truly preempts, we're going to see more states come out with things and they're going to vary. They're going to be varying requirements and applicability thresholds.

So California in June, Colorado in June, Colorado in June, California in 2027. Probably not that much to worry about if you're calling an inbound to schedule an oil change.

No, not really. So it's more back end finance, leasing kind of work that I think is going to trigger the most onerous recover requirements.

Well, I can tell you, I don't think I've said this too many times in my life. I really hope that some federal laws are passed so that we don't have to do this state by state. You know, like I said, I, I, I think that AI, it isn't going to replace humans. But I, you know, we're, we're pretty optimistic that it's going to make the humans in the dealership more efficient. Man, I, I hope this doesn't go crazy and we have 50 different things to, to follow up with. That was my list of questions. Jacob, you want to, you want to get at, do we have any other left to do.

Yeah, we still have some here. And, and if anyone else has any extras, feel free to throw them in. I think this is just a definitional thing, but is AI on outbound calls? Would, would that be looked at the same way a robocall would be?

So robocall is a term that's used in common parlance. People, even politicians, will use the term robocall, but that term actually isn't used in the statute. What's used in the statute is artificial or prerecorded voice. And so when people are talking about robocalls, that's probably what they're referring to. But robocall isn't actually a term that's defined.

Okay, let's see if a customer. So if a customer gets an SMS text with an opt out option, is that good enough to comply for texting?

If, if they receive a text message?

I assume the question here is if a customer is receiving marketing texts and they've already given consent to receive those messages, is having that opt out language in the text press 1 to stop or press pause to stop or click this link to stop. Is that good enough to comply?

The rules around the key press or voice activated do not call mechanism apply in the context of artificial or prerecorded voice. So those don't apply in the text context. But in the text context, a consumer has to be able to opt out using any of the standard keywords and the system needs to be able to recognize that. Consumers also get the ability to provide what you might call non conforming opt outs like take me off your list. And that will also work as an opt out.

Those are usually for text. They're saying they don't want to receive texts. No.

And usually they'll use one of the words stop, end, quit, unsubscribe, cancel, revoke.

Generally dealers can still call these people or send them emails or whatever.

Emails are fine until they unsubscribe from the emails. Do not call requests that come in via text also should be treated as a do not call request, applying to voice and vice versa under recent FCC guidance. So that, that is something I know some of our clients have been trying to manage as well is making sure that, you know, because often they'll have like one team that handles calls and a different team that handles texts and making sure those teams talk to each other to get those, those opt outs on them.

So to lay out an A scenario here, a dealer has a customer, they've, they're in the ebr, they've given it consent to receive follow ups, all the stuff. And they're part of a texting campaign and they reply stop or remove me from texting. Are you saying that under recent guidelines that that opt out in messaging should also remove them from voice?

Yes, unless the consumer specifies otherwise. So in your scenario, remove me from texts, I would interpret that as no more texts. But you don't have to opt them out of calls.

You can in your thing though, can't you say remove this to opt out of texts?

So what you can do is you can send a follow up text within five minutes requesting clarification. If you don't get that clarification then you have to treat it as if it's applying to both. But you can send a text, request clarification.

Yeah, I think we'll have to get some clarification on that Josh. And, and because I've got a specific question about how we should be sending these texts then to make it clear what they're opting out of as well. So yeah, okay.

When the customer comes in for service, they have a checkbox. You know, whether it's on a tablet or on a piece of paper, can communicate via text. That's all you need.

You really should get prior express written consent in conformance with those regulations. And so that consent language needs to identify who's calling, that it's for marketing purpose. If it's using an autodialer or artificial or pre recorded voice, the consent is not required for purchase. The specific number for which the consent is given and then is signed by the consumer. Right. If it's a paper form, actually have them sign it. If it's electronic, use a method that complies with the E Sign Act.

Hey Josh, one of the things that is, I mean none of, none of us want to risk our businesses etc, there is a, there is a difference between, you know, there's a difference between jaywalking and get it and stealing a car. And you know, when you, the law in, in the cases of these, there's a difference between exposure you have and it. And it's just really heightened with AI.

Some of these really heightened with AI and I think it's heightened with text because of, of just, you know, the paper trail.

Right? Yeah. So you, you get a lot of these customers who you call you have you actually even had a, A class and I mean you don't need to say but where they had don't call me again and then, and then in random state. I guess what I'm saying is it's just easier it's, it's near. I mean, there's no documentation with, with Ethel, who told you 10 months ago or whatever. I don't even know why I'm getting there. It's just. Well, we're trying to get through. We're trying to get through every scenario of how all of our customers and our vendor partners can grow their business. And some of these things are, are heightened and new and there's big exposure. Some of them maybe nothing's changed for a long time. And, and, and some of these things are just nearly impossible to create a class on.

Right?

Yeah. So if you take a situation of a consumer who says, I made a do not call request and then you, you called me. Right. In violation of that, that's a lot harder to form a class around because then it's very specific to what happened with that consumer. Right. When did they call, what did they say? How did they interact with the business? Right. So that makes it really hard to form a class because it's very fact specific as opposed to something like using AI in an outbound context without having gotten consent. That is very easy to then form a class around because that harm is the same for everyone.

Hey, we're down to two minutes. Josh, tell people how they can get ahold of you. Jacob, throw up the, throw up the QR code. If you guys like this, let us know and we will. We can have Josh on again. They are the experts.

Yeah. And always, always happy to do this. And of course, as Scott said at the start, you know, not legal advice. You need to talk to your, your own attorney for your own use case. But obviously we're happy to help as well. Yeah, you can scan the QR code also. You can just email me jstevenslawgroup.com or call our office. 614-93-999955. Always happy to help.

We got a minute left.

Yeah, we did get a question about the upcoming. And we won't get to this today, but the upcoming TCPA changes in 2026. Definitely, if you have more questions on anything we spoke about today or anything coming down in the future, definitely reach out to Josh and, you know, seek his counsel, because they are the experts here. Josh, thank you very, very much for taking the time here to join us. And for everyone tuning in, we hope you have a great day. Josh, anything to close?

Just this is an area that is continuing to cause problems and class actions, and it's important to get a compliance strategy that gets you ahead of it before you end up settling a fairly large case.

Well, good. Well, thank you all very much for joining. We hope you have a fantastic day.

Thank you.

Thank you, Scott.