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The sub-prime forum: Contract for deed - A diamond in the rough

National Mortgage Professional
Dec 26, 2005

Mortgage industry spared at 11th hour by junk fax act Jill BauerleJunk Fax Prevention Act of 2005, established business relationships The business fax just got a new lease on life. In July 2005, Congress pre-empted the Federal Communication Commission's (FCC) tough new rules governing commercial faxes, when it passed the Junk Fax Prevention Act of 2005. President Bush signed the bill into law on July 9, 2005. If the FCC's rules had taken effect, the fax-dependent mortgage industry would have been straitjacketed by costly and time-consuming record-keeping guidelines for sending a fax beginning in January 2006. The new law spares mortgage and other businesses the burden of having to obtain written permission from customers and others with which they have an "established business relationship" before sending them business faxes. The FCC's policy reversal Under the FCC ruling issued in July 2003, but postponed by the commission on three separate occasions, companies would have had to collect signed consent forms from every existing and new customer before sending them a fax. In a bizarre twist, companies would not have been allowed to use the most sensible medium, a fax, to send out the required form. Each violation of the rules would have carried a maximum fine of $11,000. To cover themselves, some mortgage companies had already posted fax consent forms on their Web sites for customers and business associates to fill out if they wanted to receive daily rates and special information by fax or e-fax. The FCC ruling dates back to the Telephone Consumer Protection Act (TCPA) of 1991. The TCPA restricts the use of the telephone or fax to deliver unsolicited advertisements without first obtaining the recipient's "prior express invitation or permission." By FCC standards, an "unsolicited advertisement" is defined as "any material advertising the commercial availability or quality of any property, goods or services which is transmitted to any person without that person's prior express invitation or permission." Congress intended to crack down on notorious "fax blasters," but the wording of the law created a gray area for businesses that rely on faxing updated information to existing customers. One year later, the FCC issued an interpretation of the law which stated that a "prior business relationship" between the sender and recipient could be construed as permission to send an unsolicited fax. Many courts disagreed with the FCC interpretation and it spawned a cottage industry of small claims petitioners. Because fax numbers often change and misdialing is common, some companies were ordered to pay fines for honest mistakes. In July 2003, in another effort to curtail the fax blasters and protect consumers from the costs involved in receiving unwanted ads, the FCC reversed its "established business relationship" exemption. Many businesses thought the new ruling went too far and penalized legitimate businesses. A group of more than 250 companies and associations across the country formed "The Fax Ban Coalition" and lobbied to change the language of the law. What the new law means for you The Junk Fax Prevention Act of 2005 does not legalize the sending of junk faxes. It enables you to fax your customers and others with whom you have an established business relationship - but with some restrictions. By law, your commercial faxes must now provide an opt-out provision on page one of every fax and provide a cost-free, 24-hour, seven-day-a week means for the customer to request to be taken off your distribution list. Furthermore, you can only send an unsolicited fax to new business contacts if they gave you their number or published it in a public source, such as a Web site, publication or directory. All fax numbers already in your Rolodex are grandfathered into your "Do Fax" list. However, if you met new contacts while the legislation was being enacted but dont yet have their fax number, you must treat them as if they were new contacts. Robert Flavell, a Miami Lakes lawyer who specializes in real estate, construction and mortgage law, advises mortgage companies to take the additional precaution of keeping a phone log of customers who verbally consent to receive a fax. "A little extra prudence never hurts, especially in conjunction with a new law that has yet to be enforced or interpreted by the courts," said Flavell. Michael Kass, whose Tampa-based firm Kass, Shuler, Solomon, Spector, Foyle & Singer serves a number of mortgage firms, points out that the Junk Fax Prevention Act of 2005 does not pre-empt tougher state laws. "For now, Florida mortgage firms need not worry because Florida has not enacted any laws governing unsolicited faxes," noted Kass. In addition to mortgage lawyers like Flavell, mortgage associations across the country have also followed news of the junk fax legislation closely. "We're thrilled," said Vicki Vidal of the Mortgage Bankers Association, who fought the FCC ruling as a member of The Fax Ban Coalition. When asked about how difficult it might have been to determine what is unsolicited in a business transaction, she replied, "When you get down to the transaction level, it gets gray. What is a solicitation and what is a transactional activity?" Vidal added that mortgage companies often work in a gray area halfway between solicitation and express permission. "When you think about how much a mortgage broker talks on the phone to a buyer or [real estate agent], that has potential earmarks of being a solicitation," she said. The mortgage industry is not the only one celebrating. The new law also comes as good news to companies that provide fax technology. One such company is Equisys, which sells Zetafax, a network fax software solution used by many firms in the mortgage industry. "As far as problems go, unsolicited faxes pale in comparison to unsolicited e-mail," said Terry Mayne, general manager of Equisys. "While no one wants faxes from strangers, requiring written consent before sending faxes to clients would have created a major headache for mortgage firms. We're pleased that Congress came up with a fair compromise." Jill Bauerle is a freelance writer based in Brooklyn, N.Y.
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