FTC Obtains Injunction Against VoIP Provider for Illegal Robocalls

Since early 2020, the Federal Trade Commission (FTC) has been sending letters to various Voice Over Internet Protocol (VoIP) service providers warning them of potential illegal robocalls being sent through their networks. One of the unlucky recipients of these letters was XCast Labs, Inc., a VoIP Provider which unwisely chose to disregard that and other communications from investigators looking into potential illegal activities allegedly undertaken by XCast’s customers.

After ignoring several warnings from the FTC that its customers were using XCast’s services to funnel hundreds of millions of illegal robocalls, in May of 2023 the Department of Justice (DOJ), acting on behalf of the FTC, filed a lawsuit accusing the company of ignoring dozens of “traceback” inquiries from the Industry Traceback Group (ITG) regarding suspicious illegal calls originating on its network, as well as inquiries from other law enforcement agencies.

According to the FTC, many of these suspect robocalls were part of organized campaigns designed to generate telemarketing leads by, for example, impersonating federal officials from the Social Security Administration.

Stipulated Injunction of the XCast VoIP Provider

On January 2nd, 2024, the parties to the lawsuit filed a stipulated order for a permanent injunction against XCast Labs prohibiting it from violating the Telemarketing Sales Rule. The company must also implement a customer screening process to ensure existing and potential customers are not violating telemarking laws and to terminate relationships with any customer that does not pass the screening process.

The order also permanently bars XCast Labs from providing VoIP services to any company with which it does not have an automated procedure to block calls that display invalid Caller ID phone numbers or that are not authenticated through the FCC’s STIR/SHAKEN Authentication Framework. Finally, the order requires XCast Labs to pay a $10 million civil penalty, which will be suspended based on its inability to pay.

Cautionary Warnings to other VoIP Provider

In a statement, FTC Director Samuel Levine criticized XCast Labs, stating that the company had been repeatedly notified about the misuse of its services by unauthorized robocall operators yet failed to take corrective actions.

Assistant Attorney General Brian M. Boynton of the DOJ also issued a cautionary statement to all companies engaged in telemarketing activities, warning them that his department intends to collaborate closely with the FTC in the stringent enforcement of the Telemarketing Sales Rule.

Don’t Ignore Regulators

The lesson here is clear: regulators like the FTC and the DOJ, working in concert with the ITG, are actively monitoring and pursuing suspicious robocall activity, and any company that provides VoIP or other communications services are squarely in their crosshairs.

All such companies must implement robust and verifiable systems to prevent abuse of their services, such as invalid Caller ID spoofing and unauthorized robocalls, and they should never, ever ignore a warning letter from the FTC or any other regulator. They will not overlook such oversights.