Why robocalls and phone scams are still out of control

For many of us, every week begins the same way: a Monday morning phone call with a recorded voice offering “important information” about car warranties or credit cards (often, warranties or credit cards that are entirely fictional). These robocalls are a plague of modern life—consumer agencies including the Federal Communications Commission and the Federal Trade Commission identified them as the No. 1 complaint in 2020—and they’re getting worse. According to communications firm YouMail, robocalls were up nearly 4% in January and are on pace to number 48 billion for the year.

Remarkably, all of this is occurring after Congress passed a law, just over a year ago, intended to stamp out the problem with a series of new technical and legal remedies. So what happened? Why have robocalls become so bad that most Americans no longer pick up the phone unless they recognize the number?

The short answer is that a shadowy auto-dialing industry, which makes good money by unleashing millions of calls a day, has proved adept at staying ahead of the law. A longer answer would also point the finger at tacit support for robocalling from big businesses (some more legitimate than others) and foot-dragging by federal agencies who could do more to enforce the law.

Who is making all those robocalls?

Once upon a time, running a telemarketing operation meant renting out a big warehouse and filling it with cubicles and miles of telephone wire. Now you can do it from your living room.

That’s what Nick Palumbo did. The Arizona man ran several companies that charged robocallers, many of them based overseas, to relay the calls they initiate via thousands of Internet-based phone lines he runs from his home. According to the Wall Street Journal, Palumbo’s businesses alone have routed hundreds of millions of calls to U.S. consumers, including many from Social Security impostors.

Palumbo was arrested by federal agents in 2019 on fraud-related charges, and last summer he entered an agreement with the Justice Department barring him and his wife from running robocalling operations. But as the ongoing flood of robocalls attest, Palumbo is far from alone in enabling the scammers.

These middlemen are not the original source of the Social Security or auto warranty calls, which typically originate from scam shops in India, the Philippines, Mexico, and other overseas countries—fraudulent operations that aim to harvest personal data and credit card info while remaining effectively beyond the reach of U.S. regulators.

But to reach your cell phone, they need a U.S.-based operator to relay their calls. Such companies provide a hyper–low-cost service for organizations, including legitimate ones such as political campaigns, to run phone campaigns—but may turn a blind eye to clients who are running scams.

For the call to reach your cell phone, of course, it has to be completed by your service provider, which for most of us is Verizon, AT&T, or T-Mobile. Why don’t these giants put a stop to the robocalls?

By all accounts, they’re trying. According to Greg Guice, a lawyer and telecom expert with Public Knowledge, the big phone companies have an incentive to kneecap the robocallers—in part because of the public outrage, but also because robocalls spur consumers to terminate landline service, which is still a big source of revenue for AT&T and Verizon (and a minor one for T-Mobile).

Meanwhile, the phone giants are learning to overcome a traditional aversion to cutting off calls. That aversion stems in part from the industry’s longtime mission to complete every call, and also from fears they will be sued for blocking calls. The new federal robocall law, however, reduces phone carriers’ legal exposure and also encourages the use of call authentication technology—which is why more consumers are seeing messages like “Scam likely” on their phone displays.

Margot Saunders, an attorney with the National Consumer Law Center, says phone carriers are getting better at choking off robocalls—she praised Verizon in particular—but says they could be doing a lot more.

Saunders suggests that the robocall situation would dramatically improve if phone carriers were legally responsible for the nuisance calls. If this were the case, the carriers would have an enormous incentive to put an end to them. But the industry’s political clout means this has been a nonstarter in Congress.

Saunders also rejects the idea that a technological solution to block robocalls is too difficult.

“I’m not going to say what the technology should be. But we have the capacity to go to Mars and perform open heart surgery, so we could come up with tech to do this,” she says.

A new law’s big loopholes

In 2019, Congress passed the Telephone Robocall Abuse Criminal Enforcement and Deterrence (or TRACED) Act. The law passed with broad bipartisan support: Both Republicans and Democrats are eager to claim they’re fighting robocalls. But while the law is supposed to make it easier to identify and penalize robocallers, it also failed to close some major loopholes.

These loopholes provide wiggle room when it comes to defining what activities can be exempt from robocalling prohibitions. For instance, many automated debt collection calls remain legal (a sop to the financial services industry), and so are various calls classified as election- or politics-related.

Meanwhile, robocallers can get around the law by claiming a customer has given consent to receive them. Unfortunately for consumers, such consent can arise inadvertently—for instance, if they’ve ticked a box on the Internet giving a company permission to contact them. In many cases, that permission also gives the company the right to sell that “consent” to third parties, including the data broker industry. The upshot is, once such a permission has been granted, it can serve as a legal backstop for marketers to pester consumers for years.

Then there are the corporate lawyers, who are quick to push any potential loophole in court. One recent example is Royal Seas Cruises, which this year wriggled out of a $123 million class action lawsuit that accused the company of making millions of robocalls flogging vacations. In order to beat the rap, the company claimed it had not made the calls, but that a third-party agency had done so. As a matter of common sense, the distinction may not matter—it seems absurd to think an agency would embark on a massive robocalling campaign without the company’s knowledge or permission—but, from a legal perspective, the argument persuaded a federal judge.

Saunders and others claim Congress needs to tighten all these loopholes so that companies are less tempted to push the boundaries. Meanwhile, she suggests that other big industries are quietly opposed to serious reform, since robocalls can be a cheap and effective form of marketing.

Finally, there is the question of whether government agencies are doing all they can to punish and deter robocallers. While the FCC has imposed a series of whopping fines on companies behind the robocall epidemic, Guice of Public Knowledge says the government has collected only a pittance—less than 2¢ on the dollar. He attributes this to a lack of coordination between the FCC and the Justice Department, which is tasked with enforcing judgments and prosecuting scofflaws.

This may change as a new chair takes the helm of the FCC under the Biden administration. Previously, President Trump’s appointee to the agency, Ajit Pai, pursued an agenda many perceived as favoring business over everyday consumer concerns. Though public interest groups say Pai took steps to address the robocalling nuisance, some question whether he was too timid.

“This was a relatively young man who wanted a long career in public service, and that career might have been hampered by an aggressive approach [to robocalling]. He was afraid to piss off the Chamber of Commerce,” said a Washington, D.C., lawyer who asked for anonymity in order to discuss Pai. (Pai did not respond to a request for comment sent via social media.)

Consumer groups are heartened by President Biden’s choice of FCC commissioner Jessica Rosenworcel to serve as acting head of the agency. They described her as more willing to confront the corrupt interests that may be impeding stricter measures against robocalls.

Nonetheless, consumer advocates also cautioned that Rosenworcel will likely be preoccupied with other matters, including the struggle to provide low-income children with reliable Internet access during the pandemic. While robocalls were not on the agenda during her inaugural meeting as chair, an FCC spokesperson says they are a priority for Rosenworcel.

“Robocalls are out of control and have been on the rise in recent years…Consumer protection is a top priority for the acting chairwoman,” said the spokesperson, adding that the agency is in the midst of a review about its past and future policies for fighting robocalls.

The bottom line is that a wide variety of economic and political forces suggest that robocalls are not going away soon. This may not pose a problem for the handful of Americans eager to hear automated warranty pitches. But everyone else will have to put up with the nuisance for the foreseeable future.