Florida AG Sues Smartbiz for 'Illegal Robocalls' in Violation of TSR

Smartbiz is “one of the most prolific transmitters of illegal robocalls” in the U.S., said Florida Attorney General Ashley Moody (R) in a complaint filed Monday (docket 1:22-cv-23945) in U.S. District Court for Southern Florida in Miami. She alleges the VoIP company violated the Telemarketing and Consumer Fraud and Abuse Prevention Act and other statutes, plus the FTC's Telemarketing Sales Rule.

The FCC’s Industry Tracebook Group (ITG) notified Smartbiz at least 255 times since April 7, 2020, about fraudulent or otherwise illegal calls conducted on Smartbiz’s network, said the complaint. Each traced call is representative of a large volume of similar illegal calls, “meaning Smartbiz has caused vast numbers of scam robocalls to reach US consumers, despite being told about the problem over and over again,” the complaint said.

The ITG informed Smartbiz over 170 times about specific scam calls it transmitted and that it needs to improve its traffic screening procedures. It also had discussions with the attorney general’s office about what the company can do to reduce or eliminate fraudulent calls on its network, but Smartbiz “has chosen profit over people and refuses to implement meaningful procedures to prevent perpetration of serious fraud on its network,” the complaint said.

In addition to the invasion of consumers’ privacy and “enormous monetary loss,” Smartbiz profits from the scam calls, said the complaint. The service provider “courts robocaller customers by allowing them to place a high volume of calls in quick succession,” then billing only for the duration of completed calls. The company transmits high-volume, short-duration call traffic that originates in a country that doesn’t use the same numbering format as the U.S., but the calls appear as U.S. phone numbers, it said.

Robocallers are able to make “huge numbers of call attempts for free and only pay a tiny amount if call recipients immediately hang up, which happens frequently,” it said. Smartbiz contracts have language that says parties “shall not withhold any payment on the basis that fraudulent calls comprise a portion” of traffic volume, the complaint said.

Smartbiz routinely transmits calls from foreign upstream carriers where the purported calling numbers match a U.S. government agency such as the Social Security Administration or law enforcement agency or a tech company such as Apple or Amazon, said the complaint. The company also accepts and connects traffic containing calling numbers purporting to be 911, which is “never used for outbound calling” in a legitimate call, it said.

It's “particularly easy to spoof” a phone number over VoIP because the calling number is “just another piece of data” transmitted with the call and any string of numbers or letters can be input, it said. Smartbiz doesn't block calls with invalid or “otherwise improper” calling phone numbers, it said, and it doesn’t require information from upstream providers to demonstrate that traffic is legal.

Though Smartbiz has access to call data records (CDRs) for all call traffic that crosses its network, it doesn’t analyze the CDRs to investigate whether its upstream providers are sending it potentially illegal robocalls, the complaint said. The company provided CDRs for traffic it received from OXNP Telecom, AlkaIP Telecom, KWK Communications and Family Communication, it said. For each carrier, “virtually all” of the calls placed by the top 20 calling numbers were associated with scam calls, it said.

The lawsuit seeks to enjoin Smartbiz from transmitting fraudulent robocalls to consumers in Florida and elsewhere in the U.S. It seeks damages of up to $1,500 per TCPA violation and a civil penalty up to $10,000 for each TCPA violation or three times that amount for each day of a continuing violation. It also seeks restitution for consumers injured by the fraudulent robocalls Smartbiz transmitted.