The Telephone Consumer Protection Act (“TCPA”) was passed in 1991, largely as a response to what Congress saw as an excess of unsolicited telemarketing and facsimile communications to residential, emergency and mobile telephone numbers. At its inception, the TCPA did not appear to be directed toward the regulation of debt collection phone calls where an existing commercial/consumer relationship existed. However, over the past 20 years the FCC and various Courts have applied the dictates of the TCPA to debt collectors, specifically those who call consumer debtor mobile phones.
According to E-marketer.com, as of January 2014 there will be approximately 4.55 billion cellular phones used worldwide this year. Additionally, e-marketer projects that 1.75 billion of those lines will be smartphones. This result is due to the increased affordability of 3G and 4G mobile phones in recent years. Pew Research made similar projections for the United States and found that 90% of adults in the U.S. have mobile phones. Approximately 58% of those users have smartphones. Finally, and most telling, the Center for Disease Control National Health Interview Survey of 2013 indicated an increasing trend of U.S. households abandoning landlines altogether. In 2007, 16% of U.S. households had no landline. In 2010, that number jumped to 26.6%. In 2013, 38% of U.S. households had no landline. This number is higher among households that fall below the poverty line to a whopping 55%. These statistics are bolstered by individuals’ ability to port their landline number to a mobile phone under the FCC’s local number portability rules.
With the increased reliance on mobile phones for communication, diligent compliance with the TCPA is even more paramount for law firms and agencies who collect debts. Specifically, recent changes in enforcement and rules promulgated by the Federal Communications Commission (“FCC”) make compliance with the TCPA more harrowing than before in light of the common usage of cell phones. Despite this reality, there are ways to protect yourself and your firm. This material will provide an overview of the Act, potential damages should a violation of the Act occur, recent changes and developments in enforcement/application of the Act and methods to avoid liability under the Act.
I. Overview of the TCPA
The Telephone Consumer Protection Act (“TCPA”) was passed by Congress in 1991 and signed
into law by then President George H.W. Bush. It amended the Communications Act of 1934 and is codified as 47 U.S.C. § 227. The intent of Congress in passing the TCPA was to “…protect the privacy interests of residential telephone subscribers by placing restrictions on unsolicited, automated telephone calls to the home and to facilitate interstate commerce by restricting certain uses of facsimile (fax) machines and automated dialers.” The TCPA was largely enacted as a result of what Congress saw as the inability of states to protect their citizens from the unsolicited telemarketing referenced. The major issues cited by Congress generally related to unsolicited calls from automated dialers to lines reserved for emergency purposes, unsolicited calls to businesses impeding commerce and unsolicited calls to residences constituting an invasion of privacy.
It is worth noting that neither the statute nor legislative history indicate an intent to regulate phone calls made by debt collectors. In fact, the FCC, charged with the rulemaking and enforcement of the TCPA, issued its initial order of proposed rulemaking on April 17, 1992, and stated that the overall intent of Section 227 “…is to protect consumers from unrestricted telemarketing.” The FCC additionally stated that “non-telemarketing use of auto dialers [was] not intended to be prohibited by the TCPA.” Generally, the FCC recognized that in the debt collection context a prior business relationship took place between the caller and called party, and that the calling party is acting as an agent of the original creditor. Because of these circumstances, the FCC originally considered such a communication a “commercial call” that did not relate to the purposes of the TCPA. However, over the course of 20 years, FCC regulations and case law have extended TCPA protections to consumers in the debt collection context.
In the consumer context, the TCPA makes it unlawful to: 1) use an automatic telephone dialing system or an artificial or pre-recorded voice message, without the prior express consent of the called party, to call any emergency telephone line, hospital patient, pager, cellular telephone, or other service for which the receiver is charged for the call; or 2) use artificial or prerecorded voice messages to call residential telephone lines without prior express consent. The elements of a TCPA violation against a debt collector include:
1) A call to a mobile phone by either an automatic telephone dialing system (ATDS) or leaving an artificial or pre-recorded message;
2) Where the call is made without the prior express consent of the recipient; and
3) Where the recipient is charged for the call (only applicable to “other” services, not mobile phones);
4) The FCC rules now require express written consent for autodialed and prerecorded calls and text messages to cell phones and written consent for prerecorded calls to landlines.
II. Case Law: Does the TCPA Affect Collction Calls?
Though it is evident that the TCPA is applicable to collection calls, the extent is unclear. Previously, if your firm did not use ATDS equipment to call cellular phones, there were no TCPA issues. This conclusion is no longer necessarily true. In 2009, the Ninth Circuit Court of Appeals addressed this issue. In Satterfield, an individual alleged violations of the TCPA by virtue of receipt of an unsolicited text message from Simon & Schuster, Inc., who sent the message for nextones.com, a ringtone provider. The Court addressed several issues, and held that: 1) a text message to a cellular phone is a “call” for TCPA purposes; 2) ATDS equipment need only have the capacity to store or produce numbers to be called using random or sequential number generation, whether the system is actually used in that way; and 3) express consent can be extended from a principal to an agent (though there was no such relationship between Simon & Schuster, Inc. and nextones.com). The holding in Satterfield is important insofar as it broadens the definition of autodialer.
Some lower state and district courts have confronted this issue by concluding that ATDS equipment must have been used or had the actual present (not conceivable) capacity to store or produce numbers to be called using random or sequential number generation. In response to this line of cases, the Association of Credit and Collection Professionals filed a Petition with the FCC on January 31, 2014 asking for changes to several rules, including clarification on what constitutes ATDS equipment, and asking that it be limited to predictive dialers that are used as contemplated by the TCPA, not those that could be used that way. Therefore, this issue is ripe for further adjudication/rulemaking among the circuits, the FCC and ultimately the U.S. Supreme Court.
A federal district court in California held that a consumer who voluntarily provided a cell phone number to complete an online purchase gave “prior express consent” to receive a text message from the business’s vendors under the TCPA. In Baird, the plaintiff had booked flights through Hawaiian Airlines’ website and gave consent therein to receive text messages from the airlines vendor, Sabre, Inc. One text message was sent inviting Plaintiff to receive flight notifications by text, which went unresponded. No further text messages were sent. Plaintiff then sued Sabre alleging TCPA violations. In its ruling, the court cited the FCC’s 1992 order, which stated that “persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary.”
Although the Satterfield and Baird decisions seem to help debt collectors easily acquire “express consent,” recent FCC rulemaking has expanded the consent requirement making it more burdensome. Namely, on February 15, 2012 (effective October 15, 2013), the FCC issued a report and order implementing several rule changes including that “express consent” must now be in writing. This writing requirement applies to autodialed and prerecorded calls and text messages to mobile phones and prerecorded calls to landlines.
The Seventh Circuit Court of Appeals recently addressed the issue of TCPA calls to unintended recipients. In Soppet a debt collector contacted a debtor with a predictive dialer at a number that no longer belonged to the original consumer. The debt collector argued that the original subscriber’s consent should extend to subsequent subscribers. The Court disagreed and held that consent must come from the current subscriber. The court gave specific suggestions to avoid liability for contacting an unintended recipient, such as having a person make a manual call to verify the number still belongs to the intended recipient, using reverse lookup to identify the subscriber or asking the original creditor if the customer is still associated with the cell number.
For many years, the Federal Circuit courts were split as to whether a private TCPA cause of action could be brought in Federal Court. Specifically, 47 U.S.C. § 227(g) provides an enforcement mechanism for state attorneys general to bring actions against persons who violate the TCPA in federal district courts.
However, 47 U.S.C. § 227(c)(5) provides for a private right of action. The section states:
A person who has received more than one telephone call within any 12-month period or on behalf of the same entity in violation of the regulations prescribed under this subsection may, if otherwise permitted by the laws or rules of court of a State bring in an appropriate court of that State –
(A ) an action based on a violation of the regulations prescribed under this subsection to enjoin such violation.
(B ) an action to recover for actual monetary loss from such a violation, or to receive up to $500 in damages for each such violation, whichever is greater, or
(C ) both such actions.
Several plaintiffs had successfully argued that this provision of the Act limited private causes of action to state court. However, some circuits, including the sixth, have held otherwise. The U.S. Supreme Court addressed the issue in 2012. In Mims, the Supreme Court resolved the split among circuits, and held that federal and state courts have concurrent jurisdiction over private suits arising under the TCPA pursuant to 28 U.S.C. § 1331.
III. Potential Penalties and Tips on Avoiding Liability
As cited previously herein, the TCPA provides for $500-$1,500 in statutory damages per call. Assuming that any given collection firm makes multiple calls to multiple debtors, potential liability under class action suits can be substantial. Cases have settled for amounts in the millions of dollar, albeit mostly for large national creditors. Regardless, such results illustrate the potential risks of TCPA liability. A large award could easily threaten the viability of many small to medium collection law firms utilizing auto-dialers to contact debtors.
There are some ways to help avoid or mitigate damages. First, some recent case law suggests that creditors and debt collection firms may be able to utilize arbitration provisions in agreements between the original creditor and customer. Arbitration could act as a barrier to excessive awards in civil proceedings. Second, the best way to avoid TCPA liability is to refrain from using an auto-dialer to call mobile phones. While this is a viable option for smaller firms, it is economically unsound for larger entities. Furthermore, because so many individuals are now porting their land lines to a cellular number, it becomes more difficult to determine which numbers are mobile. Third, use reverse lookup via a public website or a third party vendor that provides phone number scrubbing services to remove cell numbers from auto-dialed queues. If an auto-dialer is used to call debtors on mobile numbers, express written consent must be obtained or be a part of the original creditors agreement/application. Collection firms should manually call any numbers that have not been called (or verified) to prevent unintended recipient claims. The consumer TCPA bar is diligent in advising their clients to answer and record all calls and creditor firms must be equally diligent in following the dictates of the Act.