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A TCPA Win for Debt Collectors

7 Oct, 2014 By: Gregory J. Sater, Ellen T. Berge

The Telephone Consumer Protection Act (TCPA) has caused indigestion for businesses wanting to leverage the efficiency and cost-saving benefits of using the telephone to collect debts. Even though debt collection calls are not sales calls, the TCPA still covers debt collection calls when they are made to cell phones using an autodialer or an artificial or prerecorded voice. With 90 percent of American adults using cell phones, debt collection campaigns are bound to bump against the TCPA rules, and class action plaintiffs are still lurking.

The Federal Communications Commission (FCC), which writes and enforces the TCPA rules, requires that businesses have the called party’s “prior express consent” before using an autodialer or an artificial or prerecorded voice to make debt collection calls. Unlike the well defined, but perhaps overly prescriptive, “prior express written consent” standard that applies to certain marketing calls, the “prior express consent” standard is not specifically defined. This lack of clarity has been problematic for businesses for years.

The crux of the issue rests in a 2008 declaratory ruling issued by the FCC in which the agency stated that the provision of a cell phone number to a creditor (for example, as part of a credit application) reasonably evidences prior express consent to be contacted at that number regarding the debt. Some courts have questioned this ruling because it appears to allow for implied consent under circumstances when the statutory language requires express consent. Other courts have given a high degree of deference to the FCC’s interpretation.

On Sept. 29, in Mais v. Gulf Coast Collection Bureau Inc., the U.S. Court of Appeals for the Eleventh Circuit reversed a district court grant of partial summary judgment for the plaintiff against a hospital-based radiology provider and its debt collection agent. The district court had ruled that the FCC’s 2008 ruling was inconsistent with the language of the TCPA. The district court also concluded that the FCC’s 2008 ruling did not apply on the facts of the Mais case, which involved medical debt – not consumer credit. In reversing, the Eleventh Circuit court found that the district court exceeded its jurisdiction in reviewing the validity of the FCC’s interpretation. The court also concluded that the FCC’s 2008 ruling should be read broadly to reach a wide range of creditors and collectors, including medical debt collectors and others.

Notwithstanding this ruling, which is consistent with some earlier decisions by other courts, uncertainty remains for debt collectors. Prior to the Mais decision, a large commercial bank avoided litigating the prior express consent issue and agreed to pay a $32 million settlement to resolve allegations that autodialed debt collection calls it made to cell phones were not compliant with the TCPA. Other settlements have followed a similar course.

Defendants in TCPA lawsuits have also had some recent successes in challenging use of the “autodialer” in complaint allegations. While TCPA rules define “autodialer” as any equipment that has “the capacity to store or produce telephone numbers to be called, using a random or sequential number generator,” courts have often deferred to broad interpretation. However, not all courts have taken “capacity” at face value. Since 2013, some district courts have concluded that to meet the TCPA definition of autodialer, a system must have a present capacity at the time calls are made to store, produce and call numbers from a number generator. In a Washington district court case earlier this year, a defendant won on a motion for summary judgment because, as explained by the court, “random number generation” meant random sequences of 10 digits and “sequential number generation” meant, for example, (111) 111-1111, (111) 111-1112 and so on.

While it may not be possible to resolve the question about whether “prior express consent” existed or whether an autodialer was used until litigation has begun, some of these newer cases may open the door for a certain defense strategy in TCPA cases.

Ellen T. Berge and Gregory J. Sater are partners in Venable LLP‘s Advertising, Marketing and New Media Group. She can be reached at (202) 344-4000. He can be reached at (310) 229-0377.

About the Author: Gregory J. Sater

Gregory J. Sater

About the Author: Ellen T. Berge

Gregory J. Sater

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