When You Call Your Member’s Cell, Are You Violating the Law?

November 1, 2013 at 8:05 am 1 comment

When Congress passed the Telephone Consumer Protection Act (TCPA) in 1991, a smart phone was an oxymoron and automated recordings were as grating as fingernails running across a chalkboard.  Fast forward to the Siri world of 2013.  Even though it was intended to protect consumers from being inundated with automated solicitations, it is now emerging as the latest legal speedtrap used by plaintiff’s lawyers willing to nickel and dime businesses that have the audacity to try to collect on a debt owed them.

If you think this is an exaggeration you might be interested in knowing that Bank of America agreed to a $32 million settlement for alleged violations of the TCPA, and that a recent decision by the federal Court of Appeals for the Third Circuit, if followed by other courts, will make the TCPA into another one of those nettlesome consumer protection statutes that marginally benefit consumers and make compliance more expensive, but help plaintiff lawyers send their kids to college.

First, everything I’m talking about just applies to the use of automated phone calls.  If you just reach out and touch your debtors the old fashioned way, the TCPA doesn’t apply to you.  Plus, the prohibitions I’m talking about don’t apply to informational phone calls.  So the recorded message I just listened to reminding me of an upcoming doctor’s appointment aren’t affected by the statute, nor would a phone call to a member informing them of a low account balance or suspicious credit card activity.

The TCPA makes it unlawful for any person to make any call using any automated telephone system or artificial or pre-recorded voice to any land line phone, cell phone or pager (remember when pagers were cutting edge technology?).  The prohibition does not apply to consumers who have voluntarily consented to receive phone calls from businesses by, for example, giving a credit union their land line telephone number when they open an account.  The FCC has interpreted the statute as putting the burden on the business making a phone call to prove that the consumer has consented to be called.  Violators can be slapped with statutory damages equal to $500 for every single negligent violation of the statute or $1,500 for every willful violation of its provisions.

In 2012, regulations took effect which are important to your marketing department if you ever plan on sending out one of those obnoxious autodialer advertisements.  Most importantly, members must now provide clear and conspicuous consent to receive autodialed marketing pitches.  This means that simply getting a member to give you his or her telephone number as part of the account opening process is no longer adequate to demonstrate your compliance with the law.  Instead, there has to be a written consent on the part of the member.  If you get this consent either with an in-person signature or in conformity with the E-Sign Act, you can rest easy.

Everything I’ve said clearly applies to members who provide you with a traditional land line number.  But what happens if the member gives you a cell phone number instead?  Here’s where the courts are beginning to make things a little dicey.  First, in that Bank of America settlement referred to above, the Bank decided to settle a class action in which the plaintiffs contended that the Bank or its agents “illegally contacted” debtors via their cell phone with a pre-recorded message.  In other words, the fact that Bank of America was willing to settle is an indication that there are special risks when reaching out to someone’s cell phone and this is why you are beginning to see lawsuits in which alleged violations of the federal Fair Debt Collections Practices Act are coupled with allegations of TCPA violations.

Another troubling example of this trend is Gager v. Dell Financial Services,  in which a delinquent debtor claimed that the company was violating the TCPA by continuing to send pre-recorded messages to her cell after she told the company she no longer wanted to be contacted.  The company pointed out that she had previously consented to being called but the Court ruled that this consent could be withdrawn at anytime and that the exception for robo-dialing members with whom you have an established relationship only applied to land line phones.

If you are in Third Circuit’s jurisdiction your credit union has fewer collection options for the consumer who relies on her cell phone as compared to the consumer who continues to cling to the increasingly antiquated land-line phone.  The good news is that this ruling is inconsistent with at least two New York federal court rulings,  which have held that the TCPA doesn’t give consumers the right to revoke automated phone calls.  Unfortunately, the FCC’s regulations didn’t address the issue of if and when a member can revoke prior consent.  However, the preamble material clearly strengthens the argument that the existing business relationship exception does not apply to cell phone usage.

This is one of those arcane areas of law where mistakes are both easy to make and easy to avoid.  If your credit union contracts with third party debt collectors, I would reach out to them and see what precautions if any they are taking to make sure they don’t get tripped up by the TCPA.


Entry filed under: Compliance, General, Legal Watch, Regulatory.

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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