Posts tagged ‘LLC’

Why Robocall Crackdown Is Hurting Your Credit Union

Contrary to popular belief the biggest obsession in DC right now isn’t the impeachment trial; it’s auto dialing. While it’s hearting to see that the Democrats and Republicans can agree to something, the result of this bi-partisan obsession is that it’s trickier for your credit union to legally communicate with its members than it should be.

First we have yet another decision– Glasser v. Hilton Grand Vacations Co., LLC, No. 18-14499 (11th Cir. 2020)- interpreting what an auto dialer is for purposes of the Telephone Communications Protections Act. Remember, whether or not your credit union is subject to the TCPA is totally dependent on whether or not it is using an auto-dialer when it reaches out and touches someone. Law 360 is reporting that the 11th Circuit refused to allow an individual to go forward with this class action lawsuit claiming a violation of the TCPA.

The case got my attention because the court agreed with an earlier decision by the Court of Appeals for the D.C. Circuit which I have blogged about – ACA International v. Federal Communications Commission- which rejected an expansive interpretation of auto-dialer championed by our friends on the West Coast. The split between the circuits increases the likelihood that the Supreme Court will have to decide how to interpret the TCPA.

Of course, the more logical step would be for Congress to amend the TCPA to make sure that it outlaws abusive telemarketing as opposed to acting as a tripwire for class action lawsuits. But the odds of anyone in Congress voting for a bill which could be attacked as weakening the TCPA are about as good as Donald Trump being removed from office by the Senate.

All this is happening against the backdrop of heightened regulatory vigilance of auto dialers. For example, the DOJ is seeking to shut down two auto dialer companies that facilitated auto dialer operations based in New York and Arizona, which the government claimed specialized in ripping-off the elderly. In addition, regulators are continuing to review whether even more TCPA regulations should be amended. As a matter of fact, it was this comment letter from CUNA last night that got me thinking about this subject for today’s blog.

There is a reason I am providing you with this parade of horribles. No one likes robocalls, or has sympathy for companies that facilitate shams intended to pressure people into giving up their money. But there are legitimate businesses, such as credit unions, which use this technology every day to communicate with their members about legitimate topics. The current frenzy has regulators using a hatchet to deal with legitimate issues when they should be using a scalpel. I don’t see this ending any time soon. So for those of you who haven’t done so already, take a good look at the type of technology you are using and start thinking of ways that you can avoid getting caught in the regulatory dragnet.


January 30, 2020 at 9:43 am Leave a comment

If You Call Your Members, This Case May Impact You

There is an important case pending before the Court of Appeals for the 11th Circuit which will have a direct operational impact on the type of technology your members can use to reach out to potential members. It also underscores just how unhinged the TCPA has become from Congress’ original intent and why Congress should do something to restore commonsense.

First, a primer/refresher on the issue I am talking about. The Telephone Communications Protection Act (TCPA) was passed in 1991. Its Senate sponsor, Senator Ernest Hollings of South Carolina who passed away recently, described the emerging use of automated telemarketing campaigns as “the scourge of modern civilization. They wake you up in the morning, they interrupt our dinner at night, they force the sick and elderly out of bed; they hound us until we want to rip the telephone out of the wall.” While the Senator may have slightly overstated the case, the reality is many consumers continue to feel harassed by these non-stop calls and their frustration has made TCPA litigation one of the hottest areas of consumer class-action lawsuits. Credit unions have not been exempt from this trend.

The legislation he sponsored was codified as 47 USC §227. This law makes it unlawful for any person to make any call other than for emergency purposes using “any automatic telephone dialing system or an artificial prerecorded voice unless the person has an established business relationship with the recipient.” Seems simple enough except the statute defines an Automatic Telephone Dialing System (ATDS) as equipment “which has the capacity–(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”

Melanie Glasser was upset enough by her marketing phone calls from Hilton that she agreed to be the named plaintiff in what she hopes will become a class-action lawsuit. Glasser v. Hilton Grand Vacations Co., LLC., 341 F. Supp. 3d 1305, 1306 (M.D. Fla. 2018), This case does not deal with whether or not she gave Hilton consent to call her. Instead it centers on the type of equipment the company used when it made the allegedly offending phone calls. The company openly admits to using a new computerized telephone calling system specifically designed to comply with the TCPA in a way that allowed it to automate much of the calling process. Its Intelligent Global Connect dialing system uses software to determine who is going to get called but requires an employee to press a button before each call is completed. The plaintiff argues that this is a distinction without a difference but the case was dismissed by the federal district court. It concluded that because “human intervention is necessary for the numbers to be dialed, the equipment and consequently the calls being made is not covered by the TCPA.” The case is now up on appeal and the briefs read more like patent applications than an examination of appropriate marketing practices.

Although this case is only binding in the 11th Circuit,  If this ruling is upheld it will give businesses including credit unions clear-cut guidance as to what type of equipment does and does not comply with the TCPA.

It is also another great example of why all sides need to come back to the table and fix this out-of-control statute once and for all. Personally, I feel that the goal of the statute is worthwhile. People shouldn’t be inundated with unsolicited offers for things they don’t want. The problem is that, as drafted, the trigger for TCPA compliance is the equipment being used and not how it is being used. As a result, almost all businesses including all but the smallest of credit unions either use or will be using equipment that makes them subject to the TCPA even if they never use that equipment for the type of mass marketing, computer generated automated calls the statute was designed to prevent.

We also need some more commonsense guidance as to what constitutes consent but I’ve run out of space for today’s blog.

April 11, 2019 at 9:19 am Leave a comment

Is That Text Message You Just Sent To Your Member Legal?

I’ve said it before and I’ll say it again. Although credit unions continue to fret over litigation surrounding the applicability of the ADA to their websites, the litigation which should be as concerning if not more concerning to them, involves the Telephone Communications Protection Act which generally, and I mean very generally, bans companies from autodialing messages to consumers without first getting their permission.

Don’t stop reading this blog. I know you people and you’re saying to yourselves that we don’t do auto dialing so therefore the TCPA with its potential fines and class-action litigation doesn’t apply to us. Don’t be so sure. The courts aren’t and neither is the Federal Communications Commission which just issued a request for comment on how it should interpret the TCPA in light of a potentially expansive ruling by the Court of Appeals for the 9th Circuit in Marks v. Crunch San Diego, LLC , 2018 BL 340373 (9th Cir. Sept. 20, 2018). As a matter of fact, there is enough confusion among the courts as to how to interpret the TCPA that I would bet you a beer that Judge Kavanaugh rules on the issue if he gets confirmed by the Senate in the coming days. I like beer.

I know I’ve gone over this before but let’s do it again for old time’s sake. The TCPA and its enacting regulations, place restrictions on the use of automated telephone equipment including automatic telephone dialing systems and telephone facsimile machines (I doubt my kids know what a facsimile machine is). It defines an automatic telephone system as “equipment which has the capacity— (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” Remember, a smart phone was an oxymoron at the time this statute was enacted, so it didn’t anticipate the scenario which is generating so much recent controversy.

Crunch Fitness communicates with respective and current gym members by sending text messages with the help of the Text Munication System. According to the court, when it wants to send a text, a Crunch employee simply logs onto the company system, selects the phone numbers to be called, creates a message and specifies a send date. It sounds an awful lot like technology that more and more credit unions are  using to tell members and potential members about new products and services. They were sued by a gym member who claimed that by sending in texts, they were violating the TCPA.

The District Court dismissed the claim because the gym did not have the equipment to “store or produce telephone numbers…using a random or sequential number generator…and to dial such numbers.” The 9th Circuit disagreed. In its recent ruling it held that “the statutory definition of ATDS includes a device that stores telephone numbers to be called, whether or not those numbers have been generated by a random or sequential number generator.” Now look at what happened in this case. The court is saying that because the company has access to a website which can be used to generate automatic dialing, it is subject to the ATDS even though the phones used and operated by the gym presumably have no such capability.

This ruling, combined with an earlier decision by the Court of Appeals for the District of Columbia, in ACA Int’l v. Fed. Comm’cns Comm’n, 885 F.3d 687 (D.C. Cir. 2018) which I discussed in this blog, has sent the FCC scrambling to once again consider what exactly an ATDS is.

If you don’t think this has a potential impact on your credit union then consider some of the questions the FCC wants stakeholders to weigh in on such as: “Does the interpretation of the Marks court mean that any device with the capacity to dial stored numbers automatically is an automatic telephone dialing system? What devices have the capacity to store numbers? Do smartphones have such capacity? What devices that can store numbers also have the capacity to automatically dial such numbers? Do smartphones have such capacity?” Inquiring minds want to know.

October 5, 2018 at 9:00 am 1 comment

The Supreme Court’s Most Important Banking Decision

The most important banking decision the Supreme Court made in this year’s term, which ended yesterday,  may well be its decision not to take up a case decided by the Court of Appeals for the Second Circuit which oversees New York, Connecticut and Vermont.

First, as a general rule of thumb,  The National Bank Act authorizes a nationally chartered bank to export across the country the  interest rate it is permitted to charge in its home state. While the NBA doesn’t apply to credit unions, NCUA has taken a similar but  narrower approach to regulating federally chartered credit unions.  It has opined that  “ State law may not prohibit an otherwise permissible activity authorized by federal law.”

MADDEN V. MIDLAND FUNDING, LLC  involved  a consumer (Madden)  who opened up a credit card with Bank Of America  which is based  in NY which  caps interest rates at 25%.  (N.Y. Gen. Bus. Law § 349; N.Y. Gen. Oblig. Law § 5–501; N.Y. Penal Law § 190.4).   The account was brought by FIA which is incorporated in Delaware. FIA changed the credit card agreement to stipulate that Delaware law, which has no cap, applied.  Ms. Madden eventually became delinquent. FIA wrote off the debt and sold it to Midland Funding, a third-party buyer of debt. Keep in mind that whereas BOA and FIA are nationally chartered banks, Midland Funding is not FIA’a agent

When Midland tried to collect on her $5,000 credit card debt charging 27% interest Ms. Madden responded with a class action lawsuit claiming that Midland was violating both the federal Fair Debt Collections Practices Act and, most intriguingly for our purposes, New York’s usury law.

Nonsense said Midland. It made the traditional arguments that state-law usury claims and FDCPA claims predicated on state-law violations against a national bank’s assignees, , are preempted by the National Bank Act (“NBA”), and that the agreement governing Madden’s debt requires the application of Delaware law, under which the interest charged is permissible (Madden v. Midland Funding, LLC, 786 F.3d 246, 247 (2d Cir. 2015). The district court agreed and dismissed the lawsuit but the Second Circuit sided with Madden and revived the class action lawsuit.

According to the court “Because neither defendant is a national bank nor a subsidiary or agent of a national bank, or is otherwise acting on behalf of a national bank, and because application of the state law on which Madden’s claims rely would not significantly interfere with any national bank’s ability to exercise its powers under the NBA, state law applied. 786 F.3d 246, 249 (2d Cir. 2015),

But what state law applies? Midland might still win the case. It now goes back to the trial court to rule on whether or not Delaware law applies.  But the outcome of that debate is far from clear and no matter who wins he decision still has the effect of making NY debt more expensive and has sent shivers down the spine of the banking industry which was hoping that the SC would reverse the Second Circuit.

As this morning’s American Banker points out the Court’s decision to take a pass on reviewing Midland leaves several questions unanswered such as    “Can marketplace lenders convince investors that loans in excess of state rate caps are safe to buy? Will continued uncertainty impact the market for certain bonds that are backed by consumer loans? And should banks be worried about a potential erosion of their longstanding pre-emption authority?”

Will Dory find her parents?-Just wanted to see if you were still awake.

June 28, 2016 at 9:48 am Leave a comment

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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