(New York, NY): Collections TCPA exposure increases as a result of the FCC’s July 10th Declaratory Ruling and Order.
The hope of practical relief for lenders has been all but eliminated with clarifications of major aspects of the Telephone Consumer Protection Act (TCPA) in a recent FCC ruling. The ruling, released July 10th, reinforces the FCC’s broad interpretation of the law and upholds restrictive consumer safeguards that have hindered cell phone contact via an autodialer within the industry. “The FCC’s ruling is not favorable for the collections operations of credit card and auto lenders,” said Ed Falco, Director at Auriemma Group. As litigation risk increases for lenders they are likely to curtail collection efforts made to customer’s cell phones. “Automated cell phone contact efforts are not universally harmful to the customer,” adds Falco. “Quite the contrary, they are an attempt to collect a debt, which if left unattended, have broad negative customer impact.”
Some major elements, interpretation, and impacts of the rule as it relates to phone calls include: The definition of an autodialer has been expanded beyond only having the current capacity to store or produce, and dial random or sequential numbers. The definition would now apply if the equipment or system has the potential to be modified to possess the requisite functionality in the future. Some callers have previously taken actions to separate the customer data from the calling capacity as an alternate way to comply with the TCPA. These preventive measures are identified as inadequate in the Declaratory Ruling and Order and this approach no longer gives callers the protection they anticipated.
The meaning of “called party” has been explicitly clarified to mean the actual subscriber or non-subscriber customary user of the phone rather than the more generous definition of the intended recipient of the call. There is a slight win for the callers in that users of numbers on a family plan, as opposed to only the party that is billed for the line, are able to grant express consent. However, there is a clear expectation that callers take proactive measures to identify “ownership.” While the FCC admits that there are no failsafe measures, use of third-party databases that offer a lens into both ownership and reassignment is suggested. Further, the FCC expects that callers have processes in place to ensure that they do not have constructive knowledge of reassignment. The FCC has granted a one-call safe harbor before it would be considered a violation. However, the definition of a “call” is not limited to contact with the called party, but rather is limited to one call attempt. Additionally, the FCC has determined that the one-call allowance extends across the enterprise and includes any company affiliates and subsidiaries. This limitation places an extreme burden on managing telephone contacts on a customer basis and creates incremental TCPA risk for larger organizations that are organized in a product-specific service center model.
There is an incremental responsibility of callers to facilitate consent revocation, and the burden to capture it is clearly placed on the caller. The FCC has said that the called party can revoke consent through any reasonable means and channel. The outcome of recent litigation in the telecommunications industry demonstrates the increased financial exposure lenders could face. In a New York case against Time Warner Cable, Inc., the judge awarded the plaintiff a $230,000 judgment after she received numerous calls in their attempt to contact a customer she did not know, despite her notifying the company of her being the wrong party. “Callers must take proactive actions to prevent violations and have robust policies and practices in place especially related to cell phone line ownership/use and consent. The alternative is to risk facing rising punitive damages,” said Falco.
About Auriemma Group
Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. For more information, please contact Ed Falco at (212) 323-7000.