Banks Fear Ban on Autodial Systems

Bills Aimed at Telemarketing Could Hit Loan Collection

Bankers are watching closely several bills in Congress that would ban the use of automatic telephone dialing systems.

Many financial institutions use these systems in loan-collection operations, particularly to track down slow credit card payers, and in telemarketing.

The proposals before Congress are aimed primarily at stopping telemarketing firms from randomly calling people to sell or advertise goods and services. But the provisions could have a spillover effect on banks' loan collections, an increasingly important function with consumer delinquencies on the rise.

Invasion of Privacy?

Autodialers -- automatic dialing devices -- can call dozens of telephone numbers a minute. When connections are made, an operator can instantly come on the line, or the system can play a prerecorded message.

Consumers have complained that unsolicited autodialer calls are an invasion of privacy and a nuisance.

Large credit card banks rely heavily on the systems because they vastly improve productivity in collection operations. The systems manage a collection agent's time by putting him or her on the line only when a connection is made; their time is not wasted by busy signals or calls that go unanswered.

Citicorp, one of the largest users of the automatic dialing systems -- also called predictive dialing systems -- in the banking industry, has reported productivity gains of more than 300% in collection services.

But the language of the proposed bills, which may be voted on this week, is broad enough to include restrictions on the systems used in the credit card collections area.

Some banks also use the devices to solicit business through telemarketing departments.

The Banks' Defense

Bankers and executives at financial service companies such as American Express Co. say they should not be covered by rules that would limit their ability to use the highly efficient autodialing devices.

They argue that most telemarketers use random dialing to sell services. But when banks and other financial companies use the systems for selling, as opposed to collecting, they aim at people with whom they have ongoing customer relationships.

"It's . . . a new technology that is very helpful to a wide range of businesses and has been abused by a few," said John Russell, vice president of marketing at Banc One Corp., Columbus, Ohio, which uses autodialers for collections. "It would be foolish to do an across-the-board ban."

"We would take exception" to a total ban, said Owen Thomas, director of marketing at American Express' information services subsidiary in Omaha, Neb. The company does telemarketing for Fortune 500 companies and uses predictive dialing systems to make calls.

The devices "save us money and they save our clients money," said Mr. Thomas.

A spokesman for the Senate Commerce Committee acknowledged that banks using autodialers to collect unpaid bills would be affected by the pending legislation. The sponsor of one such measure is Sen. Ernest F. Hollings, D-S.C.

"The Federal Communications Commission would have to decide whether a rulemaking to exempt the banks from the ban should be considered," said the committee staff member.

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