Quietly, banks have agreed to pay hundreds of millions of dollars over the last few years to settle a slew of class actions alleging they made illegal phone calls to U.S. consumers.
The cases have become so lucrative for plaintiffs' law firms that one developed a mobile-phone app allowing users to track and potentially cash in on unwanted calls. "Recover up to $1,500 for each illegal call to your cellphone," reads the app's description.
But now the banking industry is fighting back, pressing the Federal Communications Commission to make it harder for consumers to prevail in these cases. And the industry's efforts appear to be on the verge of bearing fruit, according to participants on both sides of the debate.
Most notably, the banking industry wants to be exempted from liability in cases where a bank inadvertently calls a wrong cellphone number, an error that often occurs because the number has been reassigned to a different wireless customer. Many of the suits involve auto-dialed calls that are aimed at collecting unpaid debts.
"We're not trying to inundate anybody with very annoying communications," said Kate Larson, regulatory counsel at the Consumer Bankers Association, which filed the petition with the FCC. "There's absolutely no incentive for the bank or the company to call the wrong person."
Larson said that she met recently with FCC staffers who seemed to agree with the proposition that in cases where the callers don't even know they have the wrong phone number, it's wrong to hold them liable for making unauthorized calls.
"These companies are calling the numbers in error," said Lisa Simonetti, a partner at Stroock & Stroock & Lavan LLP, who often represents the defendants in these lawsuits. She added, in reference to the large sums banks have paid out: "It seems like a pretty harsh result."
The lawsuits stem from a 24-year-old federal law called the Telephone Consumer Protection Act. Under the TCPA, banks and other companies are generally barred from using auto-dialing technology to call wireless phones unless they have the consumer's prior authorization to do so.
The law spells out strict liability for violations $500 for each unsolicited call, or $1,500 if the company intentionally makes such a call after the customer has denied permission.
In recent years, as auto-dialing technology has become more commonplace, JPMorgan Chase, Wells Fargo, Bank of America, HSBC, Bank of the West and Discover Financial Services are among the banks that have been hit with lawsuits.
Eight large banks have agreed to settlements totaling more than $200 million, according to Jonathan Selbin, a partner at Lieff, Cabraser, Heiman & Bernstein, who represented the plaintiffs in some of those suits.
The settlement believed to be the largest in the law's history involved Capital One Financial. Last year, the McLean, Va., lender agreed to pay $73 million to settle a case, with consumers each receiving an estimated $20-$40 and up to $22.5 million being set aside for attorney fees and costs.
Today, the banking industry's push to limit its liability is drawing objections from consumer advocates.
"We're trying to explain that if you stop the lawsuits, you will allow the abuse to continue unabated," said Margot Saunders, a lawyer at the National Consumer Law Center.
It can take months for consumers who are receiving wrong-number calls to get them to stop, she said. She added that if banks are no longer financially liable, they'll have no incentive to take the steps necessary to ensure that they're calling the correct numbers.
"Consumers don't go to lawyers because they get a single, or even multiple, calls on their cellphones," Saunders said. "They go because they're being harassed."
Consumer advocates are concerned that industry groups have the ear of the FCC, which is preparing to act soon. "We understand that they are considering writing new rules, and that this consideration is imminent," Saunders said.
Michael Snyder, an FCC spokesman, said: "The FCC does routinely review regulations, and we look to improve as needed. And certainly TCPA is no exception."
It is unclear how much additional latitude banks might have under any new FCC regulations. The changes being sought by industry representatives go beyond phone calls to wrong numbers. For example, the American Bankers Association is seeking an exemption from liability for calls alerting consumers about the risk of fraud or identity theft.