JPMorgan's Robo-Calling Settlement Fuels Fight Over FCC Rules

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A $10.2 million settlement of a class action involving JPMorgan Chase has stoked the interest of banking industry and consumer groups in new rules for placing robo-calls.

JPMorgan this week agreed to settle a lawsuit that alleged the bank's auto-lending unit violated the Telephone Consumer Protection Act by calling more than 2 million consumers' cell phones without their consent. It is the latest settlement of a robo-calling lawsuit by banks, which have already paid hundreds of millions of dollars to settle past cases.

The banking industry last year started to fight back. The Consumer Bankers Association in September petitioned the Federal Communications Commission to exempt banks from liability when they inadvertently make marketing, debt-collection or other calls to numbers that have been reassigned to new consumers. Since then, groups representing other industries, including higher education, have also asked the FCC to lessen their legal liability.

Consumer groups, meanwhile, continue to file lawsuits, such as the one against JPMorgan Chase. Until the FCC issues its ruling, it is likely that multimillion-dollar settlement agreements will be the norm for banks and other industries, said Kate Larson, regulatory counsel at the Consumer Bankers Association.

"We urge the FCC to act on the mounting TCPA petitions — ours included," Larson said in an email.

Because of the lack of clarity about the act, "student loan servicers [are prohibited] from contacting students and families to explain repayment options," Larson said. "Clearly, this issue goes far beyond banking and may impact all Americans."

JPMorgan Chase declined to comment on the settlement agreement, which was filed on Tuesday in U.S. District Court for the Northern District of Illinois. The bank's law firm, Stroock & Stroock & Lavan, did not respond to a request for comment.

Under the Telephone Consumer Protection Act, enacted in 1991, 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.

Last year Capital One Financial in McLean, Va., 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.

Consumer groups have urged the FCC to retain its consumer protections from robo-calling, as many consumers are being harassed by banks, debt collectors and others, even when they are not the intended target.

"The banking and financial services industries, and others like health-care companies and debt collectors, have all been pushing the FCC to shield their industries from these lawsuits," said Margot Saunders, counsel at the National Consumer Law Center. "We're hoping the FCC's ruling will be very limited and will be consumer-friendly."

The FCC's declaratory ruling is "expected soon," said Jonathan Selbin, a plaintiffs' attorney with Lieff, Cabraser, Heimann & Bernstein who has represented consumers against banks.

The FCC did not respond to requests for comment Thursday.

Banks argue that in many cases, they are unable to ascertain when a number has been reassigned to another consumer. Banks say they do not want to place incorrectly targeted calls and they use a wide range of techniques and technology to avoid that situation.

"There's absolutely no incentive for the bank or the company to call the wrong person," Larson told American Banker in January.

Many banks use technology sold by the Seattle company WhitePages that helps identify the owners of phone numbers and associated accounts, said Rob Eleveld, general manager of the Whitepages Pro product. Banks use the software to weed out incorrect numbers, in order to comply with the terms of the act, he said.

Kevin Wack contributed to this article.

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Consumer banking Law and regulation Auto lending Debt collection