A landmark Federal Communications Commission ruling in July clarified a chaotic and confusing set of Telephone Consumer Protection Act rules and assumptions concerning the legalities of autodialers, revoking consent to contact and what penalties would come from not obeying the rules.
Vast TCPA gray areas existed before the FCC's ruling and debt collectors could justifiably cite ignorance or confusion amid puzzling legalese. Many in collections began scrambling after the ruling to make sure they had their operations and controls ready to comply. Others wondered how they will be able to afford to comply. At least one company predicted a sea-change in demand toward quality data as the ruling identified best practices such as using database services to help ferret out poor quality data - such as bad phone numbers - while trumpeting high quality data. "The industry for a long time fed on quantity. Give me all the numbers without a concern about the collateral damage of contacting wrong parties. There was no penalty. The TCPA now says you have to be concerned about the collateral damage. If you don’t, you’re going to get fined. You simply can’t dial mobile phones if you don’t have consent," said Mitchell Young, senior director at Neustar, who oversees the collections, financial services, call center and data verticals. Now, collection agencies can no longer simply dump any and all phone numbers into a dialer and enjoy the gains. The potential awards are now officially outweighed by the risks. TCPA violation penalties are severe - $500 for each unsolicited call or $1,500 if the company intentionally makes a call after the cell phone user denies permission. Third-party agencies that don’t have consent can’t auto dial anybody without facing a TCPA violation. Callers are liable even if they have the permission of the person they are trying to reach but the phone number has been reassigned to another individual. In one recent New York case against Time Warner Cable, a judge awarded the plaintiff a $230,000 judgment after she received numerous calls in an attempt to reach a customer she didn’t know, despite her notifying the company that she was the wrong party. Related litigation has dominated collection industry headlines in recent years. "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," said Ed Falco, director at Auriemma Consulting Group. "The alternative is to risk facing punitive damages."There are many ways for collectors to incur a fine or provoke a lawsuit. The FCC's ruling made clear that if a caller uses an autodialer or prerecorded message to make a non-emergency call to a wireless phone, the caller must have obtained the consumer’s prior express consent. That consent must be in writing if the message is a telemarketing call but can be either oral or written if the call is informational. The rules carve out an exemption for the first wrong-number call but not for any subsequent calls to that number.
Neustar, a data and solutions provider, saw the TCPA changes as a challenge and an opportunity. [Neustar partnered with SourceMedia, publisher of Collections & Credit Risk, months ahead of the ruling to examine TCPA issues pertaining to collections and to help understand industry perceptions, practices and priorities regarding TCPA compliance and dialing efficiency. The company published a White Paper on Collection & Credit Risk's website where it detailed results of a joint survey. Some of those results are referred to later in this article.] "It’s hard to shift on a dime toward quality, with suppliers of phone data biased for a long time toward quantity but compliance is driving a demand and collectors are realizing there’s value in getting the best data," Young said. "Our big message to the industry is that the TCPA is onerous and a real challenge, and it will require some costs so you’re not left with fines alone, but there’s real value that can come from managing your data better." Scott Pearson, a partner at Ballard Spahr LLC, is an advocate of companies that offer data-related services to help collectors navigate TCPA compliance such as making sure “you’re not getting a wrong number but a better number." "This is the new normal. This isn’t going away," he said. "People hate getting these calls at home and even though, for businesses, the more numbers you throw into an autodialer, the better the collection numbers, the collateral damage for consumers stirred regulators into action. A lot of companies still just don’t understand this key aspect of their business is really held in disdain by consumers." Sam Stuckal, senior executive advisor at CEB TowerGroup Financial Services, works with large banks and tier 1 insurance carriers. At times, those companies may need to enforce a payment agreement or claims subrogation and would work with a collection agency. "The feedback I’ve gotten from our customers [after the FCC’s ruling] is that this is a pretty serious event for them. It forces them to ratchet up their data management to keep track of potential customers and their contact information along with revocations of consent in order to stay compliant with TCPA," he said. "This is basically another trap they can fall into if they don’t get the identity management and supporting data plumbing under control. How do they keep track of all the people who don’t want to be contacted as well as calls that fall under the one strike rule? This takes a key piece out of the tool kit of any collection agencies with whom they partner.” Failure can lead to consumer anger, reputational damage and lawsuits, he added. TCPA class-action lawsuits generally have proven to be easy wins for plaintiffs. Stuckal said it’s going to be expensive for financial services firms and their agents to return to manually dialing customers and tracking the failure or success of every call to ensure they don’t make a second or third call. "Staying compliant becomes something of a big data problem within operations as there’s a great deal of transactional data to keep track of. It’s often a cliché, but companies are simply going to have to work smarter and harder. Improving data management to support identify management is critical,” he said. "It’s also essential to access identify data that’s both accurate and available in real-time or close." Some of his customers work with Neustar as a "value-added" data provider offering services that boost the ability to manage data need to respond to the recent TCPA changes. "They have a lot of access to information that’s accurate and up to date around telecommunications including mobile phone holders. Financial service firms can leverage this extensive knowledge store and to meet both the specifics of TCPA and the spirit of KYC [Know Your Customer] regulations. KYC compliance is a huge challenge across financial services and identity management with real time data is a critical part of the solution," Stuckal said.
Consent Revocation Joann Needleman, an attorney at Clark Hill PLC who leads the firm's Consumer Financial Services Regulatory & Compliance group, said consent revocation is a key part of the ruling, specifically that consumers can do so through any reasonable method such as a consumer-initiated call, responding to a call they received and orally. Importantly, any consent needs to come directly from the consumer.
Needleman serves on the Consumer Financial Protection Bureau’s Consumer Advisory Board and is immediate past president of the National Association of Retail Collection Attorneys. She advises companies to give consumers several options for revoking consent. It may be necessary to advise the consumer in every communication that they have a right to change their mind. The FCC considers opportunities to "opt-out" an important disclosure when communicating with consumers, she said. "Some of your agreements may have advised that by providing a telephone number or mobile number the consumer has given consent to be called. Err on the side of caution. Given the theme of the FCC’s ruling, control of the communication must rest with the consumer," Needleman said. "Maybe now is a good time to reconnect with that consumer to secure new consent. Furthermore, don’t get cute with the revocation of consent. The FCC made it abundantly clear that revocation can happen at any time and by any reasonable means. Don't tell the consumer that they can only revoke on the second Monday of the month or to call a specific number." Several months after the ruling it's questionable how many collection agencies are actually taking internal action to ensure they’re in compliance, added Pearson."The FCC's order has made things more difficult and the reality is there's so much pressure on all of these companies right now to deal with a whole host of compliance issues,” he said. "The ruling is 140 pages and going through the whole thing to get details out of it is difficult so we continue to see companies getting sued."
The risks of a lawsuit and large fine for non-compliance may have soared after the ruling, but so has the cost to rethink and remodel the way debtors are pursued.
"Many have [taken action] to try to comply but are not necessarily as up to date as they should be to deal with all of the developments. Then, there’s the matter of the high cost of compliance,” he said. It’s a huge challenge alone to simply capture "so-called any-reasonable-way to revoke consent," he added. "How do you make sure a letter revoking consent gets routed to the right place? Obviously you’re going to want to properly train your call center and, if someone says they don’t want to be called any more, you’d better take action.
Number Reassignment The FCC now holds that callers may incur TCPA liability where they have knowledge of that a phone number has been reassigned. FCC officials hope the ruling encourages companies to be proactive and ensure they’re robocalling the right person. The new user of a reassigned phone number shouldn’t have to deal with being bothered by callers for the old user of the phone number, FCC Chairman Tom Wheeler, a Democrat, said.
The ruling states that businesses should implement new or better safeguards to avoid calling reassigned numbers and offered examples of how callers may learn of reassignments of wireless numbers.
- Include an interactive opt-out mechanism in all artificial or prerecorded-voice calls so that recipients may easily report a reassigned or wrong number;
- Implement procedures for recording wrong number reports received by customer service representatives placing outbound calls;
- Implement processes for allowing customer service agents to record new phone numbers when receiving calls from customers;
- Periodically send an email or mail request to the consumer to update his or her contact information;
- Enable customers to update contact information by responding to any text message they receive.
The FCC acknowledged the steps may not provide actual knowledge whether a number has been reassigned and thus added the provision of making one call to a reassigned number without liability.
FCC Commissioner Mignon Clyburn, also a Democrat, voted for the new rules but acknowledged some aspects, such as provisions on recycled phone numbers, will cause difficulties for collection agencies, banks and other businesses.
"I am sympathetic to the challenges these companies face, since the absence of a comprehensive database of reassigned numbers may be an issue," she said. "The commission is striking a difficult but necessary balance.”
FCC Commissioner Ajit Pai, a Republican, doesn’t agree that companies should be held liable even if they have no reason to know they are calling a wrong number. "This will certainly help trial lawyers update their business model for the digital age," he said.
Needleman believes regulators lacked perspective in dealing with TCPA concerns and issuing its ruling.
"While there were a good amount of consumer complaints lodged to the FCC and the Federal Trade Commission about robocalls, they were slight compared to the 326 million people with cell phones - as of 2012. There are plenty of consumers who do in fact want to be contacted on their cell phones. Make sure you provide them with the appropriate opportunities to do so but on their terms," she said.Meanwhile, the freshly minted budget agreement between the Obama administration and congressional leaders includes one specific carve-out from restrictions on autodialed calls. When the caller is seeking to collect debt owed to or guaranteed by the U.S. government, it will not be necessary to get consumers' consent to robo-call them, according to the legislation.
In a research note, Isaac Boltansky, an analyst at Compass Point Research & Trading, said the bipartisan proposal would be a "slight positive" for federal student loan servicers and debt collectors.
But that glimmer of hope amid the TCPA changes is limited to a relatively small section of collection agencies. Neustar Survey
The Neustar survey canvassed 211 Collections & Credit Risk subscribers in industries ranging from banking to telecommunications to retail to healthcare.
SourceMedia surveyed senior executives and managers with authority concerning calling operations on the data, technology and protocols they use.
The results focused on businesses where outbound dialing is essential and minimizing regulatory risk is a top priority. Overall, the results indicate that businesses are changing their calling practices by investing in strategies to refine how they work and seeking multidimensional, real-time data to help calling operations be precise and profitable while respecting consumers' privacy.
The survey found that most respondents have growing concerns about TCPA risk and up to half of those identified as high-calling firms report they’ve resorted to exclusively dialing mobile phones manually. Among the high-calling firm respondents, dollars collected per dial and the right-party contact rate are the predominant performance benchmarks. Both were ranked first or second in evaluating success by more than 50%. In one case study, a collection agency revealed that phone numbers Neustar identified as "reassigned" or "disconnected" accounted for 44% of the company's list. Those numbers had a right-party contact rate of just 0.4%. Dialing those numbers generated collections totaling just 8% of aggregate revenue. Conversely, the 56% of phone numbers Neustar verified generated 92% of the revenue collected. Put another way, 92% of revenue could be generated using 56% of calling capacity while eliminating TCPA exposure on the risks 44% of numbers. The power of quality data - including taking steps to scrub data and deploy intelligence on phone types - is evident in the case study and across high-calling campaigns. About a third of respondents at high-calling firms reported they send files to outside vendors for identity verification and just more than half of those companies expect to increase the investment in outbound dialing strategies. The FCC's ruling ushered in a new dawn for debt collectors whether the industry wants it or not. Companies that can isolate phone numbers carrying the greatest TCPA risk and identify phone numbers that score higher on business performance measures - such as per dial and right-party contacts rates - hold the keys to profitability and, in turn, success.