Financial institutions that make routine collection calls now face the threat of "robocall" class action lawsuits. Earlier this month, things went from bad to worse for banks that have not committed any abusive robo-calling practices.
The Federal Communications Commission released its long-awaited TCPA Omnibus Declaratory Ruling and Order, which resolved 21 petitions involving a wide variety of issues under the Telephone Consumer Protection Act. Industry groups had been holding their collective breath for the ruling in the hope of stemming the onslaught of class-action litigation that has become the cause du jour for plaintiffs' lawyers. No such luck.
For starters, the FCC promulgated an incredibly broad definition of an "autodialer" under the statute. While Congress only prohibited dialers with the "capacity" to store or produce and dial cell phone numbers "using a random or sequential number generator," the FCC read that language right out of the statute. Instead, the FCC said that any piece of equipment that potentially could be modified to dial random or sequential numbers is an "autodialer" and is therefore prohibited unless customers have given prior express consent to receive those calls. Well, any computer or smartphone can download software that generates random or sequential numbers. That means every iPhone is an "autodialer" under the TCPA.
Even though the FCC admitted that there has be some limit to the type of equipment that can be modified to become an autodialer, the only concrete example it could give was that a rotary phone cannot be converted into an autodialer. That's little solace. The clear message is that banks should use manual rotary phones for their collection efforts, which is hardly realistic.
Assuming that your bank's equipment is an "autodialer" under the FCC's ruling, banks can escape TCPA liability if they have prior express consent from consumers to receive calls from their bank. All that requires is the voluntary provision of a cell phone number on a credit application. But what happens if a phone number for which the bank originally had consent is later reassigned to a new subscriber without the bank's knowledge? Can the bank still rely on the original consent it obtained? No way, says the FCC. Instead, banks will be held strictly liable for calling reassigned cell phone numbers even if they had no idea the number had been reassigned. This is not a trivial matter; every day, an estimated 100,000 cell phone numbers are reassigned to new users.
The FCC did allow a "compromise" by affording callers "one free call" after reassignment that will not result in TCPA liability. What if that one free call is not answered? Tough luck. The bank will be held strictly and deemed to have "constructive" knowledge of the reassignment.
While databases of reassigned numbers do exist that banks can use to try to "scrub" their records, even the FCC acknowledged that "marketplace solutions for identifying reassigned numbers are not perfect." The FCC also declined to allow a bad-faith defense where a company could show that the "called party purposefully and unreasonably waited to notify the calling party of the reassignment in order to accrue statute penalties." What then of someone who obtains a reassigned number and, after receiving a bank's "one free call," decides that rather than letting the bank know the number has been reassigned, simply waits for the bank to call again in order to have a basis for an individual or class action suit? Apparently, the FCC has no problem creating an incentive for this kind of bad actor.
Moreover, if a debtor wants to revoke his or her consent to receive collection calls, the FCC permits him or her to do so "through any reasonable means" including, for example, oral revocation over the phone or "at an in-store bill payment location." In response to banks' arguments that allowing oral revocation would put them at a disadvantage in "he said-she said" situations, the FCC's only answer was that companies must "maintain proper business records tracking consent." This is no answer at all.
In short, the FCC's ruling unfairly lumps legitimate businesses in with the telemarketing abusers the TCPA was intended to deter. The ruling passed by a 3-to-2 vote sharply divided along party lines. The two dissenting FCC commissioners lambasted the majority's ruling. Commissioner Michael O'Reilly described the order as a "farce" that "penalizes businesses and institutions acting in good faith to reach their customers using modern technologies." Well said.
Henry Pietrkowski is a member of the financial industry group at Reed Smith LLP.