On June 6, the FTC submitted a comment to the FCC on its Notice of Proposed Rulemaking (NPR) regarding the implementation of recent changes to provisions of the Telephone Consumer Protection Act (TCPA) that permit robocalls “made solely to collect a debt owed or guaranteed by the United States.” Recommending that the FCC proceed cautiously with the expansion of permissible robocalling, the FTC instructed the FCC to establish standards for the collection of government debt that are consistent with the FDCPA, Section 5 of the FTC Act, and the Telemarketing Sales Rule (TSR). Specifically, the FTC’s comment advises the FCC to limit permitted robocalls to only (i) those relating to debts in default status; (ii) persons who actually owe the debts; (iii) those relating to the collection of the government debt; and (iv) collection purposes exclusively. In addition, the FTC’s comment on the NPR suggests that the FCC (i) maintain reasonable security practices over the data collected during covered robocalls; (ii) limit robocalls to the hours of 8:00 am to 9:00 pm; and (iii) require covered callers to “transmit caller ID information that includes a caller number that connects to a live agent representing the debt collector.”
FCC Denies Petition by MBA to Exempt Certain Mortgage Servicing Calls from Prior Express Consent Requirement
In an order dated November 15, the FCC’s Consumer and Governmental Affairs Bureau denied a petition by the Mortgage Bankers Association (MBA) that sought an exemption from the FCC’s prior express consent requirement for non-telemarketing residential mortgage servicing auto-dialer calls to wireless numbers. In its order, the Bureau concluded that MBA had failed to show (1) that the calls in question would be free of charge to consumers; and (2) that the parties seeking relief should be able to send non-time-sensitive calls to consumers without their consent.
Among other things, the Order explained that the Telephone Consumer Protection Act (TCPA) “reflects Congress’ recognition of the potential costs and privacy risks imposed on wireless consumers from the use of auto-dialer equipment, which can generate large numbers of unwanted calls” and accordingly, the FCC has generally attempted to balance and accommodate the legitimate business interests of callers in addition to recognized consumer privacy interests.
On February 10, Indiana Attorney General Greg Zoeller and Missouri Attorney General Chris Koster, along with 23 other state attorneys general, wrote to the Senate Committee on Commerce, Science, and Transportation (Committee) urging it to pass legislation repealing a recent amendment to the Telephone Consumer Protection Act (TCPA) that allows debt collection robocalls to consumers’ cellphones. According to the AGs’ letter, the TCPA currently “permits citizens to be bombarded by unwanted and previously illegal robocalls to their cell phones if the calls are made pursuant to the collection of debt owed to or guaranteed by the United States.” The letter references the FCC’s efforts to slow the proliferation of robocalling and calls the recent amendment to the TCPA a “step backward in our law enforcement efforts” to protect consumers from “unwanted and unwelcome robocalls.”
The United States Supreme Court on Wednesday resolved the long-standing circuit split on whether an offer to satisfy the named plaintiff’s individual claims is sufficient to render a case moot when the complaint seeks relief on behalf of the plaintiff and a class of similarly situated individuals. In a 6-3 decision authored by Justice Ginsburg, the Supreme Court held that an unaccepted settlement or Rule 68 offer cannot moot a class action. However, the Court refused to address and explicitly left open the question of whether its ruling would be different if a defendant deposited the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then entered judgment for the plaintiff in that amount. By leaving this question open, defendants in a position to unilaterally provide complete relief may still be able to “pick off” putative class representatives and avoid class action suits. Read more…
In 2015, the CFPB further expanded its reach into debt collection through a number of enforcement actions. The CFPB also continues to conduct research on a potential rulemaking regarding debt collection activities, which may address information accuracy concerns involving debt sales and other collection activity, as well as many other issues regarding how creditors collect their own debts and oversee collectors working on their behalf. In addition to CFPB activity, this year’s Madden v. Midland Funding, LLC decision has important implications beyond the debt collection industry. Finally, developments regarding the Telephone Consumer Protection Act (TCPA) and collections will likely be of interest to regulatory agencies in the new year.
Debt Sale Consent Orders and Regulatory Guidance
Among the CFPB enforcement actions relevant to debt collection in 2015 were two consent orders with large debt buyers. These orders resolved allegations that the debt buyers, among other things, engaged in robo-signing, sued (or threatened to sue) on stale debt, made inaccurate statements to consumers, and engaged in other allegedly illegal collection practices. In particular, the CFPB criticized the practice of purchasing debts without obtaining supporting documentation or information, or taking sufficient steps to verify the accuracy of the amounts claimed due before commencing collection activities. Under the consent orders, one company agreed to provide up to $42 million in consumer refunds, pay a $10 million civil money penalty, and cease collecting on a portfolio of consumer debt with a face value of over $125 million. The second company agreed to provide $19 million in restitution, pay an $8 million civil money penalty, and cease collecting on a consumer debt portfolio with a face value of more than $3 million. In addition, both companies agreed to refrain from reselling consumer debt more generally. Read more…