On October 14, the ABA submitted a petition to the FCC requesting that it exercise its statutory authority to allow financial institutions to send consumers certain security and fraud alerts without the consumers’ prior consent. Specifically, the consumers would receive alerts regarding: (i) transactions suggesting a risk of identity theft or fraud; (ii) potential security breaches involving personal information; (iii) preventative steps consumers can take to decrease their chances of falling victim to security breaches, in addition to steps they can take to remedy harm already caused by a breach; and (iv) actions required to receive a receipt for money transfers. The petition notes that the most effective way to ensure that consumers receive these important messages is through automated texts and calls to mobile devices and accordingly requests that the FCC allow for an exemption to the Telephone Consumer Protection Act to ensure that customers receive security and fraud notifications in a timely manner.
Recently, the U.S. District Court for the District of Florida denied a major bank’s motions to vacate and modify a judgment that awarded a Florida couple a total of $1,051,000 – approximately $1,500 per unauthorized call. Coniglio v. Bank of America, N.A., No. 8:14-CV-01628-EAK-MAP (M.D. Fla. December 4, 2014). In a complaint filed in July, the couple claimed the bank violated the Telephone Consumer Protection Act after they received over 700 calls in four years, including calls from an automated telephone dialing system, without their consent. The calls began as a result of the couple falling behind on their mortgage payments in 2009. In October, the Court agreed with the couple’s claims and ordered the bank to pay the awarded amount.
On July 14, a national bank, numerous related companies, and several of their third-party collection vendors agreed to pay $75 million to resolve class claims that the bank and other parties violated the TCPA by using an automatic telephone dialing system and/or an artificial prerecorded voice to call mobile telephones without prior express consent. The bank maintains that its customer agreement provided it with prior express consent to make automated calls to customers on their mobile telephones, and that the TCPA permits prior express consent to be obtained after the transaction that resulted in the debt owed. Although they agreed to resolve the matter through settlement to avoid further costs of litigation, the bank and other defendants deny all material allegations.
Recently, Connecticut Governor Dannel Malloy signed SB 209, which makes a number of changes to the restrictions on unsolicited telemarketing contacts with consumers. Under current law, telemarketers are prohibited from making an unsolicited sales call to consumers on the state “Do Not Call” registry unless they receive a consumer’s prior written or verbal consent. The bill removes the verbal consent option, requiring telemarketers to obtain prior express written consent before making such calls. In addition to unsolicited calls, the bill also prohibits without prior express written consent unsolicited text or media messages, as well as unsolicited, automatically dialed, recorded telephonic sales calls—i.e. robocalls. Under the bill, a text or media message is a message that contains written, audio, video, or photographic content and is sent electronically to a mobile telephone or electronic device telephone number, but does not include electronic mail. The bill also increases the maximum fine for each violation from $11,000 to $20,000.
Eleventh Circuit Holds TCPA Consent To Receive Autodialed Calls Must Come From Current Cell Phone Subscriber
On March 28, the U.S. Court of Appeals for the Eleventh Circuit held that, under the Telephone Consumer Protection Act (TCPA), consent to receive autodialed calls on a cell phone number must be provided by the number’s current subscriber and not the intended recipient of the call. Osorio v. State Farm Bank, F.S.B., No. 13-10951, 2014 WL 1258023 (11th Cir. Mar. 28, 2014). The case arose when a credit card applicant (and eventual cardholder) provided her housemate’s cell phone number on the issuing bank’s credit card application. After the cardholder became delinquent on her credit card payments, and a collection agency hired by the bank made over 300 autodialed calls to the housemate’s cell phone, the housemate filed suit against the bank under the TCPA, arguing that he did not consent to receive autodialed calls from the bank. The Eleventh Circuit held that the cardholder had no authority to consent to the collection calls because only the subscriber—the housemate—could have given such consent, either directly or through an authorized agent. The court further held that the cardholder and the housemate, in the absence of any contractual restriction to the contrary, were free to orally revoke any consent previously given to call the number in connection with the credit card debt. Finally, the court rejected the bank’s argument that the TCPA prohibits autodialed calls only when the called party is charged for each specific call. The court reversed a district court ruling in favor of the bank and remanded for further proceedings.
On December 3, the U.S. Court of Appeals for the Second Circuit held that federal rules govern when determining whether a federal TCPA suit may proceed as a class action and reinstated a case dismissed based on New York state class action rules. Bank v. Independence Energy Group LLC, No. 13-1746, 2013 WL 6231563 (2nd Cir. Dec. 3, 2013). A federal district court dismissed, sua sponte, a TCPA class action complaint based on the application of New York state civil procedure, which prohibits class-action suits for statutory damages. On appeal, the Second Circuit agreed with the named plaintiff that, based on the U.S. Supreme Court’s holding last year in Mims v. Arrow Financial Services, LLC, 132 S. Ct. 140 (2012), Federal Rule of Civil Procedure 23 applies when deciding whether a federal TCPA suit can proceed as a class action. In Mims, the Court had held that TCPA Section 227(b)(3) permits private parties to bring an action in an appropriate state court, but does not require that private actions seeking redress under the TCPA be heard only by state courts. Here, the Second Circuit reasoned that Mims “suggests that in enacting the TCPA, Congress merely enabled states to decide whether and how to spend their resources on TCPA enforcement,” and that “Congress had a strong federal interest in uniform standards for TCPA claims in federal court.” Based on Mims, the Second Circuit rejected its prior interpretation of section 227(b)(3) as having “substantive content” and providing a delegation of authority to state courts to set the terms of TCPA claims. Accordingly, the court held that Federal Rule of Civil Procedure 23, not state law, governs when a federal TCPA suit may proceed as a class action.
On November 21, the U.S. Court of Appeals for the Seventh Circuit held that the federal Telephone Consumer Protection Act (TCPA) does not preempt an Indiana statute that bans most robocalls without exempting calls that are not made for a commercial purpose. Patriotic Veterans, Inc. v. State of Indiana, No. 11-3265, 2013 WL 6114836 (7th Cir. Nov. 21, 2013). A not-for-profit Illinois corporation seeking to use automatically dialed interstate phone calls to deliver political messages to Indiana residents sought a declaration that the Indiana Automated Dialing Machine Statute (IADMS) violates the First Amendment, at least as it applies to political messages, and also is preempted by the TCPA, which expressly exempts non-commercial calls such as political calls from the TCPA’s regulation of autodialers. Overturning the district court’s decision, the Seventh Circuit found that the Indiana statute is not expressly preempted by the TCPA because the plain language of the TCPA’s savings clause states that the federal law does not preempt any state law that prohibits the use of automatic telephone dialing systems and, even if the IADMS is considered a regulation of, rather than a prohibition on, the use of autodialers, the savings clause does not at all address state laws that impose interstate regulations on their use. The court further found that the IADMS is not impliedly preempted by the TCPA because it is possible to comply with the state statute without violating the TCPA, the state statute furthers the TCPA’s purpose of protecting the privacy interests of residential telephone subscribers, and Congress did not intend to create field preemption when it enacted the TCPA. The court, however, remanded the case to the district court to consider whether the statute violates the First Amendment.
On October 16, new rules took effect that require businesses to obtain express written consent before making certain telemarketing calls to customers. The rules arise from a February 2012 Report and Order issued pursuant to the Telephone Consumer Protection Act (TCPA), in which the Federal Communications Commission (FCC): (i) required that businesses obtain prior express written consent for all autodialed or prerecorded telemarketing calls to wireless numbers and residential lines, (ii) allowed consumers to opt out of future robocalls during a robocall, and (ii) limited permissible abandoned calls on a per-calling campaign basis. While the consumer opt-out and abandoned calls limitations are already in effect, compliance with the express written consent requirement was not mandated until now. The rules require that the written consent be signed and be sufficient to show that the customer: (i) receives “clear and conspicuous disclosure” of the consequences of providing the requested consent and (ii) having received this information, agrees unambiguously to receive such calls at a telephone number the consumer designates. In addition, the rules require the written agreement to be obtained “without requiring, directly or indirectly, that the agreement be executed as a condition of purchasing any good or service.” The FCC rule allows electronic or digital forms of signatures obtained in compliance with the E-SIGN Act—e.g. agreements obtained via a compliant email, website form, text message, telephone keypress or voice recording—to satisfy the written requirement. The FCC also removed an exemption that allowed businesses to demonstrate consent based on an “established business relationship” between the caller and customer.
On August 22, the U.S. Court of Appeals for the Third Circuit held that the TCPA provides consumers the right to revoke their “prior express consent” to be contacted on their cellular phones by an automated telephone dialing system. Gager v. Dell Fin. Servs., LLC, No. 12-2823, 2013 WL 4463305 (3rd Cir. Aug. 22, 2013). The consumer provided her cellular number on an application for a line of credit where prompted to provide a home phone number and did not indicate it was her cellular phone number or that the financial services company should not use an automated dialing system to call the number. The consumer later sent a letter asking the company to stop calling the phone number she had provided on the application, but did not indicate that it was a cellular number. The district court dismissed the consumer’s complaint alleging that the company violated the TCPA by continuing to call after she asked the company to stop calling the number, holding that the consumer could not revoke her prior express consent for three reasons, among them the premise the TCPA does not provide for “post-formation revocation of consent” and that any contrary instructions regarding contact by an automatic dialing system had to be given at the time she provided the number. On appeal, the court held that the absence of an express statutory authorization for revocation of prior express consent in the TCPA’s provisions on autodialed calls to cellular phones does not mean no such right exists. The court held that the consent is revocable—with no limit on the time period for revocation—for three reasons: (i) the common law concept of consent shows that it is revocable; (ii) given the TCPA’s purpose to protect and not constrict consumers rights, any silence in the statute as to revocation should be construed in favor of consumers; and (iii) an FCC declaratory ruling in another matter that consumers may revoke their prior express consent to be contacted by autodialing systems delivering text messages. The court reversed the district court’s dismissal and remanded for further proceedings.
On August 28, the U.S. Court of Appeals for the Fourth Circuit published an opinion, previously under seal, in which it held that provisions of the Telephone Consumer Protection Act (TCPA) requiring all automated telephone messages to disclose the entity initiating the call and its telephone number are constitutional. State of Maryland v. Universal Elections, Inc., No. 12-1791 (4th Cir. July 29, 2013). In affirming the district court’s judgment, the court identified three important government interests served by the disclosure requirements: (i) protecting residential privacy, by providing call recipients the information needed to stop future calls; (ii) promoting disclosure to avoid misleading recipients of recorded calls, by enabling call recipients to better evaluate the veracity of such messages; and (iii) promoting effective law enforcement by assisting the government in detecting violations.
Federal District Court Holds Phone Number Provided in Online Account Information Is Consent to Receive Text Messages
On May 30, the U.S. District Court for the Northern District of California held that a user of an online service consented to receiving text messages from that service by including his mobile number in his online account information. Roberts v. PayPal, Inc., No. 12-622, 2013 WL 2384242 (N.D. Cal. May 30, 2013). In this case, a PayPal user filed a putative class action claiming that the company sent unsolicited advertisements via text messages to users’ mobile phones in violation of the Telephone Consumer Protection Act, which generally prohibits unsolicited calls and messages using automatic dialing or prerecorded voices absent express written consent. The court granted summary judgment to PayPal, holding that, by providing his mobile phone number to PayPal when he added the number to his online account, the user provided express consent for PayPal to send text messages. The court did not resolve PayPal’s alternative argument that the user consented to receiving messages by accepting the terms of PayPal’s user agreement, which included an express consent to receive autodialed calls. That provision was not included in the agreement at the time the user created his PayPal account and accepted the user agreement, but was added several years later without notice to the user. The court expressed skepticism concerning the binding nature of an agreement amendment that is merely posted to a website without other notice to the customer, even if the customer has previously agreed to the terms and that procedure.
On January 29, a credit card holder filed a putative class action against a card issuer that funds consumer retail credit accounts for customers of a major retail chain, alleging that the issuer violated the Telephone Consumer Protection Act in attempting to collect on the card holder’s credit card debt. Complaint, French v. Target Nat’l Bank, No. 13-233 (S.D. Cal. filed Jan. 29, 2013). The named plaintiff claims that after she fell behind on her payments, the issuer began making numerous calls daily to her personal cell phone, a number she claims not to have provided to the issuer. The issuer allegedly used an “automatic telephone dialing system” to make the calls, which the card holder claims continued even after she notified the issuer that it was not authorized to contact her on her cellular phone, and asked that the calls cease. The card holder alleges that in doing so, the issuer violated the TCPA, which requires express written consent from a consumer prior to receiving calls from an automated dialing system or an artificial or prerecorded voice. On behalf of the proposed class, the card holder is seeking $500 in statutory damages for each and every alleged negligent violation, and treble damages for each alleged knowing or willful violation. The suit is the latest in a growing number of cases to be filed in recent years, particularly in California, and highlights a significant litigation risk for card issuers and debt collectors.
On October 12, the U.S. Court of Appeals for the Ninth Circuit upheld provisional class certification for a plaintiff debtor, who claimed that a debt collector had violated the Telephone Consumer Protection Act (TCPA) by using an automatic dialer to place calls to plaintiff and other debtors’ cellular telephone numbers obtained via skip-tracing, and where the debtors also had not expressly consented to be called. Meyer v. Portfolio Recovery Assocs. LLC, No. 11-56600, 2012 WL 4840814 (9th Cir. Oct. 12, 2012). The debt collector argued, in part, that typicality or commonality issues should preclude class certification because some debtors might have agreed to be contacted at their telephone numbers, which were obtained after the debtors incurred the debt at issue. Citing a recent FCC declaratory ruling, the court noted that prior express consent is deemed granted only if the debtor provides a cellular telephone number at the time of the transaction that resulted in the debt at issue. The court thus rejected the debt collector’s argument, and held that debtors who provide their cellular telephone numbers after the time of the original transaction are not deemed to have consented to be contacted under the TCPA. In addition, the court upheld the district court’s grant of a preliminary injunction to the plaintiff, finding that he had established a likelihood of success on his TCPA claim and had demonstrated irreparable harm based on the debt collector’s continuing violations of that statute.
On September 17, the U.S. District Court for the District of Washington approved a settlement entered into between a student lender and a class of borrowers who alleged that the lender violated the Telephone Consumer Protection Act (TCPA) by employing an automated dialing system to place collection calls to borrowers’ cell phones. The lender and its affiliated companies agreed to pay $24 million to resolve the case and avoid the costs of further proceedings, but the lender continues to vigorously deny the allegations. According to counsel for the class, the settlement, which the parties have been negotiating since 2010, is the largest settlement to date under the TCPA.
On January 18, the U.S. Supreme Court unanimously held that the Telephone Consumer Protection Act (TCPA) does not require that private actions seeking redress under the TCPA be heard only by state courts. Mims v. Arrow Financial Services, LLC, No. 10-1195, 2012 WL 125429 (Jan. 18, 2012). The decision reversed an Eleventh Circuit decision upholding a district court’s finding that Congress had placed exclusive jurisdiction over private TCPA actions in state courts. In so reversing, the Supreme Court contravened prior decisions from the Second, Third, Fourth, Fifth and Ninth circuits. Unlike those decisions, the Supreme Court found no reason to convert the TCPA’s permissive grant of jurisdiction to state courts into an exclusive grant barring the federal-question jurisdiction of U.S. district courts. According to the Supreme Court, in the TCPA Congress enacted “detailed, uniform, federal substantive prescriptions” related to telemarketing and “provided for a regulatory regime administered by a federal agency.” Congress could have, but did not, seek only to fill gaps in states’ enforcement capability.