Archives for November 2018

Can a named class representative continue to represent a putative TCPA class action even after a Defendant pays the Plaintiff the highest amount he/she could possibly recover on their individual claim? That question was left open in the U.S. Supreme Court’s decision in  Campbell-Ewald Co. v. Gomez,136 S. Ct. 663 (2016) but was answered  affirmatively by a district court in Maryland last week in Boger v. Trinity Heating & Air, Inc., Case No. 17-7729, 2018 WL 6050886 (D. Md. Nov. 16, 2018.)

Setting the stage. Supreme Court precedent counsels that a named class representative must have standing at all stages of the litigation. Black letter law also dictates that an uncertified class is not a legal entity capable of pursuing a claim on its own. So if a named class representative’s claim is mooted, the entire action–including the class components–should go away.

At least in theory.

In practice appellate courts over the years have concocted numerous “relation back” doctrines designed to save class actions from efforts by Defendants to “pick off” class representatives by paying them the full amount recoverable on their individual claims. The fear is that class actions under Rule 23 would evaporate if a Defendant could always just throw  few bucks at a class representative and make the claim disappear.

The law in this area continues to be in flux. In Campbell-Ewald the Supreme Court confirmed that an offer to settle a claim exceeding the amount recoverable by a class representative is insufficient to moot a claim at all–a rejected offer is a legal nullity with no effect on an underlying claim (probably).  But the divided Supreme Court in Campbell-Ewald reserved the issue of whether mootness can be bought with an effective delivery of the necessary sums to the Plaintiff.

Since Cambpell Ewald, many have tried and failed to pick off TCPA claims using the old “deposit-money-with-the-court trick.” The Ninth Circuit was first to determine that class representatives cannot be forcefully bought off in Chen v. Allstate Insurance Company, 819 F.3d 1136 (9th Cir. 2016).  The Seventh and Second Circuits have followed suit–although the Seventh Circuit has suggested that a pick off move may create valid grounds to challenge a class representative’s adequacy to represent the class. See Fulton Dental v. Bisco, Inc., 860 F.3d 541 (7th Cir. 2017).

That brings us to Boger. In that case a named class representative received 3 faxes. It sued on behalf of thousands of others that had received similar faxes. The Defendant deposited $6,000.00 with the court for Plaintiff’s benefit–more than Plaintiff could have ever recovered on its individual claim. Defendant then moved to dismiss on the ground that the claim had been mooted by the tender of complete relief.

The Boger court disagreed. Following Chen the court concluded “a class action plaintiff should have the opportunity to seek class certification before a defendant can force a settlement.” Even if a complete payment is made, therefore, the Boger court finds that it does not “necessarily satisfy Boger’s interest in pursuing a class action, which simply cannot be met by any offer that precludes him from seeking class certification.” Boger at *5.

The idea that a Plaintiff has a non-pecuniary “interest” in representing a class that cannot be mooted is curious and does not appear to derive from Rule 23 or any other federal statute. Nonetheless, this notion has cropped up time and again in TCPA “pick off” cases. Keep it in mind folks.

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Editor’s note: This article is provided through a partnership between insideARM and Womble Bond Dickinson. WBD powers our TCPA case law chart and provides a steady stream of their timely, insightful and entertaining take on this ever-evolving, never-a-dull-moment topic. WBD – and all insideARM articles – are protected by copyright. All rights are reserved.

Currently pending before the U.S. Supreme Court in Obduskey v. Wells Fargo is the question of whether the FDCPA applies to nonjudicial foreclosures. A circuit split currently exists on the issue: the Tenth Circuit in the underlying Obduskey case found that nonjudicial foreclosures do not fall under the FDCPA’s purview, whereas the Sixth Circuit found the opposite.

Directly impacted by this circuit split is a case in the Eastern District of Michigan, Garland v. Orlans PC, No. 18-cv-11561 (E.D. Mich. Nov. 21, 2018), where a judge decided to stay the matter pending the U.S. Supreme Court’s decision on the issue.

Garland, like Obduskey, deals with a nonjudicial foreclosure. Defendant filed a motion to dismiss the case, however the motion to dismiss requests that the matter be stayed (or put on hold) until the U.S. Supreme Court’s decision is released. Since the Eastern District of Michigan sits within the Sixth Circuit, the court would ordinarily be bound by the Sixth Circuit’s precedent. In this matter, it would mean that the FDCPA applies to nonjudicial foreclosures like the one from where this suit stemmed. However, since all courts in the United States — including the Sixth Circuit and the courts within its jurisdiction — are bound by the decisions of the U.S. Supreme Court, the Obduskey decision might overturn the current precedent that binds the Eastern District of Michigan and may require the court to come to a completely different conclusion.

The court agreed with the defendant. Since the Obduskey decision will directly impact the court’s decision in this matter, the court found it would be better to wait. Additionally, the court noted that staying the matter could save a substantial amount of effort and expense for the court and the parties. If the court were to deny the request to stay, the litigation would continue as usual while the Obduskey decision is pending. If the Obduskey decision comes down and finds that the FDCPA does not apply to nonjudicial foreclosures, then the FDCPA claims in this case would be moot and the time, effort, and expense used to continue the litigation would have been wasted. Since the risk of continuing the litigation while Obduskey is pending far outweighs the minimal risk to plaintiff caused by staying the matter, the court decided to grant the request to stay.

insideARM Perspective

Right now, all signs point toward the U.S. Supreme Court siding with the Tenth Circuit. Two relatively recent items support this prediction. First, the Bureau of Consumer Financial Protection (BCFP or Bureau) recently filed an amicus brief in the Obduskey case, siding with the Tenth Circuit and arguing that the FDCPA does not apply to nonjudicial foreclosures. Second, after Justice Brett Kavanaugh joined the bench, the U.S. Supreme Court now has a right-leaning majority that is unlikely to extend the reach of the FDCPA. Based on this, it sounds like the judge in the Garland matter made the right call.

Last month I attended the Online Lending Policy Summit in Washington, D.C. A number of takeaways will be of interest to the ARM industry, including the Federal Reserve’s view of the nation’s regulatory structure, and some pre-election insight into the Democrats’ agenda for leadership of the House Financial Services Committee.

The one-day event was hosted by the Online Lending Policy Institute (OLPI), which is based out of Boston University. It was attended by approximately 200+ (my estimate) state and federal regulators, as well as government affairs and industry stakeholders in the fintech space. Speakers were from the Office of the Comptroller of the Currency (OCC), Treasury, the Bureau of Consumer Financial Protection, Congress, and state regulators/attorneys general.

Overall messages I took away:

• The U.S. regulatory structure is in the way of robust fintech progress
• 10+ federal agencies are vying in uncoordinated fashion to regulate the space
• 50 states, 50 AGs complicate the regulatory environment even further
• There is disparity between treatment of bank vs. non-bank service providers
• There is a constant swing of the pendulum between over and under regulation
• The industry lauded a recent Treasury report about innovation which recommended that:
  • Laws should be harmonized
  • Regulatory overlap should be reduced
  • Regulations should be better tailored for the size and complexity of businesses
  • Credit flow needs to be improved
  • The cost of credit is an important component
  • Innovation is of critical importance – it’s exploding outside of the regulated world, but not inside
  • Regulators should network more (it was noted by a Conference of State Bank Supervisors speaker that this happens more than it used to) and work together (i.e. importance of NMLS).
  • Lending by fintechs currently = 36% of all personal loans
  • The mortgage process will be increasingly more digitized
  • The IRS income verification system should be updated to a modern, technology-driven interface that protects taxpayer information and enables automated and secure data sharing with lenders or designated third parties.

Of particular note is that the report specifically recommends “modernizing rules for digital communications, such as the Telephone Consumer Protection Act and the Fair Debt Collection Practices Act.”

The following are highlights from some of the speakers I thought would be of interest. 

Grovetta Gardiner, Senior Deputy Comptroller for Compliance and Community Affairs at the OCC shared that there is a war of sorts going on between the OCC — which recently announced the availability of a special purpose charter for fintechs (which would allow them to operate nationally and level the playing field, and is in the public interest because their mission is to expand access to the financial system) — and states, which think this usurps their power. She reminded attendees that “innovation is inherent in the banking system” – as examples she said that checking accounts, ATMs and banking by smart phone were all novel when introduced.

Paul Watkins, head of the BCFP Office of Innovation –which, notably, has three employees where the Research group has 40– offered his guiding principles. He said that consumer protection advocates usually relate to the concept of innovation negatively and with skepticism, but as we (the Bureau) were engaging in consumer protection we had to shift from the eyes of just the regulator to the eyes of the consumer. From a consumer perspective, only a small portion of transactions are redressable by enforcement. As a regulator, he said, you have to care because innovation drives competition, and we noticed that regulators around the world were creating sandboxes, promoting innovation through change in regulatory structure.

Watkins reiterated the Bureau’s responsibility to review regulations that may be outdated or unnecessary, and he described their trial disclosure and no action letter programs (which have been essentially unused since created). He said they will be taking a more flexible approach, allowing disclosures to be tested (with the ability to tweak) for up to two years, and trade groups can apply. By the way, consumer groups have bashed this approach as irresponsible. Watkins said he’s learned that it’s rare for fraud to occur in a sandbox; crooks tend to not want to engage with regulators. He noted that most financial disclosures were created for paper delivery and we need to facilitate new ways of communicating with consumers in the market.

He concluded with his core principles of clarity of timing, expectations, and coordination with other regulators. His advice to industry is to know specifically what you want and back it up with statutory support; in other words, “Here’s what we want, and here is how we think you can use your scope of jurisdiction to make the change.” He said, “We just don’t see this from business.”

Rep. Gregory Meeks (D-NY) serves on the House Financial Services Committee. He shared that during law school he used rent to own furniture, and his father used legal and illegal sources of capital to make ends meet.

This event took place just about one month prior to the election. He said, “If we take back the house, I would hope we don’t make the same mistakes. We need compromise. Blue dog dems are more moderate and more likely to compromise and bring us back together. Being from NY, I don’t see how we can say all the financial institutions are bad. The dialogue of Main Street vs. Wall Street is bad. One doesn’t work without the other.”

Meeks confirmed that if the Democrats win control of the House, Maxine Waters would be Chair of the Financial Services Committee, and that she would work to fix/shore up the CFPB (he said CFPB, not BCFP) to restore consumer confidence that someone is working to level the playing field and make sure those that are good get to move forward; those who are bad don’t. He said that opportunities for early wins/cooperation include a charter for online lenders, and rules/regulations from the CFPB to create certainty.

“I’ve started to sit down with consumer groups – to try to compromise and get them to pull back on some of their objections — take the ‘them vs. us’ out of it. The only way to fix the CFPB is through legislation. The problem is we have one head vs. five directors. I may be on the other side of my colleagues on this. It should not be a ping pong ball. That’s not good for anybody. Good folks need certainty. A board would help this.”

You can watch additional highlights here.

insideARM Perspective

I shared a version of this recap the November meeting of the Consumer Relations Consortium (CRC). Innovation and modernization are key focus areas for the group, illustrated in part by our current work on proposing a standard debt collection disclosure form (which would serve as the validation notice) — including a digital-first version, designed to be delivered on a mobile device.  

Other takeaways from the Online Lending Summit that align with CRC initiatives include the concepts that access to large amounts of data will drive the future of the industry, and API standards are needed to facilitate data sharing. 

Editor’s Note: This article previously appeared on the Ontario Systems Blog and is republished here with permission.

Telephone Consumer Protection Act (TCPA) litigation is hot. Fueled by the DC Circuit Court of Appeal’s decision last March in ACA International v. FCC, callers of all types are being sued and cases before all courts are being appealed faster than we can spell certiorari. Why? Because the stakes are high.

First Comes Confusion

ACA v. FCC left us with little to no definition of an Automatic Telephone Dialing System (ATDS). In effect, the DC Circuit’s decision was a time machine that threw us back to the late 90’s – a time when debt collectors were exempt by rule from the TCPA and life was good. For many, the decision felt like a win, but the Monday morning quarterbacks quickly realized the only thing ACA v. FCC really accomplished was to create even more confusion and ambiguity in the law. By casting aside the FCC’s 2003, 2008, 2012 and 2015 orders interpreting the definition of an ATDS, ACA v. FCC basically left consumers and businesses alike wondering if they would even know an ATDS if they saw one.

Along Came Crunch

On November 7, 2018, in the closely-followed case Marks v. Crunch San Diego, LLC, No. 14-56834 (9th Cir.), the 9th Circuit became the third appellate court to address the in the wake of ACA v. FCC.  Departing from the 2nd and 3rd Circuits, the Marks Court adopted yet another definition of ATDS. Rather than interpreting the statutory definition of ATDS as a device that can store or produce random or sequential numbers and to dial such numbers [as did the 2nd and 3rd Circuits], the Marks court held any device which can store and dial numbers to a consumer’s mobile number is an ATDS.

Marks basically skipped over the words in the statutory definition pertaining to random or sequential number generators and ruled equipment that stores and dials telephone numbers from a list, regardless of whether those numbers were randomly or sequentially generated, is an ATDS, thus classifying the common smart phone as an ATDS. It’s terribly disappointing that the 2nd Circuit did not take the time to define the word “store” as used in the statute. None the less, Crunch San Diego appealed. The 9th Circuit denied its petition and sent Crunch on its way to the U.S. Supreme Court.

Supreme Court Review

Review by the Supreme Court is not automatic. The Supreme Court only accepts cases for review in limited situations — specifically, Rule 10. Considerations Governing Review on Writ of Certiorari, provides:

Review on a writ of certiorari is not a matter of right, but of judicial discretion. A petition for a writ of certiorari will be granted only for compelling reasons. The following, although neither controlling nor fully measuring the Court’s discretion, indicate the character of the reasons the Court considers:

(a) a United States court of appeals has entered a decision in conflict with the decision of another United States court of appeals on the same important matter; has decided an important federal question in a way that conflicts with a decision by a state court of last resort; or has so far departed from the accepted and usual course of judicial proceedings, or sanctioned such a departure by a lower court, as to call for an exercise of this Court’s supervisory power;

Author’s Explanation: Huge conflict among courts of appeals and courts of last resort or some court somewhere came up with some goofball interpretation of the law.

(b) a state court of last resort has decided an important federal question in a way that conflicts with the decision of another state court of last resort or of a United States court of appeals;

Author’s Explanation: Conflict of legal decisions interpreting a federal issue among courts of last resort.

(c) a state court or a United States court of appeals has decided an important question of federal law that has not been, but should be, settled by this Court, or has decided an important federal question in a way that conflicts with relevant decisions of this Court.

Author’s Explanation: A court of last resort or court of appeals has interpreted a federal issue which conflicts with the Supreme Court’s previous or relevant decisions.

My Prediction

Due to the conflict in opinion among Circuit Courts of Appeals interpreting the definition of an ATDS, applying the requirements of Rule 10, I believe the U.S. Supreme Court may very well grant the Crunch San Diego’s petition for certiorari. Should such a review occur, we will hopefully receive the long-awaited answers to questions such as:

• Does an ATDS have to possess the capacity to generate random or sequential numbers and to dial such numbers?
• What is the definition of store? Is storage limited to RAM memory, the load of a pool, or the retention of a call record in the device after call launch?
• If the consumer you intend to call must grant consent or must the consumer you actually call grant TCPA style consent?

For an interesting blog on this topic, click here.

In the meantime, behave conservatively, document consent and revocation, audit to your processes, update your policies and procedures and diagram your call and data flows through your autodialer and your manual contact system. Remember if you do use a manual contact system, make sure it does not store numbers in RAM memory or use or save lists of numbers. Finally, if you need assistance with any aspect of your consumer contact processes or procedures please reach out to me – Happy to consult and happy to help.

Happy Thanksgiving to you my friends.

On November 20, 2018, the Federal Communications Commission’s (FCC) Chairman Ajit Pai issued a press release proposing a reassigned number database and reaffirming the FCC’s fight against robocalls.

According to the release, the reassigned number database “would help legitimate callers know whether telephone numbers have been reassigned to somebody else before calling those numbers so they can direct their calls to parties who asked for them rather than individuals who have subsequently obtained those reassigned numbers.”

The FCC’s top priority remains combatting robocalls, according to Chairman Pai. Chairman Pai also adds that preventing robotexts is also an issue that needs to be addressed.

Ultimately, the release suggests that Chairman Pai wants to establish new rules regarding the reassigned number database and create a Declaratory Ruling on robotexts. The next FCC Open Commission Meeting will be held on December 12, 2018, where these items will be addressed.

insideARM Perspective

Legitimate players in the industry want to ensure that they are calling the right party. The reassigned number database, depending on how it is created and deployed, could help companies ensure they are using their time and efforts to contact the correct person. However, without seeing how the database looks and functions, it is difficult to tell what kind of a compliance and operational burden it will place on companies.

While all of this is going on, the country continues to wait for long-needed clarity on the TCPA. A group of Republican senators submitted a letter to Chairman Pai back in August addressing the need for TCPA clarification. Chairman Pai responded in September saying that he agrees. This all occurred prior to the Ninth Circuit taking a divisive position on the definition of an ATDS in Marks v. Crunch San Diego, LLC. Since yesterday’s press release is silent as to TCPA clarification, it sounds like it may not be addressed at the next Open Commission Meeting, so we continue waiting.

Data privacy and protection concerns permeate TCPA class actions as consumer lawyers have become increasingly bold about demanding huge sets of private financial records and data from defendants. These demands risk the privacy and financial well being of millions of customers yet–in the greatest of ironies–courts are frequently told that the data is needed to assure that consumer privacy is protected–the TCPA protects privacy, after all.

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TCPA defendants need to be extremely careful when providing customer data to anyone without a court order–a point driven home to devastating effect in the remarkable saga of Cordoba v. DirecTV, LLC.  There, DirecTV finds itself in an unshakable privacy lawsuit owing to its production of customer records to its own TCPA Defense expert.

Here’s the story:

Back in 2015 Cordoba sued DirecTV alleging, inter alia, violations of the TCPA’s DNC rules.  DirecTV decided to defend itself by arguing that many of the class members had established business relationships with it, which is an exception to the otherwise black-and-white rule that numbers on the DNC may not be called for telemarketing purposes. To advance that defense DirecTV retained an expert and transferred a bunch of account data to the expert to analyze and provide guidance to DirecTV (and eventually to the Court) as to whether and to what degree class members had EBRs.

That all seems appropriate, if not prudent. But there’s a twist.

DirecTV’s data is subject to something called the Satellite Television Extension and Localism Act of 2010. (“STELA.”) STELA imposes a commandment upon DirecTV to the effect: “thou shalt not disclose personal identifying information about your consumers to anyone…” (Paraphrasing.)

While you’ve probably never heard of STELA, DirecTV’s lawyers had and this is where things get interesting. When Plaintiff moved for certification back in 2017 DirecTV opposed certification arguing, inter alia, that individualized issues respecting the applicability of the EBR defense thwart commonality. In support of this argument they submitted their expert report relying on the customer data DirecTV had supplied.

In response the Plaintiff’s lawyers–the formidable bunch over at Lief Cabraser– demanded the data underlying the expert’s report. DirecTV refused to produce the data to LC, arguing that STELA prevents disclosure.

Hmmm.

So DirecTV asked the Court to–on the one hand–accept its expert’s report relying on the secret special data but–on the other hand–to deny the Plaintiff’s expert access to the same secret special data. You see where this is headed.

The Court ordered the production of the data over to LC’s expert and in so doing made an express finding that the data produced to DirecTV’s expert was, in fact, subject to STELA. Uh oh. (It then proceed to certify the TCPA case–more uh oh.)  You can read the opinion here: Cordoba Cert. Opinion

But Lief Cabraser was not satisfied with its data award or its certification order. Oh no, they had bigger plans.

In May, 2018 that plan was unveiled when a new class representative joined the case. This class representative did not allege that she had received calls in violation of the TCPA, however. Instead, she alleged that her data had been improperly provided by DirecTV to its defense expert in violation of STELA and sought to represent a class of at least 9,100 other individuals that had suffered the same indignity.  The class seeks to recover at least $9,100,000.00 in statutory damages for the violation! If you’re curious the Third Amended Complaint asserting the STELA claims can be found here: Cordoba Complaint

Not surprisingly, the Third Amended Complaint quotes the Court’s own earlier certification order noting that the data produced to the expert was, in fact, subject to STELA. The only liability question, therefore, was whether or not the data was produced pursuant to an enumerated exception.

DirecTV responded to the filing of the Third Amended Complaint by moving to compel arbitration. The Cordoba court ruled on that arbitration motion just last week–DENYING it– in Cordoba v. DirecTV, LLC, Case No. 15-cv-3755, 2018 WL 5919588 (N.D. GA Nov. 9, 2018). There the Court determined that the claims at issue did not arise out of the contract between Romero and DirectTV but, rather, arose out of the protections of STELA which were unrelated to the account.  The Court specifically rejected DirecTV’s argument that its privacy policy–which was built into the same contract containing the arbitration clause–provides a defense under a STELA exception and, as such, held that no part of the suit arose out of the contract containing the arbitration clause. Just that easily arbitration was denied.

Cordoba is a cautionary tale for all Defendants out there that face suit in TCPA class actions. Although it is tempting–and seemingly prudent–to get a head start on data analysis via an early production and assembly of data for review by experts be ware. Customer data is extremely important and private and its production is highly regulated. Do not assume that the data can be shared with friendly third parties. As Cordoba shows, the production of such material may be enough to get you sued in an entirely separate data privacy suit.

Unrelated, have I ever mentioned how great Womble Bond Dickinson’s IP, Technology, and Data teams are?  Just throwing it out there.

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Editor’s note: This article is provided through a partnership between insideARM and Womble Bond Dickinson. WBD powers our TCPA case law chart and provides a steady stream of their timely, insightful and entertaining take on this ever-evolving, never-a-dull-moment topic. WBD – and all insideARM articles – are protected by copyright. All rights are reserved.

On November 16, 2018, the Federal Reserve Bank of New York (New York Fed) released its quarterly household debt and credit report. The report used a nationally representative sample of individuals as well as anonymized credit data from Equifax. In the third quarter of 2018 (Q3), total household debt increased by $210 billion. According to the New York Fed’s press release, this is the seventeenth consecutive quarter of increase.

For outstanding non-mortgage debt, student loans remain the behemoth. As of Q3, the student loan balance is $1.44 trillion, an increase of $37 billion since last quarter. Auto loans followed with a balance of $1.27 trillion, an increase of $27 billion since last quarter. Credit cards trailed with a balance of $844 billion, an increase of $15 billion since last quarter.

The release also includes the chart below, which shows the annualized shares of balances that transitioned into serious delinquency (90 days or more). Student loans had the highest rate of increase in serious delinquency since last quarter.

Of particular interest to the ARM industry, the report shows a continuation of the trend that the percentage of consumers with third party collections on their credit reports is decreasing, and has been since 2012. Despite this, the average amount in collections has increased in the last two years.  

insideARM Perspective

The significant drop in percentage of consumers with third party collection items on their credit reports may be attributed to the implementation of the National Consumer Assistance Plan (NCAP). In a blog post that accompanied last quarter’s report, the New York Fed believed this decrease in reported collection accounts to be temporary while collection agencies get accustomed to the new requirements. According to the most recent report, this has not yet happened.  

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Another possible explanation for the sharp decrease is the current legal climate. Since FCRA lawsuits are on the rise, third party debt collectors might be choosing to no longer credit report. The industry noticed the mass mailing of largely identical dispute letters by credit repair organizations, which appears to be a new tactic to get tradelines deleted or to drum up FCRA lawsuits against (and, thus, settlements from) debt collectors. This opens up another can of worms. Mass disputes made in such manner take away from legitimate disputes consumers may have. Finding a legitimate dispute amid the volumes of mass disputes from credit repair organziations is like finding a needle in a haystack. On a larger scale, if companies are not credit reporting delinquent items due to fear of unwarranted FCRA backlash, how accurate of a gauge is a consumer’s credit report in determining his or her creditworthiness? These are discussions for another day, but discussions that need to occur.

Edit (3:13PM): An industry source provided a third possible reason why this report shows a sharp decrease in collection accounts appearing on consumer’s credit reports. The report indicates that it pulled anonymized credit report data from Equifax. Many companies ceased reporting to Equifax after last year’s data breach, which came to light right around the time that the chart above shows a sharp decline. To paint a more accurate picture, it would be helpful to see similar data from the other two large credit bureaus.

Congress just proposed a bill to attack robocalls by leveraging the TCPA that is really dangerous but, for some reason, both parties seem to think it is a good idea. So it falls to me to save the world.

I’m up for it.

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In fairness, the TRACED Act–proposed jointly by Massachusetts Senator Ed Markey, a Democrat, and Senator John Thune, a South Dakota Republican– is a good news/extremely bad news situation. The good news is that it seeks to give the FCC the authority it has always needed–and never had–to require call identity validation and cut down on spoofed calls. That’s super critical stuff and a really big deal.

The bad news is that it modifies the existing Telephone Consumer Protection Act (“TCPA”) to encourage the FCC to bring more lawsuits against more businesses and gives the FCC an even heavier cudgel (sort of) to threaten folks with. It also requires the FCC to get together with the CFPB(!) and the DOJ to discuss why more regulators aren’t currently enforcing the TCPA and to encourage other agencies to get busy!

In other words, Congress is about to go “all in” on the TCPA and encourage the FCC and other governmental agencies to enforce the statute right alongside private actors.  This just at a time that the FCC is currently working on interpreting the reach of the TCPA in light of its recent failed power grab in expanding the statute.

All right, let’s break this down.

First, a friendly reminder. The TCPA is not the answer to the robocall problem in this country. Never has been. Never will be. And its not for a lack of teeth. The TCPA already has more teeth than a piranha family portrait and robocalls continue to run rampant.

Yes, the TCPA makes it illegal to call cell phones using certain kinds of technology without express consent. That sounds pretty good. But the TCPA was never intended to be a comprehensive tool to prevent robocalls. Instead it was a very narrowly drawn “rifle shot” intended to stop to only the most abusive types of calls made using random-fire dialers. But that’s not much of an arsenal considering the sophisticated technology scammers are using today.

And we’ve already witnessed what happens when the FCC tries to conjure up a howitzer for itself using the vague and mushy language of the TCPA– the TCPA’s disastrous private right of action allows lawyers to sue for $500.00 a call right alongside the FCC. So the broader the FCC makes the TCPA–hoping to give itself more power to fight true bad actors– the broader it makes the TCPA for consumer lawyers and class action attorneys that use the statute against legitimate businesses to shake down millions in settlements.

TRACED wants to encourage the FCC to broaden the TCPA again. But we all already know how this movie ends. We’ve seen it before.

When the FCC began responding to consumer complaints about robocalls in the early 2000s, it dusted off the TCPA (again its only tool in the fight against robocalls) and began working to expand the statute to give itself more power to fight robocalls at that time.  In 2015 it went so far as to give itself the power to regulate all calls made by any software-enabled dialing device–including smartphones–an immense power grab that allowed everyone in the country to sue everyone else for every call to a cell phone made without consent. Talk about a bad idea.

As expected, people sued. Thousands of them. In suits big and small all across the country. But instead of suing true “robocallers”–the folks making spam and scam calls–they sued legitimate American businesses, most of whom were using live agents to handle calls and not robots. Because of the FCC’s massive expansion of the TCPA, however, calls made by “predictive dialers”– modern dialing equipment commonly used by legitimate businesses that accurately dials numbers connects calls with customer service agents– became subject to the statute. Businesses caught unaware thought they were complying with the law, but suddenly they weren’t and were facing liability for $500.00 per call! The floodgates for frivolous lawsuits were thrown open and businesses–and sometimes even individual people–were hammered with lawsuits for millions or billions of dollars in statutory authority. Terrible terrible stuff.

Those were dark times–that recently came to an end (sort of) when the D.C. Circuit Court of Appeal found the FCC’s power grab to be very illegal— but, remarkably, the scourge of true robocalls only got worse and worse despite all those frivolous lawsuits. Indeed there was a huge increase in robocalls after the FCC expanded the TCPA in 2015.

So what gives?

Simple– private lawsuits against legitimate American businesses have no impact on robocalls because scam robocalls are not made by legitimate American businesses. Instead they are made by shady fly-by-nights and overseas outfits that do not have bank accounts in the states. No bank accounts means no big money for class action lawyers, means no lawsuits against the bad guys.  So even broadening the TCPA to the furthest extent imaginable was not nearly enough to stop robocallers as the FCC’s failed recent experiment taught us.

Short answer: private lawsuits under the TCPA are not the answer to stopping robocalls. 

So why on Earth is Congress proposing to modify the TCPA to make it more important to the FCC’s enforcement efforts and encouraging other agencies to also enforce the TCPA? We’ve literally just lived through a decade of the FCC expanding the statute to devastating effect–which just ended with the D.C. Circuit Court of Appeal striking down the 2015 Omnibus ruling— and the Congressional response is to encourage the FCC to do it all over again?

Probably because they need to hear from me. So here’s my quick letter to Congress on this. I assume it will fix everything.

Dear Congress,

I know you’d like to have the FCC use the TCPA to stop robocalls–it won’t work, trust me.

But if you really want the FCC to use the TCPA to stop robocalls you must–really really MUST–get rid of the private right of action.

Happy to fly out there and explain why.

Yours truly,

Czar

Oy vey. (Did I say that right?)

So what does TRACED actually plan to do to the TCPA? While the Earl works on a redline– (Earl– I expect it on my desk Monday morning, Thanks)– here’s a quick synopsis:

It adds a forfeiture penalty for “any person that is determined by the Commission, in accordance to have violated this subsection with the intent to cause such violation shall be liable to the United States for a forfeiture penalty. A forfeiture penalty under this paragraph shall be in addition to any other penalty provided for by this Act. The amount of the forfeiture penalty determined under this paragraph shall not exceed $10,000 for each violation.”

Ok so this is kind of weird for a couple of reasons. Notice that the forfeiture only applies if a person intends to “cause such violation.” That’s weird. So does that mean if a person intends to make a scam robocall to shake down some little old lady that’s fine because they didn’t intend to violate the TRACED act? Something to think about oh ye drafters of bad statutes.

Another thing to think about– isn’t the current FCC authority in forfeiture actions $16,000.00 per call under the general Telecommunications Act rules?  Me thinks the answer is yes and so does the FCC. See e.g. this Public Notice (“failure to comply with the relevant sections of the TCPA and corresponding rules may subject[you] to enforcement action, including monetary forfeitures as high as $16,000 per violation…”) So Congress wants to fight robocalls using the TCPA by lowering the forfeiture penalty for TCPA violations from $16k to $10k? I don’t get it.

But now the really bad news. TRACED would also require the DOJ and the FCC to get serious about enforcing existing laws (again–that’s just the TCPA folks) by getting together with their friends at the CFPB (!) the Department of State, the Department of Homeland Security (and suddenly this just got dystopian), the Department of Commerce and the FTC to discuss, inter alia, “whether, and if so how, any Federal law, including regulations, policies, and practices, or budgetary or jurisdictional constraints inhibit the prosecution of [TCPA] violations.” 

Again, did I mention this is a Bi-Partison bill? Come on folks, panic with me already.

Ok, so I’ve been dwelling on the negative. There’s some upside here too.

First, TRACED would require the FCC to require: “a provider of voice service to implement an appropriate and effective call authentication framework in the internet protocol networks of voice service providers.”

I’m not sure I know what that means, but I think it means Congress wants to force the carriers to track and authenticate calls and, although that’s a little dystopian (remember how the Department of Homeland Security is supposed to get involved with enforcement here), it seems like a critical first step to stop the actual scam bad guys out there. Lots of unintended consequences are likely, however, which is why Congress is dictating the FCC implement a safeharbor “from liability for unintended or inadvertent blocking of calls or for the unintended or inadvertent misidentification of the level of trust for individual calls pursuant to the authentication framework…”

Also, TRACED requires the FCC to implement regulations protecting telephone subscribers from receiving nonauthenticated calls. Again, this sounds pretty revolutionary and important to stopping the true scammers. I like where this part of TRACED is headed, although it is (by design) pretty skeletal.

In summary, TRACED gives the FCC some badly needed tools on call spoofing but boy oh boy is it misguided with respect to encouraging TCPA expansion and enforcement proceedings.

So it looks like my quixotic TCPA adventures are far from over. Thanks for being along for the ride. We’ll keep fighting.

—

Editor’s note: This article is provided through a partnership between insideARM and Womble Bond Dickinson. WBD powers our TCPA case law chart and provides a steady stream of their timely, insightful and entertaining take on this ever-evolving, never-a-dull-moment topic. WBD – and all insideARM articles – are protected by copyright. All rights are reserved.

PHOENIX, Ariz. — Empereon-Constar, a leading provider of end-to-end customer engagement and customer management solutions, is proud to announce the Company was named one of the Top 50 Largest Private Companies and Top 25 Fastest Growing Private Companies by the Phoenix Business Journal at the 2018 Arizona Corporate Excellence (ACE) Awards.

Empereon-Constar ranked number 27 on this year’s list of largest privately held companies, moving up from its previous ranking as number 31, and ranked number 24 on the list of fastest growing private companies. This is the second consecutive year Empereon-Constar was recognized as one of Arizona’s largest and fastest growing private companies. Rankings were announced during the Annual Arizona Corporate Excellence (ACE) awards ceremony held November 15th at the Scottsdale Center for the Performing Arts.

“Empereon-Constar is honored to be recognized as one of the top largest and fastest growing private companies in Arizona,” said Travis Bowley, Chief Executive Officer, Empereon-Constar. “This award belongs to our entire team and affirms our ability to leverage our experience to meet client goals. We’re here today because of their hard work and dedication.”

Steve Hayes, Chief Financial Officer, Empereon-Constar stated, “We truly value this award and the recognition of the Phoenix Business Journal and the ACE award sponsors. The award reflects the hard work of our team to earn the trust of new and existing clients through exceptional performance. We are thankful to both our clients and our employees, and we are very excited with the new opportunities that are before us in coming year.”

Each year, the Phoenix Business Journal recognizes Arizona’s outstanding private companies. Companies are ranked based on overall revenue and revenue growth over a two-year period. Now in its 24th year, the ACE Award’s goal is to increase knowledge-sharing and build a sense of community among private companies in Arizona.

About Empereon-Constar

Empereon-Constar is a leading business process outsourcing company providing end-to-end customer engagement and customer management solutions for New Sales Account Generation, Customer Care, Risk / Fraud Operations, Collections Operations, QA Agent Call Monitoring, Back Office Administration Support, and Tech Support across the entire customer account lifecycle. Our customized solutions, real-time analytics, and global footprint help our clients achieve their business goals.

Empereon-Constar’s full range of consumer and commercial services includes: lead generation, inbound / outbound sales, account origination, customer care, customer service, technical support, first party collections, recovery collections, credit bureau dispute management, fraud risk management, anti-money laundering, loan servicing and loan processing. Our world-class services and unique global strategy allow us to meet the needs of our client partners across multichannel (email, chat, phone) communication platforms, provide exceptional customer experiences, and consistently deliver world-class performance results, while maintaining the highest level of data security and compliance. For more information, please visit us online at www.empereon-constar.com or www.linkedin.com/company/22345663.

The Senate will likely vote on the confirmation of Kathy Kraninger as the next Director of the Bureau of Consumer Financial Protection. On November 14, 2018, Senate Majority Leader Mitch McConnell (R-KY) filed cloture for the Kraninger confirmation, which indicates a vote will occur soon.

The Senate Banking Committee approved Kraninger’s nomination on August 23, 2018, voting squarely on party lines. The Senate Banking Committee’s vote was preceded by a confirmation hearing held in July 2018 as well as some push back from Sen. Elizabeth Warren (D-MA).

insideARM Perspective

The wildcard here is whether a leadership change (from Acting Director Mulvaney to a permanent Director Kraninger) would have any effect on the schedule to release a Debt Collection Notice of Proposed Rulemaking (NPRM). The last two scheduling updates have maintained the March 2019 target, and every indication from Bureau staff is that they are working to make that deadline.