The Internal Revenue Service (IRS) released its quarterly update to congress on the Private Debt Collection Program (PDC Program) implemented last year. The report shows the financial progress made by the PDC Program since its inception. It provides a year-by-year comparisons of data such as total revenue, costs of the program, and the program’s overall balance (revenue less costs). The report also breaks down performance by each of the four Private Collection Agencies (PCAs) contracted for the PDC Program: CBE Group, ConServe, Performant, and Pioneer.

According ot the report, the program balance significantly increased between FY 2017 and FY 2018. FY 2018 shows a program balance of $51,059,024, compared to -$13,454,200 in FY 2017.

In FY 2018 (through September 30), the PCAs received an almost equal amount of inventory, roughly 150,000 tax receivables each. The dollar value of the receivables placed with the agencies was roughly similar with a spread of about $5 million between the highest total amount and lowest total amount placed.

All four PCAs had a significant increase in dollars collected in FY 2018 compared to FY 2017. Similar to the results reported last quarter, CBE Group led the pack with the highest amount of total dollars collected and the highest number of installment agreements entered into.

The overall cost of the program increased by roughly $11 million. FY 2018 total direct and indirect costs were $31,133,702, compared to $20,036,145 in FY 2017.

Senator Chuck Grassley (R-IA), who backed the PDC Program, issued a press release on the success of the program stating:

Letting those who shirk their tax responsibilities off the hook isn’t fair to law-abiding taxpayers who do pay their taxes. I’m glad this program is helping make the system fairer for those who fulfill their civic responsibility and follow the law… The IRS private debt collection program continues to prove its value. The most recent data again shows that revenue returned to the U.S. Treasury exceeds all associated program costs. That’s something we don’t often see here in Washington.

insideARM Perspective

The IRS attempted to implement similar programs on two prior occasions. Both times, the programs resulted in a financial net loss to the government. The 1996 pilot program resulted in a $17 million net loss and was cancelled after 12 months. The 2006 initiative resulted in a $20.9 million net loss.

[article_ad]

The IRS’s third attempt appears to be going much better. Some of the lift in revenue and costs for 2018 might be because placement of accounts began in April 2017, which means a late start for the FY 2017 statistics. However, as noted last month in the Treasury Inspector General for Tax Administration’s (TIGTA) report, the PCAs appear to be doing well even with certain hurdles placed by the IRS’s administration of the program. The latest quarterly report, much like the report from last quarter, indicates that the current program’s direction is much more profitable than the prior attempts.

It appears the third time may be the charm.

Breaking news on the infamous Marks v. Crunch San Diego, LLC case that rewrote the definition of an automated telephone dialing system (“ATDS”) to include devices that have the capacity to store numbers to be dialed (i.e. your cell phone).

Today, the Ninth Circuit denied Appellant Crunch San Diego, LLC’s (“Crunch”) Petition for Rehearing and Petition for Rehearing En Banc.

The full Ninth Circuit was advised of the Petition for Rehearing – which was also supported by an Amicus Brief from the Association of Credit Collection Professionals (“ACA Int’l”) and Sirius XM.

No Judge requested a vote on whether to rehear the matter en banc. See Fed. R. App. P. 35(f).

The big questions now are whether we will see Crunch file a petition for writ of certiorari to the United States Supreme Court, and will that petition be filed before the FCC Rules on whether to adopt the Marksdefinition of an ATDS?

—

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.

[article_ad]

NEWARK, Del. — SIMM Associates is proud to announce their support to the Ronald McDonald House of Delaware’s Adopt A Family Program. The Adopt A Family program provides donors with an opportunity to fund the expenses associated with a family’s stay. It helps provide all the care and comfort needed for families to focus their energy on their sick child. Donations directly impact the families who call the Ronald McDonald House “home” while their child receives medical treatment. This year’s annual event raised over $220,000 for the Delaware House.

“It’s a great feeling to see SIMM and its employees continue to give back to our local community,” said Chief Operating Officer Jeff Simendinger. “The Ronald McDonald House of Delaware provides immeasurable support to those families that have seriously ill children. I could not fathom the anxiety and worry that these families must experience during such a trying time. It’s comforting to know that the Ronald McDonald House will provide safe and comfortable accommodations in a very caring environment to help put the family’s mind at ease.”

The Ronald McDonald House of Delaware provides accommodations for families with seriously or chronically ill or injured children who travel to area hospitals for medical treatments.  The children range in age from newborn to age twenty-one. The Ronald McDonald House also operates Ronald McDonald Family Rooms at Bayhealth Medical Center, Christiana Care, and Nemours/Alfred I. duPont Hospital for Children.

About SIMM Associates, Inc.

SIMM is a full service nationally licensed ARM company providing collection solutions to the student lending, consumer lending, credit/retail card, healthcare, auto finance, credit union and debt buying industries. SIMM provides best in class deceased care solutions that encompass decedent verification, estate location scrub, proprietary Probate Tracker SM claim filing process and an empathetic survivor recovery solution all performed with brand sensitivity and regulatory compliance in mind. SIMM has passed the US Department of Education’s stringent requirements and currently is a subcontractor for the existing Private Collection Agency contract. Its headquarters is located in Delaware in a 32,000 sq. ft. state of the art call center. SIMM holds the following certifications: PCI Level 1, ISO 27002 and SSAE16 Type II. SIMM services customers throughout the United States including Puerto Rico.

On Friday, October 26, the Ninth Circuit made it clear that it will not tolerate Opt-Out Evaders in its Circuit.

[article_ad]

Opt-out evaders are unpleasant residents of TCPAland that set up “test” cases by, inter alia, sending everything but “stop” to a texter in a bid to continue to receive more texts. They then sue the texter under the TCPA claiming that their privacy rights were invaded by the subsequent texts. Its pretty gross, but also pretty common. One such effort (scam?) was shut down in a recent case involving Edible Arrangements.

The most famous opt-out evader case to date, however, was Epps where–at the district court level–the court held that the Plaintiff knew full well that the caller had a reasonable revocation paradigm (just text “stop”) and the Plaintiff had knowingly chose not to use it. Hence the evader’s revocation effort was “unreasonable.”

At the time the district court decision in Epps was handed down that was big news. ACA Int’l had not yet been decided so the notion that a caller could dictate the terms of revocation–even something as basic as requiring a “stop” response–was pretty cutting edge, if not somewhat taboo.

The case was appealed to the Ninth Circuit and today the same circuit that brought us Marks a few short weeks ago, affirmed the district court’s dismissal.

In Epps v. Earth Fare, No. CV 16-08221 SJO (SSx), 2017 U.S. Dist. LEXIS 63439 (C.D. Cal. Feb. 27, 2017), the Plaintiff allegedly sought to stop text messages from Defendant.   But when present with the instruction “Text STOP to end,” Plaintiff purposefully sent plain language texts such as “I would appreciate [it] if we discontinue any further texts” and “Thank you but I would like the text messages to stop can we make that happen.”   The lower court found that Plaintiff did not reasonably revoke given the totality of circumstances and therefore granted Defendant’s Motion to Dismiss.

Plaintiff appealed.  The Ninth Circuit, unsurprisingly given all of the recent developments in the area of revocation, agreed with the lower court finding that:

The district court properly dismissed Epps’ complaint after assessing the totality of the facts and circumstances surrounding Epps’ communications with Earth Fare, including the messages detailed in the parties’ text message log. . . In light of these facts and circumstances, including (1) the availability of a one-word opt-out procedure; (2) Epps’ unexplained failure to use the one-word opt-out; and (3) Earth Fare’s notice to Epps that it did not understand her non-standard messages, we agree with the district court that Epps failed plausibly to allege that she reasonably revoked her consent.

The Ninth Circuit’s message is unmistakable: Opt Out Evaders, You’re Not Welcome Here.

A little good news for TCPAland!

—

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 October 26, 2018, the Bureau of Consumer Financial Protection (BCFP or Bureau) announced that it expects to issue a proposed rule in January 2019 reconsidering its previously-issued rule on Payday, Vehicle Title, and Certain High-Cost Installment Loans (Payday Rule or the Rule). According to the Bureau, it will revisit only the ability-to-repay provisions of the original rule since they “have much greater consequences for both consumers and industry than the payment provisions.”

The original Rule was issued by the Bureau in October 2017 under Former Director Richard Cordray. The ability-to-pay provision of the original rule requires lenders to determine whether a borrower can repay the loan and still meet basic living expenses both during the life of the loan and for 30 days after the highest payment. For longer-term loans with a balloon payment, full payment means being able to afford the payments in the month with the highest total payments on the loan. Lenders must verify income and major financial obligations and estimate basic living expenses for a one-month period–the month in which the highest sum of payments is due. The original rule also caps the number of successive short-term loans to three, with a cooling off period of 30 days thereafter. 

The Bureau initially announced it will be reconsidering the Payday Rule back in January 2018. The original rule had a compliance date of August 19, 2019. The Bureau’s October 26 announcement indicates that the compliance date will also be addressed.

insideARM Perspective

It appears that the BCFP will have a busy start to 2019 with its rulemaking initiatives. In addition to the rule above, the Bureau is expected to issue its third party debt collection rules in March 2019. Also on the horizon (although the expected date is not certain) is the Bureau’s definition of “abusive” in unfair, deceptive or abusive acts or practices (or UDAAP).

At least one industry group raised issues with the original rule, including that the Bureau ignored the comments of consumers and industry members. One of the more substantial concerns is that the rule is extremely complex for small balance loans (the final rule was 1,700 pages long). This complexity has the potential to cut off consumers’ access to these types of loans because credit issuers may find the compliance burden not worth it for such small balances. This goes against one of the Bureau’s goals in its FY 2018-2022 strategic plan of ensuring that “all consumers have access to markets for consumer financial products and services.” 

This article was co-authored by Joann Needleman and Tommy Brooks. It first appeared as a ClarkHill alert and is republished with permission.

Since Donald Trump took office the hot topic has been “deregulation”. However, contradicting this ideal are efforts by financial regulators to incorporate the use of financial technology by financial institutions and fintech entities in order to provide innovative products and services to businesses and consumers. In order to achieve these initiatives, the agencies are taking a new and more welcoming approach.  

The Bureau’s Office of Innovation

Mick Mulvaney, the Acting Director of the Bureau of Consumer Financial Protection (“Bureau”), jumped on the innovation bandwagon by tapping Paul Watkins to lead the Bureau’s Office of Innovation. Watkins came from the Arizona Office of the Attorney General, where he was in charge of the office’s newly authorized fintech initiatives. He developed the FinTech Regulatory Sandbox, the first in the United States, that offered innovative financial companies with limited access to the marketplace, in exchange for limited regulatory oversight of its products and services during a testing period. One of the many objectives of the Bureau under the Dodd-Frank Act was to ensure that markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation. [Emphasis added]. See 12 U.S.C § 5511(b)(5). The Bureau’s Office of Innovation replaces Project Catalyst which intended to allow the Bureau to collaborate with start-ups and non-profits to foster innovation. To facilitate that partnership, the Bureau offered a “No Action Letter”, a statement from the agency that allows financial innovators to market products and services without fear of enforcement. However, these No Action Letters were non-enforceable and non-transferrable, and they could be revoked at any time. Under Project Catalyst only one No Action Letter was issued.

The Office of Innovation clearly is taking a different approach. First, the Bureau’s website indicates that it is in the process of revising the No Action Letter policy “in order to increase participation by companies seeking to advance new products and services.”  Second, it re-instituted the trial disclosure program which was dormant for the most part under the prior Bureau administration. A notice and comment period on the Bureau’s proposal to develop a “disclosure sandbox” and to streamline the application process to encourage more companies to conduct trials has just ended. Finally, the Bureau is interested in partnering with companies to improve financial regulation that could better foster consumer-friendly innovation.

OCC and Special Purpose National Bank Charters  

In July of this year the Office of the Comptroller of Currency (“OCC”) advised that it would begin accepting applications for special purpose national bank (“SPNB”) charters from non-depository fintech companies.  The benefits of obtaining an SPNB charter can be substantial.  Its primary advantage is that it would eliminate multi-state bank examinations in exchange for one rigorous OCC examination.  It also would make it easier to export interest rates nationwide, consolidate compliance functions and eliminate a physical presence that many states require, all of which improve profitability.  This new national bank charter may also bring with it a certain status or cache, perhaps allowing the entity better access to capital to fund operations and growth since it will not have access to low cost deposits that are otherwise available to traditional banks. Clearly the OCC is recognizing that companies that engage in the business of banking in new and innovative ways should have the same opportunity to obtain a national bank charter as companies that provide banking services through more traditional means.

SEC’s Strategic Hub for Innovation and Financial Technology (“FinHub”)

Recently, the Security and Exchange Commission (“SEC”) launched FinHub, a website devoted to facilitating the SEC’s public engagement with innovators, developers, and entrepreneurs. A link to the website can be found here. Particular areas of interest are blockchain/distributed ledgers, digital marketplace financing, automated investment advice and artificial intelligence and machine learning.  The website provides pertinent regulations, investor information, opportunities for comment and empirical data. FinHub is a logical step in the engagement process by providing interested participants an opportunity to do their due diligence prior to reaching out to the Commission. SEC Chairman Jay Clayton is quoted as saying, “The SEC is committed to working with investors and market participants on new approaches to capital formation, market structure, and financial services, with an eye toward enhancing, and in no way reducing, investor protection,”

FDIC

While there has been no official announcement of FDIC’s efforts to encourage banks to engage in the use of technology to provide innovative services to customers, Chairman Jelena McWilliams told a bank conference recently that the FDIC will set up an office of innovation to foster a more welcoming environment for banks to adopt financial technology changes.  She especially noted that innovative technology is happening outside the reach of community banks because they do not have the resources to adopt innovations nor the ability to effectively institute compliance mechanisms that would be needed to obtain approval from their regulators. 

McWilliams believes that the FDIC has the ability to approach innovations in the financial services industry in three ways.  The first is through the use of an industrial loan company, which is a specialized bank that is chartered by a state and supervised by the FDIC.  Neither it nor its parent is regulated by the Federal Reserve Board.  This would allow a fintech commercial entity to own or become an ILC, accept deposits and obtain FDIC deposit insurance, the latter deemed advantageous over an OCC-chartered special purpose national bank.

The second area where technological innovation can be fostered is how the FDIC regulates banks’ third-party vendor relationships.  If a bank does not have the resources to invest in financial innovation, it can partner with fintech entities. However, these partnerships require a bank to utilize resources in order to properly manage that third party relationship, including the development of a risk management and compliance program. Finally, the FDIC is considering working with technology companies to improve processing, service and efficiency at the banks themselves.  In this approach, banks would not contract out the services it provides to its customers, but would engage third party technology providers to help it develop its own products and services to offer to its customers.

Engaging with financial regulators requires a well-thought out strategy with well-defined objectives that will require concessions from each party. For regulators, the relaxing of regulatory expectations will have its limits. For financial institutions and fintech entities it will mean sticking your head out of the proverbial foxhole in order to advance state-of-the art ideas to retain and welcome new customers.  It will be a delicate balance, but now more than ever, regulators want to invite the financial services industry to join in the conversation.  

The Bureau of Consumer Financial Protection (BCFP or Bureau) released its Complaints Snapshot for October 2018. The 50-state snapshot illustrates complaints received by the Bureau by state between January 1, 2015 and June 30, 2018. The report primarily focuses on a high level view of trends across all products by state. However of note is that debt collection no longer holds the number one spot as the source of the most complaints.

In 2017, debt collection still accounted for 26% of the complaints (with the top issue being attempts to collect debt not owed), but the top spot went to credit or consumer reporting with 31% (with the top issue being incorrect information on consumer credit reports).

Among all categories, there was a 9% increase in average monthly complaints in 2018 versus 2017. 98% of complaints received a timely response from the company.

Below is a chart from the report that illustrates the products that saw the biggest percentage change over time. The four year trend beginning in 2015 shows the largest percentage increases in credit repair and money transfer, a steady decrease in payday loans, and fairly constant (with the exception of a one-year blip) in prepaid card and student loans.

The report breaks out the data by state. Between January 2015 and June 2018, the three big-hitter states for complaints were California (138,535), Florida (100,727), and Texas (92,530). No surprise, as these are the most populous states.

[article_ad]

insideARM Perspective

While this data is publicly available, it’s interesting to see the Bureau’s analysis, as it provides a sense of what they view as priorities.

For debt collectors, this report has positive overtones. While still representing a little over a quarter of the complaints, the year-by-year comparison shows that debt collection complaints are decreasing. It’s also nice to see debt collection no longer wear the crown for the most-complained about product; the new king is credit or consumer reporting. Not surprisingly, this follows the recent trend in lawsuits (decrease in FDCPA suits, increase in FCRA suits).  

Earlier this year Acting Director Mulvaney announced a series of Requests for Input about the Bureau’s practices, including complaints. The collection industry responded.

Many in the ARM industry (and other industries) have for years expressed frustration with the negative impact of publicly posting largely unvetted complaint data (for instance, is it really a complaint or simply an inquiry) with little to no perspective provided. Debt collectors have also complained that they often do not receive enough information from the CFPB complaint portal to investigate each matter. For instance, the name and/or account number provided by the consumer does not match any individual in their system. Or a phone number provided does not match any phone number they have a record of having dialed.

—

Editor’s note: insideARM hosts a Complaints Resource section which you can find here, or by clicking Topic in the main menu and selecting Complaints Resource Page. The section includes a real time feed from the BCFP complaints database, key complaints reports from the BCFP, and years of insideARM coverage of the complaints topic.

According to the Seventh Circuit in Smith v. GC Services Limited Partnership, No. 18-1361 (7th Cir. Oct. 22, 2018), a debt collector should bring a possible arbitration agreement to the court’s attention as early as possible or forever hold its peace. This decision seems to imply that it is general knowledge that most credit card agreements have an arbitration clause and the agreements are available online, so the debt collector should bring a potential arbitration agreement to the court’s attention even if the debt collector does not yet have the specific consumer’s agreement in hand.

Factual and Procedural Background

The underlying Fair Debt Collection Practices Act (FDCPA) lawsuit stems from GC Services’ (the company) attempt to collect on the plaintiff’s Sam’s Club credit card account. The credit agreement between the creditor and the consumer contained an arbitration clause and a class waiver for all disputes that arise from the account.

In July of 2016, plaintiff filed a class action lawsuit alleging FDCPA violations. The following timeline applies to the litigation procedures in this case:

• August 2016: The company responded by filing a motion to dismiss the suit under several grounds but did not mention an underlying arbitration agreement.
• In response, plaintiff amended her complaint, to which the company filed a second motion to dismiss that also did not mention the arbitration agreement.
• March 2017: While some discovery disputes were ongoing, the company notified plaintiff of the arbitration agreement. Plaintiff refused to arbitrate.
• April 2017: The company filed an answer to the complaint that did not contain any information about an arbitration agreement.
• June 2017: The court denied the company’s motion to dismiss.
• August 2017: The company filed its motion to compel arbitration.

The district court denied the company’s motion to compel arbitration on two grounds. First, as a non-signatory to the contract, the company could not enforce the arbitration agreement. Second, the company waived its right to arbitrate “by not diligently asserting that right.” The company appealed this decision.

[article_ad]

The Decision

The Seventh Circuit punted making a decision about whether a debt collector, as a non-signatory to the underlying credit agreement, can compel the arbitration clause within that agreement. The court stated that it does not need to decide this issue if it ends up affirming the district court’s decision that the right to arbitrate was waived. Because of this, the court first analyzed the waiver issue.

In order to determine whether the company waived its right to arbitrate the matter, the Seventh Circuit reviewed whether they “acted inconsistently with the right to arbitrate.” Some factors to determine this include: whether the party did all it reasonably could to “make the earliest feasible determination” whether to proceed with arbitration; whether the request to arbitrate was substantially delayed; and whether the requesting party participated in discovery.

The company’s explanation for the delay was that the actual agreement between the creditor and the consumer was in the creditor’s possession, which meant that the company was not aware of the existence of the arbitration clause until it received the agreement from the creditor. The court stated:

The initial suggestion that GC Services—a sophisticated debt collection agency—would be unaware that credit card agreements routinely include arbitration agreements is suspect. Such provisions are commonplace, and GC Services should have investigated whether Smith’s contract contained one. What’s more, federal regulations require credit card issuers to post their credit card agreements online. See 12 C.F.R. § 1026.58(d). Even if Synchrony Bank was nonresponsive to inquiries, GC Services could have found the agreement through a routine internet search.

The court’s decision implies that bringing the arbitration agreement to the plaintiff’s attention is not enough — the court needs to be notified. The court stated that even if the company was not aware of the arbitration agreement until March 2017 (when it brought the agreement to plaintiff’s attention), the company’s actions in delaying to bring the agreement to the court’s attention resulted in waiver to compel the agreement. Specifically, the court found that after the request to arbitrate was made to the plaintiff, the company answered the complaint without mentioning the agreement. The company also did not request that the pending motions to dismiss be stayed while the court determine whether the matter should be sent to arbitration — a decision that would moot the motions.

The court also mentioned that the plaintiff would be prejudiced if the case were to go to arbitration after the delay because the company waited to compel arbitration until after the decision on the motion to dismiss was made.

Taking all of this into account, the Seventh Circuit affirmed the district court’s decision that the company waived its right to compel arbitration.

As promised, here is Volume II following Eric’s Volume I, of our team’s analysis on the supplemental comments on the FCC’s TCPA Public Notice.

Crunch San Diego, LLC

No surprises here. Crunch San Diego, LLC was armed to the teeth and swings into action with its brief-like comment that thoroughly attacks Marks. “Marks eviscerates any kind of limitation that would delineate the types of smartphones used daily by millions of consumers from the specific type of automated dialing equipment that Congress intended to regulate – as evidenced by the statue’s plain term,” Crunch states. The gym’s arguments in support of its comment are threefold:

1. The ATDS definition cannot be read to exclude number generation.

First, Crunch emphasizes that Marks effectively places over 300 million smartphones in violation of the TCPA and gives a useful grammar lesson to help the FCC properly read the plain text of the ATDS definition.

Crunch nicely lays out how the Marks Court changed the meaning of the ATDS:

“The TCPA defines an ATDS as equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.

The Marks Court changed the meaning of an ATDS by reconstructing the definition as equipment which has the capacity—(1) to store numbers to be called or (2) to produce numbers to be called, using a random or sequential number generator— and to dial such numbers.

In other words, Marks interpreted the phrase “using a random or sequential number generator” as applying only to the word “produce”—not to “store.”

Crunch explains that the grammatical structure of the ATDS definition requires reading the phrase “using a random or sequential number generator” as applied to either the word “produce” or “store.”

Crunch urges the FCC to read the plain text in a manner that is consistent with the Supreme Court’s “instruction that a ‘natural reading’ of ‘or’ ” in the ATDS definition should cover “any combination of its nouns, gerunds, and objects.” So, the disjunctive phrase “to store or produce” before the comma requires reading the ATDS definition as to store telephone numbers using a random or sequential number generator or to produce telephone numbers using a random or sequential number generator.

Marks’s definition however alters the statute’s punctuation and indicates that random or sequential number generation would be optional – virtually allowing every cellphone that can “store numbers to be called” subject to the TCPA, Crunch comments.

[article_ad]

2. The FCC should focus on legislative intent.

Next, Crunch insists that the FCC should be guided by Congress’ legislative intent and that the TCPA was enacted to restrict telemarketing calls based on dialing equipment that dials “blocks of sequential or randomly generated numbers.”

Crunch reminds the FCC that Congress enacted the TCPA to combat problems caused by randomly or sequentially dialing – not unsolicited calls dialed from a list. “Congress specifically targeted ‘machines [that] could be programmed to call numbers in large sequential blocks or dial random 10-digit strings of numbers,’ because they ‘resulted in calls hitting hospitals and emergency care providers.’”

3. Marks directly conflicts with the Third Circuit’s interpretation of an ATDS in Dominguez and the express limitation set forth in ACA Intl.

Lastly, Crunch suggests that the FCC should follow Dominguez’s interpretation of an ATDS – an ATDS “must be able to store or produce numbers that themselves are randomly or sequentially generated,” because it is supported by the plain text of the statute and is premised on a straightforward reading of the statute and legislative intent.

Crunch further reminds the FCC that ACA Int’l “held that the TCPA unambiguously foreclosed any interpretation that ‘would appear to subject ordinary calls from any conventional smartphone to the Act’s coverage.”

Crunch also attacks the Marks opinion for creating uncertainty as to what constitutes “automatic dialing.” “This part of the opinion appears to address ‘human intervention’ case law, but does not address any of the dozens of district court cases that had developed the test.” So in conclusion, Crunch urges the FCC to at the very least clarify that the ability to send text messages or dial numbers “automatically” or without “human intervention” is required for an ATDS.

Keep up the good fight Crunch!

The comment can be found here: Crunch San Diego, LLC – FCC Comment

Sirius XM Radio

Echoing many of Crunch’s arguments, Sirius XM Radio also audaciously attacks Marks and leads its comment off with a fun summary showing just how “absurd” Marks’s interpretation of an ATDS is.

Sirius tears apart the Marks’s interpretation and like Crunch, effectively gives a grammar lesson to correct the Ninth Circuit’s reading of the statute – stating that the Ninth Circuit redrafted the statute “adding words here, moving words around there” and stating that the statute cannot be “justifiably read in that tortured manner.”

Like other comments, Sirius also focuses on the overbreadth problem that the Ninth Circuit’s interpretation creates and comments that the TCPA cannot reasonably cover all ordinary equipment like smartphones. “[According] to the Ninth Circuit, every single one of these millions of smartphones is therefore an automated telephone dialing system subject to the TCPA’s $500-per-call-ortext restrictions…” Yup Sirius, “[t]hat can’t be right.”

Sirius reminds the Commission that the same overbreadth problem is what led to the D.C. Circuit’s decision to vacate the 2015 Declaratory Ruling and“[t]he Commission should not bring that unlawful result back in through the back door after the D.C. Circuit rejected it at that front,” Sirius states.

Sirius notes that the Ninth Circuit disregards the legislative purpose of the TCPA’s ATDS provisions. “The problem Congress was trying to address was that random dialing allowed callers to reach and tie up specialized numbers – emergency rooms, hospital rooms, fire departments and the like” and “automated dialing from a handpicked list does not pose similar problems.” Congress did not intend to prohibit targeted efforts to reach known customers, Sirius asserts. “Sirius XM’s vendors call consumers who have already received subscriptions to Sirius XM’s satellite radio service; they do not call everybody in the phone book.”

In concluding its comments, Sirius states, even if the Commission could follow the Ninth Circuit’s interpretation under Chevron, it should not and urges the Commission to confirm that an ATDS must have the capacity to generate and automatically dial random or sequential numbers.

Nicely done by our good friend Shay Dvoretzky and Bryan.

The comment can be found here: Sirius XM – FCC Comment

Third Federal Savings & Loan

A sincere, but effective comment by Third Federal.

Third Federal begins by giving a succinct summary of ACA Int’l and Marks and provides three suggestions for the Commission to “clear up any and all ambiguities going forward”:

“First, Third Federal suggests that the Commission remove the word ‘capacity’ from the statutory definition of an ATDS altogether.” Under the current ATDS definition, Third Federal could manually dial a number of one of its customers and yet still be subject to the TCPA simply because it has equipment that has “capacity” to store numbers of its customers. This scenario was not the intent of Congress, Third Federal states.

Second, Third Federal suggest that the definition of an ATDS be updated to reflect the clear intent of Congress and should not be subject to competing interpretations. “Does the ATDS have to store or produce telephone numbers to be called while using a random or sequential number generator, or was the comma inserted inadvertently? Can an entity store numbers of its customers to be called for specific purposes without the fear of liability?” Great questions, Third Federal.

And third, Third Federal suggests that the intent of the call “should dictate liability under the TCPA.” Third Federal, priding itself on outstanding customer service, states it does not use the telephone to cross sell their customers other products nor does it contact its customers with unnecessary information. Additionally, Third Federal “would like to proactively contact customers impacted by natural disasters with options for relief” but because it has a system that has the capacity to store specific numbers and dial those numbers, it is subject to the TCPA.

Third Federal nicely packages up its comment with a telling statement:

“Third Federal, as with most banks, has no reason to dial random or sequential telephone numbers of the population at large. Banks need to contact their actual customers, for actual reasons, without the fear of liability.” Accordingly Third Federal would like to see the TCPA specifically permit the free flow of information between Bank and customer…”

Well stated, Third Federal.

The comment can be found here: Third Federal Savings & Loan – FCC Comment

We have more coming. Keep an eye out for Volume III friends.

—

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.

I just finished reading through most of the big consumer-side comments from notable Plaintiff’s lawyers, and consumer protection organizations.  News flash: they all agree that the FCC should adopt the Marks interpretation of an ATDS, and that smart phones should in some form or another be regulated by the TCPA.  I summarize the key aspects of each comment for you below.

You’ll note as you read through that some of these comments reference a 1991 Congressional hearing in which predictive dialers were supposedly discussed to make the argument that predictive dialers were in existence in 1992 when Congress passed the TCPA, and thus were intended to be regulated.  I’m not so sure about that, so I’ll be watching the video from this hearing personally, and will give you my breakdown to start your week on Monday.

And now, without further ado.

[article_ad]

Kazerounian/Swigart/Friedman Comment

Three Musketeers Abbas Kazerounian (aka the “Godfather of TCPAland”), Josh Swigart (dubbed by his pal Abbas as the “Princess of TCPAland”), and Todd Friedman (one of the “O.G.s of the TCPA”) submitted a comment that in many respects re-hashes what was argued in the Marks appeal.  Although as you’ll remember from Episode 20 of the Ramble, Abbas told us that the court’s ultimate ruling was based on an argument that was never made.  Namely, that the TCPA inherently contemplates devices that dial from a list because it provides exceptions for calls made with consent.  Fair point, and it’s one that the Three Musketeers raised in their comment.

On the topic of smartphones the Three Musketeers distinguished “speed dialing” – which they describe as “simply process of selecting a stored contact in a cell phone handset and then dialing that number – from “automatic dialing”.  However, they acknowledged (given the expansive interpretation by Marks), that the group texting functions of smartphones could make these devices an autodialer.  And they said to the extent the FCC finds this to be the case, it should fashion a “common-sense exception for smartphones” (whatever that means).  Although the comment makes clear that if a smartphone is actually loaded with an application that allows it to “auto-dial stored lists of telephone numbers, either by placing mass calls or sending mass text messages,” then it should be considered an ATDS.

But the trio really went out on a limb when addressing capacity.  They said that Marks recognized that “latent” capacity to function as an autodialer would be enough to make a device an ATDS, and urged the FCC to adopt the same standard.  Although “latent” is just another way of saying “potential”, and this approach has already been rejected by the D.C. Circuit in ACA Int’l.

So bottom line, the Three Musketeers want the FCC to adopt the Marks interpretation of an ATDS.  No surprise there.

But what was really interesting was their assertion that “Congress was made aware of predictive dialers during the senate hearings prior to the enactment of the TCPA.”  This statement is supported by a link to a C-Span video of a Senate Subcommittee hearing from 1991.  The hearing was two and a half hours long, but they didn’t give us a time-stamp on where the discussion of predictive dialers came up (thanks, guys).  Let’s just say I’m skeptical.  Plan to read more about it in my follow up piece on Monday.

Jeff Hansen Comment

Plaintiff’s side expert Jeff Hansen (who our readers know well) submitted a comment that contains a lot of opinions we’ve seen him express in litigation concerning the technical aspects of various types of dialing devices.  His main point is that predictive dialers are per se automatic telephone dialing systems that Congress intended to regulate because they were both in existence at the time the TCPA was passed, addressed during Congressional hearings before passage of the Act, and in FCC rulings immediately following passage of the Act.

A few other things of note.  First, Hansen said he used to be a telemarketer himself in the early 2000’s.  He talked a lot about how good he was at complying with the TCPA, and that he would never, ever call a consumer without their consent.  Doesn’t really have to do with what the FCC was asking about, but neat I guess.  Second, he took a similar position as Abbas & Co. on smartphones.  He said that smartphones aren’t an ATDS when it comes to voice calls, but suggested that the FCC should create a “common-sense” exception for group texting.

Justin Holcombe Comment

Georgia lawyer Justin Holcombe submitted a comment urging the FCC to continue to follow its 2003 reasoning on what constitutes an ATDS.  Again, lots of word parsing on what the phrase “using a random or sequential number generator” modifies that I won’t bore you with here.

On the topic of smartphones, the issue again came down to whether the group text function makes a smartphone an ATDS.  Holcombe says that group texts are a “closer call”, and urges the FCC to adopt an exception for group messages that are not sent for telemarketing purposes originating from a personal cell phone.  So under Holcomb’s approach, it seems I’d violate the TCPA by texting my contacts to see which one of my friends wanted to buy my extra Fleetwood Mac tickets.

Bottom line, Holcomb urges the FCC to interpret the ATDS consistent with Marks as a device “that stores telephone numbers and automatically calls from a database of stored telephone numbers”, and thinks that group texts sent from a cell phone for “telemarketing purposes” also qualify as calls made with an ATDS.

Joe Shields/Private Citizen Inc. Comment

Joe Shields is a spokesperson for Private Citizen Inc., an organization with a long history of advocating for regulation of the telemarketing industry.  Shields submitted a vociferous comment in which he accused “special interest groups” of trying to “neuter[] the TCPA entirely so they can bombard Americans with billions of unwanted automatically dialed calls on their cell phones.”

What’s most notable is the organization’s response to the question of whether a smartphone is an ATDS.  According to Private Citizen, the answer “is a very loud YES because a cell phone is a powerful computer than can do many things.”  POWERFUL I say!

This is no doubt the most extreme position taken by any commentator on smartphones.  According to Private Citizen, that little device in your pocket there is an ATDS, and subject to regulation under the TCPA without any qualification or exception.  Yikes.

NCLC Comment

After reading through the Shields comment, NCLC came off as pretty tame.  They take similar positions as the rest of the commentators on the definition of an ATDS and urge the FCC to adopt the definition of an ATDS set forth in Marks for reasons like Congressional intent and grammar.  The points they make are very similar to the ones made in the Three Musketeers’ comment, so I won’t repeat them here.

On the topic of cell phone use, the NCLC suggested the Commission should find the TCPA to cover smartphones that are “actually used to make multiple calls or send mass texts,” but that the TCPA does not cover “smartphones not used in these ways.”  And that’s actually a really good point.  What the NCLC is saying is that any autodialing functions of a smartphone device must actually be used in order for the use of that device to be regulated as an ATDS under the TCPA.  I agree complete with the NCLC on this point (did I just say that?), but why limit it to smartphone use alone?  How is the logic any different when it comes to other types of computing devices?  It’s not.  And there’s no reason to distinguish between one type of computing device – a smartphone – from any other used to make telephone calls or send text messages.

In fact, the NCLC refers to a smartphone as a “box with multiple functions”.  That’s an… interesting take on a smartphone, but what it really shows that a smartphone is no different than any other device used to call or text consumers.  Except maybe the box might be bigger.  Specifically, the NCLC urges the commission to “analyze the particular one of these many functions the caller is using, and ignore the functions that the caller is not using.”  Wow.  I honestly couldn’t have said it better myself, especially since this logic applies equally to any “box” that performs “multiple functions” – not just smartphones.

But in any event, watch out folks.  It looks like the consumer-side lawyers and trade organizations are gunning hard to regulate that little “box with multiple functions” sitting in your pocket.

—

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.