Last week, Continental Service Group, Inc., d/b/a ConServe, a leading private collection agency (PCA) and federal contractor that provides services to the U.S. Department of Education (ED) and the U.S. Department of Treasury, Bureau of Fiscal Service (Fiscal Service), filed comments to the Federal Communications Commission (FCC) Notice of Proposed Rulemaking (NPRM) for the Telephone Consumer Protection Act (TCPA) – FCC 16-57, CG Docket No. 02.278. The complete comments can be found here.

On May 6, 2016 the FCC issued a NPRM, seeking comments on the implementation of a provision of the Bipartisan Budget Act of 2015 (The Budget Act) that excepts certain “robocalls” that are “made solely to collect a debt owed to or guaranteed by the United States” from the TCPA’s consent requirement. Comments were due on or before June 6, 2016.

The ConServe comments begin with introductory remarks objecting to the general characterization of all calls which may be made with the assistance of certain types of telephone equipment as “robocalls.” Conserve argues:

• Equating the business of debt collection with telemarketing and other sales practices is unfair
• Telemarketing calls and sales calls where there is no pre-existing business relationship are quite different from debt collection calls
• Debt collection calls are neither random nor robotic, and require human involvement
• Debt collectors do not randomly dial telephone numbers and their activity should not be lumped in with “robocalls”

Next ConServe laid out the reasons why verbal communication with federal borrowers is essential, citing their duty to educate student loan borrowers of loan repayment options. They also cite contractual requirements with ED and Fiscal Service that require the company to engage in verbal communication with the consumer.

The company provides the following data to support the need to contact consumers on their cell phone:

• ConServe only establishes contact with 24% of the borrowers who have accounts placed with it for collections
• 70% of the company’s “right party” contacts are made to a cell phone
• 65% of right party contacts result in the consumer agreeing to a loan rehabilitation agreement
• 50% of the borrowers who list a phone number for contact provide a cell phone number as the preferred contact point

The loan rehabilitation process for federal student loans takes 9 months or longer. Missed payments and incomplete financial documentation are barriers to a borrower’s successful loan rehabilitation. Live contact, including subsequent reminders and follow-up calls with borrowers is often vital to success:

• On average approximately 50% of the consumers who enter the rehabilitation program need approximately ten (10) follow-up contacts
• One in five borrowers, to continue in the program, have needed approximately fifty (50) follow-up calls (which were consented to)

The ConServe comments cover 14 pages; additional items of particular interest to the ARM community in the comments include the following:

Covered Calls: Defining Debt, Default, Delinquency, Servicing, and Other Terms  

“Debts” in the Debt Collection Improvement Act of 1996 (“DCIA”) definition includes all debts, whether current or delinquent, matured or unmatured, liquidated or unliquidated, and federal tax or federal nontax. There is no indication that Congress intended the term “debt” in the Budget Act Amendment to include only those obligations that are delinquent or in default. Indeed, Congress has already defined the term “debt” to include that which is both delinquent and in default.

Are Debt Servicing calls covered by the Amendment?

“The plain meaning of the text of the Budget Act Amendment includes servicing calls, which is clearly encompassed by the definition of a federal nontax debt.17 Using Congress’ definition of a debt owed to the United States, the Budget Act Amendment does not differentiate between “servicing” calls and calls made “to collect a debt.” Introducing such a dichotomy into the Budget Act Amendment by regulation is inconsistent with the plain language of the statute.”

“Servicing Calls” Provide Tangible Benefits to the Consumer

“ConServe disagrees that calls made attempting to resolve federal debts can be characterized as anything other than debt collection calls, especially in light of the DCIA definition of a “debt.” To the extent the Commission bifurcates the applicability of the Budget Act Amendment between “servicing” calls and calls made “to collect a debt,” servicing calls should include any call that is made in relation to a debt obligation owed the federal government and the borrower’s rights and obligations attendant thereto.”

 Who can be called? All persons allowed by law.

“The phrase “solely to collect a debt” does not act as a limitation of calls to only the person or persons obligated to pay the debt. Congress had the opportunity to limit the exemption based on the recipient of the call, but declined to do so. Instead, as discussed herein, the Budget Act Amendment’s language makes clear that the availability of the exemption depends on the purpose of the call alone.”

Are calls to persons the caller does not intend to reach, that is persons whom the caller might believe to the debtor but is not, covered by the exception? Yes, all called persons are covered.

“ConServe does not support a rule restricting the applicability of the exemption based on the identity of the recipient and the application of the “one-call window.” To the extent the one-call window adopted by the FCC was already in place prior to the Budget Act Amendment, it is reasonable to conclude that in adopting the Amendment, Congress did not intend such a restriction to apply to the collection of federal debts.

State and federal laws other than the TCPA already limit the information PCAs may reveal to third parties, such as friends and relatives of a delinquent debtor. Other federal laws address the Commission’s concerns regarding inconvenience that may result to third-parties. ConServe is also subject to ED’s rules for third-party collection agencies and is subject to contractual consumer satisfaction and quality benchmarks pursuant to its contract with ED. Furthermore, the FDCPA precludes the disclosure of sensitive consumer information to third parties absent the consumer’s explicit consent.”

Limits on Number and Duration of Covered Calls

“The promulgation of any rules on call number and duration restrictions should be made at a later date, after analysis of the Budget Act Amendment’s efficacy in decreasing borrower defaults, increasing borrower contacts and default resolution rates.

Remedies already exist for student loan borrowers who experience annoyance or are upset by attempted collection contacts. The FDCPA, for instance, allows a consumer to demand the collector cease communication with her and, if a collector makes an unreasonably excessive number of calls, the Act creates a private right of action in consumers against the debt collector.  The FDCPA specifically provides that “[a] debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt,” including “[c]ausing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with the intent to annoy, abuse, or harass any person called at that number.

If the Commission elects to impose a call volume restriction, after focused data collection and analysis occurs post-amendment in particular with respect to federal debt, should be crafted to strike the appropriate balance in preventing perceived borrower annoyance and economic reality. Three calls per month (as suggested by the Commission in the NPRM) —even if achieved with a live-connection with the borrower on each attempt—is simply insufficient to provide a reasonable expectation that PCAs can effectively honor the contract terms to collect debts on behalf of the federal government.

If restrictions are required, any call number restriction should be determined by the number of live contacts, not number of calls attempted. Counting calls based on non-answered dials will not serve any purpose beneficial to borrowers and will interfere with the legitimate, beneficial objective of reaching borrowers at an effective rate.

There should be no restriction on the duration for calls made in an attempt to collect federal nontax debt. It can take more than an hour to obtain necessary borrower information, provide required disclosures, and finalize any borrower arrangements. Limiting the duration of a call may force consumers to hurry through important information and prompt borrowers not to ask questions in order to complete the call in the specified time. In addition, either party to a call may terminate it at any time, so it is within the borrower’s discretion to end a call should they wish to do so. Duration restrictions serve no purpose beneficial to consumers and are more likely to harm borrowers’ interests.”

Should covered calls include calls to residential phone lines?

“ConServe opposes any expansion of the Commission’s rulemaking to apply to debt collection calls placed to residential landlines. Congress specified the scope of the Commission’s rulemaking in the Budget Act Amendment, providing that the Commission “may restrict or limit the number and duration of calls made to a telephone number assigned to a cellular telephone service to collect a debt owed to or guaranteed by the United States.”  If Congress had intended for the Commission to regulate landlines it would have clearly omitted the term “cellular” from the Budget Act Amendment.”

insideARM Perspective

insideARM applauds ConServe for providing the FCC with well-reasoned comments to the NPRM.  Unfortunately, it is likely that the deck is stacked against the PCAs and the ARM industry in this process. Just yesterday the FCC Released the Consumer Advisory Committee’s Formal Recommendations on the TCPA Proposed Rule. See the recommendations here.

The recommendations appear to merely “rubber stamp” the FCC proposals in the NPRM.  That is frustrating. Yesterday insideARM wrote about the FCC call for applications to the Consumer Advisory Committee. Let’s hope that the ARM industry seeks greater input on that committee. The Consumer Advisory Committee should have diverse representation. The FCC needs to be challenged on issues like the NPRM.