Florida Federal District Court Disregards FCC’s 2008 Ruling Regarding Consent

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David Kaminski Carlson & Messler LLP

David Kaminski
Carlson & Messler LLP

In January 2008, the FCC issued a Petition for Declaratory Ruling in response to a petition filed by the ACA International.  In  that ruling, the FCC concluded that when a consumer provides a cell phone number to a creditor, (e.g., on a credit application), auto-dialed and pre-recorded message calls to wireless numbers were “deemed”  permissible under the Telephone Consumer Protection Act (TCPA) as calls made with the  “prior express consent” of the called party.  The FCC went on to conclude that “calls placed by a third party collector on behalf of that creditor are treated as if the creditor itself placed the call.”

Subsequently, there was the May 2008 decision which tested the FCC’s 2008 “consent” ruling in Leckler v. Cash Call.  In Leckler, a California Federal District Court concluded that the FCC’s consent ruling was “manifestly contrary” to the TCPA and the court refused to follow it. This decision, if it stood, would have had harmful consequences to the entire collection industry. Shortly after the Leckler decision issued, I was retained by the ACA, along with another attorney, to seek to overturn the decision. We were ultimately successful in overturning the district court’s erroneous decision pursuant to the Hobbs Act.  Under the Hobbs Act, only Federal Courts of Appeals are vested with the exclusive jurisdiction to enjoin, set aside, suspend, or to determine the validity of final orders of the FCC.  All was saved for the time being.

Then, along comes Mais v. Gulf Coast Collection Bureau, Inc., ___F.2nd____ 2013 WL 1899616 (S.D. FLA. May 8, 2013).  In Mais, where a debt collector, among others, sought to rely on the FCC’s 2008 consent ruling to demonstrate they  had prior express consent to call a cell phone number Plaintiff provided to a hospital, the Florida District Court ruled as follows:

1.         That the Hobbs Act does not deprive a Florida Federal District Court of jurisdiction to review the FCC’s 2008 consent Ruling because Plaintiff’s TCPA lawsuit is not a proceeding “to enjoin, set aside, annul or suspend any order of the [FCC].”  Rather, Plaintiff’s complaint is an action that seeks damages for collection calls that allegedly violate the TCPA.

2.         Once the Hobbs Act was out of the way, the Federal District Court ruled that the FCC’s consent ruling (“the provision of a cell phone number to a creditor, e.g., as part of a credit application, reasonably evidences prior express consent . . . to be contacted at that number . . .”) constitutes “implied consent,” not express consent, and impermissibly amends the TCPA to provide for an exception that congress did not write in the TCPA.  The District Court concluded it could ignore the FCC’s ruling.

3.         The District Court also concluded that even if the FCC’s 2008 ruling was applicable, the ruling does not apply to medical debts; rather, the District Court opined that the 2008 consent ruling only pertained to consent in the context of consumer retail credit transactions.

4.         The Federal District Court went further to state that even if the FCC’s 2008 consent order applied, the burden to prove “consent” is on Defendants.  Since Plaintiff never gave the cell phone number to the actual creditor, neither that creditor nor the debt collector collecting on its behalf, had express consent to call the cell phone via automated dialing equipment or to leave pre-recorded messages.

The Mais Court was not finished, however.  It then tackled the issue of vicarious liability, a subject upon which the FCC recently issued a declaratory ruling pertaining to sellers and third-party telemarketers.  The Court in Mais concluded that the FCC’s 2008 pronouncement that “calls placed by a third-party collector on behalf of [a] creditor are treated as if the creditor itself placed the call” is once again, contrary to the statute and conflicts with the plain language of 227(b)(1)(A) of the TCPA.  In that section of the TCPA, Congress chose to provide liability only for those who “make” calls in violation of the TCPA, not upon those who make calls on behalf of others.  In other words, the FCC added a vicarious liability provision to the TCPA where Congress did not.  Therefore, the court refused to give deference to the FCC’s ruling.

So, where does this leave us and what does all of this mean?  Clearly, the TCPA and the interpretation thereof are in flux. Creditors and debt collectors have come to rely upon the 2008 FCC ruling as a means in which to establish prior express consent under the TCPA.  Mais now holds that neither a creditor nor a debt collector have consent to call a cell phone number via automated dialing equipment or to leave prerecorded messages under the TCPA merely by obtaining a phone number provided on a credit application.  Please note:  the ruling by the Federal District Court is not binding precedent.  It may even be potentially disregarded by another Federal District Judge sitting in the same federal courthouse.  However, the reasoning of the court may be adopted by other courts in Florida and courts throughout the United States.

On a more positive front, if the District Court in Florida believes that Federal Courts have the right to indirectly challenge FCC Rulings, then it may be open season for challenges to the FCC’s dialer rulings in the 2008 Order.  As set forth in Paragraph 12 of the 2008 Ruling, “… a predictive dialer constitutes an automatic telephone dialing system” under the TCPA and a dialer is any equipment which has “the capacity to dial numbers without human intervention.”  (Paragraph 13.)  Following the logic of the Mais court’s interpretation of FCC final rulings generally, the above rulings should also be deemed “manifestly contrary to the statute” and should not be entitled to deference.  As I have argued for years, the FCC likely exceeded its rule-making authority by issuing sweeping pronouncements regarding dialers. The phrase dialers that have the “capacity to dial numbers without human intervention” essentially rewrites the dialer definition in the TCPA, 47 U.S.C § 227(a)(1). (See also Satterfield v. Simon & Schuster, 569 F.3rd 946 (9th Cir. 2009)).

The problem that one may face when challenging certain FCC rulings is that it may cause a party to make inconsistent arguments as to which FCC 2008 rulings stand and which should fall.  Further, a party seeking to challenge the FCC’s interpretation of a dialer in the Seventh Circuit and other jurisdictions may be barred by the Hobbs Act.  (See CE Design, LTD v. Prism Business Media, Inc., 606 F.3 443, 446 (7th Cir. 2010).  Other jurisdictions take a different approach. (See Leyse v. Clear Channel Broadcasting, Inc., 697 F.3d 360 (6th Cir.2012)).

All of the above points to the fact that the fight is ongoing. Multiple challenges to the FCC’s dialer rulings via formal petitions are pending before the FCC.  Change is in the air.  Challenges to FCC rulings are being fought in the courts. I have been advocating for years that it is time to level the playing field for the credit and debt collection industry with respect to a law that is by design, extraordinarily one-sided.

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Posted in Accounts Receivable Management, Banks and Credit Grantors, Collection Law Firms, Collection Laws and Regulations, Debt Collection, Debt Recovery, Dialers, Featured Post, Opinion, TCPA .

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Continuing the Discussion

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  • avatar Debtor Nation says:

    You poor victim. Debt Collectors regularly accept fraudulent subservices as valid (I’ve been fraudulently subserved 3 TIMES in the past year on two cases), accept credit card clients who have no debt instrument intake, accept clients who offer no legitimate debt suspension insurance.

    How often do you go after tornado, earthquake, hurricane victims for being deadbeats? How often do you go after sons and daughters who give up their jobs so they can CareGive for their parents, and how often won’t you accept their offer to pay once they can work again?

    Your solution, hire a robo service company so you can impale them in courts levy their meager bank accounts. Tough guy.

    Now you cry because you can’t run up someone’s cell phone bill. Rather pathetic, no?

  • avatar Mike Miller says:

    DN: I find your statement interesting. This was an informative piece about the history of the rulings in question. You are aware that InsideArm is not a collection company, correct?

    There are good collection companies and bad ones. There are good creditors and bad ones. I have been through a variety of situations in my life that impacted my ability to pay creditors. At every turn, if I called the company (bank, cell phone company, hospital or healthcare provider, etc.) and worked something out, everything was okay. Most creditors are understanding. I have sat on call center floors as calls were made to debtors. The people I sat with were polite and simply trying to do a job, although I am aware that there are less ethical companies/ agencies out there.

    I have also seen people who have opened cell phones and utility lines in their kids names with no intention of paying the bill. They plan on the collection calls and changing addresses and phone numbers when it becomes too much. People that do that make things more expensive for everyone. Companies that go after victims of nature and circumstance beyond their control do not represent every collection agency, and an effective process needs to be put in place to control for that. (Namely, there needs to be a faster, more efficient way to remove someone from a collection list when circumstances have been verified and an alternative resolution has been reached.) Those in collection do not represent every struggling debtor, and collection agencies are the check that keep that from becoming a bigger problem. People have to understand their finances, and when unable to pay bills work with creditors to find a resolution or use the remedies provided by law (bankruptcy, restructure, etc.) to right their ship. We are all one significant illness away from bankruptcy, so it could strike anyone.

    Personal shots at an attorney for his take on legislation that impacts an industry add nothing to the discourse and no value to the discussion.

  • avatar FriendoftheCourt says:

    Mike, stick to the issues. People opening cell phone accounts with the intent of not paying have absolutely nothing to do with you, as a collector, calling the cell phone.

    It is wrong to take service and not pay for it. But his being a fraudster doesn’t allow you carte blanche to violate the law in your dealings with him.

    Your attitude is as despicable as the fraudsters.

    As for the ruling, why is anyone surprised? The Federal Courts have always had the power to review and comment on FCC rulings, and if they see new law being made in the ruling, are right to disregard the FCC’s recommendation.

    The courts are to give due deference to Commission’s ruling in their deliberations, but slavish devotion is inappropriate due deference when there is a constitutional question, here, the exclusive right of the legislature to legislate.

    It is unfortunate that the Court has clouded the issue for the industry, but the court’s reasoning is sound.

  • avatar Kevin J Hough says:

    Mike…thanks for making a good and reasonable case for our industry. In addition to your words. My collection floor is as quiet and orderly as any healthcare provider’s business office. The agencies that I know go above and beyond and spend a considerable of money to stay compliant. Many times my people are the subject of extreme abuse. Foul language, racial, ethic, religious slander and slurs. Physical threats as well, I had a debtor track my home and threaten my pregnant wife with physical abuse, torture and death. We’re supposed to have equal protection under the law. We too are consumers and these laws work for us as well; and as indicated in the article the playing field is not level. Mr. DN your cynical and sly remarks may not carry as much credibility as you might think, even amongst consumers.

  • avatar Kevin J Hough says:

    Com’on “Friendofthecourt” you don’t know Mike and to say his attitude is as despicable as the fraudsters is presumptuous.

    But I do like your last sentence…..and that is a great source of frustration for me….”clouding the issues”.

  • avatar mike kaufmann says:

    The TCPA was intended to curb telemarketing companies and was arguably outdated by the time it passed. Consumer attorneys twisted the TCPA to apply to debt collectors and neither our congress or the courts are willing to side with the debt collection industry.

    We are also forgetting something here. The FDCPA provides a borrower relief from collections calls and letters by simply writting a cease and desist letter. Considering that within five years there will be more households that employ just having cellular numbers without a landline how are companies suppossed to do business if they cannot call when a borrower doesnt pay a legitimate debt?

  • avatar jessie-gomez says:

    Debtor Nation,

    It sounds like you fall in the area of a deadbeat consumer. Just because a consumer fall on hard times does not mean they can skip paying their debts. I guess you will come back and say the tornado victims in Oklahoma should get a free ride because of what happen to them. Most deadbeat consumers will not call the creditor or collection agency and try to work things out, but they will run to a credit board wanting to know how to trick the creditor or collection agency into a violation.

  • avatar Mike Miller says:

    FotC: I am willing to say I may have strayed a little off topic. I believe I stepped out of bounds to get on a soap box as much as DN stepped out of bounds to voice their opinion. My apologies. I appreciate your opinion on the legal perspective of the article, and like Kevin J, I like your last line “It is unfortunate that the Court has clouded the issue for the industry.” (FYI, I am not a collector. Never have been. I was in telecom, and was curious how a system was being used, so I asked to sit on a collection floor and listen to calls.)

    Mike Kaufmann, your points are very enlightening. It highlights another avenue of relief in the form of a letter and a future problem with fewer landlines.

    I guess my contribution to the subject of the article (the use of cell phones to collect debt) is that since the cost of unpaid bills is passed through as increased costs to others, allowing robo calls to cell phones if it attempts to collect from people that do not address the debt owed with the creditor or collector, or take legal protection seems fair. As I mentioned previously, I believe “there needs to be a faster, more efficient way to remove someone from a collection list when circumstances have been verified and an alternative resolution has been reached.” I am not in favor of abusive, repeated attempts, to call, so whatever the rule is for that today (something like max one call an hour, max 3 calls per 24 hours) seems fair. If they answer, a respectable collector will note it and stop calling as long as the debtor holds up their end and make the necessary payments.

    I am not in favor of robo calls to cell phones for solicitation or marketing purposes, but if you owe someone money, I think using a cell phone number is fair.

  • avatar Debtor Nation says:

    Jessie-Gomez, what part of “no debt instrument intake” did you not understand? After a perfect 15 year history of paying my credit cards, I did contact the companies BEFORE I was going to default.

    They had no answer.

    Now factor in that debt suspension insurance was overpriced by a factor of 10 to 20 times too high and that the comptroller of the currency actually pushed the insurance industry out and made debt suspension insurance a credit card monopoly, and an ideal way for a credit card customer to avoid a default was taken away from them.

    If reparations ever see the light of day for taking away a consumers ideal way to avoid a default over the past 15 years, we could be looking at a trillion dollar lawsuit in favor of the consumer.

    Now go after those Tornado victims in Oklahoma, I’ll bet you’re licking your chops counting the days to their default.

  • avatar casey says:

    Debtor nation you would be a good candidate to work in the compliance department of a collection agency. That is if your looking for work. You would be pleasantly surprised by a culture of honesty and integrity. You would also be hard pressed to find an industry that puts more resources into the protection of consumers rights than a large collection agency. Perhaps you might make some friends too, at least among the workers who still have a job. You see an auto dealer is a tool that provides mechanical advantage and debt collectors can’t use inventions or innovation when calling cell phones so they make up for the disadvantage they are subjected to by a law meant for the marketing industry by outsourcing the job of dialing cell phones. So the cost of paying a small group of attorneys millions of dollars and then giving a list of consumers about 50 bucks each, is the proliferation of call centers in India and the loss of jobs in the U.S. —– also if you we’re ever mistreated by an agency that was a bad actor I am truly sorry. You see the good actors are also victims of the bad actors. It has been my experience that people who have had financial difficulties in the past have a unique insight into what people in collections are experiencing and know how to communicate with them in a dignified manner. This very discussion illuminates the incredible strides that the collection industry has made. We’re not talking about abusive language, or disclosing the debt to others, or lying. This argument is about the technical definition of what a telephone is.
    I wish you well Debtor Nation. And if you don’t wish the collection industry well then you can snuggle up in your cozy bed tonight with the knowledge that debt collectors all over this country are being laid off getting marched out of the building, while a Billionaire in India reaps the spoils.

  • avatar Debtor Nation says:

    If you those of you in the debt collection industry were really interested in improving your industry’s reputation and benefit to society, you would agree that there are two types of defaults. There are Involuntary Credit Card Defaults, and there are Strategic Credit Card Defaults.

    Wjenm treating Involuntary Credit Card Defaulters identically to Strategic Credit Card Defaulters, your industry shows society that you are “just following orders”, and loving it.

  • avatar Debtor Nation says:

    Wjenm = when.

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