Editor's Note: This article previously appeared on the Ontario Systems Blog and is republished here with permission.
Below is a compliance checklist of key decisions and pivotal regulations of 2018 that are identified as the most critical compliance issues of the year.
1 – Mobile Phone Communications
Any compliance checklist worth checking has to start with a review of the Telephone Consumer Protection Act (TCPA). In March, the long-awaited decision by the DC Circuit Court of Appeals in ACA v. FCC, left us with little to no definition of an Automatic Telephone Dialing System (ATDS) and jettisoned the one free call rule. The decision also left calling parties in doubt as to whether TCPA consent must be provided by the consumer who the calling party intended to call by way of their mobile phone or the consumer the calling party actually called using an ATDS, prerecorded message or text message.
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.
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 TCPA in the wake of ACA v. FCC. Departing from the 2d 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 that any device that can store and dial numbers to a consumer’s mobile number is an ATDS. Unfortunately, Marks did not even attempt to define the word “store.” Callers now wait with baited breath for an appeal to the U.S. Supreme Court or a new rule from the Federal Communications Commission (FCC) clarifying a host of open TCPA issues.
Fortunately, the FCC confirmed its intent to permit the creation of a reassigned mobile number data base. Seemingly a signal the FCC will later rule that a caller must have the consent of the actual party called to use an autodialer, prerecorded message or text. Time will tell how this new data base will impact the unrelenting deluge of TCPA cases.
2 – Mobile Phone Communications – Text Messaging
Undaunted by the foregoing mess of legal chaos, callers of mobile phones for commercial purposes jumped head first into the world of text messaging. Noting the use of an automated platform to send or launch a commercial text message falls squarely under the TCPA, callers pulled off the band aid and embraced text messaging to collect debt. Some of the more critical compliance requirements for a text messaging program include:
- Determining the business case for your organization’s text message service (e.g. improve consumer satisfaction, offer an alternative form of communication, accept payments, reduce postage and letter costs by sending your legally required notices and letters electronically or reduce staff)
- Securing the consumer’s consent to receive single message, key word, recurring or chat text messages from the business, healthcare provider or governmental body
- Securing the consumer’s assent or acceptance of the Terms and Conditions for any one or more of the four text message services listed above
- Managing revocation of consent to text as well as the impact of a cease and desist directive for one or more of their accounts
3 – Robocall Communications
It pains me to even use the term “robocall” in a compliance article written for the thousands of sophisticated first and third-party debt collectors, credit issuers, debt buyers, governments and healthcare providers who do not call consumers repeatedly with the intent to harass, annoy or drive to the point of madness with their telephone communications. Yet, such is the case.
The legitimate commercial calls and texts placed by legitimate businesses have been caught in the regulatory effort intended to protect consumers from the calls placed relentlessly by illegitimate business’s sales and marketing calls. Time will tell if the call blocking and call identification solutions currently used in the marketplace as an aid for consumers will solve the problem. In the meantime, collection agencies should take steps to work with their software vendors and contact management vendors to employ equally strong solutions designed to penetrate the call block and caller ID solutions and allow you to reach your consumers.
4 – Letters and Notices
Collection notice lawsuits are back in vogue. The most common letter claims arise when collecting out of statute debt; disclosing interest, fees and charges; and referencing the name of the original creditor and/or current creditor in the collection notice.
Overshadowing claims kicked off the year in the matter of Riccio v. Sentry Credit, Inc. et al, 2018 WL 638748 (D.N.J. Jan. 31, 2018). In this case, the plaintiff alleged her right to dispute the debt or any portion thereof in writing, during the 30-day validation period, was eviscerated by the defendant agency’s inclusion of an invitation to contact the agency by way of a phone call. Though the Court held in favor of the agency, Riccio marked the first in a rash of cases alleging the inclusion of an invitation to contact the collection agency by phone in a validation notice constituted overshadowing.
Adding to the confusion is a series of cases alleging a verbatim restatement of the consumer’s rights, as provided in Section 1692g of the Fair Debt Collection Practices Act, can also trigger overshadowing claims should the statement of the consumer’s rights include the word “if.” Agencies are well advised to have each of their 1692 g notices reviewed by legal counsel prior to use.
Plaintiffs’ counsel and state legislatures seemingly drank the same Kool-Aid and are aligned when it comes to collecting out of statute debt. Convinced the attempt to collect an out of statute debt constitutes a deceptive, abusive or unfair practice, claims alleging the collector’s failure to disclose the debt was out of statute and the consumer cannot be sued is a violation of the Fair Debt Collection Practices Act or state law are rampant and states such as California are requiring special text requirements in notices as a condition to the collection of a time barred debt.
5 – Convenience Fees are not for the Faint of Heart
This issue should not be on our list but it is. Third-party debt collectors know, or should know, FDCPA section 15 USC 1692f (1) makes clear the collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law, is an unfair practice and therefore illegal. This makes the answer to the common question about convenience fees an easy one to answer. The third-party debt collector cannot charge a fee in connection with the collection of a debt or expense incidental to the principal obligation unless a state law permits the charge, or the charge is included – clearly included – in the underlying agreement between the consumer and the creditor.
Conversely, if the charge is not assessed by the third-party debt collector (e.g. Western Union telegram fee concept), such a fee may arguably be permitted because it is not charged, collected, or assessed by the debt collector. But don’t stop here. CONSULT WITH INDEPENDENT LEGAL COUNSEL, to determine if your process passes the convenience fee smell test or not. Class actions abound on this issue.
6 – Dispute Investigation and Resolution
Third-party debt collectors must respond to disputes as required by the FDCPA. Data furnishers who report consumer data to credit reporting agencies must respond to disputes as required by the Fair Credit Reporting Act (FCRA). Third-party debt collectors who report data to consumer reporting agencies must respond to disputes as required by both the FDCPA and the FCRA. For reasons that escape most defense attorneys who specialize in consumer law, third-party debt collectors and data furnishers simply don’t understand their duties under either law. Let’s be clear:
- Under the FDCPA, if the consumer notifies the debt collector in writing within the thirty-day validation period that the debt, or any portion thereof, is disputed, the debt collector will obtain, and mail, a copy of the verification of the debt or a copy of a judgment to the consumer;
- Under the FDCPA, if the consumer disputes the debt in writing or verbally at any time, or if the debt collector either knows or should know, the consumer disputes the debt for any reason, the debt collector must investigate the dispute and flag the item as disputed if the debt collector has also reported or will report this debt to a consumer reporting agency;
- Under the FCRA, if the consumer disputes the debt directly with the data furnisher, the data furnisher must investigate the dispute, respond to the consumer and flag the item as disputed. Using specified condition codes, the data furnisher will indicate where they are in the process and whether the consumer agrees or disagrees with the outcome of the investigation; and
- Under the FCRA, if the consumer disputes the debt indirectly by using the E-OSCAR process, the data furnisher must investigate the dispute, obtain any additional information from the creditor to assist in resolution of the dispute, and report the findings back to the credit reporting agencies using the E-OSCAR process.
Additional investigation and response requirements are triggered under the FCRA for frivolous disputes and under both the FCRA and the FDCPA for identity theft/red flags rule disputes.
These compliance highlights from 2018 are only a drop in the bucket. However, they do highlight the issues driving most of the consumer and administrative agency actions. Boards of Directors, senior leadership, operations and compliance professionals should be mindful of these issues, ensure all related policies and procedures are current, relevant and accurate and require in-house and outside legal counsel written opinions on every one of these topics.