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|Justin Brandt, Alan D. Wingfield and Chad Fuller
On October 20, the United States Court of Appeals for the Fifth Circuit delivered its opinion in Ybarra v. DISH Network, LLC (“DISH”), a case involving alleged violations of the Telephone Consumer Protection Act, which prohibits callers from using an automatic telephone dialer system (“ATDS”) and delivering messages with an “artificial or prerecorded voice” without prior express consent of the called party.
Ybarra focused on DISH’s attempts to collect an outstanding balance owed by one of its customers by calling a cell phone number believed to belong to that customer. At some point, the customer relinquished that cell phone number, and Ybarra subsequently became the subscriber to that number. When DISH’s customer failed to pay the account balance, DISH called the phone number now belonging to Ybarra fifteen times from two different DISH phone numbers. (Under recent FCC guidance, the TCPA only allows a “one-call exception” for reassigned numbers; potential liability exists after the first call attempt to a number’s new subscriber, even if the caller has no actual knowledge that the original subscriber no longer utilizes the number.)
There has been confusion regarding whether TCPA liability exists for call attempts using ATDS or prerecorded messages that fail to reach their intended recipient, whether due to lack of answer or other transmission error. In Ybarra, DISH contended that four of the calls did not violate the TCPA because “none of these calls resulted in a prerecorded voice being used because no prerecorded voice was played.”
Based on its strained reading of the TCPA, the Fifth Circuit determined that ATDS calls do not require actual connection to violate the statute because the system is still being “used.” However, the Fifth Circuit came to the opposite conclusion as to prerecorded messages, finding that the prerecorded voice is not “used” if no connection is made.
Although this decision presents a sliver of good news for callers using prerecorded messages, the more onerous outcome is the expansive liability for usage of ATDS even in situations in which contact is not made with the called party. DISH evaded liability for the four calls only because Ybarra failed to produce admissible evidence that those calls were also placed with an ATDS. Plaintiff’s lawyers will likely argue that under the view espoused by the Fifth Circuit, the TCPA can be violated by attempted calls – not just calls that actually reach the intended called party or the called party’s voicemail.
Troutman Sanders LLP has unique industry-leading expertise with the TCPA, with experience gained trying TCPA cases to verdict and advising Fortune 50 companies regarding their compliance strategy. We will continue to monitor regulatory any judicial interpretation of the TCPA following this ruling in order to identify and advise on potential risks.
| Justin Brandt, Alan D. Wingfield and Chad Fuller
On October 19, Missouri Attorney General Chris Koster filed a federal lawsuit in the United States District Court for the Eastern District of Missouri against Charter Communications, Inc., alleging violations of federal and state telemarketing and “do-not-call” laws. Koster claims that his office received 350 complaints from consumers “about harassing practices by Charter’s telemarketers … [in] an attempt to sell Charter’s cable, internet, and phone services.”
In addition to the National Do Not Call Registry, Missouri has its own No-Call list of 4.5 million phone numbers, comprised of both cell phones and landlines. Additionally, Missouri’s telemarketing law supplements federal law by prohibiting telemarketers from contacting consumers “repeatedly or continuously in a manner a reasonable consumer would deem to be annoying, abusive, or harassing.”
Koster’s complaint generally alleges that Charter Communications and its vendors “placed at least thousands of telemarketing calls to Missouri consumers, even after the consumers asked that Charter stop calling.” The complaint specifically alleges that individual consumers received dozens of calls in less than a year and up to five calls per day. Despite requests for the calls to cease, Charter allegedly informed consumers that it would take forty-five days to place consumers on its internal do-not-call list.
The complaint seeks substantial damages, including up to $16,000 for each violation of the federal Telemarketing Sales Rule (TSR), at least $500 for each violation of the federal Telephone Consumer Protection Act (TCPA), up to $5,000 for each violation of the state No-Call statute, and an unspecified civil penalty for each violation of the state telemarketing statute. Given the substantial damages potential, it is imperative for companies to institute robust compliance procedures to avoid and/or defend against such litigation.
Koster’s complaint is a reminder that in addition to federal do-not-call requirements of the TCPA and the TSR, many states have their own specific requirements.
Troutman Sanders LLP has unique industry-leading expertise with state and federal telemarketing laws, with experience gained trying such cases to verdict and advising Fortune 50 companies regarding their compliance strategies. We will continue to monitor litigation in this area, especially interpretation and application of unique state telemarketing laws, in order to identify and advise on potential risks.
CFPB Director’s Remarks at MBA Annual Convention: Progress, Updated HMDA Reporting, and Warning to Parties Engaged in Marketing Services Agreementsposted on 2015-10-28 by Ethan G. Ostroff and Mary C. Zinsner
Consumer Financial Protection Bureau Director Richard Cordray addressed the Mortgage Bankers Association at its Annual Convention on October 19. In his remarks, Cordray:
Cordray outlined the tasks the CFPB had accomplished from its initiation as a new agency to address the problems in the mortgage market. Soon after its formation, the CFPB put new rules in place to protect prospective homebuyers and support responsible lenders. These regulations included the “Ability to Repay Rule,” which is sometimes referred to as the “Qualified Mortgage” rule. Critics predicted the rules would cause origination costs to double and lamented that the regulations would lead to the demise of community banks and credit unions. However, according to Cordray, two years later these concerns have not come to pass. Instead, the CFPB believes mortgage lending has increased and that the industry saw only minor consolidation. Cordray reiterated that the restoration of the mortgage and housing market is essential to restoring the American Dream. A home is the most important financial decision most families will ever make. But more importantly, Cordray noted, “a house that becomes a home is much more than four walls and a roof. Instead it is a special place to raise a family and create lasting memories, a place to hold up as a source of pride and accomplishment.”
According to Cordray, the CFPB has been flexible in working with the MBA to meet the needs of lenders and make adjustments to rules where necessary. He noted that the Bureau approved recent amendments to mortgage origination rules to broaden the definitions of “small creditor” and “rural area” because it had been persuaded that the lines it had drawn were too rigid. Over the course of the coming year, the CFPB will be launching a “look-back process” for certain rules, providing another vehicle for lender feedback.
The CFPB has also implemented the “Know Before You Owe” mortgage disclosure rule. According to Cordray, the CFPB recognized the system and operational changes necessary to adjust to the new requirements and allowed for a long implementation period. Cordray acknowledged the struggles lenders were having with vendors and noted that “examiners will be squarely focused on whether you have been making good-faith efforts to come into compliance with the rule.” He further addressed arguments of critics of the rule, articulating again the CFPB’s position that it is necessary for consumers to review closing costs and to compare them to estimates before they get to the closing table to ensure they are getting the deal they were promised. The Home Loan Toolkit was also introduced by the CFPB to guide consumers through the process of buying and shopping for a mortgage. Similarly, the CFPB’s “Owning a Home” online tool provides consumers an interactive internet resource to help consumers make sound decisions about their home purchase.
The next “homework assignment” for the CFPB mandated by Congress is updating the reporting requirements of the Home Mortgage Disclosure Act. Cordray noted that the CFPB recently finalized the HMDA rule. He characterized the new HMDA as a “sunlight” statute intended to educate the public and lawmakers about how lenders are serving housing needs, and that provides an understanding of what is happening in local markets. The new rule will require more robust data such as the requirement that lenders disclose home equity lines of credit, the age of borrowers, and rates and fees charged by lenders. Additionally, the new rule adds other data elements to enable the Bureau to better understand trends, such as the dynamics of manufactured housing. Cordray acknowledged that the HMDA modification will mean yet another implementation process for mortgage lenders. With that in mind, the CFPB has set the date for compliance with most provisions for January 2018, with initial reports including the new data due in early 2019.
In addition to improving available data, the CFPB is also focused on building a better collection system to streamline and modify the reporting requirements. Cordray stated that the four ways the CFPB will achieve this goal are: (1) the final rule aligns definitions with the MISMO standards, the prevailing mortgage data standards in the industry; (2) the CFPB is working with the Federal Financial Institutions Examination Council and HUD to modernize the data submission process to collect information more efficiently; (3) the new rule exempts institutions originating fewer than 25 closed-end mortgage loans or 100 open-end lines of credit from HMDA data reporting requirements; and (4) the CFPB has issued plain-language implementation materials and will soon release a compliance guide for small entities.
Reiterating the CFPB’s purpose as a supervisor and regulator, Cordray closed his remarks with a warning, making clear that the Bureau’s charge includes oversight of the parties to MSAs. He noted the risks stemming from MSAs and the opportunity for parties to pay or accept illegal compensation for referrals of settlement service business. He noted the Bureau’s “grave concern about the use of MSAs in ways that evade the requirements of RESPA,” which is reflected in the bulletin released on October 8, which provided guidance to the mortgage industry with an overview of the federal prohibition on mortgage kickbacks and referral fees, examples from the Bureau’s enforcement experience, and the risks faced by lenders entering into these agreements. He warned that any party participating in MSAs, including lenders, brokers, title companies, and real estate professionals, should ensure compliance with applicable laws and regulations or be prepared to see increased enforcement actions from the CFPB. “We want the industry to follow the rules – because that is good for consumers, honest businesses, and the economy as a whole.”
In closing, Cordray thanked the MBA for its contributions toward making the mortgage market more fair and transparent for all Americans. “Together we are building a more solid foundation so that you can thrive and so that families across the country can make the American Dream their reality.”
|By Justin Brandt, Alan D. Wingfield and Chad Fuller
On August 11, the Federal Communications Commission handed down a $2.96 million fine against Travel Club Marketing Inc., related entities, and owner Olen Miller (collectively “Travel Club”), the largest fine in FCC history related to autodialed calls. The fine stems from allegations that the companies violated the Telephone Consumer Protection Act in their telemarketing efforts, including sales of vacations and timeshares. Travel Club was accused of making at least 185 “prerecorded advertising calls” to more than 142 cellular and residential telephone numbers, many of which were listed on the National Do Not Call Registry.
The fine culminates a formal regulatory process that began on October 31, 2011, when the FCC issued a Notice of Apparent Liability (NAL) to Travel Club proposing the $2.96 million forfeiture for “willful and repeated violation” of the TCPA. When Travel Club finally responded, the FCC noted the failure “to provide any information or make any arguments whatsoever to challenge the NAL’s findings” and that Travel Club “continued to make unlawful robocalls during the time that the NAL underlying this Forfeiture Order has been pending, the fact of which militates against a cancellation or reduction of the proposed forfeiture penalty.”
Under FCC rules applicable when the calls were made, such telemarketing calls were allowed only with “either prior express consent or an established business relationship” with call recipients, which Travel Club did not possess. The FCC has since further tightened these restrictions, ending the “established business relationship” exemption in 2012. The previous record fine was $2.9 million, ordered by the FCC in May 2014, in relation to autodialed calls made during the 2012 United States presidential campaign.
Although the fine represents a new high for an administrative enforcement action by the FCC, an ongoing enforcement action by the FTC and several states against Dish Network under the TCPA, the FTC’s Telemarketing Sales Rule, and parallel state laws is seeking, theoretically at least, billions of dollars in penalties arising out of allegedly illegal telemarketing calls. Our take on the Dish Network action can be found here.
Troutman Sanders LLP has unique industry-leading expertise with the TCPA, with experience gained trying TCPA cases to verdict and advising Fortune 50 companies regarding compliance strategy. We will continue to monitor regulatory and judicial interpretation of the TCPA in order to identify and advise on potential risks.
|By Ethan G. Ostroff, David N. Anthony and Keith J. Barnett
The Consumer Financial Protection Bureau sent a questionnaire with almost 60 questions to randomly selected debt collectors and service providers as part of its potential rulemaking regarding debt collection, a process that began almost two years ago.
The CFPB received 23,000 comments in response to its Advance Notice of Proposed Rulemaking (ANPR) for debt collectors, which included 162 questions. According to the CFPB, this new “survey is being conducted in order to build the [CFPB’s] knowledge of the operational costs of collecting debt that is in default” and the answers provided to the questions are intended to “help the CFPB better understand the burden of potential regulations affecting the debt collection industry.”
This questionnaire was sent with a cover letter from John McNamara, the Debt Collections Program Manager in the CFPB’s Division of Research Markets & Regulations. In it, the CFPB explains it “will be gathering information from a variety of debt collection firms, creditors, and service providers” that will “inform the Bureaus’ analysis of the benefits and costs of potential new rules relative to debt collection.”
The questionnaire asks about basic activities and operational costs of collecting debt, including, for example, questions about vendors used for activities such as dialers or print mailings, maintaining data about consumer accounts, and furnishing information to credit bureaus. The CFPB also stated that it plans to conduct “follow-up phone interviews” with some of the companies that respond to the survey “to help us understand their operations in more detail.”
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