[Senate Hearing 114-560]
[From the U.S. Government Publishing Office]
S. Hrg. 114-560
THE TELEPHONE CONSUMER PROTECTION ACT AT 25: EFFECTS ON CONSUMERS AND
BUSINESS
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
MAY 18, 2016
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri MARIA CANTWELL, Washington
MARCO RUBIO, Florida CLAIRE McCASKILL, Missouri
KELLY AYOTTE, New Hampshire AMY KLOBUCHAR, Minnesota
TED CRUZ, Texas RICHARD BLUMENTHAL, Connecticut
DEB FISCHER, Nebraska BRIAN SCHATZ, Hawaii
JERRY MORAN, Kansas EDWARD MARKEY, Massachusetts
DAN SULLIVAN, Alaska CORY BOOKER, New Jersey
RON JOHNSON, Wisconsin TOM UDALL, New Mexico
DEAN HELLER, Nevada JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado GARY PETERS, Michigan
STEVE DAINES, Montana
Nick Rossi, Staff Director
Adrian Arnakis, Deputy Staff Director
Rebecca Seidel, General Counsel
Jason Van Beek, Deputy General Counsel
Kim Lipsky, Democratic Staff Director
Chris Day, Democratic Deputy Staff Director
Clint Odom, Democratic General Counsel and Policy Director
C O N T E N T S
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Page
Hearing held on May 18, 2016..................................... 1
Statement of Senator Thune....................................... 1
Statement of Senator Nelson...................................... 3
Statement of Senator McCaskill................................... 60
Statement of Senator Blunt....................................... 62
Statement of Senator Klobuchar................................... 64
Statement of Senator Daines...................................... 66
Statement of Senator Blumenthal.................................. 68
Statement of Senator Markey...................................... 70
Letter dated February 10, 2016, to Hon. John Thune and Hon.
Bill Nelson from Greg Zoeller, Indiana Attorney General;
Mark Brnovich, Arizona Attorney General; George Jepsen,
Connecticut Attorney General; Doug Chin, Hawaii Attorney
General; Andy Beshear, Kentucky Attorney General; Brian
Frosh, Maryland Attorney General; Chris Koster, Missouri
Attorney General; Cynthia H. Coffman, Colorado Attorney
General; Karl A. Racine, District of Columbia Attorney
General; Derek Schmidt, Kansas Attorney General; Janet
Mills, Maine Attorney General; Maura Healey, Massachusetts
Attorney General; Lori Swanson, Minnesota Attorney General;
Tim Fox, Montana Attorney General; Hector Balderas, New
Mexico Attorney General; Roy Cooper, North Carolina
Attorney General; Peter F. Kilmartin, Rhode Island Attorney
General; Sean Reyes, Utah Attorney General; Robert W.
Ferguson, Washington Attorney General; Jim Hood,
Mississippi Attorney General; Joseph Foster, New Hampshire
Attorney General; Eric T. Schneiderman, New York Attorney
General; Ellen F. Rosenblum, Oregon Attorney General;
Herbert H. Slatery III, Tennessee Attorney General; and
William H. Sorrell, Vermont Attorney General............... 72
Letter dated November 2, 1015, from the Alliance for a Just
Society; Americans for Financial Reform; Center for Digital
Democracy; Consumer Action; Consumer Federation of America;
Consumers Union; The Institute for College Access & Success
and its Project on Student Debt; Mid-Minnesota Legal Aid;
NAACP; National Association of Consumer Bankruptcy
Attorneys; National Consumer Law Center on behalf of its
low-income clients; National Association of Consumer
Advocates; North Carolina Justice Center; Woodstock
Institute; US PIRG; and Virginia Poverty Law Center in
support of the HANGUP Act.................................. 75
Witnesses
Hon. Greg Zoeller, Attorney General, State of Indiana............ 4
Prepared statement........................................... 6
Becca Wahlquist, Partner, Snell & Wilmer L.L.P., on behalf of the
U.S. Chamber Institute of Legal Reform and U.S. Chamber of
Commerce....................................................... 7
Prepared statement........................................... 10
Margot Saunders, Of Counsel, National Consumer Law Center........ 23
Prepared statement........................................... 25
Richard Lovich, National Legal Counsel, American Association of
Healthcare Administrative Management........................... 41
Prepared statement........................................... 43
Monica S. Desai, Partner, Squire Patton Boggs.................... 45
Prepared statement........................................... 47
Appendix
Letter dated May 17, 2016, to Hon. John Thune and Hon. Bill
Nelson from Debra J. Chromy, Ed.D., President, Education
Finance Council (EFC); James P. Bergeron, President, National
Council of Higher Education Resources (NCHER); and Winfield P.
Crigler, Executive Director, Student Loan Servicing Alliance
(SLSA)......................................................... 79
Letter dated May 17, 2016, to Hon. John Thune and Hon. Bill
Nelson from ACA International, American Association of
Healthcare Administrative Management (AAHAM), American
Financial Services Association (AFSA), American Insurance
Association (AIA), 1Coalition of Higher Education Assistance
Organizations (COHEAO), Consumer Bankers Association (CBA),
Electronic Transactions Association (ETA), Financial Services
Roundtable (FSR), Florida Chamber of Commerce, Florida Justice
Reform Institute (FJRI), Indiana Chamber of Commerce, Las Vegas
Metro Chamber of Commerce, Missouri Chamber of Commerce and
Industry, Montana Chamber of Commerce, National Association of
Chain Drug Stores (NACDS), National Association of Mutual
Insurance Companies (NAMIC), National Restaurant Association
(NRA), National Retail Federation (NRF), Newspaper Association
of America (NAA), Oregon Liability Reform Coalition (ORLRC),
Professional Association for Consumer Engagement (PACE), Retail
Industry Leaders Association (RILA), Satellite Broadcasting and
Communications Association (SBCA), SLSA Private Loan Committee,
South Carolina Civil Justice Coalition (SCCJC), State Chamber
of Oklahoma, Student Loan Servicing Alliance (SLSA), Texas
Civil Justice League (TCJL), U.S. Chamber of Commerce (USCC),
U.S. Chamber Institute for Legal Reform (ILR), Washington
Liability Reform Coalition, Wisconsin Manufacturers & Commerce
(WMC), and West Virginia Chamber of Commerce................... 80
Prepared statement of America's Health Insurance Plans (AHIP).... 81
Prepared statement on behalf of the American Bankers Association,
Consumer Bankers Association, Credit Union National
Association, Financial Services Roundtable, Independent
Community Bankers of America, and National Association of
Federal Credit Unions.......................................... 83
Letter dated June 1, 2016, to Hon. John Thune and Hon. Bill
Nelson from Sarah E. Ducich, Senior Vice President, Public
Policy and Government Relations, Navient....................... 89
Response to written questions submitted to Hon. Greg Zoeller by:
Hon. John Thune.............................................. 93
Hon. Deb Fischer............................................. 94
Hon. Steve Daines............................................ 94
Hon. Maria Cantwell.......................................... 95
Hon. Cory Booker............................................. 95
Response to written questions submitted to Becca Wahlquist by:
Hon. John Thune.............................................. 97
Hon. Deb Fischer............................................. 101
Response to written questions submitted to Margot Saunders by:
Hon. John Thune.............................................. 102
Hon. Deb Fischer............................................. 103
Hon. Steve Daines............................................ 104
Hon. Maria Cantwell.......................................... 105
Hon. Amy Klobuchar........................................... 106
Hon. Cory Booker............................................. 106
Response to written questions submitted to Richard Lovich by:
Hon. John Thune.............................................. 107
Hon. Roy Blunt............................................... 110
Response to written questions submitted to Monica S. Desai by:
Hon. John Thune.............................................. 110
Hon. Deb Fischer............................................. 114
Hon. Steve Daines............................................ 115
THE TELEPHONE CONSUMER PROTECTION
ACT AT 25: EFFECTS ON CONSUMERS
AND BUSINESS
----------
WEDNESDAY, MAY 18, 2016
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10:12 a.m., in
room SR-253, Russell Senate Office Building, Hon. John Thune,
Chairman of the Committee, presiding.
Present: Senators Thune [presiding], Blunt, Fischer,
Sullivan, Heller, Gardner, Daines, Nelson, Cantwell, McCaskill,
Klobuchar, Blumenthal, Markey, Booker, and Manchin.
OPENING STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
The Chairman. This hearing will get underway. My apologies
for being tardy. I'm running around a lot today already, so I
thank you all for your patience. And welcome you to today's
hearing on the Telephone Consumer Protection Act.
When passing TCPA nearly 25 years ago, Congress expressly
sought a balanced approach that protects the privacy of
individuals and permits legitimate telemarketing practices. As
a result of TCPA, a number of abusive and disruptive
telemarketing practices have been significantly reduced or
eliminated. For example, companies have to maintain Do Not Call
lists and cannot make solicitation calls before 8 a.m. or after
9 p.m.
But, TCPA is also showing its age, and there are
opportunities to build on its consumer benefits while also
ensuring consumers fully benefit from modern communications.
Consumers should be able to take advantage of new technologies
that help them avoid falling victim to unscrupulous actors and
those callers who ignore Do Not Call requirements. I doubt
there's a person in this room who has not received a recorded
voice on their mobile phone telling them that they've won a
cruise. We should also ensure that the FCC continues to take
action against abusive and harassing practices, and has the
tools it needs to bring bad actors to justice, including those
operating from overseas.
We recently took a step in this direction by unanimously
approving Ranking Member Nelson and Senator Fischer's anti-
spoofing legislation as part of the FCC Reauthorization Act.
But, our discussion today is not only about policing abusive
and harassing practices and stopping bad actors. We must also
acknowledge that most businesses are trying to do the right
thing and play by the rules. And we need to understand whether
TCPA is inadvertently hurting the good actors and consumers.
When Congress passed TCPA, cell phones were uncommon and
mobile telephone service was extremely expensive. It made sense
to have particularly strict rules about contacting people on
their mobile phones. Today, however, mobile phones are not only
ubiquitous, they are actually smart devices that do much more
than just send and receive phone calls. Consumer behavior is
also far different than it was back in 1991. In fact, today's
consumer expectations about communications connectivity and the
benefits of better contact with their doctors, schools,
favorite charities, and, yes, even their lenders, would be
unrecognizable to Congress 25 years ago. More than 90 percent
of Americans now have a mobile phone, and nearly half of all
households in the United States are mobile-only. These
percentages are even higher for young adults. Simply put, if
you can't reach these people on their mobile phones, you're
going to have a hard time reaching them at all. The balance
forged decades ago may now be missing the mark, and consumers
may be missing the benefits of otherwise reasonable and
legitimate business practices.
The Federal Communications Commission was tasked by
Congress with assuring a balanced application of TCPA. The
Commission, however, has struggled to apply TCPA to a changing
communications marketplace, and the agency actually seems to be
creating more imbalances and more uncertainty. The Commission's
rules have created new questions rather than answers. For
example, what is an auto-dialer? The Commission will not answer
that clearly, and, instead, only says it's something other than
a rotary-dialed telephone. The FCC declared last year that it
would not address the exact contours of the auto-dialer
definition or seek to determine comprehensively each type of
equipment that falls within that definition. Hospitals,
charities, utilities, banks, and restaurants should not have to
engage engineers and telecommunications attorneys in order to
know if they can call their customers without being sued.
Another example is what to do if a customer's number has
been reassigned. While the FCC claims to have addressed this
issue, companies say there is still no way to know with
certainty. What is certain, however, is that, if a phone number
has been reassigned and you call it more than once, you have--
you could be liable for $500 per call, even if the new party
never answers.
TCPA litigation has also become a booming business. TCPA
cases are the second most filled type of case in Federal
courts, with 3,710 filed last year alone. That represents a 45-
percent increase over 2014. And the companies affected by an
unbalanced TCPA may surprise you. For example, Twitter stated
the following in a filing at the FCC, and I quote, ``As the
result of this hyper-litigious environment, innovative
companies increasingly must choose between denying consumers
information that they have requested or being targeted by TCPA
plaintiffs' attorneys filing shakedown suits. No company should
be put to such a choice.''
The cost of getting the balance wrong isn't just burdensome
litigation, it is also the cost to consumers and to the economy
of the important consumer contact that is not being made, for
fear of running afoul of an ill-defined rule. Text messages to
let parents know about weather-related cancellations, calls to
struggling low-income households know how to keep the heat from
getting cutoff, calls to alert borrowers that they're at risk
of defaulting on their debts and ruining their credit ratings,
and follow-up calls to patients to make sure they understand
their post-discharge treatment plans.
Another specific matter that will be discussed today is the
Obama administration's carve-out to allow robocalls to mobile
phones to collect debts owed to or guaranteed by the Federal
Government. The administration used last year's must-pass
Bipartisan Budget Act as a vehicle to achieve its robocall
carve-out. The Committee reached out to the Office of
Management and Budget, the Department of the Treasury, and the
Department of Education to testify about why the administration
has prioritized this robocall carve-out for years.
Unfortunately, the Obama administration is not represented
before us today, but we will continue to seek its input as its
robocall carve-out is implemented by the FCC and as the
Committee continues its oversight of TCPA.
Ultimately, finding the right balance is essential to
protecting the privacy of consumers while making sure that they
have reasonable access to the information they want and need
and making sure good-faith business actors can reasonably
assess the cost of doing business.
We have a variety of perspectives represented on the panel
before us today, and I look forward to hearing your testimony,
and appreciate your participation. Thank you.
I'll recognize the Senator from Florida, our Ranking
Member, Senator Nelson.
STATEMENT OF HON. BILL NELSON,
U.S. SENATOR FROM FLORIDA
Senator Nelson. Mr. Chairman, if you go anywhere in this
country and you ask a consumer, ``Do you want to receive
robocalls?'' or you ask them, ``Would you like to receive
robocalls on your cell phone?''--you may get the cell phone
thrown at you. There are few things that unite our countrymen
and -women like the distaste for robocalls that are
interrupting them at dinnertime, in the middle of driving--I
mean, it goes on and on. It's a sentiment that nearly all of us
share, and that's why, for the last 25 years, the laws have
sided with consumers. The number of consumer complaints about
robocalls, regardless of the laws, continue to increase. The
FCC receives tens of thousands of robocall complaints every
month. And we all have stories to tell.
One of our friends signed up for a landline service one
morning, and, by the afternoon, before he had given his new
number to his family and friends, his phone was being flooded
by robocalls. So, he gave up the landline. In fact, how many of
us know friends at home that have given up the landline and
just used the cell phone, for that exact same reason? They
don't want the robocalls. Most of us, our cell phone is our
lifeline, and if we allow those annoying robocalls to begin
freely bombarding folks, where do consumers go to escape the
harassment?
So, what would happen on mobile phones is that they would
start to ignore the calls from unknown numbers so they don't
have to hear another recording, only to miss an important call.
Or what about the senior citizens? And how about low-income
Americans? Many of those consumers have calling plans that are
restricted in the number of minutes that they can use every
month. So, opening the floodgates of wireless robocalls to
those individuals would have an immediate adverse effect.
Or what about driving down the road, just like I was this
morning, dodging in and out of traffic, coming across the 395
bridge, people cutting in front of me and me having to slam on
the brakes, and suddenly you get a call, and you want to answer
it, but it's not something important. It's a robocall. And
therefore, leading to distracted driving. And where would all
of that end?
The frustration is there also because of fraudulent
callers. Scammers are always going to be a problem. We have
tried to address that directly in a bipartisan way with the
Chairman, thanks to his leadership. Senator Fischer and I have
teamed up on our bill to combat spoofing. I'd also like us to
see a revamped, improved Do Not Call List.
Now, obviously, there are legitimate businesses and other
reasons to call consumers on their wireless phones. But,
there's already an answer to that. Just get the consumers'
consent. That has been the law since 1991. In this bubble of
Washington, policymakers are often in danger of losing sight to
what is actually out there in America. And there's no doubt.
Ask that question of any American consumer.
So, I want to thank you, Mr. Chairman, for calling this
hearing to shed light on the distaste of American consumers
about these annoying calls.
The Chairman. Thank you, Senator Nelson.
All right, we'll get underway. We have with us today The
Honorable Greg Zoeller, who's the Attorney General for the
State of Indiana; Ms. Becca Wahlquist, testifying on behalf of
the U.S. Chamber Institute of Legal Reform; Ms. Margot
Saunders, with the National Consumer Law Center; Mr. Rich
Lovich, testifying on behalf of the American Association of
Healthcare Administrative Management; and Ms. Monica Desai,
who's a Partner at Squire Patton Boggs law firm.
So, we'll start on my left, and your right, with Mr.
Zoeller. Please proceed. And welcome to the Committee.
STATEMENT OF HON. GREG ZOELLER, ATTORNEY GENERAL,
STATE OF INDIANA
Mr. Zoeller. Thank you, Mr. Chairman and members of the
Committee. I appreciate the opportunity to come and be heard.
I'll pick up where Senator Nelson left off, that we do, in
the state of Indiana, receive remarkable number of complaints
each year. I think last year it was somewhere around 14,000
calls, well the largest number of complaints in our consumer
protection area. Over half of those complaints were about
robocalls specifically.
Indiana has a unique statute that was passed in 1988 that
prohibits the use of the autodialer to make calls to consumers.
And this is across the board. We've successfully defended that
statute up through the Federal courts, up to the 7th Circuit
Court of Appeals, really talking about how we do not allow
these calls for any--other than those that, like Senator Nelson
mentioned, have opted in. So, the schools and the pharmacies
and the people that you referred to, in terms of important
calls, have opted in, and we do have those that are still being
heard.
But, I think the points that I want to make, I'll--I've got
written testimony that I've submitted, but I'll kind of
summarize briefly that, really, the focus of our attention has
been on maintaining the protection of our own statutes. So, the
recent budget bill that you mentioned that had the exception
for Federal debt now challenges the ability of our state to
defend our own statute. Since we did not have any exceptions,
we can claim that there are no, let's say, unconstitutional
acts on the part of the state, so now that we have this new
exception for Federal debt, I know the case that's recently
filed by the American Association of Political Consultants
challenges the constitutionality. And, according to our read of
the 7th Circuit Court of Appeals in our own defense, I think
we've got risks now whether that exception might raise the
question about whether it's unconstitutionally distinguishing
between certain types of calls. So, we have a blanket
exception. It has been very effective. And we have been able to
defend, but based on the fact that we did not have those types
of exceptions that now the Federal Government has allowed.
Just briefly, I'll say that, you know, in the last month
alone, according to YouMail, which is a national robocall
index, they estimate that 2.5 billion robocalls were made in
the month of March. So, again, the barrage of this--I, quite
frankly, had to ask my staff whether that was a legitimate
number, because I couldn't believe it. But, unless someone
wants to argue the other side, I'll just leave it that that's
the only number we've got, in terms of the volume of these.
We do have a very specific sense of what a robocall, the
autodialer, is. When it can blast out 10,000 calls per minute,
it's a robocaller. And when you say that you get a call on a
new line, it's not that they actually called you; they called
everybody in the area code. So, within an hour and a half, you
can literally call everybody in Washington, D.C.
We've heard from a number of companies that they really
need the opportunity to call cell phones. But, again, I will
side with Senator Nelson's view that we--that's the last link,
in terms of the ability to communicate, since most of us have
long since pulled out our landline due to the robocalling
abuse. And again, most of it's from overseas, so, again, not
something that either State attorneys general or the Federal
Government can address.
Frankly, the problems that we have with robocalls, I've
warned all the citizens of our state that, if it's a robocall,
you should assume it's a scam artist. It's really the best tool
for scam artists. So, anytime you see these calls, we've
trained the people of Indiana, hang up as quickly as you can,
because, frankly, anything you say or do, even just staying on
the line, will actually be sold to others. The information that
you're going to be home on a Wednesday at 10:30 is now known by
the people who have done the robocalling, and they sell that to
others that may want to use other techniques to call you at
that same time and place, knowing that you'll be home, the
likelihood. And again, the risk to seniors is really where we
see this. The use of this technology to collect data, when
you--we talk about scam artists, you're really talking about
the old version of a confidence man. The more they understand
about you, the more they can win over your confidence. And
knowing when you're going to be home, time, place, and the
ability to target people with the amount of information, the
risk to consumers are not just the harassment; this is the
number-one tool to gain the information that the scam artists
are using to bilk particularly the seniors in our state.
I'll, finally, just say that we were very disappointed with
the exception that was carved out. Without this type of
hearing--we're having a hearing after-the-fact of the budget
bill, which, again, the Chairman noticed that it was put in
without really this kind of attention--we're--I'm representing,
now, 25 attorneys general who have asked that you take up the
HANGUP Act, which would take that back out. So, while we've
made an exception, which, again, risks the constitutionality
defense, plus you're targeting particularly the younger
students who are using their cell phone, and now that we've
managed to run up a 1.3 trillion dollars of student loan debt,
again, that's going to be the number-one target. So, we're very
worried about where this ends. We're against creating a safe
harbor, a number of reasons we can go through.
But, finally, I would just say that the point that--for
years, 25 years now, of having the TCPA, there has always been
the opportunity for legitimate businesses to ask people to opt
in, ``We have new programs that you may want to know about.
Please sign up, and we won't harass you. We will use it very
specifically. You can always opt out.'' But, we've never seen
anyone really go through this process of asking consumers
whether they would like to get a robocall. So, again, without
the trial of going through the process of trying to get
people's opt-in consent, the assumption should be made that
people don't want this. And businesses know they will never get
people to sign up for a robocall unless they can really argue
the case to their own customers. This shouldn't be something
that the Federal Government allows, that the people that you
represent have already made it pretty clear that they don't
want.
So, thank you for----
The Chairman. Thank you, Mr. Zoeller, very much.
[The prepared statement of Mr. Zoeller follows:]
Prepared Statement of Hon. Greg Zoeller, Attorney General,
State of Indiana
Thank you Mr. Chairman and members of the Committee. I am Greg
Zoeller, the Attorney General of Indiana. I appreciate the invitation
to speak to you today.
Preventing unwanted and harassing calls to peoples' phones has been
a priority for attorneys general across the country, and particularly
for me. I have spent my tenure as Attorney General working to
strengthen Indiana's Do Not Call laws and prosecute violators. Unwanted
calls and robocalls are by far the most common complaint received by my
office, with more than 14,000 complaints received last year--half of
which were specifically about robocalls. My office receives new Do Not
Call and robocall complaints at a rate of nearly 50 complaints per day.
If this rate continues, the number of Do Not Call and robocall
complaints could exceed 18,000 in 2016. The YouMail National Robocall
Index estimates that 2.5 billion robocalls were made in the U.S. in the
month of March alone. Sixteen of the top twenty robocallers were debt
collectors.\1\
---------------------------------------------------------------------------
\1\ Source: http://www.youmail.com/phone-lookup/robocall-index/
2016/march
---------------------------------------------------------------------------
It has been a long, tireless battle to help protect Hoosiers'
privacy by working to stop unwanted calls that pester, intrude and all
too often scam people. In Indiana, we've advanced some of the strongest
telephone privacy laws and banned nearly all types of robocalls. A
Federal court recently upheld Indiana's ban on political robocalls to
peoples' phones without their consent. We've also expanded our state's
Do Not Call law to include cell phones.
Unfortunately, the Federal Telephone Consumer Protection Act (TCPA)
was recently altered, undermining our tough state laws. The new
amendment allows debt collection robocalls to peoples' cell phones if
the debt is owned or guaranteed by the United States. Prior to the
amendment, the TCPA prohibited all robocalls to cell phones. By carving
out this exception, Congress is legitimizing robocalls and allowing
them a free pass to harass people.
Debt collection robocalls are aggressive, relentless, and often
inaccurate. Of the nearly 700 debt collection complaints my office
received last year, about 90 percent were because the caller was
harassing the wrong person. The vast majority of robocallers are scam
artists. Legitimizing some types of robocalls adds confusion and
creates more opportunity for fraud, particularly as government
impersonation scams rise. We had more complaints about the IRS
impersonation scam this year than any other telephone privacy
complaint, with nearly 1,400 complaints received this year at a rate of
10 complaints per day.
The debt collection exception particularly burdens young Americans
struggling with student debt. College students and recent graduates are
already buried in mountains of debt. Blasting them with robocalls,
running up their cell phone bills and putting them at risk for fraud
only adds insult to injury. In a letter sent earlier this year, I--
along with 24 state attorneys general--called on the Committee to
defend the telephone privacy rights of citizens by passing the HANGUP
Act and keeping the ban on robocalls to cell phones intact.
Some sellers are urging you to create a safe harbor to protect them
from the bad acts of telemarketers calling on their behalf or
generating leads. This is because courts have imposed strict liability
on the sellers in several cases. There is no ``safe harbor'' for those
who hire telemarketers or buy leads to sell their products in Indiana.
Our legislature clearly stated that liability extends not only to those
who make calls, but also to those who cause them to be made. That is
why I am urging you not to water down the TCPA by approving any
amendment that lets sellers off the hook.
I would also like to stress the importance of the TCPA's provision
that allows private citizens to take action against companies and
individuals that violate their telephone privacy rights. As Congress
envisioned in 1991, individuals can pursue legal cases against
telemarketers, faxers and debt collectors who violate the TCPA. This
tradition has produced a rich body of case law, and curbed abuses by
those who would otherwise ignore TCPA restrictions.
Unwanted calls are a huge annoyance to our citizens. It's
frustrating when the Federal Government weakens state efforts aimed at
protecting and serving our citizens. I urge Congress to stop allowing
loopholes that legitimize robocalls and open citizens up to a barrage
of unwanted or misplaced calls.
Thank you for your time. I am available for any questions.
The Chairman. Ms. Wahlquist.
STATEMENT OF BECCA WAHLQUIST, PARTNER,
SNELL & WILMER, L.L.P., ON BEHALF OF
THE U.S. CHAMBER INSTITUTE FOR LEGAL REFORM
AND U.S. CHAMBER OF COMMERCE
Ms. Wahlquist. Good morning, Chairman Thune and Ranking
Member Nelson, members of the Committee. That was my good
mornings.
My name is Becca Wahlquist. I am honored to represent the
U.S. Chamber of Commerce and the Chamber of Institute for Legal
Reform testifying before you today.
The context for my knowledge about the TCPA is that, for
over a decade, I have defended various companies sued under the
TCPA for a variety of communications made via phone, text, and
facsimile. So, I've been a firsthand witness to the growing
cottage industry of TCPA plaintiffs lawyers who have been
targeting American businesses. I can confirm that, in the past
few years, the problems with TCPA litigation abuse have only
worsened. And so, we need your help.
Over-incentivized plaintiffs, a growing TCPA plaintiffs'
bar, and an antibusiness 2015 order from the FCC have led to an
explosion of litigation in our country, litigation that is less
about protecting consumers and more about driving a
multimillion-dollar commercial enterprise of TCPA lawsuits.
These suits, for the large part, are not about marketing calls.
They're not about the kinds of robocalls that we were just
hearing of. Robocalls are those indiscriminate calls reaching
out, trying to get anyone, going through the numbers in an area
code, just getting someone to pick up the phone. Robocalls are
not what my clients have sent.
So, for example, a client that has millions of customers,
has a lot of automated systems, a customer's credit-card
payment is rejected. The customer has provided a telephone
number as their point of contact to the company. The company
then contacts the customer to let them know, ``Your credit
card's been rejected,'' because if they don't know that, and
their service gets turned off, there are going to be fees to
get your service turned back on again. So, this is all trying
to provide information to a customer-provided number.
The biggest driver of litigation now is if that number has
been reassigned and the company has no knowledge about the
reassignment. So, who they then send that message to ends up
being a new owner, and that's what's driving a big chunk of the
TCPA litigation now, is that you now have someone who says,
``Well, I didn't consent to get that call,'' and especially if
they don't inform the company, the calls can keep rolling in
for other reasons, and then you start getting, ``I now have 40
calls, now I want my $20,000,'' and you get the demand. And
this is what companies are facing over and over again.
The TCPA itself does not provide for attorneys' fees. It's
clear that TCPA class lawsuits are just a lawyer-driven
business at this point. Attorneys' fees awards are getting
pulled from common class funds, dwarfing any recovery for
individual consumers. For example, in 2014, the average
attorneys' fees awarded in a TCPA class action was $2.4
million, while the average class member's award in those
actions would be $4.12.
It's not just large companies who are finding themselves
targeted. Small businesses throughout the country are finding
themselves brought into court when they had no intention of
violating any law, they had no knowledge of the TCPA. I have
one client right now who has six employees and found me on the
Internet because I talk about TCPA, and I took on their case.
And if they can't--they're not sure what to do. They're going
to have to shutter their business and fire their employees and
close shop if they can't get past this TCPA lawsuit that's
being brought on a class-action basis by someone who received a
call at a reassigned number.
So, small businesses throughout the country, a wide range
of industry, so you have--literally thousands of different
companies are being sued under the TCPA right now--social media
companies, electric companies, banks, sports teams, pharmacies,
family owned plumbing companies, a ski resort, an accountant, a
local dentist office. They've all found themselves defending
against TCPA litigation and facing what, for them, is
potentially annihilating statutory damages for gotcha
violations. And these are not spoofing robocalls, these are
legitimate communications that these companies are trying to
make.
The TCPA is not only a liability trap, it's a vicarious
liability trap, as well. So, for example, there are companies
that make no calls, they have no telemarketing, they have no
interaction with consumers--such as manufacturers--and they're
finding themselves getting dragged into TCPA litigation on the
argument that, ``Your product name was mentioned in the spoofed
robocall that I received. And, because your name was mentioned,
you're on the hook and you are responsible.'' And this is a
problem, because you have companies with deep pockets now in
litigations having to defend themselves on a class-action
basis, where the statutory damages are so potentially
annihilating that it really forces settlements rather than a
defense.
So, I provided some examples in my witness statement of
some of the litigation abuse, such as the Pennsylvania woman
who subscribes to 35 cellular phones, carries them around in a
suitcase with her so she can jot down all the calls that she
gets. She specifically chooses area codes from Florida areas so
that they are more likely to have potentially socioeconomically
depressed conditions. She chooses the area codes carefully and
then waits for reassigned numbers to come in, and brings
hundreds of suits.
I mentioned the Ohio man who was so resistant to putting
his number on the Do Not Call List that he actually fought up
through the Ohio Supreme Court to be able to keep getting
calls, because he wanted to bring suits under them and didn't
want to be on the Do Not Call List.
There are a lot of plaintiffs that are--people that are
making their living right now as TCPA plaintiffs.
I also provided some examples in my written statement of
TCPA attorneys who are behind quite a bit of litigation abuse.
So, it has been 25 years since the TCPA was drafted, and
the equipment that was focused on was equipment that doesn't
even exist anymore. The original intent of the TCPA is
something I discuss in part 2 of my statement. I ask you to
review that, to think about the changes that need to be made. I
make suggestions in part 5 of my statement.
I'm just here today to sum up, to voice the hope of
thousands of businesses being sued under the TCPA, that
Congress will act to update the TCPA, provide the greatest
degree of clarity and alleviate the intolerable and unfair
burdens that portions of the statute are placing on legitimate
American businesses.
[The prepared statement of Ms. Wahlquist follows:]
Prepared Statement of Becca Wahlquist, Partner, Snell & Wilmer L.L.P.,
on behalf of the U.S. Chamber Institute for Legal Reform and U.S.
Chamber of Commerce
Chairman Thune, Ranking Member Nelson, and distinguished members of
the Committee, thank you for inviting me to testify on behalf of the
U.S. Chamber Institute for Legal Reform (``ILR'') and U.S. Chamber of
Commerce. The U.S. Chamber of Commerce is the world's largest business
federation representing the interests of more than three million
companies of all sizes, sectors, and regions, as well as state and
local chambers and industry associations, and dedicated to promoting,
protecting, and defending America's free enterprise system. ILR is an
affiliate of the Chamber dedicated to making our Nation's civil legal
system simpler, faster, and fairer for all participants.
I appreciate the opportunity to testify about the impact of the
Telephone Consumer Protection Act, 47 U.S.C. Sec. 227 (``TCPA'') on
American businesses big and small, in a manner never intended by the
drafters of this 25-year-old statute.
The TCPA is a well-intentioned statute that established our
Nation's Do Not Call list and carried forward important policies. But
portions are horribly outdated; in particular, Section 227(b), which
addresses technologies used for cold-call telemarketing in the early
90s, is now being expanded to attach liability to all manner of calls
(i.e., informational and transactional) placed by businesses small and
large to customer-provided numbers. TCPA litigation is also fueled by
statutory damages that are untethered to any actual harm, and that can
quickly balloon to staggering amounts of potential liability.
Unfortunately, it is American businesses, and not harassing spam
telemarketers, who are the targets for these suits. As FCC Commissioner
Pai recently noted, ``The TCPA's private right of action and $500
statutory penalty could incentivize plaintiffs to go after the illegal
telemarketers, the over-the-phone scam artists, and the foreign
fraudsters. But trial lawyers have found legitimate, domestic
businesses a much more profitable target.'' \1\ Indeed, businesses
reaching out in good faith to customer-provided telephone numbers are
now the most common target of TCPA litigation.
---------------------------------------------------------------------------
\1\ See In re Matter of Rules & Regulations Implementing the Tel.
Consumer Prot. Act of 1991, 30 F.C.C.Rcd. 7961, 8072-73(2015) (Pai
Dissent).
---------------------------------------------------------------------------
It is time for this statute to be revisited and brought in line
with other Federal statutes that provide for statutory damages when
there is no actual harm. While protections should remain for consumers,
businesses too need protection from astronomical liability for four
years' worth of communications to customer-provided numbers (with no
stated statute of limitations, courts have applied the default four-
year period in TCPA litigation). As further detailed below, the TCPA
has created perverse incentives for persons to invite calls from
domestic businesses and then sue for those calls, and for lawyers to
search avidly for deep-pocket defendants calling their potential
clients, even offering smartphone applications to help generate those
lawsuits. TCPA litigation abuse is rampant, and its negative impact on
American businesses is not what was intended when this statute was
passed in a different technological era.
I. Background: The Destructive Force of TCPA Litigation
The TCPA was enacted twenty-five years ago to rein in abusive
telemarketers. But in recent years American businesses have discovered
that if they reach out to customers via call, text, or facsimile for
any reason, their company is at risk of being sued under the TCPA.
A plaintiff claims that a communication was made without his or her
consent using certain technologies, and more often than not, that
plaintiff claims to represent a nationwide class seeking the $500 (or
$1,500, if willful) statutory damages available under the TCPA for each
communication. Thus, the small business that sent 5,000 faxes finds
itself being sued for a minimum of $2.5 million; the restaurant that
sent 80,000 text coupons is sued for trebled damages of $120 million;
and the bank with 5 million customers finds itself staring at $2.5
billion in minimum statutory liability for just one call placed to each
of its customers.
Individual plaintiffs can also stockpile calls they believe violate
the TCPA for years, and then make demands or sue once they reach
critical mass--seeking $20,000 to $60,000 in individual damages, for
example, for 40 unanswered calls a company thought it was placing to
its own customer's number over a three-year period. The targeted
company must then decide whether to pay plaintiffs' counsel or the
complaining individual, or to spend significant money defending an
action in which, when a class is alleged, has statutory damages that
can reach into the millions or billions of dollars.
For over a decade, I have defended various companies sued under the
TCPA for a variety of communications made via phone, text, and
facsimile. I have been witness to the growing cottage industry of TCPA
plaintiffs and lawyers targeting American businesses that reach out to
their own customers for any reason (transactional, informational, or
marketing), and I can confirm that in the past few years, the problems
with TCPA litigation abuse have only worsened. Over-incentivized
plaintiffs and a growing TCPA plaintiffs' bar, as well as an anti-
business July 2015 Order from a sharply divided FCC majority,\2\ have
led to an explosion of litigation throughout the country--litigation
that is less about protecting consumers and more about driving a multi-
million dollar commercial enterprise of TCPA lawsuits.
---------------------------------------------------------------------------
\2\ See In re Matter of Rules & Regulations Implementing the Tel.
Consumer Prot. Act of 1991, 30 F.C.C.Rcd. 7961 (2015) (hereafter,
``July 2015 FCC Order''). Various appeals of this Order have been
consolidated and are now pending before the D.C. Circuit Court of
Appeals.
---------------------------------------------------------------------------
Indeed, while the TCPA itself does not provide for attorneys' fees,
it is clear that TCPA class lawsuits are a lawyer-driven business, with
attorneys' fees awards (pulled from common class funds) dwarfing any
recovery for individual consumers. For example, one survey of Federal
TCPA settlements found that in 2014, the average attorneys' fees
awarded in TCPA class action settlements was $2.4 million, while the
average class member's award in these same actions was $4.12.\3\
---------------------------------------------------------------------------
\3\ See Wells Fargo Ex Parte Notice, filed January 16, 2015, in CG
Docket No. 02-278, p. 19, available at http://apps.fcc.gov/ecfs/
document/view?id=60001016697.
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And it is not just large companies who find themselves targeted:
Small businesses throughout the country are finding themselves brought
into court when they had no intention of violating any law and had no
knowledge of the TCPA. One family-owned company from Michigan, Lake
City Industrial Products, Inc., struggled for several years to defend a
TCPA class action for 10,000 faxes, providing a chilling example of how
the risks of unknowingly violating the TCPA can be exacerbated by lead
generators who reach out to small companies and promise an inexpensive
and legal way to get new businesses. Lake City received a faxed
advertisement suggesting a way to generate new business: faxes to be
sent to approximately 10,000 targeted businesses, all for the low
sending cost of $92.\4\ The family-run company believed it was engaging
in a legal marketing tactic and worked with the fax advertiser to
design the facsimile it would send; on summary judgment, the court
found Lake City liable for approximately 10,000 violations of the TCPA
for the unsolicited marketing facsimiles, even though Lake City noted
that statutory damages of $5,254,500 would force its bankruptcy.\5\
This is just one of the small businesses that has found itself facing
annihilating statutory damages and accruing staggering defense costs
for sending faxes in the modern age, when facsimile machines are no
longer expensive and, indeed, most ``facsimiles'' are converted to e-
mail PDF and sent to a recipient's e-mail by company servers.
---------------------------------------------------------------------------
\4\ See Am. Copper & Brass, Inc. v. Lake City Indus. Products,
Inc., 1:09-CV-1162, 2013 WL 3654550 (W.D. Mich. July 12, 2013)
(business retained fax blaster to send faxes; no question that the
business first inquired whether such faxes were legal and received
assurances that they were).
\5\ See id.at *6.
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With such riches to be had through TCPA lawsuits, between 2010 and
2015, the amount of TCPA litigation filed in Federal court increased by
940 percent.\6\ For just one example of how this has impacted the
already-crowded Federal court system, look to Florida: in 2015, at
least 170 TCPA actions were filed just in Florida's Federal courts,
compared with less than 30 such Federal actions in 2010.\7\
---------------------------------------------------------------------------
\6\ See http://webrecon.com/out-like-a-lion-debt-collection-
litigation-cfpb-complaint-statistics-dec
-2015-year-in-review/.
\7\ Source: Bloomberg Law Litigation & Dockets (searched on May 10,
2016 with a search of ``TCPA'' OR ``telephone consumer protection'' in
the Florida District Courts).
---------------------------------------------------------------------------
The dramatic increase in TCPA litigation has been spurred by multi-
million dollar settlements (such as Capital One's $75 million
settlement in 2014), as well as news of individual awards in the
hundreds of thousands of dollars (such as one New Jersey woman's
$229,500 verdict against her cable provider in July 2015,\8\ or a
Wisconsin woman's $571,000 verdict in 2013 against the finance company
calling her husband's phone after she defaulted on car payments \9\).
---------------------------------------------------------------------------
\8\ King v. Time Warner Cable, 113 F. Supp. 3d 718 (S.D.N.Y. 2015).
\9\ Nelson v. Santander Consumer USA, Inc., 2013 WL 1141009 (W.D.
Wisc., March 8, 2013), a decision later vacated by agreement of the
parties as part of a confidential settlement.
---------------------------------------------------------------------------
Attorneys have profited as well, often teaming up to split the
costs of ``investing'' in a TCPA litigation, so that multiple firms
split the business risk and share in the reward when companies facing
enormous statutory damages end up settling. In the Capital One action,
for example, when considering the appropriate attorneys' fees (rather
than the 33-40 percent of the award the named plaintiffs had agreed to
with their various lawyers), the court recognized that while Capital
One had many defenses that could extinguish the plaintiffs' TCPA
claims, the in terroem value of settling an action with even a slight
chance of billions of dollars in statutory damages was ``bankruptcy-
level exposure'' that made settlement (and a fees award) more likely
than not, so that a fees award of a little over 20 percent was more
appropriate.\10\ The plaintiffs' law firms were awarded their costs and
$15,668,265 in fees out of the settlement fund.\11\
---------------------------------------------------------------------------
\10\ See In re Capital One Tel. Consumer Prot. Act Litig., 80 F.
Supp. 3d 781, 805 (N.D. Ill. 2015), appeal dismissed (May 5, 2015),
appeal dismissed (June 8, 2015), appeal dismissed (June 26, 2015) (also
recognizing ``the strong incentives to settlement created by the
magnitude of Capitol One's potential liability'').
\11\ Id. at 809.
---------------------------------------------------------------------------
Businesses of all sizes in a wide range of industries--from social
media companies, electric companies, banks, sports teams, and
pharmacies, to a family-owned plumbing company, a ski resort, an
accountant, and a local dentist's office--have found themselves
defending against TCPA litigation and demands. Indeed, the TCPA is not
only a liability trap, but also a vicarious liability trap as well. For
example, companies (such as manufacturers) who place no phone calls to
consumers are finding themselves defending class action litigation for
millions of calls or texts placed by downstream resells simply because
those communications purportedly mentioned their name-brand products.
Companies are subject to the expense of defending against claims such
as, for example, a text message was sent on their behalf, when the
company did not send the message, did not authorize that such messages
can be sent, and had no knowledge of which business partner (if any)
would breach its contract to perform illegal telemarketing (as often
the actual senders of spam text messages spoof the originating number
that would show in the Caller ID field to hide their identity). Even
the simple mention of the company's name in the text message subjects
it to class-wide TCPA litigation by plaintiffs' attorneys hoping for
the big payday of a settlement (because so many companies do settle due
to the in terrorem specter of billions of dollars in potential damages,
if a large enough class could be certified.\12\).
---------------------------------------------------------------------------
\12\ As Chief Judge Richard Posner of the U.S. Court of Appeals for
the Seventh Circuit has explained, certification of a class action--
even one lacking in merit--forces defendants ``to stake their companies
on the outcome of a single jury trial, or be forced by fear of the risk
of bankruptcy to settle even if they have no legal liability. In re
Rhone-Poulenc Rorer Inc., 51 F.3d 1293, 1299 (7th Cir. 1995).
---------------------------------------------------------------------------
To better explain the current TCPA landscape, Part II of my
testimony below first addresses the original intent of the TCPA and the
language that, in 1991, was designed to target certain abusive and
harassing marketing calls, and then explains how the statute has been
twisted and expanded without Congress' input to apply to modern
technologies. Part III examines the current driving forces behind TCPA
cases, and the reasons that companies cannot fully protect themselves
from suits under Section 227(b). Part IV provides examples of just some
of the rampant litigation abuse by both serial TCPA plaintiffs and by
attorneys incentivized to bring TCPA lawsuits at an ever-increasing
pace. I conclude in Part V by voicing the hope of the thousands of
businesses being sued under the TCPA: that Congress should act to
update the TCPA in order to provide the greatest degree of clarity and
to alleviate the intolerable and unfair burdens that portions of this
statute are placing on businesses. In order to start that discussion, I
provide several recommendations that would bring the TCPA's private
right of action in line with that of other Federal statutes offering
consumer remedies and that could help protect American companies and
Federal courts from the repercussions of litigation abuse, and allow
business to continue communications helpful and important to their
customers.
II. The Original Intent, and Current Application, of the TCPA
The TCPA was enacted during a very different technological era, and
is now twenty-five years removed from modern technologies. The
telemarketing calls and faxes that the TCPA was designed to curtail
were made by aggressive marketers employing tactics--such as random
number generation or sequential dials--that systematically worked
through every possible number in an area code, with the hope of getting
someone to answer the phone or look at a fax with a marketing pitch for
a product or service. Facsimile machines required expensive thermal
paper; cellular phones were extremely uncommon (and very bulky) with
expensive usage costs--thus, special protections were put in place for
unsolicited calls made to cell phones and for unsolicited faxes that
did not provide an easy opt-out. Caller ID was not in use, and so the
only way to know who was calling was to pick up the ringing telephone.
Text messages did not exist (indeed, e-mail was still uncommon), and
today's smart phones were science fiction fantasies.
An understanding of the technologies available in 1991 is crucial
to an understanding of the TCPA's intent: Businesses reaching out to
their own customers were not doing so through what the statute defined
as ``ATDS machines''--systems capable of randomly and sequentially
generating and dialing numbers,\13\ which were being used by
telemarketers who did not care whom they reached, as long as they could
get a certain number of people to pick up the phone. Congress was
focused on the belief that limiting calls from ATDS autodialers would
stop a certain kind of calling technology that ``seized'' phone lines
that had been called randomly or sequentially.\14\
---------------------------------------------------------------------------
\13\ See 47 U.S.C. Sec. 227(a) ``Definitions: As used in this
section--(1) The term ``automatic telephone dialing system'' means
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.''
\14\ See, e.g., Report of the Energy and Commerce Committee of the
U.S. House of Representatives, H.R. Rep. 102-317, at 10 (1991)
(discussing ``Automatic Dialing Systems'' as follows: ``The Committee
report indicates that these systems are used to make millions of calls
every day. . . . Telemarketers often program their systems to dial
sequential blocks of telephone numbers, which have included those of
emergency and public service organizations, as well as unlisted
telephone numbers. Once a phone connection is made, automatic dialing
systems can ``seize'' a recipient's telephone line and not release it
until the prerecorded message is played, even when the called party
hangs up. This capability makes these systems not only intrusive, but,
in an emergency, potentially dangerous as well.'')
---------------------------------------------------------------------------
The TCPA was designed to address consumer privacy concerns and
serious intrusions from that type of aggressive marketing. As the
Supreme Court has noted, ``Congress determined that Federal legislation
was needed because telemarketers, by operating interstate, were
escaping state-law prohibitions on intrusive nuisance calls.'' \15\ The
TCPA set rules about the kinds of consent required to make certain
communications to phones and facsimile machines,\16\ and further
authorized the establishment of a national Do Not Call (DNC) list that
would record consumers' requests to not receive any telemarketing
calls.\17\ The FCC was tasked with implementing the TCPA and
promulgating the regulations that would create the national DNC, and
over time the FCC has updated its regulations to add new requirements
(such as the need for companies to maintain their own internal DNC list
for requests to stop telemarketing otherwise permissible because of an
Existing Business Relationship (EBR)).\18\
---------------------------------------------------------------------------
\15\ Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740, 742 (2012).
\16\ See 47 U.S.C. Sec. 227(b).
\17\ See 47 U.S.C. Sec. 227(c).
\18\ See, generally, 47 C.F.R. Sec. 64.1200.
---------------------------------------------------------------------------
On the Senate floor, the TCPA's lead sponsor, Senator Hollings (D-
SC), explained that the TCPA was intended to ``make it easier for
consumers to recover damages'' from computerized telemarketing calls,
and that the intent was for consumers to go into small claims courts in
their home states so that the $500 in damages would be available
without an attorney:
The substitute bill contains a private right-of-action
provision that will make it easier for consumers to recover
damages from receiving these computerized calls. The provision
would allow consumers to bring an action in State court against
any entity that violates the bill. The bill does not, because
of constitutional constraints, dictate to the states which
court in each state shall be the proper venue for such an
action, as this is a matter for State legislators to determine.
Nevertheless, it is my hope that states will make it as easy as
possible for consumers to bring such actions, preferably in
small claims court. . . .
Small claims court or a similar court would allow the consumer
to appear before the court without an attorney. The amount of
damages in this legislation is set to be fair to both the
consumer and the telemarketer. However, it would defeat the
purposes of the bill if the attorneys' costs to consumers of
bringing an action were greater than the potential damages. I
thus expect that the States will act reasonably in permitting
their citizens to go to court to enforce this bill.\19\
---------------------------------------------------------------------------
\19\ 137 Cong. Rec. 30821-30822 (1991) (emphasis added).
It is clear that the private right of action focused on allowing
consumers to sue telemarketers. Moreover, it was so clear that TCPA
claims were intended to be handled on an individual basis in small
claims court, the few early TCPA litigants in Federal courts were told
that there was no jurisdiction in Federal court to hear TCPA claims, a
matter only finally resolved by the U.S. Supreme Court in 2012 in its
Mims decision (when the question had essentially been mooted for large
TCPA class actions by the earlier Class Action Fairness Act's provision
that class actions alleging over $5 million in damages could be removed
to Federal court).
There was no real debate over the TCPA at the time of its passage;
certainly, there was no indication of what the TCPA would grow to
become. But now, a statute designed to provide a private right of
action for consumers to pursue their own claims against entities
placing intrusive and aggressive telemarketing calls, preferably in
small claims court and without an attorney, now threatens to bankrupt
any legitimate company placing legitimate business calls, as well as
any ``deep-pocket'' entity that plaintiffs can claim could be
vicariously liable for another person's or entity's communications.
The largest driver of TCPA litigation these days is claims of
``autodialed'' calls or texts to cellular phones placed without prior
consent, because so many Americans now use their cell phones as their
primary point of contact--as of 2014, 90 percent of American households
had cellular phones,\20\ and almost 60 percent were wireless-only
households.\21\ Unlike in 1991, the modern owners of cellular numbers
often opt to provide those numbers to companies with whom they do
business. And unlike in 1991, companies often use computerized systems
to efficiently contact these numbers--systems that TCPA plaintiffs
argue are ``autodialers'' subject to the TCPA's restrictions.
---------------------------------------------------------------------------
\20\ Pew Internet Project, Mobile Technology Fact Sheet, Pew
Research Center (2014), available at http://www.pewinternet.org/fact-
sheets/mobile-technology-fact-sheet/.
\21\ Stephen J. Blumberg & Julian V. Luke, Div. of Health Interview
Statistics, Nat'l Ctr. for Health Statistics, Centers for Disease
Control and Prevention, Wireless Substitution: Early Release of
Estimates From the National Health Interview Survey, January-June 2014,
at 1-3 (Dec. 16, 2014).
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As already noted above, the TCPA defines an ``autodialed'' call as
one made on an automated telephone dialing system (ATDS), ``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.'' \22\ TCPA plaintiffs and their attorneys have been
arguing in lawsuit after lawsuit that if a call was placed with
equipment that has even a hypothetical, future capacity to store or
produce random or sequentially generated numbers (i.e., through
reprogramming), that call or text was placed with an ATDS. And in an
Order now on review before the D.C. Circuit Court, a divided majority
of FCC commissioners agreed in June 2015 that ``capacity'' to randomly/
sequentially dial need not be an operative feature in dialing equipment
for the call to be considered ``autodialed'' and subject to the TCPA's
restrictions.\23\ (The two dissenting commissioners vehemently
disagree.\24\)
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\22\ 47 U.S.C. Sec. 227(a)(1) (emphasis added).
\23\ See July 2015 FCC Order, 30 FCC Rcd. at 7974-7976.
\24\ See also id., Pai Dissent, 30 FCC Rcd. at 8074 (``That
position is flatly inconsistent with the TCPA. The statute lays out two
things that an automatic telephone dialing system must be able to do
or, to use the statutory term, must have the ``capacity'' to do. If a
piece of equipment cannot do those two things--if it cannot store or
produce telephone numbers to be called using a random or sequential
number generator and if it cannot dial such numbers--then how can it
possibly meet the statutory definition? It cannot. To use an analogy,
does a one-gallon bucket have the capacity to hold two gallons of
water? Of course not.''); see also id., O'Rielly Dissent, 30 FCC Rcd.
at 8088-90.
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The central problem to businesses with Section 227(b)'s prohibition
on ``autodialed'' calls to cellular phones is that legitimate companies
are being swept into the strict liability intended for the bad actors
who, in 1991, were cold-call telemarketing random or sequential
telephone numbers using a specific kind of equipment. No legitimate
company in 1991 was trying to reach its own customers by randomly
dialing numbers with equipment that fit the definition of an ATDS (as
it would make no sense to try to reach a customer by dialing random
numbers), so as to be subject to $500 or $1,500 per call liability for
``autodialed'' calls. Thus, it makes sense to see no affirmative
defenses built into Section 227(b), because no one making cold calls to
random telephone numbers would have a defense for such practices.
On the other hand, many companies in 1991 did conduct some form of
targeted telemarketing to customers, former customers, or prospective
customers, and were bound by Section 227(c) to adhere to all the
telemarketing rules established as to the DNC list. The separate
private right of action in Section 227(c)(5) gives more protection to
the legitimate companies that could violate DNC provisions: having
exceptions during existing business relationship periods; allowing one
free mistake each twelve months per number; setting statutory damages
at the less draconian ``up to'' $500 per communication; and providing
affirmative defenses for companies who are making good faith efforts to
comply with the law (i.e., by establishing written DNC policies and
training employees on such policies \25\). Thus, companies were given
instructions needed to comply with the DNC section of the TCPA, and
could defend themselves in the instances when the inevitable human
error, such as a customer representative not accurately recording a DNC
request, would occur.
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\25\ See 47 U.S.C. Sec. 227(c)(5) (``It shall be an affirmative
defense in any action brought under this paragraph that the defendant
has established and implemented, with due care, reasonable practices
and procedures to effectively prevent telephone solicitations in
violation of the regulations prescribed under this subsection.'').
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It should come as no surprise that most TCPA litigation is now
being brought under Section 227(b)'s unforgiving prohibitions on
autodialed or prerecorded calls placed to cellular phones without prior
express consent. Plaintiffs argue that calls or call attempts were
autodialed. While the FCC has opined that ``prior express consent'' for
transactional and informational calls exists when a customer opts to
provide his or her cellular telephone number to a company (i.e., on an
application),\26\ the FCC majority has also now stated that companies
are liable (after the first call) to all ``autodialed'' calls placed to
those customer-provided numbers if, unbeknownst to the company, the
customer has changed his or her telephone number or provided a wrong
number in the first place.\27\ Thus, a company reaching out to a
customer-provided number can unknowingly be contacting a new subscriber
to the cellular phone, who then can claim calls were made with an
autodialer in violation of Section 227(b) without prior consent.
---------------------------------------------------------------------------
\26\ See In re: Rules and Regulations Implementing the Telephone
Consumer Protection Act of 1991, 23 F.C.C.R. 559, 564-65 10 (F.C.C.
Jan. 4, 2008).
\27\ See July 2015 FCC Order, 30 FCC Rcd. at 8001.
---------------------------------------------------------------------------
As further addressed in Part IV below, this has created ``gotcha''
litigation, where someone signs up for a credit card with a friend's
telephone number, and then the friend sues for calls received, or where
someone keeps acquiring dozens of new cellular telephone lines in the
hopes of ``striking it rich'' with a phone number receiving calls from
deep-pocket companies trying to reach the prior owner of the line.\28\
Because the private right of action in Section 227(b)(3) lacks the
affirmative defenses that Congress intended should apply to legitimate
businesses (whom it was known could be targets of litigation under
Section 227(c)(5), which does have such defenses), TCPA plaintiffs and
their lawyers argue that there is strict liability for all these calls
placed without consent, regardless of the company's good faith belief
and adherence to practices meant to comply with the TCPA.
---------------------------------------------------------------------------
\28\ The Third Circuit recently made such matters worse, in a ten-
year battle over a single phone call one roommate picked up on March
11, 200, by ruling in October 2015 that a ``habitual user'' of a shared
telephone such as a roommate was in the ``zone of interests protected
by the TCPA'', and had alleged sufficient facts to pursue a claim under
the TCPA if he answered a ``robocall'' intended for his roommate (who
may herself have given prior consent for that call). See Leyse v. Bank
of Am. Nat. Ass'n, 804 F.3d 316, 327 (3d Cir. 2015).
---------------------------------------------------------------------------
One final note on the 1991 statute and the technology of that time:
Text messages did not exist twenty-five years ago when the statute was
drafted, nor did any phones capable of displaying such a message.
However, some courts and now the FCC majority have decided that a text
message is the same thing as a ``call'' to a cellular phone, and is
subject to the $500 to $1,500 per communication liabilities under the
TCPA for autodialed calls (even though Commissioner O'Rielly vehemently
dissented to extending the TCPA to text messages).\29\ Many recent TCPA
litigations focus on text messages--and even though companies ensure
that a ``STOP'' response to a text message will stop all future
messages, a consumer has no obligation to ask for texts to ``STOP'',
but instead can simply keep collecting messages until there are enough
for his or her lawyer to make a hefty demand. It is difficult to
imagine that Congress, had it conceived of text messages in 1991, would
not have had separate provisions to address this very different kind of
communication that so many consumers welcome for easy and quick
delivery of information.
---------------------------------------------------------------------------
\29\ See July 2015 FCC Order, O'Rielly Dissent, 30 FCC Rcd. at 8084
(``I disagree with the premise that the TCPA applies to text messages.
The TCPA was enacted in 1991--before the first text message was ever
sent. The Commission should have had gone back to Congress for clear
guidance on the issue rather than shoehorn a broken regime on a
completely different technology.'').
---------------------------------------------------------------------------
It should be clear that the technological shift since 1991,
particularly the advent of cellular phones and now smart phones, should
have made portions of the TCPA inapplicable to such new technologies.
However, the opposite has happened. While foreign-based scam
telemarketers continue to barrage consumers with calls, legitimate
domestic businesses find themselves targeted primarily for
transactional and informational calls never intended to be subject to
the TCPA's restrictions--calls placed via modern technologies not
contemplated by the TCPA. As Commissioner Pai has pointed out, this is
something Congress should address:
Congress expressly targeted equipment that enables
telemarketers to dial random or sequential numbers in the TCPA.
If callers have abandoned that equipment, then the TCPA has
accomplished the precise goal Congress set out for it. And if
the FCC wishes to take action against newer technologies beyond
the TCPA's bailiwick, it must get express authorization from
Congress--not make up the law as it goes along.\30\
---------------------------------------------------------------------------
\30\ July 2015 FCC Order, Pai Dissent, 30 FCC Rcd. at 8076.
But the FCC majority in issuing its recent July 2015 Order (now in
litigation in the D.C. Circuit) instead continued to expand the reach
of the TCPA, allowing litigation against businesses across all
industries to proceed aggressively.
III. Core Factors Driving TCPA Litigation Against Businesses
For many years, as it was intended to do, TCPA litigation focused
primarily on unsolicited marketing facsimile, DNC violations, and
prerecorded cold-call telemarketing calls. Around 2010, however, there
was a sea-change in TCPA litigation. I recall that year defending one
client sued on a class action basis for fraud alert calls placed to
cellular telephones alerting the recipient that he or she might be a
victim of identity theft. I thought that as soon as I alerted
plaintiff's counsel that she had not received a marketing call,
plaintiff would dismiss her lawsuit (as was usual); however, because
the TCPA's protections for cellular telephones did not specifically
apply to ``marketing'' calls, and my client was a large and well-funded
corporation, the litigation went forward with tens of millions of
dollars in statutory damages in play for fraud alert calls placed in
the previous four years. Plaintiff argued that she had not given her
prior consent for a prerecorded message from my client, but only to the
credit reporting agency.
We did win in summary judgment, with the court recognizing that
Plaintiff had requested fraud alert calls be placed to her cellular
phone through an intermediary and that there was indeed ``prior express
consent'' to receive said calls, but that victory required my client to
take on the costs of eighteen months of hard-fought litigation. In the
end, Plaintiff's counsel walked away to file more TCPA lawsuits, only
on the hook for my client's costs (and not for the significant
expenditures in attorneys' fees, under the default American rule that
leaves companies left holding the bag when a litigation ends).
Before 2010, I defended just a few TCPA cases each year. By 2012,
however, a critical mass of plaintiffs' attorneys had discovered the
TCPA and its uncapped statutory damages and saw the expansion of TCPA
litigation as a legal ``gold rush.'' By that time, I had become an
almost full-time TCPA defense lawyer. And, given the amount of TCPA
litigation being filed across the country, law firms also started TCPA
defense practice groups. Now, TCPA litigations consume significant
court resources across the country.
In my experience, TCPA actions have been fueled in the past few
years primarily by the following four issues:
a. ``Capacity'' to Autodial Remains Hotly Contested
A debate continues as to whether ``capacity,'' as used in Section
227(b) of the statute, refers to a system's present actual capacity, or
includes a system's potential capacity, and the FCC's July 2015 Order
only adds to the confusion. Under the FCC's view, any telephone call
placed with equipment that is not an old-fashioned rotary dial
telephone may encourage plaintiffs' lawyers to take a shot at a TCPA
lawsuit.
Some courts have rejected the theory that any technology with the
potential capacity to store or produce and call telephone numbers using
a random number generator constitutes an ATDS. For example, the Western
District of Washington noted that such a conclusion would lead to
``absurd results'' and would ``capture many of contemporary society's
most common technological devices within the statutory definition.''
\31\ But other courts have accepted the ``potential'' capacity argument
forwarded by the plaintiffs' bar. One judge in the Northern District of
California, for example, has held that the question is ``whether the
dialing equipment's present capacity is the determinative factor in
classifying it as an ATDS, or whether the equipment's potential
capacity with hardware and/or software alterations should be
considered, regardless of whether the potential capacity is utilized at
the time the calls are made.'' \32\ And the FCC majority refused, in
its July 2015 Order, to find that ``capacity'' should reflect a
system's present and actual abilities, with challenges to that opinion
now pending in the D.C. Circuit.
---------------------------------------------------------------------------
\31\ Gragg v. Orange Cab. Co., Inc., 995 F. Supp. 2d 1189, 1192-93
(W.D. Wash. 2014); see Hunt v. 21st Mortg. Corp., No. 2:12-cv-2697-WMA,
2013 WL 5230061, *4 (N.D. Ala. Sept. 17, 2013) (noting that, as, ``in
today's world, the possibilities of modification and alteration are
virtually limitless,'' this reasoning would subject all iPhone owners
to 47 U.S.C. Sec. 227 as software potentially could be developed to
allow their device to automatically transmit messages to groups of
stored telephone numbers).
\32\ Mendoza v. UnitedHealth Grp. Inc., No. C13-1553 PJH, 2014 WL
722031, *2 (N.D. Cal. Jan. 6, 2014).
---------------------------------------------------------------------------
Thus, there is no certainty for American businesses as to whether
the expansion of the ``ATDS'' definition advocated by TCPA plaintiffs
does indeed cover all modern, computerized systems used to dial
telephone numbers or send text messages. A company whose employees are
dialing calls that use any form of a computer in the process might find
itself a target in a TCPA lawsuit, even when calls could not have been
placed unless a human representative initiated the one-to-one call. To
have uncapped statutory damages available that may or may not apply
based on the interpretation of an undefined term in an outdated section
of a Federal statute is an untenable situation for companies to find
themselves in, when facing claims under the TCPA.
b. Calls Made To Recycled Or Wrongly Provided Cell Phone Numbers Are
Generating New Suits
On a daily basis, companies across the country make calls or send
texts to numbers provided to them by their customers, and prior express
consent should exist for such communications even if they are made to
cellular numbers with an ``autodialer'' or if they provide information
via a prerecorded message. However, cell phone numbers can easily be
relinquished and reassigned without notice to anyone, let alone to the
businesses that were provided the number as a point of contact by their
customer. Indeed, every day, an estimated 100,000 cell phone numbers
are reassigned to new users.\33\
---------------------------------------------------------------------------
\33\ July 2015 FCC Order, O'Rielly Dissent, 30 FCC Rcd. at 8090.
---------------------------------------------------------------------------
Further, sometimes a customer makes a mistake when providing a
contact number, or enters one belonging to a friend or roommate, or in
these days of family plans, enters a number for a phone line shared
with or later bequeathed to another family member. Then, when the
company attempts to reach out to its customer at the provided number,
it can unintentionally be sending communications to a non-customer,
i.e., the new or actual owner of the number. This seemingly innocent
mistake has become the most significant driver of new TCPA litigations.
Indeed, a statute intended to cover abusive telemarketing has morphed
into one supporting claims against well-intentioned companies
attempting to communicate with their own customers, generally for
transactional or informational purposes.
As another example, automated calls set up by a cell phone owner to
be sent to his or her cellular phone as a text message can be received
instead by a new cell phone owner if the prior owner forgets to turn
off such requested messages relinquishing a phone line. One California
restaurant chain's automated voice-mail systems sent 876 food-safety-
related text messages intended to reach one of its employees' cell
phones, after that employee had set a forwarding feature on his work
telephone that was designed to message his own phone. However, after he
changed numbers, those messages were unintentionally sent to the new
owner of that telephone line.\34\ That restaurant was sued for over
$500,000 in statutory damages, and after a protracted fight, the small
restaurant chain informed me that it ended up settling for an
undisclosed amount after incurring hundreds of thousands of dollars in
defense costs to fight the allegations. Again, it is difficult to
believe that Congress intended companies to be sued for ``set it and
forget it'' messaging services set up by the prior owner of a phone
line, once that line is recycled to a new owner.
---------------------------------------------------------------------------
\34\ See Rubio's Restaurant, Inc. Petition for Expedited
Declaratory Ruling, CG Docket No. 02-278, at 3 (filed Aug. 11, 2015).
---------------------------------------------------------------------------
c. Vicarious Liability Theories Are Targeting New Defendants (In
Particular, Those With Deep Pockets)
Another driver of TCPA litigation is vicarious liability: it is no
longer just the entity placing a call, sending a text, or faxing a
document that needs worry about defending a TCPA lawsuit. In a 2013
Order long-anticipated by the plaintiffs' bar, the FCC opined that
vicarious liability could attach under the TCPA to companies who
themselves had not initiated the communications in question, so long as
the calls were placed ``on behalf of'' the company, using the Federal
common law of agency.\35\ Thus, a person or company can find itself
defending a TCPA lawsuit with claims it is responsible for someone
else's decisions to communicate via phone, text, or fax.
---------------------------------------------------------------------------
\35\ See In the Matter of The Joint Petition Filed By DISH Network,
LLC, the United States of America, and the States of California,
Illinois. North Carolina, and Ohio for Declaratory Ruling Concerning
the Telephone Consumer Protection Act (TCPA) Rules, Declaratory Order,
CG Docket No. 11-50 (issued Apr. 13, 2013).
---------------------------------------------------------------------------
The FCC's vicarious liability order invites the plaintiffs' bar to
reach up the chain to the defendant with the deepest possible pocket.
This, in turn, has led to a dogpile of lawsuits being brought against
security equipment manufacturers for calls mentioning their branded
equipment (even when the calls were not made to sell that equipment,
but rather the caller's own $39.99 a month monitoring services).
Further, lawsuits are being brought against major corporations for
third-party calls made by independent contractors not authorized in any
way to call as, or on behalf of, the company.
And in the case of an employee gone rogue who violates the TCPA's
rules by breaking all of his own company's policies, the company finds
itself facing potentially annihilating liability if it loses on the
vicarious liability fight, and enormous pressure to settle. One
insurance company, for example, recently completed settlement of a $23
million class action that was brought by the recipient of a facsimile
sent against company policy by an insurance agent who contracted on his
own with a fax blaster to set up a server and send faxes in a home
garage. When alleged vicarious liability for millions of faxes would be
in the billions of dollars, it is easy to see how enormous the pressure
to settle can be. And when there is a deep pocket defendant to put on
the ropes, it is no wonder that the fax blaster who actually sent the
faxes (after ensuring clients that such transmissions were legal) was
not sued by the plaintiff.
Companies are facing allegations of vicarious liability for calls
and texts for which no source can even be ascertained; if a prerecorded
marketing message promises a free gift card for a certain retailer,
that retailer finds itself facing demands under the TCPA under the
argument that it is liable under some ratification or apparent
authority aspect of vicarious liability.
d. Revocation of Prior Express Consent Also Driving New Lawsuits
A fourth breeding ground for modern TCPA litigations is found in
situations in which a company is calling its customer, at the customer-
provided number, but then the recipient claims to have revoked consent
for further calls. The Third Circuit stood alone in 2013 when it held
that the TCPA provides consumers with the right to revoke their prior
express consent to be contacted on cellular telephones by autodialing
systems.\36\ Before this point, there were no revocation-based TCPA
litigations; now, with the FCC majority stating in its July 2015 Order
that prior consent can be revoked at any time and in any manner, claims
that consent was revoked has become one of the fastest growing areas of
TCPA litigation.\37\
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\36\ Gager v. Dell Financial Services, LLC, 727 F.3d 265, 272 (3d
Cir. 2013).
\37\ Commissioner O'Rielly points out that the TCPA itself had no
mention of revocation or a means to do so, and that the FCC majority
has simply invented a vague and unworkable new ``common-law'' based
rule never vetted by Congress. See July 2015 Order, 30 FCC Rcd.,
O'Rielly Dissent, at 8095.
---------------------------------------------------------------------------
The problem with allowing revocation by any means when larger
businesses are making informational and/or transactional calls
(sometimes through a variety of vendors) is that TCPA plaintiffs and
their lawyers plan to generate suits by ``revoking consent'' for
further calls with an oral statement, in the hopes that the customer
representative does not capture that oral request.\38\ Other plaintiffs
are sending convoluted text messages that a system might not recognize
as a ``STOP'' message, and then claiming consent had been revoked. One
demand I recently dealt with for a client involved someone who never
replied ``STOP'' as the text messages instructed him to do whenever he
wanted to opt out of the text reminders, and instead sent a wordy text
message ``withdrawing permission for future calls to his cellular phone
number.'' The system did not recognize this language, and in any case
would only have been able to stop text messages and not phone calls;
the determined consumer insisted that he had revoked consent for all
communications, and was entitled to tens of thousands of dollars for
later calls he received.
---------------------------------------------------------------------------
\38\ For example, in April 2014, the Davis Law Firm of
Jacksonville, Florida, posted an article providing 5 steps to ``stop
calls'' from a targeted company and to potentially make money under the
TCPA. See http://davispllc.com/lawyer/2014/04/16/Consumer-Protection/
How-to-Get-DirecTV-to-Stop-Calling-You-_bl12785.htm, last accessed
November 6, 2014. Step 2 instructs cell phone owners to say ``I revoke
my consent for you to call me'' and then to hang up. Thereafter, the
firm asks the cell phone owner to keep a detailed call log regarding
any additional calls to be the basis of a TCPA lawsuit. See id.
---------------------------------------------------------------------------
Another issue with the newly announced ``revocation'' right is that
the FCC majority implies that it should be instantaneous in
implementation, without giving the business time to receive and process
DNC requests from its vendors and/or to adjust its outbound calls. (In
contrast, a business knows that DNC prohibitions attach to a number 30
days after it is entered into the DNC list.\39\) Thus, claims of
``immediate'' revocation rights are leading to even more ``gotcha''
litigation, including claims that a consumer revoked prior consent on a
Monday morning but received three more calls over the next few days
before all calls stopped--and that $4,500 in willful calling damages
for the three calls are thus owed to that consumer under the TCPA.
---------------------------------------------------------------------------
\39\ See 47 C.F.R. Sec. 64.1200 (``Persons or entities making calls
for telemarketing purposes (or on whose behalf such calls are made)
must honor a residential subscriber's do-not-call request within a
reasonable time from the date such request is made. This period may not
exceed thirty days from the date of such request.'').
---------------------------------------------------------------------------
Thus, revocation-based claims--like those claims based on
``capacity'' arguments, recycled or wrongly-provided numbers, and
vicarious liability allegations--are certain to increase in number as
TCPA litigation continues to grow exponentially throughout the country.
Another certainty is that litigation abuse, too, will spread.
IV. Examples of TCPA Litigation Abuse
As I mentioned at the start of this testimony, I have defended
various companies facing TCPA claims for more than a decade. As a
junior associate in 2001, I began working on a then-rare TCPA case in
which a client was sued for millions of faxes an affiliated company had
sent in a three-day period using a fax blaster service. I was shocked
to see a statute (which I had not heard anything about in law school)
that could create such staggering statutory liability--my client
settled for millions rather than face billions of dollars in statutory
liability, and because its insurance policy covered the claims
(something that is no longer the case). My introduction to the TCPA was
during a time when the few lawsuits being brought still focused on the
kinds of unsolicited facsimiles and cold-call telemarketing that the
statute was intended to address when it was authored and adopted in
1991. But seeing just how lucrative TCPA lawsuits can be, various
serial TCPA plaintiffs and TCPA-focused attorneys are doing everything
they can to find and bring TCPA actions against American businesses.
a. Serial TCPA Plaintiffs
Serial plaintiffs amassing multiple phone numbers at which to
receive calls are making a living through TCPA demands and litigation.
Some focus on sending copious demand letters to businesses, seeking
several thousand dollars from each company. An early example was a man
in San Diego who acquired a telephone number of 619-999-9999, even
though such telephone numbers were normally not given out to
consumers--he found out that companies at the time whose systems
required some telephone number be entered into a phone number field had
set a default of the 999-9999 to fill in after an area code, and his
number was getting thousands of calls each month from systems of
various companies. As Commissioner Pai has noted, this man even hired
staff to log every wrong-number call he received, issue demand letters
to purported violators, file actions, and negotiate settlements; only
after he was the lead plaintiff in over 600 lawsuits did the courts
finally agree that he was a ``vexatious litigant.'' \40\ But what
Commissioner Pai does not know (and I do, as I was brought in to deal
with later demands from the phone's new ``owner'' after this man was
barred from his ``TCPA business''), is that the man then leased this
telephone number to a friend who started her own business, paying
commissions to the owner of the 999-9999 number for the calls she
received and acting with her part-time staff of paralegal support to
send TCPA demand letters to hundreds of businesses. It was only after
this contract came to light that her ``TCPA business'', too, was
finally shuttered.
---------------------------------------------------------------------------
\40\ July 2015 FCC Order, Pai Dissent, 30 FCC Rcd. at 8073.
---------------------------------------------------------------------------
But other consumers in the business of TCPA actions continue to
make their living (and a good living, too) through this statute. For
example, in the past year alone, one Pennsylvania woman has filed at
least eleven (11) TCPA cases in the Western District of Pennsylvania
and at least twenty (20) pre-litigation demand letters. When a company
she had sued deposed her recently, it found that she had intentionally
bought 35 cell phones and subscribed to cellular service lines for the
sole purpose of receiving calls under which she can assert ``wrong
number'' TCPA violations. Moreover, she specifically sought phone
numbers in economically depressed area codes to make the receipt of
collections calls more likely (i.e., she lives in PA, but acquires FL
area code numbers). She carries all 35 plus phones with her when she
travels so she can keep up on her recordkeeping--she logs all calls
coming into the telephone numbers in efforts to reach the previous
owner of the cellular phone. And she even loads more minutes as needed
onto her phones to ensure she keeps the lines open for business.
Another constant TCPA litigant, an Ohio man, has been bringing TCPA
actions for fifteen years, and in recent years he has lent his name to
actions in Federal court outside of Ohio as well, including in
Wisconsin, Florida, Illinois, New York, West Virginia, California, and
Connecticut. As an example of one recent suit, this consumer was the
named plaintiff in a TCPA action settled by American Electric Power in
2015. He received two (2) marketing phone calls while on the Federal
DNC (entitling him to up to $1,500 for the second call, if the company
had no valid defenses), but his named-plaintiff incentive payment under
the settlement is $12,500. Tellingly, this man's actual registration on
the DNC list only happened ten years into his TCPA career. Because it
was so clear he wanted marketing calls (and was making his living by
receiving them), he was ordered by one state court in 2005 to register
his phone lines with the Federal DNC, but he appealed that order to the
Ohio Supreme Court, which held in 2007 that he was not required to
register his telephone numbers. Later, with the shift in TCPA
litigation to autodialed/prerecorded calls, he registered his lines
(via a settlement in 2011) and now sues for autodial/prerecorded calls,
as well as violations of his registered Federal DNC status. Like many
persons supplementing their incomes or fully depending on TCPA monies,
he has the usual mechanisms for trapping callers (recordings and logs)
and generating demand letters.
Indeed, there are plenty of ``do-it-yourself'' guides on the
Internet advising consumers how to bring TCPA claims and rake in
significant money. What businesses are finding problematic in the past
few years lawsuits and demands brought by family members, roommates, or
partners of a customer who gave that person's telephone number as his
or her own. In actions I am currently defending for various companies,
the plaintiff or class plaintiff is the daughter, the aunt, the
boyfriend, the son, the mother-in-law, or the guardian of the customer
who provided their telephone number to a company as his or her own
number. There are indications that some such provisions are happening
on purpose, to try to create viable fact patterns for a TCPA claim by
that family member or friend. Indeed, I had one recent demand letter in
which the telephone number the customer provided actually belonged to a
well-known TCPA lawyer, who then of course threatened suit and demanded
payment of thousands of dollars.
The consumers abusing the statute to ensure that calls are placed
to them, so that they can support themselves from demands and lawsuits
filed against American businesses, are bad enough; as detailed below,
the tactics of some of the lawyers specializing in TCPA claims are even
worse.
b. Over-incentivized TCPA Attorneys
As already detailed above, the TCPA (which has no attorneys' fees
provision) provides for hefty statutory damages that incentivize
attorneys to start litigations and carve fees out of the uncapped
statutory damages that are available. One Connecticut-based firm,
Lemberg Law, LLC, even came out with a smartphone application, ``Block
Calls, Get Cash,'' that potential clients could download to make their
call data directly available to the firm, which could review inbound
calls to look for potential litigation targets.\41\ The app's website
states that ``with no out-of-pocket cost for the app or legal fees, its
users will `laugh all the way to the bank.' '' \42\ And at least one
other firm has followed suit with its own competing application.
---------------------------------------------------------------------------
\41\ See Reply Comments of the U.S. Chamber of Commerce, CG Docket
02-278, at 4 (filed Dec. 1, 2014) (citing Lawsuit Abuse? There's an App
for That, U.S. Chamber Institute for Legal Reform (Oct. 29, 2014),
http://www.instituteforlegalreform.com/resource/lawsuit-abuse-theres-
an-app-for-that/).
\42\ Id.
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Lemberg Law is now engaged in litigation with an associate who
withdrew to start up her own lucrative TCPA shop, and its business
practices are being revealed. In counterclaims against Lemberg Law,
which sued the associate for absconding with clients and the settlement
monies they could engender, she claims that demands are filed by
Lemberg Law for consumers who have no idea that they have ``retained''
a law firm to represent them and who were not even consulted about
complaints filed on their behalves.\43\ In fact, the former associate
claims that the first time some of these consumers find out about their
own lawsuit is when Lemberg tries to contact the client to send them
their portion of a settlement agreement (after accessing the consumer's
private phone call information, crafting demands based on calls, and
carving out Lemberg's own fees and costs, including a $595
``PrivacyStar'' Cost).\44\
---------------------------------------------------------------------------
\43\ See, e.g., Amended Answer, Affirmative Defenses, and
Counterclaim, Dkt. No. 32, Filed 11/12/15, in Lemberg Law, LLC v. Tammy
Hussin and the Hussin Law Offices, P.C., Case No. 3:15-cv-00737-MPS (D.
Conn), at 1.k, 1.l, 1.o, and 1.p; see also 1.p (``Based on Hussin's
belief that her paralegal had confirmed the facts with the new clients,
Hussin unknowingly filed complaints on behalf of Californians who were
unaware of legal representation.'').
\44\ See, e.g., id. at Affirmative Defenses, 1.f, 1.g, 1.k; see
also 1.s (``Lemberg insisted on taking a 40 percent referral fee for
new ``clients' without even having discussed legal representation with
them and without having obtained a signed fee agreement. Upon reaching
the new ``clients'' when Hussin transferred the cases to her firm, most
of them had no knowledge of Lemberg's firm and were unaware of legal
representation, yet Lemberg insisted on taking a 40 percent referral
fee on said cases.'').
---------------------------------------------------------------------------
As just one more example of many, Anderson & Wanca is a Midwest-
based firm focused on bringing facsimile actions after receiving, in
discovery years ago, a roster of clients from a fax-blaster named B2B.
In a recent decision, the Seventh Circuit upheld $16,000 worth of
statutory damages against a small digital hearing aid company in Terra
Haute, Indiana, for 32 facsimile ads, but noted its distaste in doing
so:
Fax paper and ink were once expensive, and this may be why
Congress enacted the TCPA, but they are not costly today. As a
result, what motivates TCPA suits is not simply the fact that
an unrequested ad arrived on a fax machine. Instead, there is
evidence that the pervasive nature of junk-fax litigation is
best explained this way: it has blossomed into a national cash
cow for plaintiff's attorneys specializing in TCPA disputes. We
doubt that Congress intended the TCPA, which it crafted as a
consumer-protection law, to become the means of targeting small
businesses. Yet in practice, the TCPA is nailing the little
guy, while plaintiffs' attorneys take a big cut. Plaintiffs'
counsel in this case admitted, at oral argument, that they
obtained B2B's hard drive and used information on it to find
plaintiffs. They currently have about 100 TCPA suits
pending.\45\
---------------------------------------------------------------------------
\45\ Bridgeview Health Care Center, Ltd. v. Jerry Clark, 2016 WL
10852333, *5 (7th Cir. Mar. 21, 2016) (emphasis added; internal
citations and quotations omitted).
As the Seventh Circuit has recognized in its recent decision quoted
above, it is a perversion of the original intent of the TCPA to
``target small businesses'' who are not alleged to have caused actual
harm. And I should note that Anderson & Wanca is not always so unlucky
as to only get $16,000 verdicts; that firm has been the recipient of
multi-million dollar fees awards in the past few years from class
action settlements as well.
V. Conclusion and Recommendations
The TCPA was designed to protect privacy and to stop invasive and
persistent telemarketing, primarily of the ``cold call'' kind, that
ensues when telemarketers use dialing technology to randomly or
sequentially dial numbers. It was not designed to subject companies to
claims regarding ``autodialed'' calls when they reach out to targeted,
segmented lists of their own customers who have a common need for
information using the telephone numbers (including cellular phone
numbers) provided by those customers. It was not intended to apply to
text messages, and it was not designed to cover collections calls,
which have independent sets of rules to ensure that those calls are not
abusive or overly intrusive.
Congress needs to take a hard look at updating the TCPA in a manner
that provides more certainty and protection for businesses who need to
legitimately communicate with their customers and employees, and who
strive to comply with the law but who, for example, may unknowingly be
calling a reassigned number, or have a customer representative err in
recording a revocation request. If Congress wishes to pull text
messages into the TCPA's protection, then it should assess what rules
should apply.
In sum, considering the unfair and unintended onslaught of TCPA
cases hammering American businesses, the following updates to the
statute could be taken under consideration.
Statute of Limitations: The TCPA contains no statute of
limitations, and so has fallen into the four-year default, which makes
no sense for calls/faxes that are supposedly invasions of privacy that
the consumer knows about at the moment they are placed. Class actions
reach staggering amounts of damages because class plaintiffs seek four
years' worth of calling data and liability. (I defended one putative
class action brought against a company for a single text sent three
years and ten months before Plaintiff filed his suit.) The TCPA's time
to bring suit should be reasonably limited, as is the case with the
other Federal statutes providing private rights of action for statutory
damages.\46\
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\46\ See, e.g., Electronic Funds Transfer Act (15 U.S.C.
Sec. 1693), Section 1693(m) (statute of limitations--1 year); Fair Debt
Collection Practices Act (15 U.S.C. Sec. 1692), Section 1692(k)
(statute of limitations--1 year).
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Capping Statutory Damages and Adding Provisions for Reasonable
Attorneys' Fees: Like every other Federal statute providing statutory
damages and a private right of action to consumers to seek those
damages, the TCPA should have a cap on the amount of individual and
class action damages that can be sought.\47\ There is no better way to
curb litigation abuse, bring the TCPA in line with its sister statutes,
and avoid unconstitutional and excessive fines for technical violations
causing no actual harm.
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\47\ See, e.g., Electronic Funds Transfer Act (15 U.S.C.
Sec. 1693), Section 1693(m); Fair Debt Collection Practices Act (15
U.S.C. Sec. 1692), Section 1692(k); Truth in Lending Act (15 U.S.C.
Sec. 1631 et. al), Section 1640; Fair Credit Reporting Act (15 U.S.C.
Sec. 1681 et. al.), Section 1681(o). (Several of these statutes also
permit defendants to recover costs/fees when actions are shown to have
been brought in bad faith.)
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Affirmative Defenses: As businesses are targeted for calls under
Section 227(b), as well as for the 227(c) calls that Congress knew
could be made in error by a business acting in good faith to follow the
appropriate policies and procedures (see Part II above), the
affirmative defenses available in Section 227(c) should also be
imported into Section 227(b) to provide protection to businesses
working in good faith to comply with the TCPA.
Capacity: The ``capacity'' of an autodialer should be interpreted
for past calls as written in the text of the statute, meaning only
those devices that have the actual ability to randomly/sequentially
dial telephone calls would be actionable. And if Congress wishes to
limit some other sort of calling technologies or text messages, new and
more precise language should be drafted, vetted, and implemented after
a notice period to companies so that they can comply with statutory
requirements.
Reassigned or Wrongly-Provided Number: Businesses should not be
punished via TCPA lawsuits when they, in good faith, call a customer-
provided phone number that now belongs to a new party unless and until
the recipient informs the caller that the number is wrong and the
business has a reasonable time to implement that change in its records.
(If, after that notice and reasonable time the company continues to
call, then lack of prior consent would be established for future
calls.)
Vicarious Liability: The FCC has interpreted the TCPA to allow ``on
behalf of'' liability for prerecorded/autodialed calls, something not
specifically provided for in the statute. Among other things, the TCPA
should be revised to define any such vicarious liability so that it
would exist only against the appropriate entities--those persons who
place the calls, or who retain a telemarketer to place calls, or who
authorize an agent to place calls on their behalf.
Bad Actors: The TCPA should be reformed to focus on the actual bad
actors (i.e., fraudulent calls from ``Rachel from Cardmember
Services'', with spoofed numbers in Caller ID fields to hide the
identity of caller), instead of companies trying to contact their
consumers for a legitimate business purposes.
Address New Technologies, Such As Text Messaging: A text message is
not the same as a call, and courts are wrong in treating them equally.
Should Congress wish to set rules on text messaging within the TCPA, it
should do so through the regular channels of drafting, vetting, and
implementing new statutory language.
Revocation: If a consumer that has provided a telephone number to a
company no longer wishes to receive communications at that number,
there should be a set process (as in the Fair Debt Collection Practices
Act) on how the business should be told of the revocation, and a
reasonable time for the company to implement that change.
Importantly, when considering these changes, Congress should keep
in mind what TCPA reform should not include policies that will:
Increase in the number of phone solicitations;
Encourage abusive or harassing debt collection practices
(which are addressed, in any case, by the FDCPA); and
Create an end-run around the Federal and Internal Do Not
Call List rules.
The changes discussed above--which would help to protect American
companies from expensive and damaging litigation abuse--would not risk
any of these repercussions. Thus, we urge this Committee to revisit the
TCPA to bring this 20th Century statute in line with 21st Century
challenges. Twenty-five years have passed, and it is evident that the
TCPA has had a negative impact on businesses that Congress never
intended when first enacting this law in 1991. We appreciate the
Committee's calling of today's hearing and stand ready to work with you
on this important issue.
******
Thank you for inviting me to testify. I am happy to answer any
questions you may have.
The Chairman. Thank you, Ms. Wahlquist.
Ms. Saunders.
Ms. Saunders's oral remarks at this May 18, 2016, hearing and
written prepared statement submitted to the Committee before the
hearing follow.
On May 20, 2016, Ms. Saunders wrote to the Committee and noted that
she had ``referred to the incorrect row of figures supplied by the FTC.
As a result, in those parts of my testimony discussing the number of
complaints to the FTC about robocalls, my numbers were slightly off.''
Here are Ms. Saunders corrections:
There were 2,200,000 complaints about robocalls to the FTC
(not 3,500,000) in 2015.
There were an average of 184,000 complaints to the FTC about
robocalls each month (not 298,000) that year.
Complaint numbers have spiked in the first four months of
2016 which when annualized indicate that there may be 3,300,000
complaints to the FTC about robocalls in 2016 (not 5,200,000
complaints).
For every 1,000 complaints to the FTC, less than two (not
``only one'') lawsuits are filed. Most consumers who receive
robocalls do not take the time to complain to a Federal agency
and even a tinier percentage, less than two-tenths of 1 percent
(not one-tenth of 1 percent) actually files a lawsuit.
STATEMENT OF MARGOT SAUNDERS, OF COUNSEL,
NATIONAL CONSUMER LAW CENTER
Ms. Saunders. Chairman Thune, Senator Nelson, Senator
Markey, members of the Committee, thank you very much for
inviting me to testify today on behalf of the National Consumer
Law Center and eight other national groups that collectively
represent millions of American consumers. We believe that
robocalls pose a severe problem, and we ask that you defend the
TCPA and work to strengthen it.
Twenty-five years ago, the TCPA was passed because of the
complaints about one line of robocalls which are still pouring
in. The problem is that robocalls cost only a tiny fraction of
a penny per call, making it cheaper for businesses to make the
calls than to be careful about who they're calling.
The TCPA was designed to ensure that consumers control who
robocalls them on their cell phone by requiring express consent
before the calls can be made, unless there is an emergency. And
many of the examples that Senator Thune made of--raised were
emergencies that should fall under the exception already in the
law.
The industry is making extravagant claims about spurious
lawsuits and wrongful class-actions, churning new claims,
litigating TCPA--in TCPA litigation, all to support their
insistence that the law be changed. Yet, the judicial system
has a--robust mechanisms to protect against meritless claims.
As TCPA claims don't lead to attorneys' fees, the costs of
initiating, investigating, and litigating a lawsuit already
restricts these cases only to those in which numerous illegal
calls have been made.
In 2015, there were over three and a half million
complaints to the FTC, far more than any other issue for
robocalls. For every 1,000 complaints, only one lawsuit was
filed. Most consumers who've received unwanted robocalls don't
complain to a Federal agency. Only one-tenth of 1 percent of
those that did complain filed.
Here are a few of many examples of the cases brought to
stop the unwanted barrage of robocalls: Yahoo sent 27,000
wrong-number text messages to one consumer, refusing to stop
even after the FCC got involved to ask them to stop. State Farm
Bank made 327 robocalls to one consumer in 6 months, seeking to
collect a debt owed by someone else. Time Warner Cable used an
automated system involving zero human capacity to make 153
robocalls to a woman who had never been a customer, including
74 calls made after she filed suit.
In all of these cases, business entities set loose an
automated system that called the consumer's phone multiple
times, even after the consumer's repeated attempts to stop the
calls. In each case, the caller had decided that it was simply
more cost-effective to ignore the expressed wishes of these
consumers and continue to make these automated calls.
Seventy million people, approximately, rely in this country
on prepaid or lifeline cell phones which only provide a fixed
number of minutes. Many of these consumers are low-income, and
they rely on these limited minutes for essential calls. And
unwanted robocalls eat into these essential minutes. Any one of
the industry proposals would lead to the receipt of more
unwanted robocalls to all cell phone users, and would be
devastating to these users with limited minutes.
For example, the industry argues that the FCC's
longstanding definition of ``autodialer'' is wrong, based on
the notion that the current definition covers too many
instruments, thus making the distinction effectively
meaningless. But, the definition the industry proposes would
exclude all of the technology that's currently being used to
make calls.
Unfortunately, Section 301 of the Budget Act passed last
October to create an exemption to the TCPA that permits
collectors of Federal debt, primarily student loan borrowers
and--as well as taxpayers pursued by private collectors to be
made without the consent of the consumer. This is dangerous
precedent that will impact over 61 million Americans, and it
should be repealed. We strongly support the HANGUP Act, which
repeals Section 301. It is evident the consumers need more
protection from such abuses, not less.
Continued enforcement of the TCPA is critical, and we ask
that you support consumers in this battle.
Thank you.
[The prepared statement of Ms. Saunders follows:]
Prepared Statement of Margot Freeman Saunders, Of Counsel, National
Consumer Law Center, On behalf of the low-income clients of the
National Consumer Law Center, and Americans for Financial Reform,
Center for Responsible Lending, Consumer Action, Consumer Federation of
America, Consumers Union, National Association of Consumer
Advocates, National Center for Law and Economic Justice, Public
Citizen, and MFY Legal Services
Chairman Thune, Senator Nelson, and Members of the Committee, I
appreciate the opportunity to testify today on the importance of
maintaining the integrity of the Telephone Consumer Protection Act
(TCPA) for consumers. I provide my testimony here today on behalf of
the low-income clients of the National Consumer Law Center \1\ (NCLC),
as well as Americans for Financial Reform, Center for Responsible
Lending, Consumer Action, Consumer Federation of America, Consumers
Union, National Association of Consumer Advocates, National Center for
Law and Economic Justice, Public Citizen, and MFY Legal Services.\2\
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\1\ The National Consumer Law Center (NCLC) is a non-profit
corporation founded in 1969 to assist legal services, consumer law
attorneys, consumer advocates and public policy makers in using the
powerful and complex tools of consumer law for just and fair treatment
for all in the economic marketplace. NCLC has expertise in protecting
low-income customer access to telecommunications, energy and water
services in proceedings at state utility commissions, the FCC and FERC.
We publish and annually supplement nineteen practice treatises that
describe the law currently applicable to all types of consumer
transactions, including Access to Utility Service (5th ed. 2011),
covering telecommunications generally, and Federal Deception Law (2d
ed. 2016), which includes a chapter on the Telephone Consumer
Protection Act.
\2\ A description of all the groups on whose behalf this testimony
is provided is included in an Appendix.
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I am here today, on behalf of the millions of consumers whom we
represent, to ask you to defend and strengthen the Telephone Consumer
Protection Act as an essential bulwark against unwanted, annoying,
harassing, and even dangerous, robocalls.
``If robocalls were a disease, they would be an epidemic.'' \3\ An
average of 298,000 complaints were made to the Federal Trade Commission
(FTC) every month in 2015 about robocalls.\4\ Indeed, some estimate
that 35 percent of all calls placed in the U.S. are robocalls.\5\ The
problem is escalating: the FTC reported more than 3.5 million
complaints about unwanted calls in 2015--over twice as many complaints
as there were in 2010.\6\ Almost half of these calls (1,823,897)
occurred after the consumer had already requested that the company stop
calling.\7\ Indeed, in the first four months of 2016, the complaint
numbers have spiked again, increasing to an average of over 440,000 a
month, which will produce a yearly rate of over 5.2 million
complaints.\8\
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\3\ Rage Against Robocalls, Consumer Reports (July 28, 2015)
[hereinafter Rage Against Robocalls], available at http://
www.consumerreports.org/cro/magazine/2015/07/rage-against-robocalls/
index.htm.
\4\ Federal Trade Commission, National Do Not Call Registry Data
Book, FY 2015, at 5 (Nov. 2015).
\5\ Rage Against Robocalls.
\6\ Federal Trade Commission, National Do Not Call Registry Data
Book, FY 2015, at 4 (Nov. 2015).
\7\ Federal Trade Commission, National Do Not Call Registry Data
Book, FY 2015, at 5 (Nov. 2015).
\8\ The 2016 figures for robocall complaints to the FTC's Do Not
Call Registry were supplied by the FTC's Bureau of Consumer Protection
on May 12, 2016. The 2016 annualized complaint data was determined by
averaging the total complaints received in the first four months and
then multiplying that monthly average by twelve.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Congress passed the Telephone Consumer Protection Act \9\ (TCPA) in
1991 in direct response to ``[v]oluminous consumer complaints about
abuses of telephone technology--for example, computerized calls
dispatched to private homes.'' \10\ Yet 25 years later, the complaints
are still pouring in. Robocalls are very inexpensive to make. Both
legitimate callers and bad actors can discharge tens of millions of
robocalls over the course of a day at a fraction of a penny per
call.\11\ The TCPA needs to be strengthened.
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\9\ 47 U.S.C. Sec. 227.
\10\ Mims v. Arrow Fin. Servs., L.L.C., 132 S. Ct. 740, 744 (2012).
\11\ See e.g., Call-Em-All Pricing, which quotes pricing from a
high of 6 cents per call to $7.50 per month ``for one inclusive monthly
fee. Call and text as much as you need.'' https://www.call-em-all.com/
pricing, (last accessed May 13, 2016).44, 73
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The problem of unwanted and harassing robocalls is growing worse.
No one likes robocalls. Consumers in every district and every state are
complaining. The current structure of the TCPA does provide some
protection, but it does not provide enough.
In this testimony I will cover the following topics:
1. The role that the Telephone Consumer Protection Act plays in
protecting consumers from unwanted and invasive calls and texts
to cell phones.
2. The reasons why the FCC's 2015 Omnibus Order \12\ on the TCPA was
correct.
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\12\ In re Rules and Regulations Implementing the Telephone
Consumer Protection Act of 1991, CG Docket No. 02-278, Report and
Order, 30 FCC Rcd. 7961 (2015) [hereinafter 2015 TCPA Declaratory
Ruling and Order].
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3. The importance of passing the HANGUP Act.
4. Needed additions to Federal law to deal with abusive robocalling
to consumers.
5. A real fix for the reassigned number problem.
6. Vicarious liability rules under the TCPA are appropriate.
1. The Telephone Consumer Protection Act provides consumers critically
important protections from unwanted and invasive calls and
texts to cell phones.
Privacy Concerns. The TCPA is an essential privacy protection law,
intended to protect consumers from the intrusions of unwanted automated
and prerecorded calls to cell phones. But for the exception created in
the Budget Act last October,\13\ the TCPA permits these calls only if
the consumer has given ``prior express consent'' to receive them.\14\
Calls for emergency purposes are excluded from this prohibition. When
it enacted the TCPA in 1991, Congress found that automated and
prerecorded calls are ``a nuisance and an invasion of privacy,
regardless of the type of call . . .'' \15\ They are no less a nuisance
and an invasion of privacy today.
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\13\ Congress amended the TCPA in 2015 to allow calls to be made
without consent to collect a debt owed to or guaranteed by the United
States, subject to regulations issued by the FCC. Pub. L. No. 114-74,
129 Stat. 584 (2015) (Sec. 301).
\14\ 47 U.S.C. Sec. 227(b)(1)(A)(iii).
\15\ TCPA, Pub. L. No. 102-243, 105 Stat. 2394 (1991) Sec. Sec. 12-
13.
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Heavy impact on struggling households. Many people in the United
States today rely exclusively on their cell phones as their only means
of communication. These consumers include:
Close to 70 percent of adults aged 25-29 and over 67 percent
of adults aged 30-34;
Nearly 60 percent of persons in households below the poverty
line;
59 percent of Hispanics and Latinos, and 46 percent of
African Americans.\16\
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\16\ See Stephen Blumberg and Julian Luke, U.S. Dep't of Health and
Human Services, National Center for Health Statistics, Wireless
Substitution: Early Release of Estimates From the National Health
Interview Survey, July-December 2014, at 6 (June 2015).
Many, if not most, of the households living below the poverty line
rely on pay-as-you-go, limited-minute prepaid wireless products. These
wireless plans have been growing in use, especially among low-income
consumers and consumers with poor credit profiles.\17\ These prepaid
wireless products provide a fixed number of minutes, and often a fixed
number of texts. After these limits are exceeded, consumers must
purchase a package of new minutes periodically to maintain their
service. Consumers in such plans are billed for incoming calls in
addition to outgoing calls, making them very sensitive to repetitive
incoming calls--especially calls that they do not want.
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\17\ Federal Communications Commission, Annual Report and Analysis
of Competitive Market Conditions With Respect to Mobile Wireless,
Eighteenth Report, WT Docket No. 15-125, 44, 73, 95, 96 (Dec. 23,
2015).
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Additionally, almost 12.5 million low-income households maintain
essential telephone service through the Federal Lifeline Assistance
Program.\18\ Most of these Lifeline participants have service through a
prepaid wireless Lifeline Program, which most commonly limits usage to
only 250 minutes a month for the entire household.\19\
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\18\ Universal Service Administrative Company, 2014 Annual Report 9
(2014).
\19\ Federal Communications Commission, Second Further Notice of
Proposed Rulemaking, Order on Reconsideration, Second Report and Order,
and Memorandum Opinion and Order 15-71, 16 (Rel. June 22, 2015).
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Allowing calls without the consent of the person called, limiting
the right to revoke consent, or curbing the definition of autodialer--
all proposals made by the calling industry in repeated filings before
the FCC--would be devastating for households struggling to afford
essential telephone service. Any one of these changes would lead to the
receipt of more unwanted and unconsented-to calls that would further
deplete the scarce minutes available for the Lifeline household. For
the lower-income consumers and households that struggle to afford
telephone service, any one of these changes would use up the minutes on
which the entire Lifeline household depends to access health care,
transportation, emergency, and other essential services, and to avoid
social isolation.
Public safety threatened. Cell phones accompany people wherever
they go, including in cars. Too often, calls and texts are answered
while people are driving because so many cannot resist the imperious
ring of the wireless telephone. Receiving cell phone calls while
driving threatens public safety. The National Highway Traffic Safety
Administration found that cell phone use contributed to 995 (or 18
percent) of fatalities in distraction-related crashes in 2009. More
robocalls will inevitably lead to more distracted drivers and,
inescapably, more accidents.\20\
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\20\ See U.S. Dep't of Transportation, Facts and Statistics,
available at http://www.dis
traction.gov/stats-research-laws/facts-and-statistics.html (last
accessed Jan. 14, 2016) (citing 3,154 deaths and 424,000 injuries from
distracted drivers in 2013, and noting that text messaging, because of
the visual, manual, and cognitive attention required from the driver,
is ``by far the most alarming distraction''). See also Injury
Prevention & Control: Motor Vehicle Safety: Distracted Driving, Centers
for Disease Control and Prevention, available at http://www.cdc.gov/
motorvehiclesafety/distracted_driving/ (last accessed Jan. 14, 2016)
(``Each day in the United States, more than 9 people are killed and
more than 1,153 people are injured in crashes that are reported to
involve a distracted driver.'').
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Texts are as intrusive as calls. The TCPA's prohibitions against
unwanted communications apply to both phone calls and texts.\21\ This
is because text messages are just as intrusive and costly to consumers
as phone calls. And, particularly for low-income consumers using
prepaid wireless plans, the unwanted texts deplete the limited data
they pay for and rely on.
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\21\ See In re Rules and Regulations Implementing the Telephone
Consumer Protection Act of 1991, CG Docket No. 02-278 Report and Order,
18 FCC Rcd. 14014 (2003) ( 165).
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As noted in a recent Gallup study: ``Texting, using a cellphone and
sending and reading e-mail messages are the most frequently used forms
of non-personal communication for adult Americans.'' \22\ As Americans'
use of texts as a regular means of communication increases, unwanted
texts become more and more invasive. People now respond to text
messages in the same reflexive way they respond to calls--the beep of a
text demands an immediate acknowledgment. As a result, autodialed texts
that arrive in droves interrupt, annoy and harass consumers just as
robodialed calls do. And these unwelcome texts use up precious limits
for consumers whose cell phone plans impose restrictions, such as those
consumers on prepaid or Lifeline plans.
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\22\ Frank Newport, The New Era of Communication Among Americans,
Gallup (Nov. 10, 2014), available at http://www.gallup.com/poll/179288/
new-era-communication-americans.aspx.
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Litigation protects consumers and is justified by the number of
complaints about robocalls. In addition to the hundreds of thousands of
complaints made monthly to government agencies, a tiny percentage of
consumers who are plagued with repeated and unwanted robocalls and
prerecorded calls do file suit. A small selection of cases illustrates
just some of the abuses to which consumers have been subjected:
Dominguez v. Yahoo, Inc.\23\--Yahoo sent 27,809 wrong number
text messages in 17 months to this consumer, and refused to
stop even after the consumer's many pleas.
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\23\ 629 Fed. Appx. 369 (3d Cir. 2015).
Osorio v. State Farm Bank\24\--327 robocalls to the
consumer's cell phone in 6 months, all seeking to collect on a
debt owed by someone else.
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\24\ 746 F.3d 1242 (11th Cir. 2014).
Gager v. Dell Fin. Servs., L.L.C.,\25\--40 robocalls to the
consumer's cell phone in 3 weeks, even after she asked the
company to stop robocalling.
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\25\ 727 F.3d 265 (3d Cir. 2013).
King v. Time Warner Cable,\26\--An automated system for debt
collection calls involving zero human intervention or review
resulted in 153 robocalls to a woman who had never been a
customer. The calls continued even after she informed Time
Warner of its error and asked it to stop calling, including 74
additional robocalls after she filed suit.
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\26\ 113 F. Supp. 3d 718 (S.D.N.Y. 2015), appeal filed, No. 15-2474
(2d Cir. Aug. 6, 2015).
Moore v. Dish Network L.L.C,\27\--31 robocalls in 7 months
to the cell phone of a low-income consumer using a Lifeline
support phone, even after he repeatedly told the company it had
the wrong number and to stop calling.
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\27\ 57 F. Supp. 3d 639 (N.D. W. Va. 2014).
Munro v. King Broadcasting Co.\28\--Hundreds of text
messages despite the consumer's dozens of requests for the
company to stop.
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\28\ 2013 WL 6185233 (W.D. Wash. Nov. 26, 2013).
Beal v. Wyndham Vacation Resorts, Inc.\29\--Dozens of
robocalls to the consumer's cell phone, which continued even
after her repeated requests to stop calling.
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\29\ 956 F. Supp. 2d 962 (W.D. Wis. 2013).
In these cases, and in a number of filings before the FCC, the
defendants argued that the technology used to make the multiple calls
did not fit the definition of an autodialer under the statute (see
Dominguez;\30\ King;\31\ Moore \32\); that the statutory term ``called
party'' should be construed to allow calls to a number given by, and
formerly assigned to, a different person (the ``intended party'') (see
Osorio,\33\ King,\34\ Moore \35\); and that the consumer could not
revoke consent (see Osorio;\36\ Gager;\37\ King;\38\ Beal;\39\ Munro
\40\). If the FCC's position had not been sustained in those cases, or
if it had been changed by statute, nothing would prevent callers like
these from continuing the unwanted calls.
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\30\ 629 Fed. Appx. at 371.
\31\ 113 F. Supp. 3d at 722, 725.
\32\ 57 F. Supp. 3d at 652-55.
\33\ 746 F.3d at 1252.
\34\ 113 F. Supp. 3d 718 at 722, 725.
\35\ 57 F. Supp. 3d at 648-49.
\36\ 746 F.3d at 1255-56.
\37\ 727 F.3d at 272.
\38\ 113 F. Supp. 3d 718 at 726.
\39\ 956 F. Supp. 2d at 977.
\40\ 2013 WL 6185233, at *3-4.
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In all of these cases, a business entity set loose an automated
system that called a consumer's cell phone multiple times, even after
the consumer's repeated attempts to stop the calls. In each case, the
caller had simply decided that it was more cost-effective to ignore the
clearly expressed wishes of these consumers and continue to make these
automated calls and texts.
It is evident that consumers need more protection from such abuses,
not less. The sheer number of calls a single caller with an autodialer
can generate is staggering. The figures exemplify why robust
interpretation and continued enforcement of the TCPA is critical,
particularly given the increase in cell phone use and advances in
technology.
The calling industry, including all those represented here today,
make extravagant claims about spurious lawsuits, wrongful class
actions, and nefarious attorneys churning new claims relating to TCPA
litigation--all to support their insistence that the TCPA must be
changed, and their arguments that the FCC's 2015 Order is substantively
improper. For example, some groups point to websites that track
incoming unlawful calls to support their claim that much of TCPA
litigation is a sham. Yet these businesses, like Privacy Star, track
calls only after callers choose to make them. Further, the judicial
system has robust mechanisms to protect against meritless cases. And
even if there were some meritless cases that still made it through the
judicial system, this would certainly not justify allowing innocent
consumers to fall victim to a barrage of unwanted robocalls. Congress
should not let this fictional specter of spurious litigation distract
it from the harmful effects on consumers of the millions of unwanted
calls.
Congress deliberately created statutory penalties in the TCPA to
ensure compliance. Any allegedly harsh consequence of repeated
violations is precisely the deterrent intended and needed to instigate
corrective action and industry-wide compliance. Only businesses that
make robocalls without consent and without up-to-date dialing lists
risk liability from TCPA lawsuits.
Despite the facts that robocalls consistently top the list of
consumer complaints \41\ and that 3.5 million complaints about unwanted
calls were made to the FTC in 2015,\42\ there were only 3,710 TCPA
lawsuits filed in 2015.\43\
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\41\ See 2015 TCPA Declaratory Ruling and Order 1.
\42\ Federal Trade Commission, National Do Not Call Registry Data
Book, FY 2015, at 4 (2015).
\43\ See WebRecon, Out Like a Lion . . . Debt Collection Litigation
& CFPB Complaint Statistics, Dec 2015 & Year in Review, available at:
http://webrecon.com/out-like-a-lion-debt-collection-litigation-cfpb-
complaint-statistics-dec-2015-year-in-review/#sthash.m8WYbAKa.dpuf.
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This means that for every 1,000 complaints to the FTC, only one
lawsuit is filed. Most consumers who receive robocalls do not take the
time to complain to a Federal agency, and even a tinier percentage (one
tenth of 1 percent) actually files a lawsuit. Most contact the caller
or give up. Only those who are very frustrated will seek redress with
state or Federal agencies. For example, the consumer in the Dominguez
case, who received nearly 28,000 text messages from Yahoo, repeatedly
asked Yahoo to stop, without success. The consumer then turned to the
FCC, which also asked Yahoo to stop. Yahoo refused, stating that it did
not believe, based on its narrow view of what constitutes an autodialer
under the TCPA, that it was regulated by the FCC. Only then did the
consumer file suit.\44\ If the industry callers represented here today
achieve their goal of weakening the law, the number of unwanted calls
and texts will skyrocket.
---------------------------------------------------------------------------
\44\ 629 Fed. Appx. at 371.
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The TCPA does not provide for an attorney fee award even when the
consumer prevails, and the statutory damages recovery is limited to
$500 per impermissible call. (The court has discretion to treble this
amount if it finds that the defendant acted willfully or
knowingly.\45\) This means that only cases involving a high volume of
illegal calls will provide the possibility of a recovery that is even
sufficient to cover the attorney's time to investigate, file and
litigate the case. Thus the very structure of the TCPA weeds out cases
that involve only a low volume of isolated, unwanted calls.
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\45\ 47 U.S.C. Sec. 227(b)(3)(C).
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Moreover, the alarmist criticisms of class actions are simply a red
herring. A few problematic class actions do not diminish the necessity
of fostering effective enforcement of the significant substantive
protections provided by the TCPA. The vast majority of TCPA claims are
brought as individual actions, but having the ability to pursue TCPA
claims as a class action furthers the statute's fundamental purpose.
Class settlements bring real relief to the public, as many defendants
then stop making the offending calls or they implement safeguards.
Also, because the TCPA has no attorney fee provision, class actions
often present the only practical means of litigating a claim.\46\
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\46\ ``It may be that without class certification, not all of the
potential plaintiffs would bring their cases. But that is true of any
procedural vehicle; without a lower filing fee, a conveniently located
courthouse, easy-to-use Federal procedural rules, or many other
features of the Federal courts, many plaintiffs would not sue.'' Shady
Grove Orthopedic Associates, P.A., v. Allstate Insurance Co., 559 U.S.
393, 435 n.18 (2010).
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2. The FCC's 2015 Omnibus Order on the TCPA was correct.
The callers have pressed the FCC to change three critical
definitions within the TCPA:
(a) They seek a narrow definition of ``autodialer'' or ``ATDS''
under the TCPA--which would have the effect of eliminating any
statutory or government oversight over automated calls, whether
for informational, telemarketing, debt collection, or other
purposes.
(b) They seek a definition of the term ``called party'' to mean the
``intended recipient'' of the call--which would remove any
incentives for callers to maintain timely records of consent,
and eliminate the legal basis for consumers to ask that wrong
number calls cease.
(c) They seek a ruling that once a consumer has provided consent to
receive robocalls, such consent can never be revoked,
regardless of the number of unwanted automated calls and texts
the consumer receives.
Not only are these arguments incorrect as a matter of law, but the
granting of any one of them would unleash a tsunami of unwanted calls
upon owners of cell phones in the United States. The FCC was quite
correct, both legally and as a policy matter, to deny each of these
requests by the industry.
Autodialer definition. The calling industry's argument that the
FCC's longstanding definition of autodialer is wrong is based on the
notion that the current definition covers too many instruments,
supposedly making the distinction meaningless. The implication is that
because so many people have smart phones, each of which could be
considered an autodialer, all of those people could be sued under the
TCPA--a danger the industry would prevent by changing the definition of
autodialer to exclude all of the technology that is actually being used
by commercial entities to call consumers.
Called party. The calling industry argues that ``called party''
must mean the person the caller intended to call, rather the person the
caller actually reached at the dialed number. The industry proposes a
tortured analysis of the TCPA's plain language that would lead to
disastrous results for consumers. Adopting the industry's absurd
interpretation not only runs afoul of the TCPA's plain reading, but it
would also leave innocent consumers who receive uninvited, wrong number
robocalls without recourse. For example, in one reported case, Nelnet
called one consumer over 185 times, contending that it had consent
because the intended recipient was the person it was trying to call,
namely the real debtor.\47\
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\47\ Cooper v. Nelnet, 6:14-cv-00314-GKS-DAB (M.D. Fla.).
---------------------------------------------------------------------------
If the position advanced by industry were to become the rule,
Nelnet would have no liability no matter how many times it called the
wrong person. Nelnet's defense would be that because it intended to
call one party 185 times, and it had consent from that party, that
would be sufficient. It would not matter that it actually reached
someone else 185 times. The person who answers and owns the phone is
clearly the ``called party.'' It does not make sense to treat the
``intended party'' as the ``called party,'' and leave the party
actually called unprotected.
In Osorio, the consumer received 327 debt collection robocalls to
her cell phone for a debt owed by someone else.\48\ In Dominguez, Yahoo
sent 27,809 texts, and maintained that it did not have to stop because
it had consent from a prior subscriber.\49\ In Allen v. JPMorgan Chase,
N.A., a noncustomer of Chase Auto Finance received over 80 prerecorded
calls to her cell phone relating to the debt of someone else. When she
answered the calls, an automated voice instructed her to call Chase
Auto Finance to discuss ``her'' account, or to visit www.chase.com.
When she called, Chase initially refused to take action because she was
not a customer. Only after numerous complaints and litigation did the
calls cease.\50\
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\48\ 746 F.3d at 1246.
\49\ 629 Fed. Appx. at 371.
\50\ Case No. 13-cv-08285 (N.D. Ill.).
---------------------------------------------------------------------------
The FCC did not make new law in its 2015 ruling. It simply
reiterated the holdings of the vast majority of courts that ``called
party'' is indeed the person actually called and not some other
intended recipient.\51\
---------------------------------------------------------------------------
\51\ See Osorio, 746 F.3d at 1250-52 (rejecting argument that
``intended recipient'' is the ``called party''). See also Soppet v.
Enhanced Recovery Co., 679 F. 3d 637, 640-41 (3d Cir. 2013); Paradise
v. Commonwealth Fin. Sys., Inc., No. 3:13-cv-00001, 2014 WL 4717966, at
*3 (M.D. Pa. Sept. 22, 2014) (``called party'' does not mean intended
recipient); Fini v. DISH Network L.L.C., 955 F. Supp. 2d 1288, 1296
(M.D. Fla 2013) (``possessing standing as a `called party' . . . does
not require the plaintiff to have been the intended recipient''); Manno
v. Healthcare Revenue Recovery Group, L.L.C., 289 F.R.D. 674, 682 (S.D.
Fla. 2013); Breslow v. Wells Fargo Bank, N.A., 857 F. Supp. 2d 1316,
1322 (S.D. Fla. 2012) (``called party'' refers to the actual, not the
intended, recipient).
---------------------------------------------------------------------------
The reassigned numbers issue is a red herring. In its 2015 Omnibus
Order, the FCC allowed callers only one call to determine whether a
cell phone number had been reassigned to a new consumer.\52\ It did
this because if there were not a strict limit on these calls, callers
would have no incentive to ensure that they are calling the person who
provided consent to be called.
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\52\ See 2015 TCPA Declaratory Ruling and Order at 8006-10, 85-
92.
---------------------------------------------------------------------------
Wrong number calls generally are not a matter of one or even two
calls, but usually result in many calls. Here are just a few examples
involving a huge number of wrong number calls:
Singh v. Titan Fitness Holdings, L.L.C. d/b/a Fitness
Connection: 200 calls.\53\
---------------------------------------------------------------------------
\53\ Case No. 4:14-cv-03141 (S.D. Tex).
Percora v. Santander: 50 calls \54\
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\54\ Case No. 5:14-cv-04751-PSG (N.D. Cal.)
Scott v. Reliant Energy Retail Holdings, L.L.C.: at least
100 calls.\55\
---------------------------------------------------------------------------
\55\ Case No. 4:2015-cv-00282 (S.D. Tex).
It does not matter if the industry does not benefit from wrong
number calls--the industry must be incentivized to stop the wrong
number calls. The TCPA places the burden of proving consent on the
caller. This burden should remain on the caller to ensure that the
consent remains valid. The experience reflected in the cases shows
that, without proper incentives to stop making wrong-number calls, the
industry will simply keep calling. (But actually, the industry does
benefit from the wrong number calls by shifting the cost of ensuring
that the right party is called from the caller to the called party.)
The FCC's Order on reassigned numbers is reasonable, and allows
industry groups one ``free'' call before liability attaches. After all,
the businesses placing the calls are in the best position to ensure
ongoing consent. Industry groups that insist on placing robocalls to
consumers can seek technologies with a higher accuracy rate than those
on the market (which currently have between 85 to 99 percent accuracy
in identifying cellular numbers).\56\ They can combine existing
technologies with other strategies to prevent wrong number calls, such
as making a manual call first, or developing a method to confirm that
the called party is in fact the intended recipient. The discussion in
section 6 of this Testimony provides more detail about methodologies
that can be used to avoid wrong number calls.
---------------------------------------------------------------------------
\56\ Michael P. Battaglia, Meg Ryan, Marcie Cynamon, Purging Out-
Of-Scope And Cellular Telephone Numbers From RDD Samples, in
Proceedings of the AAPOR-ASA Section on Survey Research Methods 3798
(2005).
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Keeping the onus on the caller is appropriate. It is analogous to
what transpired in the financial sector after the Fair Credit Billing
Act was passed.\57\ Placing the burden of managing consumer fraud in
credit card transactions upon banks provided them with the incentive to
create systems that limit and avoid fraud. The rationale is the same
here.
---------------------------------------------------------------------------
\57\ 15 U.S.C. Sec. Sec. 1601 et seq.
---------------------------------------------------------------------------
Many callers communicate regularly with the persons they intend to
call (i.e., their own customers). Who better than the callers to ensure
that they have ongoing consent? These callers have processes in place
to maintain current customers' contact information; they can also
establish consent to call cell phones. Businesses can implement
features in their customer communications to confirm ongoing consent
(i.e., via their websites, at their storefronts, via telephone). If
they are unable to confirm consent, the best practice would be to
remove the consumer's name from their automated calling lists.
Notably, most cell phone providers do not reassign numbers for at
least 30 days.\58\ Autodialers are equipped to record ``triple-tone''
signals that identify a number that has been disconnected. A manual
dialer will also hear a triple-tone. Once the caller knows that the
number has been disconnected, it also knows that the number is on track
to be reassigned to a different person.\59\
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\58\ See Numbering Resource Optimization, CC Docket No. 99-200,
Report and Order, 15 FCC Rcd. 7574, 7590, 29 (2000).
\59\ See 2015 TCPA Declaratory Ruling and Order at 38 n.303.
---------------------------------------------------------------------------
And, of course, if a business wants an absolute guarantee against
TCPA liability, it has the option of simply refraining from making
robocalls; it can manually dial instead. Businesses do not have a
``right'' to make robocalls. And their ability to do so must not
undermine the privacy rights of consumers. The FCC's a safe harbor for
liability for one call is an appropriate balance between assisting
callers to determine whether a number has been reassigned and opening
the floodgates to unwanted calls to consumers.
``Reasonable means of revoking consent'' includes only means that
are reasonable. The calling industry also complains about the FCC's
order requiring that callers honor consumers' use of ``reasonable
means'' to revoke consent.\60\ But any ``reasonable'' means to revoke
consent is appropriate and consistent with the plain reading of the
TCPA. Industry arguments paint a myriad of far-fetched examples of ways
consumers could attempt to revoke consent. Yet the FCC did not say
consent could be revoked in any way, but rather any reasonable way.
---------------------------------------------------------------------------
\60\ See 2015 TCPA Declaratory Ruling and Order 47.
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Industry objects to the use of reasonableness as a standard. But
reasonableness is often used as a standard in statutes, court rules,
and administrative agency rules and decisions. The ``Reasonable Man''
is an eminent personality in United States law. For example, the term
``reasonable'' is used to define a standard in Rules 4, 5, 11, 12, 15,
16, 17, 23, 26, 27, 30, 32, 33, 34, 36, 37, 43, 45, 50, 51, 53, 56, 60,
65, and 68 of the Federal Rules of Civil Procedure.
The Uniform Commercial Code--the basic law governing commercial
transactions throughout the United States--imposes upon parties a duty
of good faith, defined to include ``reasonable commercial standards of
fair dealing.'' \61\ It provides that an offer shall be construed as
inviting acceptance ``by any medium reasonable in the circumstances''
and is construed to remain open for a ``reasonable time.'' \62\
``Reasonably predictable'' fair market rent is part of the standard for
distinguishing between a lease and a sale.\63\ When the parties have
not agreed upon a time for an action to be taken, it is to be taken
within a ``reasonable time.'' \64\ And this is just a partial list of
the references to reasonableness as a standard in only the first of the
U.C.C.'s eleven Articles. The industry's objection to a reasonableness
standard is alarming, and indicative that--absent this requirement--
these industry groups would seek to impose unreasonable measures to
restrict revocation of consent.
---------------------------------------------------------------------------
\61\ U.C.C. Sec. Sec. 1-201, 1-304.
\62\ U.C.C. Sec. 2-206.
\63\ U.C.C. Sec. 1-203.
\64\ U.C.C. Sec. 1-205.
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It is only when callers make it unduly cumbersome to revoke consent
that they are likely to receive varying manners of revocation, which
may or may not ultimately be deemed reasonable. For example, if the
caller does not provide a mechanism to opt out when making a robocall
(and many do not), the consumer might go to the brick and mortar
storefront and ask a representative to remove his name from the calling
list.
Reasonable methods of revocation should include an easy-to-use opt-
out mechanism provided within the call or text. Other methods may
include going to the caller's website, or calling the company's
customer service line. It stands to reason that consumers would be
likely to use these methods. However, no specific method should be
mandatory because not every method fits every scenario.
Instead of requiring consumers to discern how to revoke consent for
a particular business (i.e., XYZ Co. requires completion of a form),
the onus must be on the caller. If a business wants to robocall
consumers, it should train its employees how to handle a consumer's
wish to opt out of robocalls, and not shift its burden to consumers.
Allowing the industry to limit mechanisms for revocation is
contrary to the TCPA's broad construction, and also disregards the
myriad of ways in which businesses may be organized (i.e., not all have
a website or customer service line). Allowing any reasonable manner of
revocation that conveys a message to the caller that the recipient does
not wish to receive future communications is appropriate.
Some industry groups have suggested that the terms for revocation
should be limited to the terms set out in the underlying contracts.
However, not all communications are subject to a contractual
relationship between the parties (e.g., wrong number calls), so even
the most consumer-protective contract would not be a one-size-fits-all
solution. More important, leaving the matter to contract opens the door
to unequal bargaining positions in contractual drafting and obscure
provisions in fine print, all leading to consumer confusion about how
to revoke consent. Better to keep the FCC's approach: that revocation
must simply be reasonable.
3. The importance of passing the HANGUP Act.
Unfortunately, a provision seriously undermining the important
protections of the TCPA was jammed through Congress as part of the
Bipartisan Budget Act of 2015. Section 301 of this Act creates an
exemption to the TCPA that permits robocalls and texts by debt
collectors of Federal debt--primarily student loan borrowers who are
delinquent on Federal student loan payments, as well as taxpayers
pursued by private collectors--to be made to cellphones without the
consent of the consumer. This is a dangerous precedent that will harm
tens of millions of Americans, and it should be repealed. Senate Bill
2235, the HANGUP (Help Americans Never Get Unwanted Phone calls) Act,
repeals the enactment of Section 301 in the budget bill. We strongly
support the HANGUP Act.
Our best estimate of the total number of people who could be
negatively impacted by Section 301 is over 61 million people. This
includes:
Federal Student Loans. The total number of unduplicated
recipients of Federal student loans (including Direct loans,
Federal Family Education loans, and Perkins loans) was 41.8
million as of Q1 2016.\65\
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\65\ U.S. Dept of Education, Federal Student Aid Portfolio Summary
(May 2016), available at https://studentaid.ed.gov/sa/about/data-
center/student/portfolio.
Federally Guaranteed Mortgages. As of September 2015, there
were a total of 4,934,260 mortgages with an explicit guaranty
from the U.S. Government, including the Federal Housing
Administration, the U.S. Department of Veterans Affairs, and
certain other departments to a lesser extent. This number
includes both current and performing mortgages (4.4 million) as
well as delinquent mortgages (474,000).\66\
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\66\ ``Office of the Comptroller of the Currency, OCC Mortgage
Metrics Report, Third Quarter 2015 (Feb. 2016), available at http://
www.occ.treas.gov/publications/publications-by-type/other-publications-
reports/mortgage-metrics/mortgage-metrics-q3-2015.pdf.
Small Business Loans. The Small Business Administration
(SBA) offers several kinds of guaranteed loan programs, as well
as direct business loans and disaster loans. For Fiscal Year
2015, the SBA approved over 80 thousand loans.\67\
---------------------------------------------------------------------------
\67\ ``U.S. Small Business Administration, Number of Approved Loans
by Program (Feb. 2016), available at https://www.sba.gov/sites/default/
files/WDS_Table3_ApprovalCount_Report
.pdf.
Agriculture Loans. The U.S. Department of Agriculture (USDA)
offers various kinds of loan programs, including direct and
guaranteed loans for single/multi-family housing, community
facilities, and business programs. The USDA's Rural Development
loan programs serve 306,552 borrowers through direct programs
and 942,367 borrowers through guaranteed programs, as of Fiscal
Year 2015.\68\
---------------------------------------------------------------------------
\68\ ``U.S. Dep't of Agriculture, Office of Inspector General,
Rural Development's Financial Statements for Fiscal Years 2015 and 2014
at 23, available at http://www.usda.gov/oig/webdocs/85401-0005-11.pdf.
IRS Taxpayer Delinquent Accounts. Since 2004, the number of
taxpayer delinquent accounts subject to collection activities
has grown each year.\69\ As of September 30, 2015, a total of
13.3 million taxpayer accounts were subject to IRS delinquent
collection activities.\70\ These accounts are now subject to
robocalling by private debt collectors.\71\
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\69\ Internal Revenue Service Data Book, SOI Tax Stats--Delinquent
Collection Activities, Table 16 (2015), available at https://
www.irs.gov/uac/SOI-Tax-Stats-Delinquent-Collection-Activities-IRS-
Data-Book-Table-16.
\70\ Internal Revenue Service Data Book 43 (2015), available at
https://www.irs.gov/pub/irs-soi/15databk.pdf.
\71\ See 26 U.S.C. Sec. 6306 (amended by Pub. L. No. 114-94, 129
Stat. 1312 (Dec. 4, 2015)).
Student loan collectors' and servicers' repeated debt collection
violations. Student loan collectors and servicers have frequently
violated the laws and regulations designed to protect consumers from
overreaching, abuse and harassment. For example, consider the student
loan servicer Navient's recent settlements with the FDIC and the
Department of Justice. On May 13, 2014, Navient reached an agreement
with the Department of Justice requiring it to pay $60 million to
compensate student loan debtors for interest overcharges that violated
the Servicemembers Civil Relief Act (SCRA).\72\ On the same day, the
FDIC announced a separate $96.6 million settlement with Navient for
manipulating the allocation of students' payments in order to maximize
late fees, misrepresenting and inadequately disclosing how borrowers
could avoid late fees, and violating SCRA requirements.\73\
---------------------------------------------------------------------------
\72\ See Press Release, Justice Department Reaches $60 Million
Settlement with Sallie Mae to Resolve Allegations of Charging Military
Servicemembers Excessive Rates on Student Loans (May 13, 2014),
available at http://www.justice.gov/opa/pr/justice-department-reaches-
60-million-settlement-sallie-mae-resolve-allegations-charging.
\73\ See Press Release, FDIC Announces Settlement with Sallie Mae
for Unfair and Deceptive Practices and Violations of the Servicemembers
Civil Relief Act (May 13, 2014), available at https://www.fdic.gov/
news/news/press/2014/pr14033.html. While this matter involved private
student loans, rather than the Federal student loans for which section
301 provides a carve-out, the behavior of student loan servicers is
relevant to the discussion.
---------------------------------------------------------------------------
Moreover, in 2014 testimony to Congress about problems with student
loans, the Consumer Financial Protection Bureau's Student Loan
Ombudsman stated:
Loan servicers are the primary point of contact on student
loans for more than 40 million Americans. . . . .
As the recession decimated the job market for young graduates,
a growing share of student loan borrowers reached out to their
servicers for help. But the problems they have encountered bear
an uncanny resemblance to the problems faced by struggling
homeowners when dealing with their mortgage servicers. Like
many of the improper and unnecessary foreclosures experienced
by many homeowners, I am concerned that inadequate servicing
has contributed to America's growing student loan default
problem, now topping 7 million Americans in default on over
$100 billion in balances.
The Bureau has received thousands of complaints from borrowers
describing the difficulties they face with their student loan
servicers. Borrowers have told the Bureau about a range of
problems, from payment processing errors to servicing transfer
surprises to loan modification challenges. To ensure that we do
not see a repeat of the breakdowns and chaos in the mortgage
servicing market, it will be critical to ensure that student
loan servicers are providing adequate customer service and
following the law.\74\
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\74\ Hearing on the Impact of Student Loan Debt on Borrowers and
the Economy Before the United States Senate Comm. on the Budget, 113th
Cong., 2d Sess. (June 4, 2014) (testimony of Rohit Chopra, Assistant
Director & Student Loan Ombudsman, Consumer Financial Protection
Bureau) (emphasis added).
Student loan collectors and servicers have also frequently been
subject to private suits for TCPA violations. For example, Nelnet was a
defendant in a recent TCPA action, Cooper v. Nelnet, because it
contacted third parties' cell phones with pre-recorded messages. Mr.
Cooper does not have a student loan serviced by Nelnet. Yet, he
received the following pre-recorded call several times on his cell
---------------------------------------------------------------------------
phone in addition to texts and other calls:
Hello, this is an important message for Leonor Vargas from
Nelnet, calling on behalf of the U.S. Department of Education.
We do not have a current address, phone number, or e-mail on
file for Leonor Vargas. Without current contact information, we
are unable to provide important information about their student
account. Please contact Nelnet 24/7 at 888-486-4722 or visit us
at www.nelnet.com. This matter requires your immediate
attention. Thank you.
Similarly, Sallie Mae was the defendant in Cummings v. Sallie Mae,
12-cv-09984 (N.D. Ill.), a case involving allegations that Sallie Mae
called people who were references for the students' loans with pre-
recorded debt collection messages. Sallie Mae had no relationship with
these references in regards to the accounts that were the subject of
the calls.
These examples demonstrate that student loan servicers and
collectors are autodialing and delivering artificial voice messages to
cell phones in violation of the TCPA, as well as violating other
critically important consumer protections. Until the servicers and
collectors begin complying with the rules and regulations to which they
are currently subject, it is a mistake to create special exemptions
from consumer protection law for their benefit. The situation calls for
stronger enforcement, not weaker protections.
Financially distressed consumers. Studies have shown--and
executives in the credit industry have repeatedly admitted--that the
major causes of serious consumer delinquency are unemployment, illness,
and marital problems. Moreover, the credit industry's overextension of
credit, particularly high-cost credit, greatly inhibits debtors'
ability to repay.
When Congress wrote the Federal Fair Debt Collection Practices Act
(FDCPA) it explicitly recognized that most delinquency is not
intentional. Just the opposite is the case. Most overdue debts are not
the fault of the consumer:
One of the most frequent fallacies concerning debt collection
legislation is the contention that the primary beneficiaries
are ``deadbeats.'' In fact, however, there is universal
agreement among scholars, law enforcement officials, and even
debt collectors that the number of persons who willfully refuse
to pay just debts is minuscule. Prof. David Caplovitz, the
foremost authority on debtors in default, testified that after
years of research he has found that only 4 percent of all
defaulting debtors fit the description of ``deadbeat.'' This
conclusion is supported by the National Commission on Consumer
Finance which found that creditors list the willful refusal to
pay as an extremely infrequent reason for default.
The Commission's findings are echoed in all major studies: the
vast majority of consumers who obtain credit fully intend to
repay their debts. When default occurs, it is nearly always due
to an unforeseen event such as unemployment, overextension,
serious illness, or marital difficulties or divorce.\75\
---------------------------------------------------------------------------
\75\ S. Rep. No. 95-382, 95th Cong., 1st Sess., reprinted in 1977
U.S. Code Cong. & Admin. News. (Aug. 2, 1977) (emphasis added).
The FDCPA, along with other laws protecting debtors from abuse and
harassment, is based on this recognition, rather than on the myth that
draconian collection tactics are justified by the existence of
substantial numbers of debtors who sought out credit without the
intention or wherewithal to repay.\76\
---------------------------------------------------------------------------
\76\ David Caplovitz, Consumers in Trouble: A Study of Debtors in
Default ch. 11 (1974). See also Teresa A. Sullivan, Elizabeth Warren,
and Jay Lawrence Westbrook, As We Forgive Our Debtors: Bankruptcy and
Consumer Credit in America (1989).
---------------------------------------------------------------------------
There are clear, objective, widely recognized causes of delinquency
and default on consumer debt. Unemployment is widely recognized as the
leading cause of the failure to pay credit card debt.\77\ Excessive
medical debt is also widely seen as cause for the non-payment of other
bills.\78\
---------------------------------------------------------------------------
\77\ Sumit Agarwal and Chunlin Liu, Determinants of Credit Card
Delinquency and Bankruptcy: Macroeconomic Factors, 27 Journal of
Economics and Finance 1 (2003).
\78\ See e.g. Theresa Tamkins, ``Medical Bills Prompt More than 60
percent of Bankruptcies,'' CNN Original Series, June 5, 2009.
---------------------------------------------------------------------------
The impact of the FCC's proposed rule on borrowers with Federal
debt from for-profit colleges. There are numerous for-profit colleges
that have been repeatedly investigated or sued for fraudulent
activities that seriously harm consumers, especially low-income
consumers. Just two examples are Corinthian \79\ and ITT.\80\ As the
result of predatory practices, students who attend for-profits often do
not benefit from the education paid for with the Federal student loans,
and thus disproportionately default on their Federal student loans.
---------------------------------------------------------------------------
\79\ See Anya Kamenetz, Corinthian Colleges Misled Students On Job
Placement, Investigation Finds, Higher Ed, Nov. 17, 2015, available at
http://www.npr.org/sections/ed/2015/11/17/456367152/corinthian-misled-
students-on-job-placement-investigation-finds. See also Annie Waldman,
How a For-Profit College Targeted the Homeless and Kids With Low Self-
Esteem, ProPublica, Mar. 18, 2016 (newly released e-mails and
PowerPoints show first-hand Corinthian Colleges' predatory practices),
available at https://www.propublica.org/article/how-a-for-profit-
college-targeted-homeless-and-kids-with-low-self-esteem: Press Release,
CFPB Sues For-Profit Corinthian Colleges for Predatory Lending Scheme
(Sept. 16, 2014) (Bureau Seeks More than $500 Million In Relief For
Borrowers of Corinthian's Private Student Loans), available at http://
www.consumerfinance.gov/about-us/newsroom/cfpb-sues-for-profit-
corinthian-colleges-for-predatory-lending-scheme/.
\80\ Danielle Douglas-Gabriel, Is this the beginning of the end for
ITT? Washington Post, Oct. 19, 2015 (CFPB accused the company of
providing zero-interest loans to students but failing to tell them that
they would be kicked out of school if they didn't repay in a year; when
students could not pay up, ITT allegedly forced them to take out high-
interest loans to repay the first ones),available at https://
www.washingtonpost.com/news/grade-point/wp/2015/10/19/is-this-the-
beginning-of-the-end-for-itt/
---------------------------------------------------------------------------
The vast majority of students at these for-profit colleges have
Federal student loans. A 2012 report from the U.S. Senate's Health
Employment Labor and Pension Committee that examined 30 publicly traded
for-profit colleges, found that these institutions were up to 450
percent more expensive than their public counterparts, and that 96
percent of students who attend for-profit colleges borrow in order to
do so.\81\ Further, students who attend for-profit colleges are far
less likely to be able to repay their loans, leading to greater default
and serious financial consequences for former students. Nationally, the
for-profit college sector generates nearly half of all student loan
defaults, while enrolling only about 13 percent of all students.\82\
These harmful practices most often impact vulnerable populations
including low-income persons, people of color, and veterans, all of
whom are overrepresented in enrollment at for-profit colleges. This is
illustrated in an October 2014 Center for Responsible Lending:
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\81\ Staff of S. Comm on Health, Education, Labor, and Pension,
112th Cong., For Profit Higher Education: The Failure to Safeguard the
Federal Investment and Ensure Student Success (2012), available at
http://www.help.senate.gov/imo/media/for_profit_report/Contents.pdf.
\82\ Peter Smith & Leslie Parrish, Do Students of Color Profit from
For-Profit College? Poor Outcomes and High Debt Hamper Attendees'
Future, Center for Responsible Lending (Oct. 2014), available at http:/
/www.responsiblelending.org/sites/default/files/nodes/files/research-
publication/crl-for-profit-univ-final.pdf.
We find that students who attend for-profit colleges are more
likely to need to borrow for their education and tend to borrow
more than their peers at public or private, non-profit schools.
Unfortunately, this financial investment does not appear to pay
off for many for-profit students, who graduate at lower rates,
are more likely to default on their loans, and may face poor
employment outcomes. African Americans and Latinos are at
greater risk of the high debt burdens and poor outcomes caused
by for-profit colleges because they are more likely to attend
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these schools than their white peers.
[A]id received by recent veterans as part of the new Post-9/11
GI bill does not count towards the 90 percent limitation on
Federal aid [that for-profits receive]. As a result, for-profit
colleges target their recruitment efforts toward current and
former members of the military, whose additional grant aid can
be counted towards the 10 percent of funds that are intended to
come from private sources.\83\
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\83\ Id.
Vulnerable populations with delinquent Federal student loans from
potentially fraudulent for-profit schools should not be further
harassed by robocalls to their cell phones.
Abusive debt collection calls. Collectors are not generally dealing
with people who are choosing not to pay something they can pay. Rather,
they are dealing with people who are already struggling to pay their
debts, for whom choosing to pay one debt will often mean that other
debts or necessities will go unmet. This is supported by estimates
indicating that the new loophole for debt collection robocalls will not
generate significant revenue for the Federal Government. As pointed out
by Consumerist, the Congressional Budget Office projects that debt
collection robocalls will raise, at most, $500,000 per year over the
next ten years.\84\ This is why both debt collection regulation and
cell phone regulation should not permit abuse, harassment or unfair or
deceptive practices.
---------------------------------------------------------------------------
\84\ Chris Morran, Government's Own Budget Analysis Shows that
Allowing Debt Collection Robocalls is Pointless, Consumerist, Oct. 28,
2015, available at https://consumerist.com/2015/10/28/governments-own-
budget-analysis-shows-that-allowing-debt-collection-robocalls-is-
pointless/.
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Causing one's cell phone to ring repeatedly is even more abusive
for consumers than causing one's home phone to ring. Debt collection
often begins with a series of form letters and then graduates to phone
calls from collection employees. The industry's technological
capabilities, along with the perverse incentives it provides its
employees, often ensure that these calls are frequent and often
abusive. In particular, the collection employee is often eligible for
salary incentives based on the amount he or she collects. Collectors
use automated dialing systems that will place a million calls per day.
As is indicated by the numerous cases filed in the courts about
multiple calls as a collection tactic, people find it enormously
stressful to receive multiple collection calls every day.\85\ The calls
are highly intrusive. They cause great distress and trigger
difficulties in marriages. Numerous collection calls interfere with
daily life. The calls themselves, the dread of future calls, and the
fear of the dissemination of personal, embarrassing information to
friends, neighbors, co-workers and employers permeate the lives of
consumers. Indeed, in some cases, aggressive collection efforts have
caused such significant emotional distress as to cause physical
illness.\86\
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\85\ See, e.g., CashCall, Inc. v. Morrisey, 2014 WL 2404300 (W. Va.
May 30, 2014) (84,371 calls to 292 consumers) (unpublished); Meadows v.
Franklin Collection Serv., Inc., 414 Fed. Appx. 230 (11th Cir. 2011)
(200-300 calls); Rucker v. Nationwide Credit, Inc., 2011 WL 25300 (E.D.
Cal. Jan. 5, 2011) (approximately 80 phone calls in one year); Krapf v.
Nationwide Credit, Inc., 2010 WL 2025323 (C.D. Cal. May 21, 2010) (four
to eight calls daily for two months); Turman v. Central Billing Bureau,
Inc., 568 P.2d 1382 (Or. 1977) (at least four calls over nine days).
\86\ See, e.g., Margita v. Diamond Mortgage Corp., 406 N.W.2d 268
(Mich. Ct. App. 1987) (stress from telephone collection efforts
including phone calls aggravated paroxysmal atrial tachycardia); Turman
v. Central Billing Bureau, Inc., 568 P.2d 1382 (Or. 1977) (affirming
tort verdict; blind consumer rehospitalized with anxiety and glaucoma
complications after repeated collection calls); GreenPoint Credit Corp.
v. Perez, 75 S.W.3d 40 (Tex. App. 2002) (affirming jury verdict of $5
million in compensatory damages against debt collector; elderly
consumer suffered severe shingles-related sores, anxiety, nausea, and
elevated blood pressure due to repeated telephone and in-person
harassment over a debt she did not owe).
---------------------------------------------------------------------------
Complaints about debt collection--wrong people called routinely.
The Consumer Financial Protection Bureau's Annual Report for 2015 shows
that 40 percent of debt collection complaints involved continued
attempts to collect debts not owed, which include complaints that the
debt does not belong to the person called.\87\ Almost one fifth of all
the complaints related to debt collector communication tactics.\88\
---------------------------------------------------------------------------
\87\ Consumer Financial Protection Bureau, Consumer Response Annual
Report 16 (January 1-December 31, 2015) available at http://
files.consumerfinance.gov/f/201604_cfpb_consumer-response-annual-
report-2015.pdf.
\88\ Id.
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Similarly, a 2009 survey conducted by the Scripps Survey Research
Center at Ohio University shows that 30 percent of respondents were
being called regarding debt that was not their debt.\89\ And according
to statistics from the Federal Reserve, one in seven people in the
United States is being pursued by a debt collector, a substantial
percentage of whom report being hounded for debts they do not owe.\90\
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\89\ Marcia Frellick, Survey: Debt collection calls growing more
frequent, aggressive, Creditcard.com, Jan. 28, 2010, available at
http://www.creditcards.com/credit-card-news/debt-collectors-become-
more-aggressive-break-law-1276.php.
\90\ David Dayen, Someone Else's Debt Could Ruin Your Credit
Rating, New Republic, Mar. 31, 2014, available at http://
www.newrepublic.com/article/117213/debt-collector-malpractice-someone-
elses-debt-could-ruin-your-credit.
---------------------------------------------------------------------------
Senate Bill 2235, the HANGUP Act, repeals the enactment of Section
301 in the budget bill. The best protection against unwanted robocalls
is to require the consent of the called party, as the TCPA does for all
other non-emergency robocalls and texts made to cell phones.
We urge you to pass S. 2235 as soon as possible.
4. Federal law should be strengthened to deal with abusive robocalling
to consumers.
As is evident from the growing number of complaints about
robocalls, as well as the growing litigation, American consumers are
suffering from two problems related to robocalls. One is too many
robocalls from legitimate companies. The other is the escalating number
of robocalls from scammers. In the public's mind, these two issues are
intertwined. And, until they are each independently dealt with, the
complaints--both to government agencies and through the courts--will
continue to escalate.
The TCPA and the Do Not Call Registry provide some protection for
consumers from unwanted robocalls from legitimate companies, but these
mechanisms have completely failed to address the entire robocall
problem. Major phone companies provide little effective protection from
the calls sent by scammers and unscrupulous actors. These calls cost
consumers an estimated $350 million in 2011.\91\ Many of these scam
robocalls originate from overseas, outside of the reach of the law.\92\
The FTC has had difficulty in enforcing the restrictions against
unwanted calls, collecting less than 12 percent of the $1.2 million it
has charged to Do Not Call and robocall violators since it created the
national registry.\93\
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\91\ Kevin B. Anderson, Federal Trade Commission, Staff Report of
the Bureau of Economics, Consumer Fraud in the United States, 2011: The
Third FTC Survey (April 2013), available at https://www.ftc.gov/sites/
default/files/documents/reports/consumer-fraud-united-states-2011-
third-ftcsurvey/130419fraudsurvey_0.pdf. The survey identified
approximately 3.5 million telemarketing fraud cases in 2011 with a
median loss per case of $100. Id. at 38 and 39.
\92\ Ringing off the Hook: Examining the Proliferation of Unwanted
Calls before the United States Senate Special Comm. on Aging, 114th
Cong., 1st Sess. (2015) (testimony of the Federal Trade Commission),
available at http://www.aging.senate.gov/imo/media/doc/FTC_Greisman
_6_10_15.pdf.
\93\ Federal Trade Commission, FTC DNC and Robocall Enforcement,
(Apr 19, 2016) (on file with the author).
---------------------------------------------------------------------------
The confluence of two changes in the law in 2015 with the ongoing
caller ID spoofing problems will tremendously exacerbate existing
problems. Scammers posing as IRS collection agents have long been known
as perpetrating one of the worst consumer scams. Now that private debt
collectors can collect IRS debts,\94\ it will be especially difficult
for consumers to determine the difference between real collectors for
the IRS and scammers.\95\ This likely confusion is made worse by a new
statutory provision authorizing the debt collectors of IRS debt to
robodial consumers without consent. Calls from real collectors for the
IRS will be permitted to robodial consumers--which directly conflicts
with the explicit advice of the FTC ``that the IRS never calls
consumers out of the blue.'' \96\
---------------------------------------------------------------------------
\94\ See 26 U.S.C. Sec. 6306 (amended by Pub. L. No. 114-94, 129
Stat. 1312 (Dec. 4, 2015)) (requiring the IRS to enter into tax
collection contracts for all inactive tax receivables).
\95\ Internal Revenue Service, Phone Scams Continue to be a Serious
Threat, Remain on IRS ``Dirty Dozen'' List of Tax Scams for the 2016
Filing Season (Feb. 2, 2016), available at https://www.irs.gov/uac/
Newsroom/Phone-Scams-Continue-to-be-a-Serious-Threat,-Remain-on-IRS-
Dirty-Dozen-List-of-Tax-Scams-for-the-2016-Filing-Season.
\96\ Jon Morgan, Federal Trade Commission, It's the IRS calling . .
. or is it? (Mar. 12, 2015) (``This has all the signs of an IRS
imposter scam. In fact, the IRS won't call out of the blue to ask for
payment, won't demand a specific form of payment, and won't leave a
message threatening to sue you if you don't pay right away. Have you
gotten a bogus IRS call like this? If you did, report the call to the
FTC and to TIGTA--include the phone number it came from, along with any
details you have.'').
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One part of the problem is that scammers are able to use a spoofed
caller-ID so that it may look to the consumer answering the telephone
as though a legitimate business is actually calling. That spoof is
often the beginning of a telemarketing scam. Until we deal with caller
ID spoofing, we won't be able separate the robocalls from legitimate
businesses from the scammers.
What is needed. The telephone companies must be required to provide
easy to use and free services that enable consumers to block unwanted
callers, especially robocalls. Additionally, effective and mandatory
anti-spoofing technology needs to be developed and adopted immediately.
We appreciate the sentiment behind Senator Nelson's introduction of
Senate Bill 2558: the Spoofing Prevention Act of 2016. This bill is a
good start in the battle to push for a solution to the serious problem
of caller ID spoofing. However, we fear that the effective anti-
spoofing technology will not be developed until the telephone companies
themselves are required to employ it.
H.R. 4932, the ROBOCOP (Repeated Objectionable Bothering of
Consumers on Phones) Act, gives consumers the ability to protect
themselves from scam robocalls. It directs the FCC to require phone
companies to offer free, optional tools to all of their customers that
will block unwanted autodialed or prerecorded calls. Emergency
robocalls and those calls to which the consumer has consented would not
be affected by this mandate. The bill would also require phone
companies to address the ``spoofing'' problem \97\ by improving call-
blocking technologies and robocall enforcement.\98\ This bill outlines
a comprehensive solution to the robocall problem, and we ask the Senate
to introduce a companion bill as quickly as possible.
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\97\ Federal Communications Commission, ``Spoofing and Caller ID,''
available at https://www.fcc.gov/consumers/guides/spoofing-and-caller-
id.
\98\ H.R. 4932 (ROBOCOP Act), 114th Cong., 2d Sess. (2016).
---------------------------------------------------------------------------
Our groups also encourage consumers to put pressure on the major
phone companies to offer all of their customers effective robocall-
blocking tools at no additional cost. The FCC has declared that phone
companies ``should'' offer these technologies,\99\ and last summer, 45
state attorneys general called on five major phone companies to provide
them to their customers.\100\ Over 600,000 people have already signed
Consumers Union's petition asking AT&T, Verizon, and CenturyLink to
provide these technologies to their customers. Consumers can join the
campaign at www.EndRobocalls.org.
---------------------------------------------------------------------------
\99\ Tom Wheeler, Another Win For Consumers, Federal Communications
Commission Blog, (May 27, 2015) available at https://www.fcc.gov/news-
events/blog/2015/05/27/another-win-consumers.
\100\ Letter from National Association of Attorneys General to
Randall Stephenson (AT&T), Lowell C. McAdam (Verizon), Glen F. Post,
III (CenturyLink), Marcelo Claure (Sprint), John Legere (T-Mobile)
(July 22, 2015), available at http://www.oag.state.md.us/Press/NAAG
_Call_Blocking.pdf.
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5. A real fix for the reassigned number problem.
One of the chief bugaboos in the discussions about callers'
professed difficulties complying with the FCC's 2015 Omnibus Order is
this industry's statements that it has no reasonable way of knowing
when the phone numbers have been reassigned to new people. So, they
say, how can they reasonably avoid making these wrong number calls?
There are several ways to avoid these calls. First, the calling
industry can arrange for a fully accurate database by setting up one
with the cooperation of the cell phone providers.\101\ A database would
be fully accurate and relatively inexpensive to operate and access by
the caller if has the following components:
---------------------------------------------------------------------------
\101\ My understanding is that Twitter has already arranged for a
private database providing this information.
1. All cell phone providers would participate by providing timely
---------------------------------------------------------------------------
information about cell phone numbers that change ownership.
2. The information provided would simply be--on each reporting
date--any telephone number that had been returned to the cell
phone company (because it was dropped or abandoned or
terminated) since the previous reporting date.
3. The providers would make these reports within a short time (one
day? two days?) from the date that the number was dropped.
4. Callers could access the database easily online and simply ask:
``For telephone number XYZ, when was the last time it changed
ownership?'' There would be no big data dump from the database,
just the simple answer to the question: ``Number XYZ most
recently changed ownership on ABC date.''
5. The fees charged to callers for accessing the information would
pay for the maintenance of the database.
The keys components here are (a) all cell phone providers would
participate, (b) by providing timely and updated information, (c)
allowing reasonable cost for callers to access.
Indeed, there are already database systems on the market that
provide, with a high degree of accuracy, information about whether
phone numbers have been reassigned. For example, Early Warning, a data
exchange company,\102\ runs a database that can be accessed by callers
to determine the status of each of the numbers they want to call. Early
Warning describes its procedure in this way:
---------------------------------------------------------------------------
\102\ For more information, see Early Warning's website at http://
www.earlywarning.com/about-us.html.
---------------------------------------------------------------------------
How Mobile Number Verification Service Works:
1. Organizations query the service, in real-time or batch, prior to
calling customers.
2. The service returns a number match or mismatch indicator based
on:
Changes to the account since the last date the
[caller] contacted the customer.
The network status of the number, if deactivated or
suspended. This allows the organization to refrain from
making an outbound call to an outdated number or out of
service number.
3. If the response returned is a ``number match'', then
organizations can add the verified number to the Auto-Dialer/
Contact Center process. If a number is flagged as a mismatch,
organizations can take the steps necessary to re-verify,
confirm or update the customer file.\103\
---------------------------------------------------------------------------
\103\ Data Sheet from 2014, describing the mobile number
verification service offered by Early Warning (emphasis added). This
data sheet is on file with the author.
This company claims a high degree of accuracy: ``In a recent test,
Mobile Number Verification Service correctly identified over 99 percent
of mobile changes.'' \104\ We think it is likely that there are other
companies that provide similar services or can develop them.
---------------------------------------------------------------------------
\104\ Id.
---------------------------------------------------------------------------
Additionally, callers can and should employ best practices that
would include a number of practices to increase the accuracy of the
callers' records to assure that the phone numbers for which they have
consent to call still belong to their customers. After all it is in
their interest to ensure that they are actually reaching their intended
customers. Some ideas for these best practices might include:
Capturing incoming numbers from customers and providing an
alert when the number called from is different than the one for
which the consumer has provided consent.
Requesting current telephone numbers in all interactions
with customers, including online and paper transactions.
The reassigned number problem need not really be a problem. Simple
solutions are within reach. Congress should require that the cell phone
providers participate in the database described above, and thereby
provide a reasonable way to eradicate the reassigned numbers issue.
6. The vicarious liability rules under the TCPA are appropriate.
The issue of the extent to which one company should be liable for
the TCPA violations of others has arisen recently, largely as the
result of a case brought against DISH Network, L.L.C. The case was
first filed in 2009 by the U.S. Department of Justice and the states of
Illinois, California, Ohio and North Carolina.
The litigation was brought because DISH Network's dialers, as well
as several of its retailers, were aggressively marketing DISH Network
through robocalling consumers. Many of the calls were made to consumers
who were on the National Do Not Call Registry. Some had specifically
requested to DISH that they not to be called again. Consumers testified
about the substantial inconvenience that DISH's calls caused them.
Illinois consumers, for example, testified that the calls interrupted
family meals, childcare, and taking care of sick relatives.
Retailers were paid by DISH simply based on the sign-up volume. The
evidence produced at trial demonstrated that DISH knew many of the
retailers would do telemarketing as part of their sales practices. The
Federal and state governments argued at trial that, among other things,
DISH knew the retailers were making outbound telemarketing calls with
automatic dialers, and that DISH was aware there were violations of
both TCPA and telemarketing laws because of consumer complaints and
enforcement actions.
The issue is whether DISH Network can be held liable for the TCPA
violations of its dialers and retailers. The FCC ruled that the Federal
common law of agency is sufficient to show vicarious liability.\105\
The court has since agreed with that position, holding that the facts
could support a finding that DISH Network is liable for the TCPA
violations of the retailers making calls on its behalf.\106\ Although
there have been reasoned positions advanced that third-party liability
under the TCPA should reach further than agency principles to any act
by a representative of or for the benefit of another,\107\ the FCC and
the court were clearly right to apply at least the common law rules of
agency liability to the entity--DISH Network--on whose behalf the calls
were made.
---------------------------------------------------------------------------
\105\ In re DISH Network, L.L.C., CG Docket No. 11-50, Declaratory
Ruling, FCC 13-54, at 11 (May 9, 2013).
\106\ United States v. DISH Network, L.L.C., 75 F. Supp. 3d 942,
1042 (C.D. IL 2014), vacated in part on reconsideration, (Feb. 17,
2015).
\107\ In re DISH Network, L.L.C., CG Docket No. 11-50, Declaratory
Ruling, FCC 13-54, at 4 (May 9, 2013).
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Congress should not consider passing any change to the vicarious
liability standards applicable to TCPA enforcement cases.
Conclusion. Thank you very much for the opportunity to testify
today. I would be happy to answer any questions.
______
Appendix
Descriptions of National Organizations On Behalf of Which This
Testimony Is Filed
Americans for Financial Reform is an unprecedented coalition of
over 250 national, state and local groups who have come together to
reform the financial industry. Members of our coalition include
consumer, civil rights, investor, retiree, community, labor, faith
based and business groups.
The Center for Responsible Lending (CRL) is a nonprofit, non-
partisan research and policy organization dedicated to protecting
homeownership and family wealth by working to eliminate abusive
financial practices. CRL is an affiliate of Self-Help, a nonprofit
community development financial institution. For 30 years, Self-Help
has focused on creating asset building opportunities for low-income,
rural, women-headed, and minority families, primarily through financing
safe, affordable home loans.
Consumer Action has been a champion of underrepresented consumers
nationwide since 1971. A non-profit 501(c)(3) organization, Consumer
Action focuses on consumer education that empowers low-and moderate-
income and limited-English-speaking consumers to financially prosper.
It also advocates for consumers in the media and before lawmakers to
advance consumer rights and promote industry-wide change. By providing
consumer education materials in multiple languages, a free national
hotline, a comprehensive website (www.consumer-action.org) and annual
surveys of financial and consumer services, Consumer Action helps
consumers assert their rights in the marketplace and make financially
savvy choices. Over 7,000 community and grassroots organizations
benefit annually from its extensive outreach programs, training
materials and support.
The Consumer Federation of America is an association of nearly 300
nonprofit consumer groups that was established in 1968 to advance the
consumer interest through research, advocacy and education.
Consumers Union is the public policy and advocacy division of
Consumer Reports. Consumers Union works for telecommunications reform,
health reform, food and product safety, financial reform, and other
consumer issues. Consumer Reports is the world's largest independent
product-testing organization. Using its more than 50 labs, auto test
center, and survey research center, the nonprofit rates thousands of
products and services annually. Founded in 1936, Consumer Reports has
over 8 million subscribers to its magazine, website, and other
publications.
MFY Legal Services envisions a society in which there is equal
justice for all. Its mission is to achieve social justice, prioritizing
the needs of people who are low-income, disenfranchised or have
disabilities. MFY does this through providing the highest quality
direct civil legal assistance, providing community education, entering
into partnerships, engaging in policy advocacy, and bringing impact
litigation. MFY assists more than 20,000 New Yorkers each year. MFY's
Consumer Rights Project provides advice, counsel, and representation to
low-income New Yorkers on a range of consumer problems, including
unwanted and harassing debt collection robocalls, and supports
strengthening the TCPA.
The National Association of Consumer Advocates (NACA) is a non-
profit association of attorneys and consumer advocates committed to
representing consumers' interests. Its members are private and public
sector attorneys, legal services attorneys, law professors, and law
students whose primary focus is the protection and representation of
consumers. As a national organization fully committed to promoting
justice for consumers, NACA's members and their clients are actively
engaged in promoting a fair and open marketplace that forcefully
protects the rights of consumers, particularly those of modest means.
National Center for Law and Economic Justice (NCLEJ) works with
low-income families, individuals, communities, and a wide range of
organizations to advance the cause of economic justice through ground-
breaking, successful litigation, policy work, and support of grassroots
organizing around the country.
The National Consumer Law Center (NCLC) is a non-profit corporation
founded in 1969 to assist legal services, consumer law attorneys,
consumer advocates and public policy makers in using the powerful and
complex tools of consumer law for just and fair treatment for all in
the economic marketplace. NCLC has expertise in protecting low-income
customer access to telecommunications, energy and water services in
proceedings at state utility commissions, the FCC and FERC. We publish
and annually supplement nineteen practice treatises that describe the
law currently applicable to all types of consumer transactions,
including Access to Utility Service (5th ed. 2011), covering
telecommunications generally, and Federal Deception Law (2d ed. 2016),
which includes a chapter on the Telephone Consumer Protection Act.
Public Citizen is a national non-profit organization with more than
225,000 members and supporters. We represent consumer interests through
lobbying, litigation, administrative advocacy, research, and public
education on a broad range of issues including consumer rights in the
marketplace, product safety, financial regulation, safe and affordable
health care, campaign finance reform and government ethics, fair trade,
climate change, and corporate and government accountability.
U.S. Public Interest Research Group (U.S. PIRG) serves as the
Federation of State PIRGs, which are non-profit, non-partisan public
interest advocacy organizations that take on powerful interests on
behalf of their members. For years, U.S. PIRG's consumer program has
designated a fair financial marketplace as a priority. Our research and
advocacy work has focused on issues including credit and debit cards,
deposit accounts, payday lending and rent-to-own, credit reporting and
credit scoring and opposition to preemption of strong state laws and
enforcement. On the web at www.uspirg.org.
The Chairman. Thank you, Ms. Saunders.
Mr. Lovich.
STATEMENT OF RICHARD LOVICH, NATIONAL LEGAL
COUNSEL, AMERICAN ASSOCIATION OF HEALTHCARE
ADMINISTRATIVE MANAGEMENT
Mr. Lovich. Chairman Thune, Ranking Member Nelson, and
members of the Committee, thank you for the opportunity to
submit this testimony for the record.
My name is Richard Lovich, and I serve as the National
Legal Counsel for the American Association of Healthcare
Administrative Management, known as AAHAM, which is a national
organization actively representing the interests of healthcare
administrative management professionals through a comprehensive
program of legislative and regulatory monitoring and
participation in many industry groups. I appreciate your
holding this hearing today on these important issues.
As you know, the FCC last July ruled on more than 20
petitions seeking clarifications to the Telephone Consumer
Protection Act and the FCC's TCPA rules. AAHAM was one of the
petitioners and saw the clarification of what prior express
consent means in the healthcare context, as well as a partial
exemption from the Act to facilitate important healthcare-
related calls. The FCC's ruling did not clarify consent and
exempted only certain types of calls made by healthcare
providers. These calls cannot be financial in nature.
Because of the ambiguity of the term ``prior express
consent'' and whether related entities are protected, many
well-intended healthcare organizations have been sued, and TCPA
litigation continues to skyrocket.
To be clear, healthcare providers cannot do their jobs
effectively, efficiently, or cost-effect--in a cost-effective
manner without using appropriate technology. The TCPA inhibits
the use of such technology, and, as a result, drives the cost
of healthcare higher.
The TCPA was intended primarily to protect consumers from
receiving unsolicited telemarketing calls in their homes at all
hours of the day and night by restricting the use of
autodialers and through requiring consent to be called. Mr.
Chairman, AAHAM fully supports the goal and mission of the TCPA
in helping to reduce unsolicited telemarketing calls. The
complaints that have been mentioned here today typically are
not involving healthcare providers.
Despite its positive intent, 25 years since its passage,
the TCPA has become severely outdated. It prevents Americans
from receiving non-marketing service messages that they want,
including healthcare appointment reminders, insurance coverage
eligibility issues, Social Security disability eligibility and
payment options, credit-card fraud alerts, notifications of
travel changes, package delivery information, and many more.
Further, it prevents them from receiving these communications
on the devices that they prefer; specifically, their mobile
telephones.
At the time the TCPA legislation was passed, over 90
percent of U.S. households relied on their home or landline
phone. Today, the trend is away from landline phones; in fact,
nearly half of all American homes no longer maintain a
landline, relying exclusively on wireless or cell technology.
Since the enactment of the TCPA, the use of text messaging has
exploded. In 2012, more than 2.19 trillion text messages were
sent and received. This could not be anticipated when the TCPA
was first enacted.
To make matters worse, new laws and regulations have been
passed that make compliance with the TCPA even more difficult.
Two examples are the Affordable Care Act and the new IRS
regulations dealing with charitable hospitals.
The ACA requires hospitals and outpatient clinics to
perform post-discharge follow up with patients to reduce the
rate of readmission, which is a big contributor to the cost of
healthcare. We know the reminders, surveys, and education that
have proven to lower readmission rates can be successfully and
cost-effectively conducted by phone. However, this cannot be
economically done under the current TCPA.
Similarly, the IRS's 501(r) regulations create another
unfunded Federal mandate. These regulations require hospitals
to make reasonable efforts to determine whether an individual
is eligible for financial assistance with regard to their
hospital bills. Again, the TCPA prohibits the use of the most
efficient manner in which to do this.
By requiring the use of more labor-intensive methods to
comply with the regulations, the FCC's TCPA decisions have
added unnecessary expense, diverting resources that could
otherwise be dedicated to patient care.
In today's technologically burgeoning society, it makes no
sense for the FCC to allow technology to be used to contact
consumers via their landline phone but not their cell phones.
Today, the FCC is looking at the modernization of the TCPA in
the wrong way. The FCC should be looking at balancing the needs
of consumers to obtain healthcare and other information quickly
and efficiently through their mobile devices, and also be
protected by the strong anti-telemarketing rules that already
exist. We urge Congress to modernize the TCPA to allow
automated dialing technology to be used to text or call mobile
phones as long as these texts or calls are not for
telemarketing purposes.
Mr. Chairman and Ranking Member Nelson, modernization of
the TCPA in the healthcare arena is not a partisan issue, nor
should it be. This issue simply points out the need for
government regulations to keep pace with the needs of today's
consumers and businesses. This is about government working to
bring healthcare costs down for consumers, not drive them up by
continuing to require adherence to outdated rules and
regulations.
The current TCPA invites opportunistic parties to pressure
caregivers for huge payouts. Lawsuits, even unsuccessful ones,
require extraordinary time, cost, and effort to defend, and,
thus, rob hospitals of the ability to fulfill their mission,
which is delivering quality healthcare at a reasonable cost.
Thank you for this opportunity. And if you or your staff
have any questions, please feel free to contact me. I would
love to work with the Committee on real solutions to this very
important issue.
[The prepared statement of Mr. Lovich follows:]
Prepared Statement of Richard Lovich, National Legal Counsel,
American Association of Healthcare Administrative Management
Chairman Thune, Ranking Member Nelson, and members of the
Committee, thank you for the opportunity to submit this testimony for
the record.
My name is Richard Lovich and I serve as National Legal Counsel for
the American Association of Healthcare Administrative Management
(AAHAM), which is the national organization actively representing the
interests of healthcare administrative management professionals through
a comprehensive program of legislative and regulatory monitoring and
its participation in industry groups such as ANSI, DISA, WEDI and NUBC.
AAHAM is a major force in shaping the future of healthcare
administrative management.
I appreciate your holding this hearing today. As you know, the
Federal Communications Commission recently ruled on over 22 petitions
seeking changes to the current rules governing the Telephone Consumer
Protection Act (TCPA). AAHAM was one of those groups that submitted a
petition seeking clarification of how the FCC defines consent. Consent
by definition may seem like something simple to answer, but we have
found that consent does not mean the same thing to so many people and
thus has caused our members to be sued over this issue. Healthcare
providers cannot do their job effectively, efficiently, or in a cost
effective manner without using technology today.
The TCPA was signed into law in 1991 and already is out of date,
yet, the FCC seems unwilling to consider real modernization. Technology
has advanced so rapidly since 1991 and continues to develop at a pace
the government cannot keep up with, yet agencies like the FCC, are
unwilling to keep pace with these changes.
The TCPA was designed to protect consumers from receiving
unsolicited telemarketing calls in their homes at all hours of the day
and night. To prevent these intrusive calls, Congress restricted the
use of ``automatic telephone dialing systems,'' broadly limited the use
of pre-recorded voice messages and prohibited outreach to mobile phones
without ``prior express consent'' from the call recipient. Mr.
Chairman, AAHAM supports that goal and mission of the TCPA. Nothing we
or others have proposed would change that.
Twenty three years since its passage, the TCPA has become outdated.
It restricts Americans from receiving customer service messages they
want--including healthcare appointment reminders, credit card fraud
alerts, notifications of travel changes, power outage restoration, UPS
delivery information and more. Further, it prevents them from receiving
these communications on the device they prefer, their mobile phones.
At the time the TCPA legislation was passed, over 90 percent
of U.S. households relied on their home or landline phone. Only
3 percent of Americans had a mobile phone, they were truly the
province of the elite. So much has changed since then.
Today, the trend is away from landline phones, in fact
nearly 2 in 5 American homes no longer maintain a land line and
rely exclusively on wireless or cell technology.
Since the enactment of the TCPA, a new form of
communication, text messaging, has emerged. In 2012, more than
2.19 trillion text messages were sent and received. In 1991,
legislators had no way of predicting the growth of the mobile
market or the rapid adoption of text messaging as a critical
form of communication.
To make matters worse, new laws and regulations have been passed
that make compliance with the TCPA even more difficult. The Affordable
Care Act (ACA) as well as new IRS regulations dealing with charitable
hospitals, place unfunded mandates on hospital providers the
fulfillment of which is made difficult if not impossible by the current
language and interpretation of the TCPA.
The ACA was passed in 2011, requires hospitals and outpatient
clinics to perform post-discharge follow-up with patients to reduce the
rate of readmission, a big contributor to the cost of healthcare. We
know the reminders, surveys, and education that have proven to lower
readmission rates, can be successfully and cost effectively conducted
by phone.
However, under the TCPA, these calls place the hospital at high-
risk of violating the statute and facing penalties and defense fees and
costs where the patient's primary contact number is a mobile number and
the patient didn't expressly provide the mobile phone number for that
purpose. The FCC's recent ruling helps by making some slight changes to
the TCPA for healthcare related calls, but it just touches the surface
and does not get to the root of the problem.
The IRS's 501(r) regulations create another Federal Government
unfunded mandate. These regulations require hospitals to call patients
and orally inform them they may be eligible for financial assistance. A
laudable endeavor and one hospitals are fully in favor of conducting.
However, this is a process that could be more effectively, efficiently,
and economically performed through the use of technology. The chilling
effect of the ambiguity of the TCPA has required hospitals to refrain
from the use of auto dialers and contacting patients through the use of
mobile technology. By requiring the use of more labor intensive methods
to comply with the regulations, the TCPA adds unnecessary expense which
requires diverting resources that could otherwise be dedicated to
patient care.
President Obama has proposed ``clarifying that the use of automatic
dialing systems and pre-recorded messages is allowed when contacting
wireless phones in the collection of debt owed to or granted by the
United States. In this time of fiscal constraint, the Administration
believes that the Federal Government should ensure that all debt owed
to the United States is collected as quickly and efficiently as
possible and this provision could result in millions of defaulted debt
being collected . . .''
The practical impact on the care provider community is devastating.
It is a significant financial strain on a hospital or any size, let
alone a physician's office to try and determine if the phone number a
patient left is a cell number or landline number. Then is it is a
wireless number, determining if the provision of the number constituted
express consent to call them and for what purpose? In addition, when
can a hospital vendor rely upon the level of consent provided to the
hospital to gauge if their work on behalf of the hospital is protected
at least to the limited extent that the hospital is protected.
The bottom line is that healthcare providers must be able to
effectively, efficiently, and economically communicate with their
patients. The TCPA robs our community of this fundamental aspect of the
careprovider-patient relationship by imposing outdated and artificial
restraints on effective communication. In addition, the TCPA prevents
providers from fulfilling statutory and regulatory mandates in an
effective and efficient manner, all at the expense of greater patient
care.
Those in the healthcare sector aren't looking to inundate consumers
with telemarketing calls. The great majority of the communication with
patients is care related and mandated by Federal statute or regulation.
Any government mandate in and of itself should provide a safeguard
against unwarranted lawsuits against hospitals for fulfillment of the
essence of the caregiver-patient relationship and to make calls they
are required by law to make.
In today's technologically burgeoning society, it makes no sense
for the FCC to allow technology to be used to contact consumers via
their landline phone, but not their cell phones. Almost 40 percent of
homes today rely on their cell phones as the primary means of
communication. This number is expected to continue to rise. With this
the trend, the FCC is missing a golden opportunity to truly modernize
the TCPA in a way that will have beneficial impacts on industry, while
also safeguarding the protections consumers want.
Today the FCC is looking at the modernization the TCPA the wrong
way. The FCC should be looking at meeting two mutually achievable
goals-balancing the needs of consumers for obtaining healthcare and
other information quickly and efficiently through their mobile devices,
with maintaining the strong anti-telemarketing rules that already
exist.
This is not a challenging endeavor. AAHAM has met with key members
of the FCC several times and the message has been the same. AAHAM has
explained in great detail what healthcare calls are and what, in the
healthcare industry, would be considered (and prohibited) healthcare
telemarketing calls. Yet, still getting the needed changes has been
challenging.
We urge Congress to immediately modernize the TCPA to allow
automated dialing technology to be used to text or call mobile phones,
as long as these texts or calls are NOT for telemarketing purposes.
These changes are critical to the future of care giver-patient
communication.
Mr. Chairman and Ranking Member Nelson this is not a partisan
issue, nor should it be. This is a simple issue of the need for
government regulations to keep pace with the needs of today's consumers
and businesses. This is an issue about government working to bring
healthcare costs down for consumers, not drive them up by continuing to
rely on outdated rules and regulations.
The TCPA is outdated and needs to be modernized immediately. The
FCC's recent decision was disappointing and troubling for us in the
healthcare industry. AAHAM's petition was very modest and simply asked
for clarification on the definition of consent. The ruling did not
effectively end this inquiry. This means that the care giver community,
those upon which we all rely to provide effective healthcare to us,
will continue to be subjected to costly lawsuits draining resources
that would otherwise go to patient care.
Thank you for this opportunity and if you or your staff have any
questions, please feel free to contact me. I would love to work with
the Committee on real solutions to this very important issue.
The Chairman. Thank you, Mr. Lovich.
Ms. Desai.
STATEMENT OF MONICA S. DESAI, PARTNER,
SQUIRE PATTON BOGGS
Ms. Desai. Good morning, Chairman Thune, Ranking Member
Nelson, and members of the Committee. Thank you very much for
the opportunity to address the effects of the TCPA on consumers
and on businesses.
My name is Monica Desai. I'm a Partner at Square Patton
Boggs. I'm testifying today in my own individual capacity and
not on behalf of any specific client.
Before joining Squire Patton Boggs, I spent over a decade
in senior positions at the Federal Communications Commission,
including service as Chief of the Consumer and Governmental
Affairs Bureau, which is the bureau that oversees
implementation of the TCPA policies and rules.
In private practice, I work with a wide range of clients in
a--in various industry sectors on TCPA compliance. They all
share one very serious dilemma: how to manage TCPA risk in an
environment where the normal, expected, or desired way to
communicate is by calling a cell phone or sending a text, and
where regulators and industry standard require certain out-
bound communications via a call or a text, but where every
single call to a cell phone or every single text carries with
it the potential risk of ruinous damages.
When Congress implemented the TCPA, it struck a careful
balance in protecting consumers from abusive calls that made
them feel frightened and harassed, protecting public safety
entities and businesses from the jammed phone lines caused by
specialized dialing equipment that automatically generated and
dialed thousands of random or sequential numbers, and
protecting normal, expected, or desired communications.
Today, there are no longer any safeguards protecting
callers from TCPA liability for normal communications. It
doesn't matter if you're a national bank, a local blood bank,
or tire banks. You may have obtained prior express consent, but
you will never know for certain before you make a call whether
that number has been reassigned.
The FCC created a safe harbor, but that safe harbor doesn't
work. The safe harbor doesn't apply after one single reassigned
call, whether or not there's any actual knowledge of a
reassignment. You may be using modern technology that does not
use, or even have, a random or sequential number generator,
but, according to the FCC, you're still using an automatic
telephone dialing system if your equipment has something more
than the theoretical potential to be modified at some
hypothetical point in the future to become an ATDS. No one
knows what this means. This is not workable and not what
Congress intended.
As a result, beneficial consumer communications are
chilled, compliance-minded entities are put into a Catch 22.
Consumers trying to manage default and companies trying to
engage in financial education are punished.
First, many types of important and beneficial consumer
communications trigger TCPA risk in the current environment,
including communications from utilities to warn of service
outages, mobile health programs, such as Text for Baby, schools
to provide attendance notifications, nonprofits to ask for cans
to restock food banks, credit unions to provide low-balance
alerts, political candidates to provide information regarding
townhalls and election information. The list goes on and on and
on.
Second, while the environment surrounding communications
has become increasingly punitive, other regulatory agencies are
increasingly encouraging, and even requiring, contact through
phone calls and texts. Companies are diverting resources from
core business functions and taking inefficient steps to
mitigate TCPA risk. For example, companies are replacing modern
technologies, which have many consumer benefits, with low-tech
systems and fat-finger dialing, although this creates a higher
risk of wrong-number calls. Larger companies with more
resources are paying for multiple databases without any
assurance of additional accuracy. Small businesses often can't
afford to do so. Companies are requiring consumers to provide
notice of any phone number change, and subjecting them to
lawsuits for failure to do so.
Finally, I want to emphasize that not getting a call
doesn't mean that a debt will go away. What a call is likely to
do, if a person is reached, is educate the consumer about
available repayment options and potentially avoid negative
consequences, such as the shutting off of a service, a bad
credit report, foreclosure, or other legal remedy. The
Department of Education stated that, when servicers are able to
contact a borrower, they have a much better chance at helping
the borrower resolve the delinquency or the default.
In conclusion, I very much appreciate that the Commerce
Committee wants to understand how the TCPA is impacting
consumers and businesses today. I have three recommendations
for restoring the balance that Congress worked so hard to
achieve.
First, I would--I would ask Congress to support the
creation of a reassigned numbers database and allow a safe
harbor for any caller who checks against the database to
confirm that a number has not been reassigned.
A second quicker step would be for Congress to confirm
that, when it created a statutory defense for prior express
consent of the called party, it did not intend for that defense
to be meaningless.
Third, Congress should confirm that, when it precisely
defined an automatic telephone dialing system, it did not
intend to broadly sweep into that definition any and every
modern dialing technology.
Congress did not intend for the TCPA to serve as a
litigation trap, with callers being put at untenable risk for
normal, expected, or desired communications and with consumers
ultimately suffering the consequences.
Thank you, and I look forward to your questions.
[The prepared statement of Ms. Desai follows:]
Prepared Statement of Monica S. Desai, Partner, Squire Patton Boggs
Good morning Chairman Thune, Ranking Member Nelson, and Members of
the Committee. Thank you for the opportunity to speak to the Committee
today to address the effects of the Telephone Consumer Protection Act
(TCPA)\1\ on consumers and business. My name is Monica Desai, and I am
a partner at the law firm of Squire Patton Boggs. I am testifying today
in my individual capacity, and not on behalf of any specific client.
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\1\ 47 U.S.C. Sec. 227; see also 47 C.F.R. Sec. 64.1200.
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When the TCPA was enacted 25 years ago, it was a welcome shield to
protect consumers from abusive calls that made them feel frightened and
harassed, and to protect essential public safety services and
businesses from the jammed phone lines caused by specialized dialing
equipment that automatically generated and dialed thousands of random
or sequential numbers.\2\ Over time, the TCPA has been transformed into
a sword for harassing and abusive lawsuits, with astonishingly
disproportionate settlements for cases with little to no actual harm.
Consumers and business, as well as governmental entities, suffer from
the lack of common sense application of the statutory language to
modern technology and the failure to take into account how consumers
and businesses communicate today. The careful balance that Congress
struck between protecting consumers and safeguarding beneficial calling
practices has all but been eliminated. The resulting state of disarray
is not without significant cost. I will focus my testimony on three
direct results of unchecked abusive litigation under the TCPA:
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\2\ See H.R. Rep. 102-317 (Nov. 15, 1991); Rules and Regulations
Implementing the Telephone Consumer Protection Act of 1991, CG Docket
No. 02-278, Report and Order, FCC 03-153 (July 3, 2003).
---------------------------------------------------------------------------
(1) detrimental impact to beneficial consumer communications,
(2) detrimental impact to businesses, non-profits and government
entities engaging in normal, expected or desired
communications, and
(3) detrimental impact to consumers trying to manage default and
keep current on their payments.
Background
Before joining Squire Patton Boggs, I spent over a decade in senior
positions at the Federal Communications Commission (FCC) under both
Republican and Democratic administrations, including service as Chief
of the Consumer and Governmental Affairs Bureau at the FCC, the Bureau
that oversees implementation of TCPA policy and rules.
Since leaving the FCC in 2010, I have advised a broad range of
clients in a wide variety of industries on TCPA compliance, including
those in the retail, financial services, debt collection, insurance,
energy, education, technology, and communications sectors. They all
share one very serious dilemma: how to manage TCPA risk in an
environment where the normal, expected or desired way to communicate is
by calling a cell phone or sending a text, and where regulators and
industry standards require certain outbound communications via call or
text, but where every single call to a cell phone or every single text
carries with it the risk of tens of millions to hundreds of millions in
damages. While the plaintiffs bar advertises apps designed to entrap
legitimate businesses with slogans such as ``Laugh all the Way to the
Bank,'' \3\ such exposure is no joke for compliance-minded companies
and organizations, and is ultimately harmful for consumers. This could
not have been what Congress intended.
---------------------------------------------------------------------------
\3\ See U.S. Chamber of Commerce et al. Notice of Ex Parte, CG
Docket No. 02-278, at 4 (Sep. 24, 2014).
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The TCPA--Trigger Points for Litigation
The TCPA generally prohibits calls made to a cell phone using an
``automatic telephone dialing system'' (or ``ATDS''), or artificial or
prerecorded voice, without the prior express consent of the called
party.\4\ The FCC has since ruled that if such calls deliver a
telemarketing message, they require a very specific form of ``prior
express written consent.'' \5\ The FCC has also determined that a text
message counts as a ``call'' under the TCPA.\6\ Two of the largest
areas of controversy triggering TCPA litigation involve whether an ATDS
was used in a particular communication, and what happens when a caller
calls a number that has been provided, but the number has been
subsequently reassigned to another person without the knowledge of the
caller.
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\4\ 47 U.S.C. Sec. 227(b)(1)(A); 47 C.F.R. Sec. 64.1200(a)(1).
\5\ 47 C.F.R. Sec. 64.1200(a)(2); Rules and Regulations
Implementing the Telephone Consumer Protection Act of 1991, CG Docket
No. 02-278, Report and Order, FCC 12-21, 20 (Feb. 15, 2012).
\6\ Rules and Regulations Implementing the Telephone Consumer
Protection Act of 1991, CG Docket No. 02-278, Report and Order, FCC 03-
153, 165 (July 3, 2003).
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What is an ATDS? Congress provided that statutory liability for a
call to a cell phone is not triggered unless a calling party uses an
ATDS, or unless a caller uses an artificial or prerecorded voice. An
ATDS is ``equipment which has the capacity . . . to store or produce
telephone numbers to be called, using a random or sequential number
generator; and . . . to dial such numbers.'' \7\ Whether or not
particular dialing equipment is an ATDS has been a contentious issue in
litigation. The definition turns in part on the ``capacity'' of that
equipment. The term ``capacity'' is not defined in the statute--and
many plaintiffs have taken the position that ``capacity'' means future,
hypothetical ability to perform the requisite statutory functions--and
not the present ability. Last year, despite numerous court cases to the
contrary,\8\ the FCC agreed with the plaintiffs bar and found that
``capacity'' means ``potential ability.'' \9\ Whether or not equipment
uses or even has the statutorily required ``random or sequential number
generator'' makes no difference under the FCC's interpretation.
According to the FCC, if there is ``more than a theoretical potential
that the equipment could be modified'' to meet the statutory definition
of ATDS, then it is an ATDS.\10\ Or, in other words, the statutory
definition does not matter. If the phone or dialing equipment used to
make a call or send a text can ``theoretically'' become an ATDS in the
future, the calling party is liable as if using an ATDS now, statute
notwithstanding. The only equipment that the FCC confirms does not fall
under this sweeping interpretation is a ``rotary-dial phone.'' \11\
Indeed, the FCC even refused to rule out the possibility that a
smartphone now qualifies as an ATDS.\12\
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\7\ 47 U.S.C. Sec. 227(a)(1).
\8\ See, e.g., Hunt v. 21st Mortg. Corp., 2013 U.S. Dist LEXIS
132574, at *11 (N.D. Ala. 2013); Gragg v. Orange Cab Co., 995 F. Supp.
2d 1189, 1193 (W.D. Wash. 2014).
\9\ Rules and Regulations Implementing the Telephone Consumer
Protection Act of 1991 et al., CG Docket No. 02-278 et al., Declaratory
Ruling, FCC 15-72, 19 (July 10, 2015) (``2015 TCPA Order'').
\10\ 2015 TCPA Order 18.
\11\ 2015 TCPA Order 18.
\12\ ACA International et al. v. FCC et al., No. 15-1211, Brief for
Respondents, at 34-36 (filed Jan. 15, 2016); see also ACA International
et al. v. FCC et al., No. 15-1211, Brief for Petitioners ACA
International et al., at 2, 13, 15, 24-25, 30-31 (filed Nov. 25, 2015);
2015 TCPA Order 21.
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Reassigned Numbers: Who is the ``Called Party''? Congress created a
statutory defense to the TCPA--calls and messages made to cell phones
with the ``prior express consent of the called party'' are exempt from
liability.\13\ ``Called party'' is not defined under the statute.
Callers have commonly been sued when they obtain the requisite consent
but the number is then reassigned to a new person unbeknownst to the
caller.\14\ The FCC acknowledged that there is no comprehensive
database of reassigned numbers, and many carriers do not participate in
any database at all.\15\ Yet the FCC ruled strict liability under the
TCPA is triggered if a caller calls or texts a number that the caller
had consent to contact, even if the number was subsequently reassigned
to a new subscriber without the knowledge of the caller (and without
any practical way for the caller to find out in advance). The FCC
created a ``one call safe harbor'' but the safe harbor stops applying
literally after ``one'' call--whether or not there is any actual
knowledge of a reassignment,\16\ including, for example, if the caller
is greeted with a machine voice-mail message. There is no explanation
of how the ``safe harbor'' would work in the text context. This
interpretation of ``called party,'' combined with the unworkable ``safe
harbor,'' eviscerates the statutory defense for ``prior express
consent'' provided by Congress.
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\13\ 47 U.S.C. Sec. 227(b)(1)(A); 47 C.F.R. Sec. 64.1200(a)(1).
\14\ By one estimate, almost 37 million phone numbers are recycled
each year. Alyssa Abkowitz, Wrong Number? Blame Companies' Recycling,
The Wall Street Journal (Dec. 1, 2011), available at http://
www.wsj.com/articles/SB10001424052970204012004577070122687462582.
\15\ 2015 TCPA Order 85 (``The record indicates that tools help
callers determine whether a number has been reassigned, but that they
will not in every case identify numbers that have been reassigned. Even
where the caller is taking ongoing steps reasonably designed to
discover reassignments and to cease calls, we recognize that these
steps may not solve the problem in its entirety.'') See also Comments
of Twitter, Inc., CG Docket No. 02-278, at 9 (Apr. 23, 2015) (stating
that ``Twitter obtains information about deactivated numbers from those
wireless carriers willing to supply it, and then uses privately
purchased data to assess whether the number was reassigned'').
\16\ 2015 TCPA Order 90.
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These interpretations leave callers in an impossible situation--(1)
they cannot rely on the statutory definition of an ATDS, because the
FCC has determined that the definition applies so long as there is the
``theoretical potential'' that their dialing equipment ``could be
modified'' to become an ATDS in the future; and (2) they cannot rely on
consent (as Congress intended) because of the lack of any reliable way
to determine if a number has been reassigned, and the uselessness of
the ``one call safe harbor.''
Combine this impossible situation with a private right of action
for violations, strict liability statutory damages of $500 per call or
text (and up to $1,500 for each ``willful'' or ``knowing''
violation),\17\ and the result is liability exposure in a single class
action lawsuit quickly reaching tens of millions to hundreds of
millions of dollars or higher.
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\17\ 47 U.S.C. Sec. 227(b)(3).
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(1) Detrimental Impact to Beneficial Consumer Communications
I first became aware of abusive TCPA litigation in 2012, when
SoundBite Communications, Inc., located in Bedford, Massachusetts,
approached me after it had been targeted with a multi-million dollar
TCPA class action lawsuit. The purported violation? Sending an
immediate, one-time confirmation reply message whenever a customer sent
a request to stop receiving future text messages. In sending the
confirmation message, SoundBite was adhering to consumer best
practices, and acting consistent with wireless industry requirements to
send such a confirmation. I learned that SoundBite was not alone--at
the time, many other companies, including Redbox, American Express,
Barclays Bank, Citibank, Taco Bell, NASCAR, the NFL, and GameStop, were
all being targeted with multi-million dollar class action lawsuits
based on these one-time confirmations. Due to the lawsuit, SoundBite,
then a publicly traded company with approximately 150 employees, was
threatened with going into bankruptcy because of the potential risk of
TCPA exposure. We petitioned the FCC to provide relief on this
issue.\18\ Then-Senator John Kerry and Senator Scott Brown asked the
FCC to take into consideration that sending a confirmation in response
to a request to cease future text messages ``is not harmful to
consumers, it is useful.'' \19\ We were grateful the FCC recognized the
usefulness of such messages to consumers and found them to be
consistent with consumer expectations when it granted our petition and
declared a simple confirmation of an opt-out did not violate the
TCPA.\20\
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\18\ SoundBite Communications, Inc. Petition for Declaratory
Ruling, CG Docket No. 02-278 (Feb. 16, 2012).
\19\ Letter from Senators John F. Kerry and Scott P. Brown to
Chairman Julius Genachowski, Federal Communications Commission (Apr.
13, 2012); SoundBite Communications, Inc. Notice of Ex Parte, CG Docket
No. CG 02-278, at 2 n. 4 (June 29, 2012).
\20\ See Rules and Regulations Implementing the Telephone Consumer
Protection Act of 1991; SoundBite Communications, Inc. Petition for
Expedited Declaratory Ruling, CG Docket No. 02-278, Declaratory Ruling,
FCC 12-143, 8 (Nov. 29, 2012).
---------------------------------------------------------------------------
Similarly, the Retail Industry Leaders Association (RILA) explained
to the FCC that while it has become increasingly common for smartphone-
equipped consumers to expect and demand concierge-like, personalized
experiences from retailers, the fear of TCPA litigation threatened one
particularly popular emerging service--``on demand'' texts.\21\ In that
context, a consumer sees a display advertisement (e.g., a store display
ad to text ``offer to 12-345 for 20 percent off your next purchase'').
If interested, the consumer texts the word ``offer'' to 12-345, and
receives a near instant response text containing the desired offer. We
were again grateful that the FCC recognized that this type of
convenient and efficient communication--that consumers were proactively
requesting--should not subject a retailer to frivolous class action
lawsuits.\22\
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\21\ Retail Industry Leaders Association Petition for Declaratory
Ruling, CG Docket No. 02-278 (Dec. 30, 2013); Comments of RILA, CG
Docket No. 02-278, at 2 (Feb. 21, 2014).
\22\ 2015 TCPA Order 103-06 (the FCC ``agree[d] with
commenters'' that ``consumers welcome'' such text messages).
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However, there are many, many other types of communications that
are also useful to consumers, or that are otherwise normal, expected or
desired, that are already the subject of TCPA class action litigation
or create risk for TCPA liability--with potentially ruinous results for
the entities sending the text messages or making the calls. For
example:
Utilities are at risk: Calls or texts to warn about planned
or unplanned service outages, provide updates about outages or
service restoration, ask for confirmation of service
restoration or information about the lack of service, provide
notification of meter work, tree-trimming, or other field work,
verify eligibility for special rates or services, such as
medical, disability, or low-income rates, programs and
services, warn about payment or other problems that threaten
service curtailment, and provide reminders about time-of-use
pricing and other demand/response events, are all threatened by
TCPA litigation.\23\
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\23\ Edison Electric Institute and the American Gas Association
Petition for Expedited Declaratory Ruling, CG Docket No. 02-278, at 3
(Feb. 12, 2015) (``EEI/AGA Petition''). The EEI/AGA Petition explains
that one EEI member company was sued under the TCPA after it sent a
text message to its customers that had previously provided a wireless
telephone number to the company notifying them of a new text program
designed ``to inform customers of power outages by text message, and to
allow customers to report an outage to the utility by text message.''
Id. at 10; see also Grant v. Commonwealth Edison, No. 1:13-cv-08310
(N.D. Ill.).
Mobile health programs are at risk: The U.S. Department of
Health and Human Services has touted mobile health programs as
``an opportunity to improve health knowledge, behaviors, and
clinical outcomes, particularly among hard-to-reach
populations'' through text programs, including, for example, to
influence behavior changes to improve short-term smoking
cessation outcomes as well as short-term diabetes management
and clinical outcomes.\24\ Federal agency policies encourage
aggressive use of such programs and use text messaging and ATDS
calls, but TCPA lawsuits stifle such programs. Anthem points
out that federally supported text messaging initiatives are all
at risk, including Text4baby, which provides information and
referral times keyed to the prenatal stage or age and
developmental stage of the child; QuitNowTXT, which delivers
day-specific quit messages to persons in the process of smoking
cessation; and Health Alerts On-the-Go, which provides the
Centers for Disease Control and Prevention's health
information, including seasonal flu and public health
emergencies.\25\
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\24\ Anthem Petition for Declaratory Ruling and Exemption Regarding
Non-Telemarketing Healthcare Calls, CG Docket No. 02-278, at 4-5 (June
10, 2015) (``Anthem Petition''); see also U.S. Dep't of Health & Human
Services, Using Health Text Messages to Improve Consumer Health
Knowledge, Behaviors, and Outcomes: An Environmental Scan, at 1 (May
2014), available at Khttp://www.hrsa.gov/healthit/txt4tots/
environmentalscan.pdf.
\25\ Anthem Petition at 5-8 (noting the societal benefits of these
communications).
Important school communications are threatened by TCPA
litigation: Attendance messages alerting parents that a child
did not arrive at school as expected; alerts regarding
emergency situations (weather, facilities issue, fire, health
risk, threat situation); outreach messages providing
information regarding school activities (teacher conferences,
back-to-school night); and survey messages, which allow
recipients to RSVP to events or provide input on an important
issue using a telephone keypad, are all at risk.\26\
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\26\ Blackboard, Inc. Petition for Declaratory Ruling, CG Docket
No. 02-278, at 8 (Feb. 24, 2016).
Nonprofits are equally impacted: The National Council of
Nonprofits has noted that nonprofits--including entities like
American Red Cross, Salvation Army, United Ways, food banks,
emergency shelters, food pantries and soup kitchens--call and
send text messages for a wide variety of reasons, including to
provide event updates, schedule changes, and important safety
information, and to provide patients and clients with reminders
of appointments, and other helpful notifications that people
generally want.\27\ These communications are subject to TCPA
risk.
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\27\ Comments of National Council of Nonprofits, CG Docket No. 02-
278, at 2-3 (Sept. 24, 2014).
Financial institutions are constrained in their ability to
deliver time-sensitive and valued financial communications:
Fraud and identity theft alerts, out-of-pattern activity
notices, data breach information, fund transfer confirmations,
responses to service inquiries, FEMA disaster related financial
relief and service options, fee avoidance and low balance
notifications, due date reminders, notifications to prevent
lapses in insurance coverage, account closure and other
milestone notice, and loan repayment counseling, are all at
risk.\28\
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\28\ The FCC recognized that financial institutions must be able to
contact consumers to quickly alert them to fraud, a data breach,
related remediation, and money transfers. 2015 TCPA Order 125, 127-
39. Although the FCC provided an exemption for such communications, the
conditions it imposed in connection with the exemption made the
exemption virtually unusable. See American Bankers Association Petition
for Reconsideration, CG Docket No. 02-278 et al. (Aug. 8, 2015).
Political discourse and communications that provide
important information about issues of public concern, including
``tele-town hall'' discussions,\29\ the voting process, and
other election information.\30\
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\29\ See Marco Trujillo, Lawmakers could be violating robocall
restrictions, The Hill (July 28, 2015); Federal Communications
Commission, FAQs--Tele-Town Halls (July 31, 2015), available at https:/
/www.fcc.gov/document/faqs-tele-town-hall-robocalls.
\30\ The American Association of Political Consultants, The
Democratic Party of Oregon, Public Policy Polling, Tea Party Forward
PAC, and Washington State Democratic Central Committee have filed a
lawsuit alleging that the ban on certain calls to cell phones under the
TCPA is an unconstitutional violation of their First Amendment rights
because it is content based and cannot withstand strict scrutiny.
American Association of Political Consultants, Inc. et al. v. Loretta
Lynch, Case No. 5:16-cv-00252-D, Complaint (May 12, 2016); see also
Shamblin v. Obama for America et al., 2015 U.S. Dist. LEXIS 54849 (M.D.
Fla. Apr. 27, 2015) (complaint alleged violations of TCPA based on
prerecorded calls explaining how to vote by mail, and calls encouraging
early voting, instructions to bring a driver's license to vote, and
voting locations; case decided on class certification issue without
discussion of TCPA claims).
Shopping and retail notifications requested by consumers:
Threatened communications include those that inform a consumer
that an online purchase is available or has been delivered or
offers and discount information that a consumer signs up for
and expects to receive.\31\
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\31\ ACA International et al. v. FCC et al., No. 15-1211, Brief of
Retail Litigation Center, Inc., National Retail Federation, and
National Restaurant Association as Amici Curiae in Support of
Petitioners, at 9-10 (D.C. Cir. filed Dec. 2, 2015).
Social media notifications that consumers expect and
desire.\32\
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\32\ See, e.g., Comments of Twitter, Inc., CG Docket No. 02-278, at
3 (Apr. 22, 2015) (Twitter allows users to choose to ``have Tweets sent
to their cell phones as text messages'' by inputting their phone
numbers and providing express consent, but because telephone numbers
are reassigned so frequently and due to the ``hyper-litigious [TCPA]
environment, innovative companies increasingly must choose between
denying consumers information that they have requested or being
targeted by TCPA plaintiffs' attorneys filing shake-down suits.'').
Food safety notices have been the subject of TCPA
litigation.\33\
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\33\ Rubio's Restaurant, Inc. Petition for Declaratory Ruling, CG
Docket No. 02-278, at 1-3 (Aug. 11, 2014) (In order to ``promptly
respond to health and safety issues affecting the over 190 of Rubio's
restaurant locations,'' Rubio's provides a ``Remote Messaging'' service
that contacts only telephone numbers of Rubio's ``Quality Assistance''
staff. The Remote Messaging service is used ``exclusively to report
food safety-related issues, including, but not limited to, alleged
foodborne illnesses, alleged foreign objects found in food, or
suspicions of a team member having a disease transmittable through
food.'' Rubio's was sued under the TCPA when a Remote Messaging alert
was ``sent to a cellphone number previously assigned to a Rubio's
[Quality Assistance] Staff member who subsequently lost his phone,''
after which the number was reassigned without Rubio's knowledge.).
A confluence of factors have fueled this fire of TCPA litigation:
(1) increasing reliance on cell phones as the primary or only means of
communications;\34\ (2) increasing requirements by regulatory agencies
to make specific outbound communications;\35\ (3) industry guidelines
requiring certain outbound communications in order to send messages
through text channels;\36\ and (4) the fact that there is no reliable
way to determine if a number has been reassigned.\37\ Combine these
factors with high strict liability damages, no limits on total damages,
and very low barriers to filing even the most frivolous of lawsuits,
and the reasons for skyrocketing class action litigation in this area
are clear.
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\34\ The Center for Disease Control's December 2015 Wireless
Substitution Report estimates wireless use during the first half of
2015, finding: (1) as of June 2015, 71.3 percent of young adults (ages
25-29) lived in wireless only households. Also, 67.8 percent of adults
aged 30-34 lived in wireless-only households, and the percentage of
adults living with only wireless telephones decreased as age increased
beyond 35 years--56.6 percent for those 35-44; 40.8 percent for those
45-64; and 19.3 percent for those 65 and over; and (2) the rate of
wireless-only households has grown significantly over the past several
years. For example, the number of adults aged 25-29 that live in
households with only wireless telephones increased by 10 percentage
points between 2012 and 2015. The number of adults aged 35-44 that live
in wireless-only households grew by 17.5 percentage points between June
2012 and June 2015. See U.S. Dep't of Health and Human Services,
Centers for Disease Control and Prevention, Wireless Substitution:
Early Release of Estimates from the National Health Interview Survey,
January-June 2015, at 6 (Dec. 2015), available at http://www.cdc.gov/
nchs/data/nhis/earlyrelease/wireless
201512.pdf.
\35\ See, e.g., the CFPB ``Early Intervention Rule.'' 12 C.F.R.
Sec. 1024.39(a).
\36\ CTIA--The Wireless Association, CTIA Short Code Monitoring
Program Short Code Monitoring Handbook, v. 1.5.2, at 2 (Oct. 1, 2015)
(requiring that an ``opt-in confirmation message . . . must be sent to
customers always'' (emphasis retained)).
\37\ 2015 TCPA Order 85 (the FCC ``agree[d] . . . that callers
lack guaranteed methods to discover all reassignments immediately after
they occur'').
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Unfortunately, these key background factors have not only
persisted, but the situation has only become worse. In 2010, there were
354 TCPA cases filed.\38\ In 2015, there were 3,710.\39\
---------------------------------------------------------------------------
\38\ See WebRecon, LLC, Out Like a Lion . . . Debt Collection
Litigation & CFPB Complaint Statistics, Dec 2015 & Year in Review,
Consumer Litigation: 2007-2015 (2016), available at http://
webrecon.com/out-like-a-lion-debt-collection-litigation-cfpb-complaint-
statistics-dec-2015-year-in-review/.
\39\ Id.
---------------------------------------------------------------------------
(2) ``Catch-22'' for Businesses, Non-Profits and Governmental Entities
The specter of high-stakes ``bet the company'' litigation--which
can be based on a single call or a single text--and which has now been
amplified by the FCC's recent interpretations, has made it punitive for
businesses and other entities to engage in normal, expected or desired
communications by call or text.
Financial institutions in particular have often been trapped in a
``catch-22'' \40\ as a result of myriad statutory and regulatory
obligations to make outbound communications to customers, while FCC
rules penalize them for doing so. For example, the Consumer Financial
Protection Bureau's (CFPB) ``Early Intervention Rule'' requires ``live
contact'' or a good faith effort to establish live contact within 36
days after a mortgage loan becomes delinquent.\41\ The Home Affordable
Modification Program requires that an entity ``proactively solicit''
customers for inclusion--by making a minimum of four telephone calls to
the customer at different times of the day.\42\
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\40\ ``A problematic situation for which the only solution is
denied by a circumstance inherent in the problem or by a rule.''
Merriam-Webster, Catch-22 (last visited May 16, 2016), available at
http://www.merriam-webster.com/dictionary/catch%E2%80%9322.
\41\ 12 C.F.R. Sec. 1024.39(a).
\42\ Home Affordable Modification Program, Handbook for Servicers
of Non-GSE Mortgages, Making Home Affordable Program, at 46 (Dec. 2,
2010), available at https://www.hmpadmin
.com/portal/programs/docs/hamp_servicer/mhahandbook_30.pdf.
---------------------------------------------------------------------------
At the same time that financial regulators are advocating that
financial institutions communicate with borrowers and create financial
inclusion tools, the TCPA as interpreted by the FCC is stifling the
exact type of communications that would benefit consumers. For
instance, the CFPB recognized that especially for ``economically
vulnerable consumers,'' tracking transactions through mobile
technologies such as text messaging may help consumers ``achieve their
financial goals'' and can ``enhance access to safer, more affordable
products and services in ways that can improve their economic lives.''
\43\ And, CFPB Director Richard Cordray positively described the use of
text alerts to provide real time information about funds to customers
as an ``innovative approach[] to improving customer service.'' \44\
Further, just this month, the Federal Deposit Insurance Corporation
(FDIC) released a request for comment on ``Mobile Financial Services
Strategies and Participation in Economic Inclusion Demonstrations''
\45\ as a continuation of their October 2015 qualitative research that
found that text message alerts give consumers ``Access to account
information;'' ``Help[] consumers avoid fees;'' and ``Help[] monitor
accounts for fraud.'' \46\ In fact, the FDIC research concluded that
underbanked consumers may prefer texts to e-mails when receiving alerts
because texts are ``Faster,'' ``Easier to receive,'' ``Attention
grabbing,'' and ``Quicker and easier to digest.'' \47\ According to an
Underbanked Mobile Financial Services User interviewed as part of the
study, ``[t]ext-it's immediate. E-mail, you have to go in and actually
be checking your e-mail account.'' \48\
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\43\ CFPB, CFPB Mobile Financial Services: A summary of comments
from the public on opportunities, challenges, and risks for the
underserved., at 10. (Nov. 2015), available at http://
files.consumerfinance.gov/f/201511_cfpb_mobile-financial-services.pdf.
\44\ CFPB, Prepared Remarks by Richard Cordray at the CFPB
Roundtable on Overdraft Practices (Feb. 22, 2012), available at http://
www.consumerfinance.gov/about-us/newsroom/prepared-remarks-by-richard-
cordray-at-the-cfpb-roundtable-on-overdraft-practices/.
\45\ Federal Deposit Insurance Corporation, Request for Comments on
Mobile Financial Services Strategies and Participation in Economic
Inclusion Demonstrations (May 3, 2016), available at https://
www.fdic.gov/news/news/financial/2016/fil16032.pdf.
\46\ Federal Deposit Insurance Corporation, Qualitative Research
for Mobile Financial Services for Underserved Consumers, at 19 (Oct.
30, 2015), available at https://www.fdic.gov/about/comein/2015/come-in-
2015.pdf.
\47\ Id. at 21.
\48\ Id.
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But it is not just financial institutions that are caught in this
bind. The wireless industry requires sending an affirmative ``opt-in
confirmation message'' in order for companies to send text messages
associated with company programs across carrier networks.\49\ The
Federal Trade Commission has emphasized the importance of proactive
communications in connection with data breaches and is urging required
notifications.\50\ Utilities are required under some state laws to
engage in proactive communications.\51\ The Consumer Product Safety
Commission's product safety ``Recall Checklist'' recommends that
companies send ``text messages to customers'' as part of an ``effective
and comprehensive product safety recall.'' \52\
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\49\ CTIA--The Wireless Association, CTIA Short Code Monitoring
Program Short Code Monitoring Handbook, v. 1.5.2, at 2 (Oct. 1, 2015).
\50\ See Prepared Statement of Edith Ramirez, Protecting Personal
Consumer Information from Cyber Attacks and Data Breaches, Before the
Senate Committee on Commerce, Science, and Transportation, 113th Cong.,
at 2 (Mar. 26, 2014) (explaining that the ``FTC supports Federal
legislation that would strengthen existing data security standards and
require companies, in appropriate circumstances, to provide
notification to consumers when there is a security breach''), available
at https://www.ftc.gov/system/files/documents/public_statements/294091/
ramirez
_data_security_oral_statement_03-26-2014.pdf.
\51\ For example, New York requires utilities to provide
``[s]pecial notice . . . during the cold weather protection period
(November 1 to April 15) before any heat related utility service can be
shut off. The utility must notify each tenant that service will be shut
off and must also attempt to find out if a serious health or safety
program would be caused in the household by the shutoff.'' See New York
State Dep't of Public Service, Consumer Guide: The Handbook for Utility
Customers with Disabilities (Dec. 18, 2012), available at http://
www3.dps.ny.gov/W
/PSCWeb.nsf/All/1882DD3FA554D6D585257687006F395C?OpenDocument.
\52\ See Consumer Product Safety Commission, Recall Guidance,
Recall Checklist (last visited May 16, 2016), available at http://
www.cpsc.gov/en/Business--Manufacturing/Recall-Guidance/.
---------------------------------------------------------------------------
Compliance-minded companies are diverting resources from core
business functions and taking inefficient steps to avoid frivolous
lawsuits, with detrimental results for both companies and consumers:
Purposefully Adding Technology Inefficiencies--Automated
dialing technologies have many consumer benefits: they improve
the ability to honor consumer contact preferences (such as time
of day to call, specific dates to call, to what number to
call); they improve the ability to honor ``do not call''
requests; they help govern call frequency attempts (daily,
weekly, monthly); they help manage time between calls; and they
improve access to historical account information, and
information regarding financial assistance programs. Yet
despite these benefits, companies that have already spent tens
of thousands to hundreds of thousands of dollars on dialing
technologies that are not an ATDS based on the statutory
definition, are now evaluating and spending resources to add
functions such as ``self-destruct'' mechanisms that will wipe
out a calling system in the event a software update attempt is
made. Companies are making calls from the most basic, ``de-
engineered'' systems, but are still getting sued on the theory
that such a calling system could theoretically get ``plug[ged]
. . . into'' an ATDS.\53\ Companies are moving to offshore call
centers (where manual dialing is more efficient) and requiring
manual dialing on desktop phones--and still getting sued.\54\
Companies are purposefully interjecting elements of ``human
intervention'' to make calls even where that carries a risk of
wrong number calls and is less efficient.
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\53\ ACA International Notice of Ex Parte, CG Docket No. 02-278, at
3 (May 9, 2014).
\54\ See Leschinsky v. Inter-Continental Hotels Corporation et al.,
Case No. 8:15-cv-01470-JSM-MAP, Defendants Orange Lake Country Club,
Inc., and Inter-Continental Hotel Corporation's Dispositive Motion for
Summary Judgment and Incorporated Memorandum of Law, at 1-2, 5-9 (Sept.
28, 2015).
Databases--Companies that have more resources are sometimes
paying for multiple databases to check for reassigned numbers,
still without any assurance of accuracy (as many carriers do
not participate in any database at all). Smaller organizations,
and those with more limited resources such as many non-profits,
---------------------------------------------------------------------------
cannot afford to do so.
Terms and Conditions--Per the FCC's suggestion in the 2015
Order, companies are starting to add requirements to their
terms and conditions that consumers who consent to receiving
calls or texts must affirmatively provide a notification if
they have abandoned the number they have provided. The FCC
stated that ``[n]othing in the TCPA or our rules prevents
parties from creating, through a contract or other private
agreement, an obligation for the person giving consent to
notify the caller when the number has been relinquished,'' and
that ``the caller may wish to seek legal remedies for violation
of the agreement.'' \55\ It appears that the FCC is suggesting
callers sue their customers for not notifying the caller when
they change phone numbers.
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\55\ 2015 TCPA Order 86, n. 302. In his dissent from the Order,
Commissioner Pai stated that perhaps the ``most shocking'' part of the
ruling was the FCC's suggestion that ``companies . . . sue their
customers.'' 2015 TCPA Order Dissenting Statement of Commissioner Ajit
Pai at 121. Commissioner O'Rielly's dissent also noted the oddity of
the FCC's position that it is ``reasonable to have companies sue their
own customers.'' 2015 TCPA Order Statement of Commissioner Michael
O'Rielly Dissenting in Part and Approving in Part at 134 (emphasis
retained).
Reducing Communications--Companies are evaluating what
communications are absolutely necessary, and reducing consumer-
beneficial communications as described in the first section.
Indeed, many companies have chosen to stop or significantly
---------------------------------------------------------------------------
curtail elective helpful communications.
Insurance Premiums--Due to the high risk of exposure to
frivolous litigation and potentially astronomical damages,
there is very little choice for TCPA insurance (sometimes none
at all); if insurance is available, the premiums and the
deductibles are extremely high.\56\
---------------------------------------------------------------------------
\56\ ACA International Notice of Ex Parte, CG Docket No. 02-278, at
2 (May 9, 2014).
---------------------------------------------------------------------------
(3) Detrimental Impact to Consumers Trying to Manage Default and Keep
Current on Payments
Keeping customers up to date on payments and managing their default
is critical for financial well-being. Defaulting on payments can have
long-term devastative consequences for consumers by impacting their
credit score and ability to obtain credit in the future. Most people
need credit to buy their home, finance their child's education, or
start the small business they have worked toward. These purchases are
made much more difficult with a damaged--or even bruised--credit score,
which is why it is vital that consumers are aware of their financial
obligations.
It is important to keep in mind that not getting a call does not
mean that the debt will somehow go away. What a call is likely to do,
if a person is reached, is educate the consumer about available
repayment options, potentially avoid negative consequences such as
shutting off of a service, increased debt due to added collection costs
and fees, a bad credit report that can harm future borrowing,
foreclosure on a home, repossession, or other legal remedy. There are
consumer benefits to these calls in addition to avoiding default--for
example, by one estimate, around 25 percent of identity theft
occurrences are discovered through the debt collection process.\57\
---------------------------------------------------------------------------
\57\ Id. at 5.
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In addition to consumers' critical credit needs, servicing debt and
managing default are critical to government and non-government entities
alike. Being able to make a call to discuss a debt is impactful for the
Federal Government, state and local governments, colleges and
universities, healthcare institutions, retailers, financial
institutions, and indeed all types of businesses large and small.
The City of Philadelphia, for example, said in a 2013 Request for
Information that funds recovered by debt collection agencies ``are
essential to support important community services, like public safety,
a clean environment and quality public schools. Failure to collect all
funds owed to the City jeopardizes much needed services and increases
the financial burden on compliant taxpayers and residents.'' \58\
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\58\ City of Philadelphia, Request for Information, Accounts
Receivable Management & Collections, The Office of the Chief Revenue
Collections Officer, Exhibit 1 at 2 (Aug. 8, 2013); ACA International
Notice of Ex Parte, CG Docket No. 02-278, at 1 (May 5, 2014).
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Nothing in the legislative history suggests that Congress intended
the TCPA to be used as a shield against communications between a
creditor and its customers concerning a past due obligation. Indeed, as
the report of the House Committee on Energy and Commerce clearly
states:
The restriction on calls to emergency lines, pagers, and the
like does not apply when the called party has provided the
telephone number of such a line to the caller for use in normal
business communications. The Committee does not intend for this
restriction to be a barrier to the normal, expected or desired
communications between businesses and their customers. For
example, a retailer, insurer, banker or other creditor would
not be prohibited from using an automatic dialer recorded
message player to advise a customer (at the telephone number
provided by the customer) that an ordered product had arrived,
a service was scheduled or performed, or a bill had not been
paid.\59\
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\59\ H.R. Rep. 102-317 (Nov. 15, 1991) (emphasis added).
Fundamentally, congressional recognition of TCPA privacy rights
applicable to mobile telephone customers was intended to provide choice
of contact, not isolation from contact. Those who elect to conduct
telecommunications solely by cell phone, or who choose to identify
mobile telephone numbers as their preferred method of contact in
dealing with service providers, have exercised the privacy choice
protected by the TCPA. It is not good policy to make that choice more
burdensome and less efficient.
To conclude otherwise would significantly harm both private and
public debt collection programs, further straining our distressed
economy. Indeed, the White House has over the last four years
consistently emphasized the importance of contacting debtors
specifically ``via their cell phones'' in connection with the
collection of debt owed to or granted by the United States.\60\ This
Congress agreed when it exempted such calls from the TCPA.\61\
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\60\ The Office of Management and Budget, Budget of the United
States Government, Fiscal Year 2013, at 232 (2012), available at
https://www.whitehouse.gov/sites/default/files/omb/budget
/fy2013/assets/budget.pdf; The Office of Management and Budget,
Analytical Perspectives, Budget of the United States Government, Fiscal
Year 2013, at 168 (2012), available at https://www.whitehouse.gov/
sites/default/files/omb/budget/fy2013/assets/spec.pdf; The Office of
Management and Budget, Budget of the United States Government, Fiscal
Year 2016, at 116 (Feb. 2, 2015), available at https://
www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/
budget.pdf; The Office of Management and Budget, Analytical
Perspectives, Budget of the United States Government, Fiscal Year 2016,
at 127-28 (2015), available at https://www.whitehouse.gov/sites/
default/files/omb/budget/fy2016/assets/spec.pdf.
\61\ Bipartisan Budget Act of 2015 Sec. 301; 47 U.S.C.
Sec. 227(b)(1)(A)(iii). However, the FCC has proposed rules that would
appear to thwart this Congress' intent in creating an exemption for
Federal debt calls, by limiting the number of calls that can be placed
to delinquent or defaulting account holders to three calls per month--
regardless of whether or not the call results in a conversation with
the borrower. Three calls per month is not sufficient to (1) have a
live conversation with a borrower; (2) discuss available repayment,
forbearance and deferment options with the borrower; and (3) enroll the
borrower in the right plan based on the borrower's circumstances. See,
e.g., Statement of Commissioner Michael O'Rielly Dissenting in Part and
Approving in Part, Rules and Regulations Implementing the Telephone
Consumer Protection Act of 1991, CG Docket No. 02-278, Notice of
Proposed Rulemaking, FCC 16-57, at 2 (May 6, 2016).
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The same principle--that a call to a cell phone is beneficial in
helping borrowers resolve delinquencies--applies with equal force to
state and local governments, and businesses large and small. This is
supported by findings of the Federal Government and loan servicers. The
U.S. Department of Education stated in a 2015 report that when
``servicers are able to contact a borrower, they have a much better
chance at helping that borrower resolve a delinquency or default.''
\62\ For example, there are Income Driven Repayment (IDR) plans
available to qualifying borrowers under which monthly payments may be
as low as $0, and qualifying borrowers may have remaining balances
forgiven after 20-25 years. The U.S. Department of Education endorsed
allowing servicers to use modern technology to contact borrowers to
help educate them about this and other repayment options and avoiding
default.
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\62\ U.S. Dep't of Education, Strengthening the Student Loan System
to Better Protect All Borrowers, at 16 (Oct. 1, 2015), available at
http://www2.ed.gov/documents/press-releases/strength
ening-student-loan-system.pdf.
---------------------------------------------------------------------------
One servicer estimates that it is able to help more than 90 percent
of student loan borrowers avoid default when it has a telephone
conversation with the borrower; conversely, 90 percent of student loan
borrowers who have not had a telephone conversation with the servicer
default.\63\ And Federal Student Aid--an office of the U.S. Department
of Education--estimates that 93 percent of persons in default ``were
not successfully contacted by telephone during the 360 day collection
effort.'' \64\
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\63\ Navient Corp. Notice of Ex Parte, CG Docket No. 02-278, at 2
(Mar. 29, 2016).
\64\ Cynthia Battle & Eileen Marcy, Late Stage Delinquency
Assistance, Federal Student Aid, at 7 (last visited May 16, 2016),
available at https://www.ifap.ed.gov/presentations/attach
ments/06FSAConfSession41.ppt.
---------------------------------------------------------------------------
Moreover, there is in place substantial oversight of the operating
practices of financial service companies, including their interactions
with consumers, through Federal laws such as the Fair Debt Collection
Practices Act (FDCPA), the Dodd-Frank Act prohibition against Unfair,
Deceptive and Abusive Acts and Practices, the Fair Credit Reporting
Act, section 5 of the Federal Trade Commission Act, the Gramm Leach
Bliley Act, the Truth in Lending Act, the Fair Credit and Charge Card
Disclosure Act, the Federal Bankruptcy Code, and the Real Estate
Settlement Procedures Act, and through oversight from a number of
different Federal entities including the Federal Reserve, Federal Trade
Commission, FDIC, Office of the Comptroller of the Currency, and the
CFPB.\65\ Additionally, the FDCPA explicitly outlines how a consumer
can end any communications with a debt collector.\66\
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\65\ See 15 U.S.C. Sec. 1692 et seq.; Pub. L. 111-203; 15 U.S.C.
Sec. 1681 et seq.; 15 U.S.C. Sec. 45 et seq.; Pub L. 106-102; 15 U.S.C.
Sec. 1601 et seq.; 15 U.S.C. Sec. 1637(c); Title 11 of the U.S.C.; 12
U.S.C. Sec. 2601 et seq. There are also numerous state laws in place
providing oversight and constraint. Approximately 35 states have laws
or requirements specific to debt collection communications. Examples:
Cal. Civ. Code Sec. 1812.700 (special text requirement); Iowa Code Ann.
Sec. 537.7103(3)(a)(6) (call frequency); Me. Rev. Stat. Ann. tit. 32
Sec. 11013(3)(C) (postdated checks); Minn. Stat. Sec. 332.37(13)
(prerecorded messages); W. Va. Code Ann. Sec. 46A-2-125(d) (call
frequency). Approximately 40 states have laws specific to licensing.
\66\ 15 U.S.C. Sec. Sec. 805(c), 1692c.
---------------------------------------------------------------------------
It is also important to recognize that when Congress enacted the
Dodd-Frank Act, it expressly assigned the regulation of debt collection
to the CFPB. It granted the Bureau rulemaking authority for the FDCPA,
which was designed to protect consumers when communicating with debt
collectors and to provide remedies for abusive collection
practices.\67\ Significantly, the CFPB has announced its intention to
initiate a rulemaking process to update and modernize the FDPCA and to
promulgate comprehensive rules to govern the debt collection industry,
covering first-party creditors (i.e., financial institutions collecting
debt owed to them) under its Dodd-Frank Act authority to prevent
unfair, deceptive or abusive practices, and third-party collectors
under the FDCPA.\68\
---------------------------------------------------------------------------
\67\ See 15 U.S.C. Sec. 1692l(d).
\68\ See Consumer Financial Protection Bureau, Fall 2015 Regulatory
Agenda submitted by the Consumer Financial Protection Bureau to the
Office of Management and Budget (Nov. 20, 2015), available at http://
www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_
AGENCY_RULE_LIST¤tPub=true&agencyCode=&showStage=active&agencyCd=3
170.
---------------------------------------------------------------------------
Consistent with this mandate, the CFPB has been actively pursuing
abusive debt collection practices and expects to release a debt
collection proposed rule this year. In the CFPB's fifth annual Fair
Debt Collection Practices Act Report, CFPB Director Cordray indicated
that ``[i]n 2015 such actions by the CFPB returned $360 million to
consumers wronged by unlawful debt collection practices and collected
over $79 million in fines. During this time period, our colleagues at
the Federal Trade Commission (FTC) banned 30 companies and individuals
that engaged in serious and repeated violations of the law from ever
again working in debt collection.'' \69\ Further, the CFPB has
resources on its website informing consumers of their rights against
debt collectors, including explaining the laws mandating what debt
collectors can or cannot do,\70\ what is harassment by a debt
collector,\71\ and how many times a debt collector may call a
consumer.\72\
---------------------------------------------------------------------------
\69\ CFPB, Fair Debt Collection Practices Act, CFPB Annual Report
2016, at 2 (Mar. 2016), available at http://files.consumerfinance.gov/
f/201603_cfpb-fair-debt-collection-practices-act
.pdf.
\70\ CFPB, Are there laws that limit what debt collectors can say
or do? (last visited May 16, 2016), available at http://
www.consumerfinance.gov/askcfpb/329/are-there-laws-that-limit-what-
debt-collectors-can-say-or-do.html.
\71\ CFPB, What is harassment by a debt collector? (last visited
May 16, 2016), available at http://www.consumerfinance.gov/askcfpb/336/
what-is-harassment-by-a-debt-collector.html.
\72\ CFPB, Is there a limit to how many times a debt collector can
call me? (last visited May 16, 2016), available at http://
www.consumerfinance.gov/askcfpb/1397/there-limit-how-many-times-debt-
collector-can-call-me.html.
---------------------------------------------------------------------------
Correcting the Imbalance
I appreciate that the Commerce Committee wants to understand how
the TCPA, enacted in 1991, is impacting consumers and businesses today.
The current TCPA litigation environment, combined with the FCC's recent
interpretations, is punitive to compliance-minded businesses,
governmental entities, and non-profits that want to engage in normal,
expected or desired communications with consumers. The environment is
also detrimental to consumers, who expect to communicate via their cell
phones and through texts, and who find it convenient and beneficial to
do so. In today's environment, a compliance-minded caller or sender of
text messages can have obtained the prior express consent that Congress
established would protect a caller from TCPA liability, can be using
modern technology that is not an ATDS under the statutory definition,
and can still be subjected to potentially ruinous liability for every
single call or text. This is fundamentally unfair to any entity making
calls or sending texts, and is fundamentally unfair to consumers--who
are increasingly paying the societal costs of abusive lawsuits. When
Congress enacted the TCPA 25 years ago, it sought to implement a
careful balance between protecting beneficial, normal, expected or
desired communications and protecting public safety entities and
consumers from abusive practices. That balance must be restored.
Mandate a Reassigned Number Database: One idea moving forward would
be to establish a telephone number subscriber database that would
require the participation of all carriers, and timely updates by the
carriers to the database. The database would link each telephone
subscriber--and to the extent possible any persons on that subscriber's
family or business plan--with their telephone number. Callers or those
sending text messages could check against the database to determine
whether a number for which they have been given consent to call or text
now belongs to a different subscriber. A TCPA safe harbor should be
provided for callers who check the database for confirmation that the
number that they have been provided consent to call or text has not
been reassigned.
Privacy concerns could be avoided by allowing a calling party to
check against the database only to see whether (and if so, when) a
number has been reassigned to a different subscriber--but not provide
the identity of the subscriber. There is no doubt that any combined
database of 80+ carriers would take significant time, effort, and
resources. If this could be accomplished, the benefits would be
tremendous. Compliance-minded callers and texters who have obtained
prior express consent could rely on that consent, as Congress intended.
Those callers or texters would not be placed in the impossible
situation of risking TCPA liability for each and every call or text
based on a factor over which they have zero control--knowledge of a
reassignment. Consumers would be less likely to receive calls or texts
based on a reassigned number, and would be less likely to miss
important, beneficial or desirable communications that they provided
consent to receive.
Prior Express Consent is Not Meaningless: Another, more simple
option may be for Congress to confirm that when it provided a statutory
defense for ``prior express consent of the called party,'' it did not
intend for that defense to be meaningless. Congress intended that when
a caller received prior express consent, it could rely on that consent
until a caller had actual knowledge that consent has been withdrawn
(including through a reassignment).
ATDS Definition is Not Meaningless: Another option may be for
Congress to explicitly confirm that when it provided a narrow, specific
and precise statutory definition of an ``automatic telephone dialing
system,'' it did not intend to broadly sweep into the definition any
and every software system or device that ``theoretically'' could be
modified at some hypothetical future point in the future to ``store or
produce numbers to be called, using a random or sequential number
generator, and to dial such numbers.''
Restore the Balance: Congress should confirm that when it enacted
the TCPA it did not intend for it to become a ``litigation trap'' where
compliance-minded callers are put at untenable risk for engaging in
beneficial, normal, expected or desired communications, and where
consumers are also suffering the consequences. Congress should consider
taking steps to restore the balance that it intended when it enacted
the TCPA.
The Chairman. Thank you, Ms. Desai.
Let's start with 5-minute rounds of questions.
I'll start with Ms. Wahlquist. As you know, the FCC's
concluded that, and I quote, ``Service outages and
interruptions in the supply of water, gas, or electricity
could, in many instances, pose significant risk to public
health and safety, and the use of prerecorded message calls
could speed the dissemination of information regarding service
interruptions or other potentially hazardous conditions to the
public.'' Nonetheless, and despite receiving prior consent, a
number of utilities have faced expensive litigation and
potentially ruinous judgments for making just such calls.
Do you agree that the Commission's action on the Edison
Electric Institutes and the American Gas Association's petition
for declaratory ruling filed with the Commission over a year
ago would help utilities avoid meritless but oftentimes costly
litigation for these notices? And do you think that that ruling
is long overdue?
Ms. Wahlquist. I would agree that it would be helpful to
the electric companies to have that ruling. I agree that it is
overdue. I am concerned, though, that it's--would just be one
more exception that the FCC would add into the checkbox of,
``Here's a few kinds of calls we think are OK.'' And in the
2015 order, they listed a few. And this would just add a few
more. OK? So, the electric companies can now say something
about outage. And the problem is, there are all of these other
calls that consumers would want, that they've signed up for,
that they've requested, they've asked, that businesses are
afraid to make, or, if they're making, they're getting sued
under the TCPA. So, I think that the FCC does need to rule on
that order. And I don't know why it wasn't in the earlier
ruling.
Clearly, people need to know if there are power outages. I
believe one of the petitions pointed out that people may have
medical equipment at home that relies on power, and we need to
be able to alert them to an outage. So, it--I think that should
be ruled on. But, I think there needs to be a much bigger look
across the board at calls that are legitimate calls that are
generating lawsuits.
The Chairman. Ms. Desai, at a recent field hearing, CFPB
Director Cordray said, and I quote, ``Let me also take a moment
to acknowledge another positive development, which is the
decision some banks and credit unions have made to provide
consumers with real time information about the funds in their
accounts available to be spent. They are doing this through
text and e-mail alerts, which can reduce the risks that
consumers inadvertently overspend their accounts.''
How can banks, credit unions, and other financial
institutions increase communications with their consumers if
they have the threat of TCPA litigation hanging over their
heads?
Ms. Desai. Well, thank you, Chairman Thune. You raise a
very important point. There are all types of time-sensitive
consumer-beneficial communications, such as the example you
raised, available funds to reduce the risk of overspending, but
also high-purchase alerts, low-balance alerts. And these types
of time-sensitive communications are only possible through
modern technology. These communications can't be made through a
rotary phone.
And this is the heart of the challenge, not only for my
financial institution clients, but, frankly, all of my clients
who engage in communications with consumers and with their
customers. They are paying a significant cost for the
additional risk that any time-sensitive communication they make
runs the risk of being sent to a reassigned number, and that is
a factor that they cannot fully control. As a result, many of
my clients are choosing to decrease beneficial elective
communications through cell phone or text because they know
that every single one of these communications does carry that
additional risk.
The Chairman. Mr. Lovich, you stated that, ``The practical
impact of TCPA restrictions on the care provider community is
devastating.'' I'm wondering if you could sort of elaborate on
what that--devoting so many resources to TCPA compliance means
for patient care.
Mr. Lovich. Thank you, Chairman. I think that's probably
the most important question that I could be asked today,
because it does impact upon patient care, which is obviously
the most important aspect of providing healthcare.
As any other enterprise, a hospital has to make economic
decisions when they are dealing with a finite pot of resources.
If resources have to be dedicated to an administrative action,
such as dealing with the TCPA, that requires decisions to be
made with regard to staffing. If that impacts, for example, the
number of nurse to--nurses that are there to treat patients, it
reduces the direct interaction between the nurses and the
patient, the delivery of direct follow up instructions, other
instructions with regard to the patient care.
There have been studies done by the Department of Health
and Human Services. The Agency for Healthcare Research and
Quality has found that the reduction in nursing staffing has a
direct relationship to negative patient outcomes with regard to
the treatment of their conditions.
So, the more resources that have to be dedicated to the
non-use of up-to-date technology calls from that pool of talent
that is not being directed to patient care. And I don't think
that's something that we want to do as a Nation.
The Chairman. My time's expired. I've got some other
questions, but I'll hand it off to Senator Nelson.
Senator Nelson. Mr. Chairman, I'm going to defer my
questions until later, but I just want to introduce a thought.
The law says that it's illegal, robocalls on cell phones. And
yet, our consumers receive millions of those robocalls on cell
phones. Can you imagine if we made it legal, what would happen?
I'm going to defer and let our members ask their questions
first.
The Chairman. Next up is Senator Blunt.
Oh, well, I'm sorry, if you--that's right. We'll keep it
even. I have Blumenthal, not here. Senator McCaskill would be
up.
STATEMENT OF HON. CLAIRE McCASKILL,
U.S. SENATOR FROM MISSOURI
Senator McCaskill. So, this is not that complicated. All
you have to have is the permission of the person you're
calling, and call them. I mean, you guys make this sound like
this is an impossible thing to do. I mean, Mr. Lovich, you have
somebody who leaves your hospital, and you guys can't manage to
get their permission to follow up with them by phone and call
them? Why is that so economically difficult for you?
Mr. Lovich. Thank you, Senator. The problem is, as my
colleague, Ms. Wahlquist, had indicated in her testimony--is
that the plaintiffs' bar has taken the opportunity to twist the
language with regard to the use of consent, and has chosen to
sue most of the members of my association with regard to the
inexactitude of the language involved in the consent process.
Typically, consent is obtained through the conditions of
admission when someone is admitted to the hospital. That's a
written document that's signed by the patient. That language is
then torn apart by some of my brethren----
Senator McCaskill. Why don't you just do a simple--when
someone checks out of a hospital, why don't you just present
them a simple card and said, ``Do you mind if we call you on
follow up?'' and have them sign that? I don't think lawyers
would have much luck with that in front of a jury. And if you
guys are settling those cases, shame on you. Take them to trial
and kick them in the rear in the courtroom. That's what you do.
You guys need to understand this. This is the biggest
consumer problem in the country. No bigger problem. And some of
these witnesses--you all are in here whining about these poor
businesses, and consumers really want these. They don't want
them, Ms. Wahlquist. They don't want them. And when somebody
has a reassigned number, you need to call them 40 times to
figure out it's a reassigned number? That was your testimony.
What about mail? Can you drop them a note in the mail and
figure out that they have a different phone number?
Ms. Wahlquist. Yes, Senator. The problem is that not all
the numbers are reassigned. There are numbers that are wrongly
provided from the start. And if it was just that one number, it
wouldn't be the issue. The issue is that, as long as there's
one number, then a class-action is brought. You have a class-
action, there was no statute of limitations put into the TCPA
when it was drafted. So, then suddenly all phone calls made by
that company for 4 years are put at issue. And that's what
makes it not simple.
Senator McCaskill. Let me ask you, Mr. Zoeller. Have the
complaints gone down or up on robocalls in the last several
years?
Mr. Zoeller. They've gone up every year in our office, and
we're on track to set all new records yet this year.
Senator McCaskill. So, you would think that, if in fact
these lawsuits were really damaging the cost of doing business
in this country, you would see the opposite impact, wouldn't
you, Attorney General?
Mr. Zoeller. Well, you know, I think the massive amounts of
phone calls are not from people being represented here, so the
problem we have are the bulk calls that come from overseas,
where none of us have the ability, other than--I guess I'll
throw the FCC under the bus--that they're the only ones who can
really regulate those huge, massive calls that originate
outside of our jurisdiction. So, without any enforcement
ability, those are the ones that really are, let's say, well
over half of the complaints we get.
Senator McCaskill. Although, I will tell you--I know you
work with my Attorney General, Chris Coster, closely--in the
last few months, he's brought against an insurance company, a
lawn-care service, a home security company, a duct-cleaning
service, and a charity for violating the Missouri law. Now, I
don't hear tones of international in any of that list. So, this
is a real problem.
And, by the way, Ms. Wahlquist, I would just suggest this.
I know that the carriers are all members of the Chamber. We
know, from hearings we've had in this committee, that the
technology is available that the carriers could adopt. And it
has been clarified by the FCC that there is no duty to connect
calls that prohibits them from adopting this technology. They
can adopt technology and make it available to consumers that
allows consumers to opt out without having to take these calls.
And what we're really trying to do here--we're not trying to
punish people with litigation. We're trying to put power in the
hands of the consumer. And this may not be the most artful way
to do it, but I will just speak for me, and I think probably
for a whole lot of people who run for office that hang out
around here, if you think I'm backing up on going after people
who make robocalls, in light of what I encounter every day from
people I meet, including my own family--I mean, my son can't
get two companies to quit calling him on his cell phone. He
finally handed the phone to me. You know, and I said, ``I'm a
U.S. Senator. I'm going to sue you.'' Guess what? They called
him 15 minutes later.
Ms. Wahlquist. Your Honor, I think that those are really
the bad actors that need to be targeted, that have been getting
targeted, and continue--would have liability under whatever
modification you're doing to the TCPA, because I'm not saying
that, when somebody receives notice, ``This is a wrong
number,'' and they receive it in a reasonable way, where they
know, they should have a little bit of chance to implement that
knowledge, and the calls should stop. And if they haven't,
then----
Senator McCaskill. But, they don't. Ask Ms. Saunders. They
don't stop.
Ms. Wahlquist. The--she has some examples of ones that
didn't. I have processes and procedures in place with most of
my clients, where this is--it works for 99 percent of the time,
but you have human error, you have something that doesn't
happen. You might have a vendor that hasn't been following the
company's procedures and policies and didn't record the Do Not
Call. And companies don't want to call the people that aren't
their clients. We're trying to call our customers to convey
information to those customers. There's no desire to continue
to call someone who's not a customer with this information.
Senator McCaskill. Doesn't feel like that on the receiving
end. It doesn't feel like that. I'm just telling you. That's
not the perception consumers have.
Thank you, Mr. Chairman.
The Chairman. All right.
We'll go to the other half of the Missouri duo here.
Senator Blunt. Exactly.
The Chairman. Senator Blunt.
STATEMENT OF HON. ROY BLUNT,
U.S. SENATOR FROM MISSOURI
Senator Blunt. Well, thank you, Chairman.
What I think Attorney General Zoeller said was that half of
the robocalls come from out of the country. What could we do
about that?
Mr. Zoeller. Senator, I--that's a great question. And
again, between, you know, addressing this with the FCC, which
has the regulatory authority, and the carriers, which I'll
agree with the Senator, your colleague, that they do have some
ability. They've pointed to one another for years. So, up until
recently, I've always been critical of the FCC and their
failure to regulate. The carriers have always said, ``We're
nervous about whether we have the ability to use the
technology.'' Now that they've passed the rule, which we've
long asked for, the ball is back to the carriers to say, ``Why
aren't you using the technology that's currently available to
block some of these''--and we're not talking about any of the
types of calls that you're hearing about. These are the massive
calls that literally call everybody in a--in an area code. So,
when I get the complaint, I literally tell people, ``Don't feel
too special, because they called 9,999 other people that same
minute.'' So, it's only the FCC and the carriers. Somewhere in
that finger-pointing is the answer to your question.
Senator Blunt. Well, it seems to me that one of the things
you said is exactly the crust of what we are talking about
here. We're talking about two different problems. We're talking
about massive robocalls, half of them, based on your
information, from outside the country. Then the other thing is
people legitimately trying to contact someone whose number they
either no longer have or never had given to them in the correct
way. Surely, there's some way we can separate this discussion
to where we deal with these problems in the way they ought to
be dealt with.
You know, Ms. Desai, I've heard that some banks, for
instance, no longer even try to notify on what they would see
as a routine problem that I'd like to be notified of, such as
some activity in my account that doesn't seem to make sense,
but they don't notify me, because they think they might be
calling a number that they're not sure of? Is that a real
problem?
Ms. Desai. Yes. And the American Bankers Association
actually submitted a filing on exactly that issue. I mean, it
is a problem. And, you know, it--we--I wish it was as easy as
just simply getting consent. But, once you have consent, you
have to be able to rely on that consent. And the problem with
TCPA liability, the way it has been interpreted, is that you
cannot any longer rely on that consent, because there's no way
of knowing if a number has been reassigned. And that's why
there are increasing numbers of banks and other institutions
that are afraid to make routine calls or send routine messages.
Senator Blunt. Does anybody on the panel know? How long
does it take to reassign a number? If I give up my cell phone
number, is there a definite period that that can't be available
to anybody else? Or how long does is it take before somebody
else is answering the number I used to have that I gave the
hospital or I gave the bank or I gave the college--how long
might it be before somebody else has that number?
Ms. Wahlquist. Senator, it depends on the provider of the
cell phone number. I think it can be as short as 30 days. Some
providers wait 6 months before reassignment. It's just kind of
a hodgepodge. And part of the problem also is, the business
doesn't know who the cell phone provider is on any given
number. You wouldn't know the timeframe in which it's switching
out.
Senator Blunt. Well, say we had a rule that you couldn't do
it any quicker than 6 months. Anybody that got my cell phone
number earlier than 6 months wouldn't have any certainty that
it was still my number. Is that right? Until they called it.
Ms. Saunders, does that sound right to you?
Ms. Saunders. Yes, sir. But, I think the cell phone
companies may not agree to wait 6 months, because some cell
phone companies have a smaller batch of numbers that they're
going to want to recirculate. But, I--if I might----
Senator Blunt. You might.
Ms. Saunders.--I think that several of us agree on this
panel that one way of dealing with the calls to reassigned
numbers is for there to be a mandatory database that all cell
phone companies participate in that would allow callers to
access and ask, ``When was the last time this particular phone
number was transferred?'' And once that answer is provided, the
caller would know whether or not they had valid consent. And
the problem with the situation now is, apparently there are no
full databases that are--that include all the cell phone
companies. So, I think several of us on different sides of this
issue have all been encouraging both the cell phone companies
and the FCC to either voluntarily do this or mandate it. But,
that would solve a lot of the litigation against the wrong--
about the wrong-number calls.
Senator Blunt. It just seems to me, Mr. Chairman, that
we've got two very different problems here. One, it's really
easy to be outraged about. And in the Missouri delegation,
Senator McCaskill usually deals with the outrage better than I
do. And I appreciate that. And I like to see that happen.
Senator McCaskill. It's called good cop, bad cop.
Senator Blunt. Well, maybe so. And the other one is a
problem that we're all very sympathetic to. If we could figure
out how to divide this discussion into those two categories,
we're much more likely to find a solution to both problems than
not. And I hope we can figure out how to do that.
The Chairman. Thank you, Senator Blunt. And that suggestion
is one we may want to explore and take a look at if everybody
sort of agreed that that would make sense. I know, definitely
in the Missouri delegation, if I have to call somebody, I'm
going to call the good cop.
[Laughter.]
The Chairman. Somebody doesn't like unsolicited phone
calls.
I have up next--Senator Klobuchar and then Senator Daines.
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. OK, very good. Thank you very much.
Thank you, Mr. Chairman, and thank you, Senator Nelson, for
your leadership on this, as well as Senator Markey and many
others.
So, I'm a cosponsor of the HANGUP Act to repeal a provision
from the Bipartisan Budget Act of 2015 allowing robocalls to
cell phones for the collection of debt owed to the government.
Ms. Saunders, in your testimony, you estimate that this
provision would impact 61 million people. You also point out
that, in many cases, debt collectors do not have accurate
information about who owes the debt.
Mr. Zoeller, you testified that 90 percent of the debt-
collection complaints your office received last year were
because the caller was harassing the wrong person.
In both of your opinions, how significantly does the
provision undermine existing robocalling protections? Because I
can tell you, when--we just did the senior tour around
Minnesota, our staff and in my own experiences meeting with
people, robocalls are still one of the number one things that
they list as something that they're very angry about. They get
sucked into things they don't want to. And, well, you know all
about it.
So, Ms. Saunders?
Ms. Saunders. We think this--the provision is very
dangerous. One of the concerns--one of the many concerns that I
have heard is that the FTC and other government agencies, such
as Attorney General Zoeller's, tell people not to answer any
robocalls. The FTC has said publicly, repeatedly, ``The IRS
won't call you.'' But, now, because the IRS can hire debt
collectors and because the IRS debt collectors can robocall
without consent, that advice from the FTC is no longer
available. And yet, how do people who are receiving the scam
calls know the difference? And so, I can go on, but I--the
problem is----
Senator Klobuchar. Right.
Ms. Saunders.--tremendous, and it is not a good resolution
to allow consumers who owe money to be called more.
Senator Klobuchar. Yes.
Attorney General Zoeller?
Mr. Zoeller. You know, and I'll add to that. My earlier
focus about--you know, in carving out the exception, we may
well have lost the ability to defend the TCPA as a
constitutional matter, because, again, in our experience, going
up through the--Indiana and then the 7th Circuit Court of
Appeals, it was because we did not distinguish between the
types of calls being prohibited that it was neutral. Once
you've started to carve this out--and I think it's--it almost
goes back to the point about looking at these things
differently. The very different part about creating a better
defense, we're not against defending, and I think it would go a
long way to eliminate some of the--let's say, the frivolous
litigation. And I'm not here to defend the trial bar. But, I
think, to create a better defense, as opposed to an exception--
once you've got these exceptions, our ability to defend these
statutes really is compromised. So----
Senator Klobuchar. And you point to a rise in the phone
scams involving government impersonation. And I know that often
these scams involve someone spoofing to try to fool a victim
into thinking they're someone calling from the government. And
if we don't pass this HANGUP Act, or some kind of strong
antispoofing legislation, do you think you would see more of
this going on?
Mr. Zoeller. Well, I got a little bit numb to it until they
started to spoof using Office of the Indiana Attorney General.
Senator Klobuchar. Well, there you go.
Mr. Zoeller. So, I'll stand as outraged.
Senator Klobuchar. OK. That's pretty bad. So, you've
actually had people use your own office name? And what were
they calling to say that they wanted to do?
Mr. Zoeller. Well, there were a number of issues. But,
again, the fact that I was constantly telling people, you know,
to be careful of this--the spoofing, and that you can't really
rely on it. They can put any number up there. OK, it's another
violation of the law. But, by the time they were using mine, it
was because we were so public about, ``Of course, you can trust
the Office of the Attorney General.'' So, what little
credibility my office tries to maintain and trust----
Senator Klobuchar. Yes.
Mr. Zoeller.--was being used against us.
Senator Klobuchar. Exactly.
It has been 13 years now since the Do Not Call Registry was
started. While there are more than 222 million numbers
registered, it shows that the public is incredibly supportive
of this concept. There are also more complaints than ever.
Robocalls and text spamming have proliferated due to advanced
technologies, which were discussed here earlier. Again, to both
of you, we know that more needs to be done to protect consumers
from fraudsters and robocalls. What, in your opinion, are the
most significant limitations of the Do Not Call Program in
addressing the current robocalling problem?
Ms. Saunders. I think we've mentioned it here, and it's the
spoofing problem. And while I very much appreciate Senator
Nelson's bill on antispoofing, we really think that the law
needs to be much more heavy-handed and require that the cell
phone--that all of the phone companies adopt antispoofing
technology. I find it very hard to believe, in this day and
age, with the advanced----
Senator Klobuchar. When the technology is out there.
Ms. Saunders. The technology----
Senator Klobuchar. So, you would pass Senator Nelson's bill
and then also add in this?
Ms. Saunders. Yes. Yes, ma'am.
Senator Klobuchar. All right.
Attorney General?
Mr. Zoeller. Well, while we're doing that, you know, the
idea of having some ability to stop all the illegal ones that
are being done from overseas, I think that's something that,
you know, technology has gotten us into this problem, and we
really need to focus on how can it get out. So, when the FCC
passed their recent regulation, I know the carriers were
concerned that they were going to require the use of the
technology to block the overseas calls. When that wasn't in
there, I know they all had a sigh of relieve. But, quite
frankly, we were all hoping that it would be in there.
Senator Klobuchar. Got it. And I'm not going to do anything
more. I'm over my time. But, as you know, I've been doing a lot
on the call-completion issue and dropped calls. And so, I'll
put something on the record on that. We're hoping to have a
markup soon.
Thank you.
The Chairman. OK, we're going to--Senator Daines, then
Senator Blumenthal.
STATEMENT OF HON. STEVE DAINES,
U.S. SENATOR FROM MONTANA
Senator Daines. Thank you, Mr. Chairman.
I brought along a phone from 1992. The size of it is only
exceeded by its weight. It would make a good boat anchor. And
this is 25 years old, and it is approximately the same time
TCPA was enacted. We can see how far technology has come from
this device to what I have in my hand, my iPhone 6, that's
reduced the need for a lot of phone calls because of the power
of the knowledge here, where I can make an airline reservation,
I can do my online banking, I can SnapChat Cory Booker. I can
do a lot of things here on my iPhone 6.
But, as we've heard today, now 25 years later, unwanted
phone calls are still among the top consumer complaints. And
even when consumers do file lawsuits for violations, it seems
like the trial lawyers are the only ones that truly benefit. In
fact, I've heard the TCPA has even been referred to the ``Total
Cash for Plaintiffs Attorneys.''
Ms. Wahlquist, consumers are still receiving unwanted
calls. In your testimony, in fact, you said the average payout
to the trial lawyers on a case in 2014--I believe it was $2.4
million, while the consumer average payout was $4.12. Is the
TCPA really helping consumers today?
Ms. Wahlquist. Senator, I just really don't think that it
is. The abuses that are happening on the litigation side mean
that it's really become a lawyer-driven statute, when we have
the suits for it. And it--the kinds of calls that are driving
everyone crazy--and I get them, too--the spoofed calls and--
that's not what is getting--nobody would sue for that. There's
no money, there's no pocket at the end of it.
So, for example, I have a restaurant client that had an
opt-in put on their menu, ``If you want to get our coupons, you
know, on a weekly basis, text us this and we'll start sending
them to you.'' And this purely opt-in thing that a lot of young
people joined up for and were doing, one text message that was
sent, that one plaintiff's lawyer brought a suit on, and
suddenly my client is facing $32 million in statutory damages
for that single text message that went to the club, and stopped
the club. Nobody's getting the coupons anymore. And this kind
of thing doesn't benefit consumers. Now nobody's getting their
coupons.
Senator Daines. In a state like Montana, we have a lot of
small businesses. They're not trying to call their customers to
sell them products they don't need. They're not inundating them
with texts and faxes. But, they are trying to reach their
customers to remind them of appointments or alert them to a
potential service disruption.
Ms. Desai, is it reasonable to ask small businesses to
comply with the 2015 TCPA order?
Ms. Desai. I think the interpretations provided by the FCC
in 2015 were particularly damaging for small businesses. They
shouldn't have to check a database to see if the number that
they were provided by their own customer has suddenly been
reassigned. They probably can't afford to do so. And if they
did, it wouldn't give them an accurate answer anyway.
I think it's expensive for a small business to have to turn
to manual dialing in order to reach their customers.
Senator Daines. I grew up in a small business. My mom and
dad run a little construction business. Their compliance
department would be my mom and dad, versus a large business,
where a compliance department could be an entire wing of the
headquarters of a building.
Ms. Desai. Yes.
Senator Daines. So, what kinds of compliance costs and
challenges would these small businesses face?
Ms. Desai. Well, you know, in order to be completely sure
that they're using a dialing equipment that won't trigger TCPA
liability, they'd have to invest in a rotary phone, if they
could find one. They would have to try to figure out on a
regular basis, whether the numbers that they've been provided
consent to call are still accurate.
I don't have dollar figures for you. I don't know. Even my
large clients, who have thousands of employees, have a
difficult time trying to figure out how to manage TCPA risk. I
can't imagine what a small company would have to do.
Senator Daines. Mr. Lovich, I want to bring up this issue
of rural healthcare. Again, a lot of states who serve on this
committee are from more rural States. And if you've visited
Montana, hospitals are simply not around every corner. Patients
really rely on technology to communicate with their doctors.
Oftentimes, 30, 40, 50, 60 miles away, even further, from a
hospital. Can you explain how today's application of the TCPA
impacts patients in rural communities who do not have easy
access to a clinic?
Mr. Lovich. Certainly. Thank you, Senator.
I would think that the impact on a rural community would be
even more devastating than one in a metropolitan community. The
interaction between the physician and the patient and the
healthcare provider is a sacred relationship. And if there
isn't an ability to, for example, follow up on inpatient care,
to provide instructions with regard to further care, remind
people about prescription pickups, remind people about
appointments, it all would be devastating to the effectiveness
of the healthcare that's provided.
One of the things that the healthcare community is trying
to do is cut down on readmissions. That is a tremendous drain
on the healthcare system, is when a patient isn't adequately
treated the first time because of the rush to discharge them.
With adequate instruction, adequate interaction between the
caregiver and the patient, readmissions will reduce, and
therefore the overall cost of healthcare will go down.
The inability to use the most current technology to pursue
that end is devastating to the industry and just causes more
cost and more administrative draining of revenue that, again,
impacts on patient care, it reduces the availability of the
caregiver to the patient, and that is the essence of the
relationship in--with regard to healthcare.
Senator Daines. Thank you, Mr. Lovich.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Daines.
And I'd just want to know where the Senator from Montana
came up with that Vanilla Ice vintage mobile phone there,
because that's----
Senator Daines. Mr. Chairman----
The Chairman. Please tell me you got that in a museum and
you aren't collecting----
Senator Daines. We did. And it's heavy enough--I see you
doing curls in the gym every morning with this thing.
[Laughter.]
The Chairman. Thank you, Senator Daines.
Senator Blumenthal.
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thanks, Mr. Chairman.
If there is a form of consumer complaint that is common and
passionate among the people of Connecticut, it is unwanted
calls, whether from telemarketers or local officials or
politicians. And among those calls, the most aggravating and
annoying are the robocalls. If we overlook the anger and
aggravation caused by these calls, we are doing a grave
disservice to the people of America, and they want stronger
measures, like the ones that I and Senator Markey have
proposed, that give consumers, essentially, more control over
the calls they receive. That's essentially it. Whether it's
through a private right of action or stronger consumer
protection from government authorities, there's no question in
my mind that the present law needs to be updated and upgraded
to provide better, swifter, stronger protection, because this
problem is only going to increase.
Mr. Zoeller, you do now what I used to do for 20 years, and
a lot of your mandate is consumer protection. Are you finding
an increase in the number of complaints, as I have received,
for example, from a 76-year-old woman in Dayville, Connecticut,
who says to me, ``I'm weary of all the robocalls that I
receive. Can't the Senate address this issue?''--which seems to
be noncontroversial, to me. A 76-year-old research scientist. I
have reams of complaints from people who are upset about these
calls. Quote, ``Every day, I get unwanted robocalls. Most
annoying, I have reported these to the No Call List people, but
nothing is done.'' That's the reason that we have a private
right of action. Public authorities are doing perhaps less than
they should. What's your experience?
Mr. Zoeller. Well, Senator, as a former Attorney General,
as well as Senators Ayotte and Sullivan, you all kind of
remember the days where we literally did have some protection.
And, I think, particularly in Indiana and Missouri, which had
the strongest of all Do Not Call laws, we literally had quiet
at home. So, I think, going from the perspective where people
knew that they could be stopped, they understood that something
was going right, their government had protected them, to the
point where now the vast majority have taken out their
landlines, and when I tell them, ``Believe it not, the U.S.
Congress is thinking about opening up new exemptions to allow
robocalling to cell phones,'' they're outraged. So, again, not
to say that it might diminish the high standing that the
Congress has held by the public, but you really risk the fear
that people are going to come here with pitchforks and torches,
because this is a very passionate--and I've got plenty of those
same stories. So, you're right on the money.
Senator Blumenthal. Well, I've heard the verbal pitchforks,
and worse. And I think you're absolutely right. For a Congress
that has done so little, to now do something so bad as to
dilute the consumer protection laws would be absolutely
outrageous. The calls I get are not normally outraged, but
incredulous.
Let me ask Ms. Saunders, What do you think is preventing
the implementation of call-blocking software by the phone
companies? Because, again, giving consumers control, empowering
consumers, is basically the goal of these laws. It's not to
restrict calls that consumers want. It's to enable consumers to
stop the calls that they find bothersome, annoying, intrusive,
invasive, and worse.
Ms. Saunders. I don't know the answer to that question,
Senator. I think you'll need to ask the phone companies why
they won't employ those call-blocking methodologies. I would
point to the example of what this Congress did 40 years ago,
when it passed the Consumer Credit Protection Act, putting the
burden on banks for losses when credit cards--when there were
credit--when there was credit-card fraud. And, because the
banks had that burden, the banks have been very vigorous in
developing antifraud protections, so there are very little
losses, because the losses that are suffered are then suffered
by the banks. If the phone companies had the same losses that
were--resulted from robocalls, especially overseas
telemarketing spammers, they would be very quick to employ very
vigorous antispoofing and call--robocall-blocking technologies.
Senator Blumenthal. Thank you.
My time has expired. I have many more questions and many
more comments. I will put them in the record.
I do believe that the present penalties in the TCPA are
inadequate as a deterrent for the bad actors and repeated
violators. And I hope that we can strengthen, not weaken, this
important Federal measure.
Thank you very much, Mr. Chairman.
The Chairman. Thank you, Senator Blumenthal.
Senator Markey.
STATEMENT OF HON. EDWARD MARKEY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Markey. Thank you, Mr. Chairman, very much.
I enjoy this conversation, because we're kind of in the
wayback machine, to a certain extent, when Senator Daines holds
up a cell phone from 1992. Because, when I authored this law in
1991--I am the author of it--it was because there was an
epidemic of calls that were going into people's homes. There
were no laws. And so, people were almost afraid to look at
their phone at night, because it would just start to ring at
about 6 o'clock, and it wouldn't stop until 9:30 or 10 o'clock
at night. So, we had to put a law on the books. I was the
Chairman of the Telecommunications Committee. It's my law.
And, to Senator Daines' point about the primitive nature of
the phone which he had in his hand, I also knew that we were
putting in 200 megahertz of spectrum so that we could create
the third, fourth, fifth, and sixth cell phone license in
America, that we would go digital, and everyone would have one
in their pocket by the year 1995. So, that's how quickly that
all changed. So, we were building in--I was building in
anticipatory consumer protections.
Now, when people hold this phone in their pocket right now
and it starts to ring, people say, ``It's probably somebody I
know. I think I'll take the call on my wireless device. I think
I'll take it.'' Why? Because the protections in that law in
1991 are very high for wireless devices. It's probably somebody
you know. That's what you think. But, when that phone is
ringing at home at night, even today, that landline phone,
people look at it, almost terrorized, ``It could be somebody I
don't know. It could be somebody who's going to harass me. It
could be somebody that's still calling me the same way they
were in 1991 or 2001.'' And that's the truth.
Now, should we change the laws to make it easier to call
people on these wireless devices? I don't think so. Because
it's personal. It's on you. How much of an intrusion would that
be on people, to have that phone going off all day long with
these robocalls? And, by the way, what happens, of course--
Senator McCaskill was right on the point here--these firms have
moved overseas, yes. But, who is paying them? People in America
are paying people in India to be harassing people so they can
get around the laws. That's what's going on. We should try to
figure out how to make the laws tougher so that these offshore
overseas calls are harder to make.
So, if I can, Ms. Saunders--and perhaps I was influenced by
the fact that I did work for the National Consumer Law Center
when I was in law school, so maybe I was infected by this
philosophy of, ``The consumer should be protected first.'' I
was there the first year the Consumer Center was established,
working there as a law student researcher.
So, can you talk a little bit about this concept of consent
and whether or not it might be possible, actually, to have the
information come in by e-mails or the consumer would be able to
respond by e-mails rather than having the phone be ringing, the
wireless or home phone? Are there ways of dealing with this
issue that are much less intrusive on the consumer in our
country?
Ms. Saunders?
Ms. Saunders. Yes, there are. I think the first point
really needs to be made is that there's not a constitutional
right to make robocalls. And before the automated systems
developed, businesses communicated quite well with their
customers through manual dialed calls or e-mails or, in the
olden days, snail mail. And I remember getting calls from my
credit card company, where they--I actually had a person on the
line who said, ``There's a suspicious activity. Is this your--
really your credit card use?'' And there's no reason that that
can't be used when the business is not sure about who actually
has consented and currently owns the phone.
Senator Markey. Well, let me----
Ms. Saunders. But----
Senator Markey.--Ms. Saunders, and you, Attorney General
Zoeller--we're talking about, last year, a relaxation of the
laws, in terms of being able to call people who have debts. And
it's people with student loans. There are 40 million of them in
America. Now it's easier to harass them by phone. Can you each
talk about that and what might be better ways, you know, for
people to be communicated with who have debts in our country?
Attorney General Zoeller?
Mr. Zoeller. Well, again, I think, at the beginning, when
people sign up for debt, you know, to get their opt-in as part
of the, you know, transaction. And again, I'll agree that we
could make that defense, so, you know, I'm not here to defend,
again, the plaintiffs' bar. So, tightening up a better line of
defense. But, I would point out that it's the exceptions that
I'm nervous about. And again, when we went up to the 7th
Circuit, it was clear that, because we had no exceptions, the
political free speech against personal privacy, two very
important constitutional rights, and we won, based on the fact
that it was not limiting free speech. There are plenty of
opportunities to speak, just not by ringing the phone. So, be
careful of the difference between that defensive side, which,
again, we would support bolstering--don't make exceptions
because you've suddenly picked winners and losers, and the
courts won't allow that--limitations on free speech.
Senator Markey. With your indulgence, Mr. Chairman, could I
ask Ms. Saunders to respond to a little bit----
Ms. Saunders. The idea that calling a debt--a consumer that
owes a debt multiple times will assist them in paying back the
debt is somewhat flawed. I think the record is full of examples
of both consumers who owe the debt and consumers who don't owe
the debt being called numerous times, robocalled, which is
harassing and abusive. It's also not particularly helpful and
against the--and not--not in furtherance of good public policy
to bother people into paying a debt.
Senator Markey. And again, in last year's Budget Act, there
was a provision snuck in--snuck in--to a must-pass piece of
legislation that makes it much easier for debt collectors to
call consumers--students--40 million students who owe student
loans, and makes it a lot easier for them to do that. And I've
introduced the HANGUP Act that would just stop that. It's
absolutely irresponsible.
And I ask unanimous consent, Mr. Chairman, to add two
letters to the record, one from 25 attorneys general, led by
Attorney General Zoeller, who is testifying here today, and one
from 16 consumer groups who have all written in support of the
HANGUP Act, so that----
The Chairman. Without objection, it will be entered into
the record.
Senator Markey. And I appreciate that, Mr. Chairman.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you.
Senator Markey. We thank all of you for being here today.
The Chairman. Thank you, Senator Markey.
Senator Nelson, anything for the--OK.
Let me just ask one last question. And again, this kind of
gets at the point of other regulatory bodies. And, Ms. Desai,
you, I think, indicated that some don't have the same view as
the FCC when it comes to communicating with consumers via cell
phone. Have other regulators seen consumer benefits in
communicating with consumers via mobile phone or text message?
Ms. Desai. Oh, sure. Yes, thank you for the question.
The Consumer Financial Protection Board has an early
intervention rule that encourages out-bound communications. The
Home Affordable Modification Program, the Federal Deposit
Insurance Corporation, the Federal Trade Commission, the
Consumer Product Safety Commission have all discussed the
benefits of out-bound communications, both by call and by text.
There are also State laws that require out-bound
communications, because they see the value in that. For
example, with utilities.
The Chairman. Well, I just want to make, kind of, one final
point, and that is, nobody is proposing that consumers
shouldn't have the right to stop unwanted calls at any point.
Even with the Obama robocall carve-out that was mentioned a
couple of times today that passed last fall, the FCC's proposed
rules would allow consumers to demand that a caller stop
calling immediately, even in that particular circumstance.
And I also want to be very clear, there is, I believe, and
I think you heard it here today, strong bipartisan interest in
ensuring that consumers are protected from harassing robocalls.
The problem we have is that the TCPA is no longer working as
well as it should. As we've heard, all of us are plagued by
unwanted calls, even on our cell phones, which is, I think, the
point that Ms. Saunders is getting at. At the same time, you
have legitimate companies that are facing needless lawsuits,
and consumers are being denied information that they need. And
I think what this cries out for is a balanced solution.
And your input today and testimony, I think, has been very
helpful in elevating these issues and getting a discussion.
Frankly, for that matter, I thought hearing some--perhaps some
common ground when it comes to, you know, the bad, the
harassing, the bad actors and the good actors, and perhaps
we'll be able to find a way to come up with some solutions that
reflect that common ground.
So, I want to thank you all very much for being here.
Senator Markey. Could--Mr. Chairman, is----
The Chairman. Yes.
Senator Markey.--is it possible I can ask one more
question? Then that would be it.
The Chairman. I kind of expected that would happen, so,
Senator Markey, one more question.
Senator Markey. And I appreciate that. And I know it's an
unwanted intrusion.
The Chairman. It's never unwanted.
Senator Markey. But, I thank you.
Last year's surface transportation bill, the FAST Act,
included a provision requiring the IRS to hire private debt
collectors to collect certain unpaid taxes, Attorney General.
That means that the IRS is going to be hiring many people to go
after those who may be unable to pay their taxes. This
provision, coupled with the TCPA carve-out in the budget deal,
will open the floodgates to private debt collectors robocalling
and robotexting millions of Americans. The enactment of the two
provisions coincide with the rise of tax and debt-collection
scams as a serious problem, costing Americans millions and
millions of dollars. Last year, bogus tax scams and fake debt
collectors topped the Better Business Bureau's list of top
scams of 2015, with over 32 percent of all scam reports about
phony tax and debt collectors.
So, Attorney General, will these two changes in the budget
and transportation laws on robocalls and robotext provisions
make it harder for consumers to protect themselves from
fraudulent tax and debt collectors?
Mr. Zoeller. Well, there's no question of looking at those
two, coupled together, that there was this kind of interest.
And again, like the Chairman said, it was put into the must-
pass budget. So, I think this idea of making the carve-out
exception really puts consumers at risks, because we've told
people, you know, ``The IRS will not call you.'' And that's--
``Don't worry, if that you do get the call.'' So, this is not
going to be a very effective tool to try to go after people,
other than the harassment that--if that's supposed to get
things done.
And I guess I would leave it that, again, this carve-out
with the exception is going to make the constitutional question
about whether the Federal Government has now made winners and
losers in an area which is really covered with free speech. So,
you may have really killed the whole TCPA by that carve-out.
Senator Markey. Yes. So, they become electronic kind of
Luca Brasis, you know, as debt collectors, which is bothering
you all night long.
Ms. Saunders, do you agree with the Attorney General?
Ms. Saunders. Yes, I do.
Senator Markey. OK, thank you.
I appreciate it, Mr. Chairman, very much. I think we
should----
The Chairman. Thank you, Senator Markey.
Senator Markey.--tread carefully into this.
The Chairman. We do very much thank you for being here,
taking the time, and for responding to our questions. And we
will keep the hearing record open for 2 weeks, during which
time Senators are asked to submit any questions for the record.
And, upon receipt, we would ask all of you if you could submit
your written answers to the Committee as soon as possible.
So, thank you all for being here.
This hearing is adjourned.
[Whereupon, at 11:45 a.m., the hearing was adjourned.]
A P P E N D I X
May 17, 2016
Hon. John Thune,
Chairman,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
Hon. Bill Nelson,
Ranking Member,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
To the Members of the U.S. Senate Committee on Commerce, Science, and
Transportation:
We, the undersigned student loan organizations, commend the
Committee for holding this hearing, ``The Telephone Consumer Protection
Act at 25: Effects on Consumers and Business,'' to examine class action
litigation abuses under the Telephone Consumer Protection Act (TCPA).
The TCPA, which was enacted over 25 years ago, was well-intentioned
legislation aimed at protecting the privacy of American consumers
against abusive telemarketing calls. The law has not kept up with
technology and was implemented at a time when cell phones were a luxury
and fees were commonly assessed for individual calls. This is no longer
the case. According to a recent study from the Centers for Disease
Control and Prevention,\1\ nearly one-half of American homes (47.4
percent) had only wireless telephones during the first half of 2015--an
increase of 3.4 percent over the last year. This number is even higher
for those age brackets more likely to have student loans--more than
two-thirds of adults aged 25-29 (71.3 percent) and aged 30-34 (67.8
percent) live in households with only wireless telephones.
---------------------------------------------------------------------------
\1\ Stephen J. Blumberg & Julian V. Luke, Wireless Substitution:
Early Release of Estimates From the National Health Interview Survey,
January-June 2015, National Center for Health Statistics (Dec. 1,
2015). http://www.cdc.gov/nchs/data/nhis/earlyrelease/
wireless201512.pdf
---------------------------------------------------------------------------
In recent years, the TCPA's original purpose has been corrupted by
widespread and abusive class action litigation where the plaintiffs'
lawyers are the only big winners. Lawsuits have increased by over 940
percent between 2010 and 2015, often against legitimate businesses such
as student loan servicers that are attempting to contact borrowers to
provide important information, not to make telemarketing calls. As a
result of this wide-spread litigation, some companies that have prior
consent are considering not using automated call technology to contact
borrower cell phones. If this occurs, even more struggling borrowers
will not receive helpful information such as deadline reminders and
repayment guidance that could prevent unnecessary student loan
delinquency or defaults.
We also commend the Congress for including a provision in the
Bipartisan Budget Act of 2015 (BBA) that would exempt from the TCPA
calls made using automated call technology to cell phones ``to collect
debt owed to or guaranteed by the United States.'' This important
provision will help student loan borrowers nationwide by enabling
Federal student loan servicers and collectors to effectively contact
and communicate with those who are struggling, to help borrowers
navigate the often-confusing array of student loan repayment options,
and to provide tailored solutions to prevent unnecessary delinquencies
and defaults. Our members are not just calling borrowers to say ``pay
up;'' they can offer real relief to struggling borrowers. The BBA
provision is an important step in helping us communicate more
effectively, and is an important beginning to TCPA reform.
We were very disappointed that the Notice of Proposed Rulemaking
(NPRM) issued by the Federal Communications Commission (FCC) does not
fully recognize the importance of allowing student loan servicers the
ability to call and text student loan borrowers in order to help them
avoid the negative and costly consequences of delinquency and default.
The NPRM proposes to arbitrarily limit the exemption to three (3)
contact attempts per month, regardless of whether we reach the borrower
or not. It would also subject these calls to the FCC's recent rule on
reassigned numbers, permitting only one call to a reassigned number
before exposure to TCPA liability occurs. It commonly takes a number of
call attempts simply to establish live contact with a borrower, and
multiple live contacts to help the borrower enroll in an appropriate
repayment plan, resolve a delinquency or, in the case of defaulted
borrowers, to establish a rehabilitation program to cure their default
and repair their credit.
Under the provisions of the proposed rule, servicers and collectors
will, in most instances, be unable to make live contact with a borrower
before it is too late to help keep them out of delinquency or default,
or to help those in default to rehabilitate their loans. As the
rulemaking progresses, we look forward to providing the FCC with our
specific recommendations to improve the proposed rule so that it
focuses on most effectively helping student and parent borrowers. As
stated, we believe a special case can and should be made to help
Federal student loan borrowers.
Today's hearing serves as an important first step in telling the
troubling litigation story under the TCPA, and in laying the groundwork
for continued meaningful reform of the statute which was initiated by
the BBA. We remain committed to working with this Committee to advance
important reforms that will modernize the TCPA and allow us to better
serve our student loan borrowers.
Sincerely,
Debra J. Chromy, Ed.D.,
President,
Education Finance Council (EFC).
James P. Bergeron,
President,
National Council of Higher Education Resources (NCHER).
Winfield P. Crigler,
Executive Director,
Student Loan Servicing Alliance (SLSA).
______
May 17, 2016
Hon. John Thune,
Chairman,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Hon. Bill Nelson,
Ranking Member,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Dear Chairman Thune and Ranking Member Nelson:
We, the undersigned organizations, commend the Committee for
holding today's hearing to examine class action litigation abuses under
the Telephone Consumer Protection Act (TCPA). The TCPA, which was
enacted over 25 years ago, was well-intentioned legislation aimed at
protecting the privacy of everyday Americans against abusive
telemarketing calls.
But the TCPA has become an engine for abusive class action
litigation that has become widespread. The numbers are staggering. Last
year alone, 3,710 TCPA lawsuits were filed in Federal court, and
between 2010 and 2015, case filings increased by over 940 percent.
Given that the TCPA has not been meaningfully amended by Congress
since 1991, countless well-intentioned businesses and organizations
(small and large) who legitimately try to communicate with employees,
members or customers find themselves defending abusive class action
litigation. The alleged liabilities appear in many forms and are
usually based on expansive legal theories that Congress never intended
when it first enacted the TCPA.
Today's hearing serves as an important first step to tell the
troubling litigation story under the TCPA. We remain committed to
working with this Committee to advance important reforms that will
bring a 20th Century solution in line with 21st Century challenges.
Sincerely,
ACA International
American Association of Healthcare Administrative Management
(AAHAM)
American Financial Services Association (AFSA)
American Insurance Association (AIA)
Coalition of Higher Education Assistance Organizations (COHEAO)
Consumer Bankers Association (CBA)
Electronic Transactions Association (ETA)
Financial Services Roundtable (FSR)
Florida Chamber of Commerce
Florida Justice Reform Institute (FJRI)
Indiana Chamber of Commerce
Las Vegas Metro Chamber of Commerce
Missouri Chamber of Commerce and Industry
Montana Chamber of Commerce
National Association of Chain Drug Stores (NACDS)
National Association of Mutual Insurance Companies (NAMIC)
National Restaurant Association (NRA)
National Retail Federation (NRF)
Newspaper Association of America (NAA)
Oregon Liability Reform Coalition (ORLRC)
Professional Association for Consumer Engagement (PACE)
Retail Industry Leaders Association (RILA)
Satellite Broadcasting and Communications Association (SBCA)
SLSA Private Loan Committee
South Carolina Civil Justice Coalition (SCCJC)
State Chamber of Oklahoma
Student Loan Servicing Alliance (SLSA)
Texas Civil Justice League (TCJL)
U.S. Chamber of Commerce (USCC)
U.S. Chamber Institute for Legal Reform (ILR)
Washington Liability Reform Coalition
Wisconsin Manufacturers & Commerce (WMC)
West Virginia Chamber of Commerce
cc: Members of the Committee on Commerce, Science, and Transportation
______
Prepared Statement of America's Health Insurance Plans (AHIP)
America's Health Insurance Plans (AHIP) is the national trade
association representing the health insurance community. AHIP's members
provide health and supplemental benefits through employer-sponsored
coverage, the individual insurance market, and public programs such as
Medicare and Medicaid. AHIP advocates for public policies that expand
access to affordable health care coverage to all Americans through a
competitive marketplace that fosters choice, quality, and innovation.
We appreciate this opportunity to comment on the Telephone Consumer
Protection Act of 1991 (TCPA) and how it affects the ability of health
plans to communicate with and provide vital information to their
customers. We want to highlight the following three points:
Telephonic communications play an essential role in
supporting the innovative strategies through which health plans
are working to improve health outcomes for their enrollees.
It is important to modernize the TCPA to account for changes
in the health care and telecommunications markets over the past
25 years. Specifically, the law needs to be implemented in a
way that allows health plans to focus on affirmative outreach
and include essential communications relating to appointment
and exam confirmations and reminders, wellness checkups,
hospital pre-registration instructions, pre-operative
instructions, lab results, post-discharge follow-up intended to
prevent readmission, prescription notifications, and home
health care instructions.
We are concerned about the Federal Communications
Commission's (FCC) 2015 TCPA Order that would prohibit HIPAA-
defined covered entities (e.g., health plans and health care
clearinghouses) from fulfilling their statutory, regulatory
and/or commercial contract obligations to place time-sensitive
health care calls to members to support and enhance critical
health care services and to ensure that members have the
information necessary to make well-informed decisions regarding
their health care.
Telephonic Communications Are a Valuable Tool in Improving Patient Care
Health plans have a long history of developing innovative tools and
strategies to ensure that enrollees receive health care services on a
timely basis, while also emphasizing prevention and providing access to
disease management services for their chronic conditions. Using systems
of coordinated care, health plans work to ensure that physician
services, hospital care, prescription drugs, and other health care
services are integrated and delivered with a strong focus on preventing
illness, improving health status, and employing best practices to
swiftly treat medical conditions as they occur--rather than waiting
until they have advanced to a more serious level.
Communicating with health plan enrollees is essential to the
success of the strategies health plans have developed to improve health
care quality and health outcomes. This includes, for example,
telephonic communications that remind enrollees to schedule
appointments with their doctor and refill prescription drugs. In other
cases, these messages provide information that can promote compliance
with treatment regimens, encourage healthy activities, and improve the
management of chronic conditions. These telephone messages are
permitted, under certain circumstances, by an exemption from the TCPA's
restrictions on unsolicited phone calls.
A May 2014 report \1\, commissioned by the Department of Health and
Human Services (HHS), identifies five categories of mobile health
programs that use text messaging to communicate with consumers, health
care professionals, and others:
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\1\ ``Using Health Text Messages to Improve Consumer Health
Knowledge, Behaviors, and Outcomes: An Environmental Scan,'' prepared
for the U.S. Department of Health and Human Services by the Mathematica
Policy Research and Public Health Institute, May 2014.
Health Promotion and Disease Prevention--delivering health
information and prevention messaging to promote healthy
---------------------------------------------------------------------------
behaviors or referrals to services;
Treatment Compliance--providing patient reminders to take
drugs or attend medical appointments to improve management of
asthma, diabetes, or other conditions;
Health Information Systems and Point-of-Care Support--
offering clinical support for health professionals and
community health workers through telemedicine;
Data Collection and Disease Surveillance--obtaining real-
time data on disease outbreaks from community health workers,
patient self-reports, or clinic and hospital records; and
Emergency Medical Response--maintaining alert systems that
disseminate information in an emergency or during disaster
management and recovery.
Health plans have demonstrated strong leadership in this area. For
example, some health plans send phone calls of one minute or less, or
text messages consisting of 160 characters or less, to remind members
of upcoming appointments, home visits, or other notifications aimed at
improving their health. These communications include:
Case management communications to members with helpful
instructions on processes such as post-discharge follow-up and
medication adherence;
Preventative care communications for screenings,
vaccinations, and available services; and
Health plan benefits communications regarding provider/
benefit changes, plan enrollment reminders, and even weather
emergencies affecting an upcoming appointment.
Implementation of the TCPA Needs to Keep Pace With Changes in the
Health Care and Telecommunications Markets
The TCPA was approved by Congress and signed into law in 1991. Over
the past 25 years, the TCPA has played a useful role in shielding
consumers from many unsolicited phone calls, including those using
automated and pre-recorded messages. As we noted above, an exemption
from the law's restrictions is provided for certain types of telephone
messages that health plans use to promote the health and well-being of
their enrollees. At the same time, health care communications conducted
by telephone are subject to the privacy, security, and marketing
protections of HIPAA. Patients should feel confident that when they
receive telephonic communications from their health plans, their
personal health information will receive the same level of protection
that is assured in other circumstances.
Unfortunately, the current TCPA exemption draws an arbitrary and
antiquated distinction between the use of land line telephone numbers
and cell phone numbers. Due to the complexity of the exemption--and its
use of outdated definitions--health plans are reluctant to contact
enrollees by cell phone, except in limited cases where they have proof
that the enrollee has granted prior express consent for such
communications. As a result, the TCPA health care exemption is
essentially meaningless for health plans that, as part of their quality
improvement efforts, would like to send telephone messages to a cell
phone. At a time when cell phones are replacing land lines in many
households, these restrictions on the ability of health plans to
contact enrollees on a cell phone have impeded the delivery of
important medical care messages to certain at-risk populations and in
some cases have barred health plans from completing quality-focused
outreach that is required under state law.
This policy is highly problematic, particularly in light of
research findings that clearly demonstrate that telephonic
communications on health care services are successful in improving
quality and leading to better health outcomes. According to the HHS
report mentioned above, a ``substantial body of research'' has shown
that text messaging programs can:
Bring about changes in behavior that are helpful in
improving short-term smoking cessation outcomes and improving
short-term diabetes management and clinical outcomes;
Improve patients' compliance with recommended treatments,
including adhering to prescribed medications and showing up for
doctor appointments; and
Improve immunization rates, increase knowledge about sexual
health, and reduce risky behaviors related to HIV transmission
(although the literature is less definitive in these areas).
Further, the restrictive interpretation of the TCPA regarding
health-related calls puts the TCPA at odds with the requirements of
certain government programs, particularly Medicaid, in which state
agencies either mandate or strongly encourage that health plans reach
out to members to provide new member welcome calls and reminders to
reestablish Medicaid eligibility. These state agencies also encourage
plans (often through financial incentives) to take proactive efforts to
improve quality through outreach to members, including many of the
types of calls and texts noted above.
Recognizing the advances that have occurred over the past 25 years
in both the health care system (i.e., the use of text messaging through
mobile health programs) and in the telecommunications market (i.e., the
expanded use of cell phones), we believe it is time for Congress and
the FCC to revisit the TCPA and reevaluate whether the current
implementation approach is serving the best interests of consumers.
We urge the Senate Commerce, Science, and Transportation Committee
and the FCC to reconsider the parameters of the TCPA's current health
care exemption. By updating this policy to reflect the realities of the
modern era--through a solution that creates parity between land lines
and cell phones--policymakers can remove barriers to the delivery of
important communications that have the potential to significantly
improve health outcomes for consumers.
______
Prepared Statement on behalf of the American Bankers Association,
Consumer Bankers Association, Credit Union National Association,
Financial Services Roundtable, Independent Community Bankers of
America, and National Association of Federal Credit Unions
Chairman Thune, Senator Nelson, and members of the Committee, the
American Bankers Association (ABA),\1\ Consumer Bankers Association
(CBA),\2\ Credit Union National Association (CUNA),\3\ Financial
Services Roundtable,\4\ Independent Consumer Bankers of America
(ICBA),\5\ and National Association of Federal Credit Unions\6\
(collectively, the Associations) appreciate the opportunity to submit a
statement for the record for this hearing on the effects of the
Telephone Consumer Protection Act (TCPA). As you are aware, that
statute prohibits, with limited exceptions, telephone calls to
residential lines and calls and text messages to mobile phones using an
automatic telephone dialing system (autodialer) unless the caller has
the prior express consent of the called party.
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\1\ ABA is the voice of the Nation's $16 trillion banking industry,
which is composed of small, regional, and large banks that together
employ more than 2 million people, safeguard $12 trillion in deposits,
and extend more than $8 trillion in loans.
\2\ Founded in 1919, the Consumer Bankers Association (CBA) is the
trade association for today's leaders in retail banking--banking
services geared toward consumers and small businesses. The nation's
largest financial institutions, as well as many regional banks, are CBA
corporate members, collectively holding well over half of the
industry's total assets. CBA's mission is to preserve and promote the
retail banking industry as it strives to fulfill the financial needs of
the American consumer and small business.
\3\ CUNA represents America's credit unions and their more than 100
million members.
\4\ The Financial Services Roundtable represents the largest
integrated financial services companies providing banking, insurance,
payment and investment products and services to the American consumer.
FSR member companies provide fuel for America's economic engine,
accounting for $92.7 trillion in managed assets, $1.2 trillion in
revenue, and 2.3 million jobs.
\5\ The Independent Community Bankers of America, the Nation's
voice for more than 6,000 community banks of all sizes and charter
types, is dedicated exclusively to representing the interests of the
community banking industry and its membership.
\6\ The National Association of Federal Credit Unions is the only
national trade association focusing exclusively on federal issues
affecting the Nation's federally insured credit unions. NAFCU
membership is direct and provides credit unions with the best in
Federal advocacy, education and compliance assistance.
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The Associations commend the Committee for holding this hearing.
Reform of the TCPA is urgently needed. Enacted 25 years ago to limit
aggressive telemarketing and secondarily, to protect the nascent
wireless phone industry, the TCPA was designed to provide consumers
with a right to pursue an individual claim against an unlawful caller
in small claims court and without the need for an attorney. Since then,
the TCPA has been interpreted by the Federal Communications Commission
(Commission or FCC) to apply, potentially, to any dialing technology
more advanced than a rotary phone and to impose liability for calls to
numbers for which consent has been obtained but the number has been
reassigned unbeknownst to the caller. With statutory damages of up to
$1,500 per call, any call that is purported to have been made using an
autodialer and that is inadvertently made to a wireless number without
documented consent can result in a class action lawsuit with a damage
claim in the millions, if not billions, of dollars. While the total
dollar value of these class action lawsuits can be staggering, and
frequently generate millions in fees for the attorneys that pursue the
cases, these lawsuits rarely accomplish a substantial recovery for
consumers. As the attached chart of recent TCPA settlements from one
financial institution demonstrates, the median amount awarded to
consumers would have been $7.70 if all class members submitted a claim.
This risk of draconian liability has led financial institutions to
limit--and, in certain instances, to eliminate--many pro-consumer, non-
telemarketing communications, including calls to combat fraud and
identity theft, provide notice of data security breaches, and help
consumers manage their accounts and avoid late fees and delinquent
accounts. The balance Congress struck between protecting consumers and
allowing routine and important communications between a business and
its customers to occur has been lost--and, all too often, the very
consumers Congress sought to protect are harmed.
In our statement, we make three points:
The TCPA, as interpreted by the Commission, has a
detrimental impact on consumers by effectively preventing
financial institutions from sending important, and often time-
sensitive, messages to consumers.
The TCPA is out of touch with current technology and
consumer communication preferences and expectations and
prevents financial institutions from effectively serving
consumers who wish to communicate by cell phone.
Congress should reform the TCPA by imposing a damages cap
and mandating the establishment of a database of reassigned
numbers.
I. The TCPA Has a Detrimental Impact on Consumers by Effectively
Preventing Financial Institutions from Sending Important, and
Often
Time-sensitive, Messages to Consumers
Financial institutions seek to send automated messages to prevent
fraud and identity theft, provide notice of security breaches, provide
low balance and over-limit alerts, and help consumers avoid
delinquency, among other beneficial purposes. Autodialers enable
financial institutions to provide these important communications to
large numbers of consumers quickly, efficiently, and economically. The
Commission's recent interpretation of the TCPA, coupled with the threat
of class action liability, discourages financial institutions from
making these calls that benefit consumers.
A. The Significance of Facilitating Important Communications to Cell
Phone Users, Particularly Low Income Users
Consumers today value, and increasingly expect, the convenience of
wireless connectivity and the convenience of being able to use mobile
financial services. Nearly 50 percent of U.S. households are now
``wireless-only,'' with that percentage rising to over 70 percent for
adults between 25 and 29.\7\
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\7\ Stephen J. Blumberg & Julian V. Luke, U.S. Dept. of Health and
Human Services, Ctr. for Disease Control & Prevention, Nat'l Ctr. for
Health Statistics, Wireless Substitution: Early Release of Estimates
from the National Health Interview Survey, January-June 2015 (2015),
available at http://www.cdc.gov/nchs/data/nhis/earlyrelease/
wireless201512.pdf (Tables 1 & 2).
---------------------------------------------------------------------------
This new reality has profound implications for how financial
institutions communicate with consumers, especially those of low and
moderate incomes for whom a cell phone may be their only point of
contact. Often, low income consumers strictly rely on their cell phone
for Internet and other communications because purchasing multiple
devices, such as landlines and laptops, can be prohibitively expensive.
Research conducted by the Federal Deposit Insurance Corporation (FDIC)
found that underbanked consumers prefer text messages to e-mails when
receiving alerts from financial institutions because texts are faster,
easier to receive, attention grabbing, and quicker and easier to
digest.\8\ Building on this research, the FDIC is exploring the
potential for mobile banking to promote and support underserved
consumers' banking relationships in part by increasing the
communications and alerts sent to those underserved consumers that use
mobile services.\9\ The Bureau of Consumer Financial Protection
(Bureau) also concluded that alerts to cell phones help consumers,
including low income consumers, access financial services and manage
personal finances:
---------------------------------------------------------------------------
\8\ Fed. Deposit Ins. Corp., Qualitative Research on Mobile
Financial Services for Underserved Consumers (Oct. 30, 2015), at 21,
available at https://www.fdic.gov/about/comein/2015/come-in-2015.pdf.
\9\ Fed. Deposit Ins. Corp., Fil-32-2016, Request for Comments on
Mobile Financial Services Strategies and Participation in Economic
Inclusion Demonstrations 3 (2016), available at https://www.fdic.gov/
news/news/financial/2016/fil16032.pdf.
By enabling consumers to track spending and manage personal
finances on their devices through mobile applications or text
messages, mobile technology may help consumers achieve their
financial goals. For economically vulnerable consumers, mobile
financial services accompanied by appropriate consumer
protections can enhance access to safer, more affordable
products and services in ways that can improve their economic
lives.\10\
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\10\ Bureau of Consumer Fin. Prot., Mobile Financial Services: A
Summary of Comments from the Public on Opportunities, Challenges, and
Risks for the Underserved, at 10 (Nov. 2015), available at http://
files.consumerfinance.gov/f/201511_cfpb_mobile-financial-services.pdf
(emphasis added).
Financial institutions want to serve their customers and members--
and promote financial inclusion--by connecting with consumers who may
use only cell phones for communications. The TCPA should not interfere
with the efforts of these institutions to provide financial services to
consumers of all economic levels.
B. The Threat of TCPA Litigation Unnecessarily Limits Several Types of
Pro-
Consumer Calls
The threat of class action liability threatens to curtail the
following categories of pro-consumer, non-telemarketing communications
made by financial institutions:
(1) Breach Notification and Fraud Alerts
With identity theft and fraud losses at all-time highs,\11\
financial institutions are relentlessly pursuing fraud detection and
prevention capabilities. A key component is autodialed calling to
consumers' wireline and mobile telephones, including text messaging to
customers' mobile devices, to alert customers to out-of-pattern account
activity and threatened security breaches. In addition, financial
institutions are required to establish response and consumer
notification programs following any unauthorized access to consumers'
personal information, under Section 501(b) of the Gramm-Leach-Bliley
Act, as well as under the breach notification laws of 46 states and the
District of Columbia.\12\ The volume of these required notifications,
which average 300,000 to 400,000 messages per month for one large
financial institution alone, cannot be accomplished at all, much less
with acceptable speed, unless the process is automated.\13\ In
addition, identity theft victims have the right, under the Fair Credit
Reporting Act (FCRA), to have fraud alerts placed on their credit
reporting agency files, which notify all prospective users of a
consumer report that the consumer does not authorize the establishment
of any new credit plan or extension of credit without verification of
the consumer's identity. Further, the FCRA expressly directs financial
institutions to call consumers to conduct this verification.\14\
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\11\ In 2015, 781 data breaches were reported, a 27 percent
increase from 2013. Press Release, Identity Theft Resource Center,
Identity Theft Resource Center Breach Report Hits Near Record High in
2015 (Jan. 25, 2016), available at http://www.idtheftcenter.org/
index.php/ITRC-Surveys-Studies/2015databreaches.html. In 2014, 12.7
million people were victims of identity fraud. Al Pascual & Sarah
Miller, Javelin Strategy & Research, 2015 Identity Fraud: Protecting
Vulnerable Populations (Mar. 2015), https://www.javelinstrategy.com/
coverage-area/2015-identity-fraud-protecting-vulnerable-populations.
\12\ Gramm-Leach-Bliley Financial Services Modernization Act of
1999, Pub. L. 106-102, 113 Stat. 1338, Sec. 501(b); see, e.g., Cal.
Civ. Code Sec. 1798.29; Fla. Stat. Sec. 817.5681; 815 ILCS Sec. 530/
10(a); NY CLS Gen. Bus. Sec. 899-aa; N.C. Gen. Stat. Sec. 75-65; Rev.
Code Wash. Sec. 19.255.010.
\13\ The greater efficiency of automated calling is suggested by a
report issued by Quantria Strategies, LLC, which states that automated
dialing permits an average of 21,387 calls per employee per month, as
opposed to an average of 5,604 calls per employee per month when manual
dialing is used. The gain in efficiency when automated methods are used
is 281.6 percent. See J. Xanthopoulos, Modifying the TCPA to Improve
Services to Student Loan Borrowers and Enhance Performance of Federal
Loan Portfolios 9 (July 2013), available at http://apps.Com
mission.gov/ecfs/document/view?id=7521337606.
\14\ Fair Credit Reporting Act Sec. 605A (codified at 15 U.S.C.
Sec. 1681c-1).
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Although the Commission granted an exemption from the TCPA's
consent requirements for these data breach and suspicious activity
alert calls, the Commission inexplicably required that exempted calls
be made only to a number that was provided by the customer. As a result
of this requirement, many consumers will not be contacted with time-
sensitive messages intended to prevent fraud and identity theft simply
because there is no documentation that the consumer, not a spouse or
other joint account holder, provided the number to the financial
institution. What we have learned from the marketplace is that the
``provided number'' condition is unnecessarily limiting the ability of
financial institutions to send exempted messages:
One bank is unable to send approximately 3,000 exempted
messages each day due to the provided number condition.
A second large bank is not able to send exempted messages to
approximately 6 million customers because of the condition.
A third bank is not able to send an exempted message to 62
percent of its customers because of the condition.
Small financial institutions, including credit unions and community
banks, have also expressed concerns, or found that they do not have the
resources to comply with a number of conditions that must be met to
qualify for this exemption. The experience of these financial
institutions shows that the provided number condition, rather than
serving the interests of consumers, has effectively prevented consumers
from enjoying the benefits the exemption was intended to provide.
(2) Consumer Protection and Fee Avoidance Calls
Financial institutions use autodialed telephone communications to
protect consumers' credit and help them avoid fees. Institutions seek
to alert consumers about low account balances, overdrafts, over-limit
transactions, or past due accounts in time for those customers to take
action and avoid late fees, accrual of additional interest, or negative
reports to credit bureaus. Indeed, the FDIC listed ``low-balance
alerts'' as one of the ``most promising strategies'' for financial
institutions to help consumers avoid overdraft or insufficient funds
(NSF) fees.\15\ Autodialed calls that deliver prerecorded messages are
the quickest and most effective way for these courtesy calls to be
made. Failure to communicate promptly with consumers who have missed
payments or are in financial hardship can have severe, long-term
adverse consequences. These consumers are more likely to face
repossession, foreclosure, adverse credit reports, and referrals of
their accounts to collection agencies. Prompt communication is a vital
step to avoid these harmful consumer outcomes.
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\15\ Fed. Deposit Ins. Corp., Fil-32-2016, Request for Comments on
Mobile Financial Services Strategies and Participation in Economic
Inclusion Demonstrations 3 (2016), available at https://www.fdic.gov/
news/news/financial/2016/fil16032.pdf.
---------------------------------------------------------------------------
(3) Loan Modification Calls
Financial institutions also rely upon automated calling methods to
contact consumers who are encountering difficulty paying their
mortgages or student loans. Autodialers and prerecorded messages are
used to initiate contact with delinquent borrowers, to remind them to
return the paperwork needed to qualify for a modification, and to
notify borrowers that a modification is being delivered so that the
package will be accepted. Significantly, the Commission's consent
requirement is in conflict with the Bureau's mortgage servicing rules,
which require servicers to make a good faith effort to establish live
contact with a borrower. If the servicer has not obtained the consent
of the borrower, it cannot--consistent with the TCPA--efficiently make
the calls required by the Bureau's rules to the approximately 50
percent of consumers with wireless numbers only.
(4) Customer Service Calls
Financial institutions rely upon the efficiency of autodialed
calling to provide follow-up calls to resolve consumers' service
inquiries. For example, if a consumer inquiry requires account
research, a customer service representative often completes the
necessary research and places an autodialed follow-up call to the
consumer. Autodialed calls are initiated also to remind consumers that
a credit card they have requested was mailed and must be activated.
(5) Insurance Policyholder Alerts
Insurance providers use autodialers to advise consumers of the need
to make payment on automobile and life insurance policies to prevent
potential lapse. Automobile insurers are required to give written
notice 10-30 days in advance before terminating policies for failure to
pay. Using an autodialer helps ensure the consumer is aware of the need
to make payment in time to avoid a lapse in policy, late fees, or
driving without legally-required liability insurance.
Similarly, life insurance policies require advance written notice
of cancellation. If a policy lapses for non-payment, some individuals
may no longer be eligible for life insurance or may have to pay
substantially more for that insurance. Use of the autodialed messages
helps avoid nonpayment cancellation of the life insurance.
(6) Disaster Notifications
Many property insurance companies rely on the speed of autodialers
to notify their customers when a catastrophe is imminent of how and
where to file a claim. Furthermore, immediately after a disaster,
wireline phone use may be unavailable, claim locations may have
changed, and normal communications may not be operating, necessitating
calls to mobile phones. Similarly, autodialers may also be used by
insurers to give information regarding the National Flood Insurance
Program.
II. The TCPA Prevents Financial Institutions from Effectively Serving
Consumers who Wish to Communicate by Mobile Phone
As interpreted by the Commission, the TCPA imposes significant
impediments on the ability of financial institutions and other
businesses to communicate with those consumers who elect to communicate
by cell phone. Put simply, the TCPA effectively prevents financial
institutions from using the most efficient means available to advise
these mobile phone-electing consumers of important and time-sensitive
information affecting the consumers' accounts. This is not what
Congress intended. In enacting the TCPA, Congress sought to provide
consumers with choice of contact, not isolation from contact. Making
that choice for cell phone users more burdensome and less efficient--as
the Commission has done in its recent orders--is not what Congress
sought to accomplish. The report of the House Committee on Energy and
Commerce accompanying the enactment of the TCPA clearly states that,
under the TCPA, ``a retailer, insurer, banker or other creditor would
not be prohibited from using an automatic dialer recorded message
player to advise a customer . . . that an ordered product had arrived,
a service was scheduled or performed, or a bill had not been paid.''
\16\
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\16\ H.R. Rep. 102-317 (1991).
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There are two primary ways in which the TCPA, as interpreted by the
FCC, imposes significant impediments on the ability of financial
institutions to contact consumers, as described below.
A. The TCPA Has Been Interpreted to Sweep all Non-manual Dialing
Technologies within the TCPA's Limited Autodialer Category
The Commission has construed the definition of an autodialer so
broadly that it sweeps in technologies used by financial institutions
to send important messages to consumers that were never contemplated to
fall within the definition of this term. This expansive interpretation
effectively prohibits financial institutions from using many efficient
dialing technologies unless the consumer's prior express consent has
been obtained. Congressional action is needed to return the definition
of autodialer to its original, limited application.
As defined in the TCPA, an autodialer 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.'' \17\
Significantly, financial institutions, unlike the abusive telemarketers
from which Congress intended to protect consumers, are interested only
in calling the telephone numbers of actual customers and members and
have no desire or incentive to dial numbers generated randomly or in
sequence.
---------------------------------------------------------------------------
\17\ 47 U.S.C. Sec. 227(a)(1) (emphasis added).
---------------------------------------------------------------------------
However, the Commission greatly expanded the scope of the devices
classified as an autodialer beyond those devices that use a random or
sequential number generator. In addition, the Commission concluded a
device is an autodialer if it has the ``potential ability'' to perform
the autodialer's functions--even if it does not have the present
ability to do so.\18\ This interpretation, divorced from the statutory
text, sweeps in dialing systems used by financial institutions,
preventing them from sending important messages to consumers
efficiently. In fact, one financial institution has resorted to
purchasing last generation ``flip'' cell phones solely to ensure
compliance with the Commission's rulings concerning the TCPA. Financial
institutions should not be forced to use all-but obsolete technology in
order to remain compliant with federal law.
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\18\ In the Matter of Rules & Regulations Implementing the Tel.
Consumer Prot. Act of 1991 et al., 30 F.C.C. Rcd. 7961, 7976 (2015)
(emphasis added).
---------------------------------------------------------------------------
B. The TCPA's Imposition of Liability for Calling Reassigned Numbers is
Harmful to Consumers
As interpreted by the FCC, the TCPA creates a risk of liability for
calling a number for which the caller has received consent, but which
has been subsequently reassigned to another consumer unbeknownst to the
caller. The potential liability for calls made in good faith to
reassigned numbers threatens to curtail important and valued
communications between the institution and consumers.\19\ If the fear
of calling a reassigned number prevents a financial institution from
sending an alert to a consumer about potential identity theft,
suspicious activity on the account, or a low balance, the consumer
suffers.
---------------------------------------------------------------------------
\19\ Although the Commission established a ``one call'' safe
harbor, this provides little comfort to financial institutions, as
callers often do not learn whether a call has connected with the
intended recipient--as opposed to a party to which the number may have
been reassigned--and thus do not receive notice when the number has
been reassigned to another consumer.
---------------------------------------------------------------------------
The TCPA's imposition of liability for calls made to reassigned
numbers is wholly unnecessary to protect the privacy of consumers.
There is simply no need or incentive for a financial institution to
place a non-telemarketing, informational call to anyone other than the
intended recipient. Moreover, institutions make significant efforts to
promote accuracy in the numbers they call, such as providing consumers
multiple means to edit contact information, confirming a consumer's
contact information during any call with the consumer, regularly
checking to confirm that a residential landline number has not been
transferred to a wireless number, or providing instructions for
reporting a wrong number call.
Financial institutions--which can place billions of informational
calls annually--cannot completely avoid calling reassigned wireless
telephone numbers. Telephone companies recycle as many as 37 million
telephone numbers each year,\20\ and yet there is no public wireless
telephone directory or tool available to identify numbers that have
been reassigned. As discussed below, Congress should mandate the
establishment of a database of reassigned numbers to assist callers
with contacting consenting consumers at those consumers' current
number.
---------------------------------------------------------------------------
\20\ Alyssa Abkowitz, Wrong Number? Blame Companies' Recycling,
Wall Street J. (Dec. 1, 2011), available at http://www.wsj.com/
articles/SB100014240529702040120045770701226874
62582#ixzz1fFP14V4h.
---------------------------------------------------------------------------
III. Congress Should Reform the TCPA by Imposing a Damages Cap
We urge Congress to reform the TCPA to ensure that financial
institutions and other callers can make important, and often time-
sensitive, calls to consumers. A statute designed to provide consumers
with a right to pursue an individual claim against an unlawful
telemarketer in small claims court and without the need for an attorney
\21\ now threatens any company or financial service provider that seeks
to use automated dialing technologies to communicate with its customers
or members with abusive class action litigation. The balance that
Congress struck between protecting consumers and safeguarding
beneficial calling practices has been eviscerated, and recent
interpretations of the TCPA clearly demonstrate the Commission's
refusal to restore this balance.
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\21\ See 137 Cong. Rec. 30821-30822 (1991) (statement of Sen.
Hollings) (``The substitute bill contains a private right-of-action
provision that will make it easier for consumers to recover damages
from receiving these computerized calls. The provision would allow
consumers to bring an action in State court against any entity t hat
violates the bill. The bill does not, because of constitutional
constraints, dictate to the states which court in each state shall be
the proper venue for such an action, as this is a matter for State
legislators to determine. Nevertheless, it is my hope that states will
make it as easy as possible for consumers to bring such actions,
preferably in small claims court. . . . Small claims court or a similar
court would allow the consumer to appear before the court without an
attorney. The amount of damages in this legislation is set to be fair
to both the consumer and the telemarketer.'') (emphasis added).
---------------------------------------------------------------------------
Congress should amend the TCPA by imposing a damages cap similar to
the damage caps assigned to other consumer financial protection
statutes. The Truth in Lending Act (TILA), the Electronic Funds
Availability Act, and the Fair Debt Collection Practices Act each limit
the amount awarded in individual and class action litigation. TILA, for
example, includes not only individual statutory damages caps, but also
imposes an aggregate cap in the event of a class action or series of
lawsuits tied to the same lack of compliance. We believe that a similar
cap would be an appropriate addition to the TCPA. We welcome the
opportunity to work with Congress to determine what the proper damages
cap amount would be for TCPA litigation.
Conclusion
In enacting the TCPA, Congress struck a balance between protecting
consumer privacy and safeguarding calling practices that help consumers
avoid identity theft, late fees, and other harms. The Commission's
interpretations of the TCPA have eviscerated that balance, preventing
financial institutions and others from serving consumers who wish to
communicate by cell phone. Congress should protect consumers' ability
to receive important, and often time-sensitive, calls by reforming the
TCPA.
______
Navient
Washington, DC, June 1, 2016
Hon. John Thune,
Chairman,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Hon. Bill Nelson,
Ranking Member,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Dear Chairman Thune and Ranking Member Nelson,
Thank you for the recent hearing on the Telephone Consumer
Protection Act of 1991 (the ``TCPA'') and its impact on consumers and
businesses.\1\ When your Committee announced the hearing, Navient
looked forward to a fulsome discussion regarding a variety of
stakeholder concerns regarding the TCPA, including how the statute is
hindering efforts to protect consumers who are often prevented from
receiving important, time-sensitive non-marketing information. We also
expected that you would hear about the growing number of unreasonable
challenges that organizations face in complying with the TCPA, and how
this Congress's recent passage of the Bipartisan Budget Act of 2015
(the ``Budget Act'')\2\ can spur much-needed assistance to Federal
student loan borrowers. Given the complexity of the student loan system
and the numerous options available to borrowers in repayment, this
discussion is critically important.
---------------------------------------------------------------------------
\1\ The Telephone Consumer Protection Act at 25: Effects on
Consumers and Business: Hearing Before the S. Comm. on Commerce,
Science, & Transportation, 114th Cong. (2016) (``2016 TCPA Hearing'').
\2\ See Bipartisan Budget Act of 2015 Sec. 301, codified at 47
U.S.C. Sec. 227 (2016) (the ``Budget Act'').
---------------------------------------------------------------------------
While there were many important issues addressed in the hearing, we
were disappointed that there was not a fuller discussion of the
importance of contact with Federal student loan borrowers and the
impediments that the TCPA imposes to reaching and helping struggling
and at-risk borrowers. Rather than exploring how the Budget Act can
help prevent Federal borrowers from advancing in delinquency or
defaulting, we were dismayed by some of the misinformation provided to
the Committee regarding Federal student loan borrowers, based on
preconceived notions of--and inaccurate testimony related to--
``robocalls.''
We are hopeful that this submission will supplement the record with
information not provided during the hearing; address several erroneous
statements made during the hearing; and highlight rules that the FCC
has proposed that will undermine the clear directive this Congress gave
the agency and, if adopted, will cause further harm to student loan
borrowers.
We hope that the Committee will consider this additional
information as it continues its important work regarding the TCPA and
the Budget Act.
Our Shared Goal in Helping Borrowers
Navient is the Nation's largest student loan servicer and a partner
to millions of Federal student loan borrowers. Navient does not set or
even influence the interest rates or terms for Federal student loans;
those are set by Congress. We also do not set the tuition rates or
enrollment fees, which are set by colleges and universities. Nor do we
set the penalties for non-payment. Instead, our role is to work with
borrowers after they have selected the school of their choice and
incurred a debt. We help borrowers navigate the overly complex array of
repayment options as they work towards successfully repaying their
loans. There are now more than 50 options available to borrowers,
including deferment, forbearance, and forgiveness, with 16 repayment
programs (nine of which are based on income, as discussed below).
And Navient is a dedicated and successful partner. Overall, Federal
student loan borrowers who enter repayment and have Navient as their
servicer are 38 percent less likely to default than borrowers who use
other Federal student loan servicers.
Mr. Chairman, Navient is one of the businesses ``trying to do the
right thing and play by the rules.'' \3\ We too understand the
frustration that comes when the phone rings and the voice on the other
line is a prerecording claiming that we just won a ``free'' cruise.\4\
Your sentiment harkens back to the TCPA's enactment, legislation
adopted to curb abusive telemarketing calls.\5\ But Federal student
loan servicers are different from telemarketers offering a free cruise,
and the TCPA's implementation should reflect this simple truth.
---------------------------------------------------------------------------
\3\ See 2016 TCPA Hearing, Statement of Sen. John Thune, Chairman,
S. Comm. on Commerce, Science, & Transportation (``Chairman Thune
Statement'').
\4\ Id.
\5\ See S. Rep. No. 102-178, at 2 (1991); H.R. Rep. No. 102-317, at
1 (1991). The House Report, for example, noted that ``[u]nrestricted
telemarketing . . . can be an intrusive invasion of privacy'' and that
``[m]any consumers are outraged [at] the proliferation of intrusive,
nuisance calls to their homes from telemarketers.'' H.R. Rep. No. 102-
317, at 1 (1991).
---------------------------------------------------------------------------
In the first quarter of 2016, the total value of Federal student
loans in default reached $121 billion.\6\ Statutorily mandated
penalties for default are harsh and include wage garnishment (without
the need for a court order), offset of Federal tax refunds, and loss of
eligibility for Federal financial assistance. These are in addition to
the impact to the borrower's credit file. Calls and text messages from
student loan servicers are proven, effective reminders that help
millions of Americans. And keeping borrowers on track has tangible
benefits such as making it easier to pass a pre-employment credit
check, obtain housing, or secure financing for other essential products
and services.
---------------------------------------------------------------------------
\6\ See Dept. of Ed., Fed. Student Aid Data Ctr., Direct Loan and
Federal Family Education Loan Portfolio by Loan Status, https://
studentaid.ed.gov/sa/about/data-center/student/portfolio (last visited
May 24, 2016).
---------------------------------------------------------------------------
Myths About the TCPA are Harming Borrowers and Other Consumers
The purpose for the hearing was to ``understand whether [the] TCPA
is inadvertently hurting the good actors and consumers.'' \7\ The bad
news is that it is. The worse news is that seemingly well-minded
organizations are advocating for policies that threaten to harm
consumers and prevent Federal student loan servicers from providing
borrowers with critical, time-sensitive information that can help avoid
financial catastrophe.
---------------------------------------------------------------------------
\7\ Chairman Thune Statement at 1.
---------------------------------------------------------------------------
For example, during the hearing, the Committee received testimony
that the ``best estimate of the total number of people who could be
negatively impacted by [the Budget Act's amendments to the TCPA] is
over 61 million people,'' including an estimated 41.8 million Federal
student loan borrowers.\8\ This is a red herring that exponentially
overstates the number of affected borrowers. Recall that the Budget Act
amendments to the TCPA only impact borrowers for which callers did not
already have prior express consent to call. Navient already has consent
to autodial 90 percent of the Federal student loan borrowers that it
services, so the Budget Act amendments only pertain to the remaining
borrowers.
---------------------------------------------------------------------------
\8\ 2016 TCPA Hearing, Statement of Margot Saunders, Of Counsel,
National Consumer Law Center (``NCLC'').
---------------------------------------------------------------------------
Moreover, the Committee received testimony that ``[m]any, if not
most, of the households living below the poverty line rely on pay-as-
you-go, limited-minute prepaid wireless products.'' \9\ Again, this is
a red herring. In the first instance, unanswered calls typically do not
trigger any expense to the wireless subscriber. Second, less than one
percent of the borrowers that Navient services: (1) use a prepaid cell
phone; (2) have not provided Navient with consent to contact; and (3)
are delinquent on their Federal student loan obligations. The idea that
allowing student loan servicers to help borrowers avoid delinquency and
default--and the Federal penalties stemming from delinquency and
default--will result in massive numbers of individuals losing ``access
to health care, transportation, emergency, and other essential
services'' and falling victim to ``social isolation'' \10\ borders on
hysterics.
---------------------------------------------------------------------------
\9\ Id. at 4. Even though no citation was provided, we currently
have no reason to disagree with this claim.
\10\ Id. at 5.
---------------------------------------------------------------------------
NCLC testified that the major causes of consumer delinquency are
unemployment, illness and marital problems.\11\ While this may be true,
it does not support restricting attempts to reach Federal student loan
borrowers. Unlike other forms of consumer credit, there are numerous
options for borrowers to resolve delinquencies and avoid default. In
some cases, such as repayment plans based on income, the payment
obligation can be as low as $0. More than 90 percent of the time that
Navient has a live conversation with a borrower, the customer is able
to resolve his or her delinquency. But the converse is also true: 90
percent of borrowers that we service who default on their student loans
do not have a live conversation with us beforehand, despite our best
efforts to reach them. Based on these facts, we should be promoting,
not hindering, efforts to connect servicers with borrowers,
particularly when default prevention options such as deferments due to
unemployment or a temporary total disability are available.
---------------------------------------------------------------------------
\11\ Id. at 16-17.
---------------------------------------------------------------------------
Included within the 50 different options available to borrowers are
nine different income-driven repayment (``IDR'') plans. These plans
allow borrowers to base their monthly payment on their discretionary
income, adjusted for family size. The monthly payment can be as low as
$0. Currently, one in four Direct Loan borrowers that Navient services
is enrolled in an IDR plan.
Live contact with struggling borrowers is key to helping them
navigate the multitude of options and the complexity of the repayment
system. Because of the TCPA's restrictions, we are less able to reach
and assist borrowers who have not given us consent to contact them on
their cell phones. As mentioned above, we can autodial nine out of 10
of the Federal student loan borrowers we service today. And these
borrowers are far more likely to be current. Indeed, borrowers who we
are not able to autodial are more likely to be delinquent and default.
Only 50 percent of borrowers who default have provided consent to call
them on their cell phones. It bears repeating--if we are able to speak
with these struggling borrowers, nine out of 10 will not default. Yet,
today's interpretations of the TCPA impose hurdles to providing these
borrowers the very information that they need.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In sum, there is a strong and direct correlation between Navient's
ability to contact borrowers and the likelihood that a borrower will
avoid the serious consequences of delinquency or default on a student
loan, and the TCPA makes it much more difficult for Navient to contact
those borrowers.
The FCC is Undermining this Congress's TCPA Directives
Fortunately, last year this Congress took swift action to allow
Federal student loan servicers to continue to help borrowers in need
while also maintaining important consumer protections. In no uncertain
terms, Congress exempted from the TCPA calls to collect debts owed to
or guaranteed by the United States. But Congress gave to the FCC the
task of implementing regulations. Unfortunately, the FCC's proposed
rules, if adopted, would do little to help millions of Federal student
loan borrowers lower their risk of default. The proposals suffer from
several key flaws.
First, the FCC proposes limiting the exemption to calls made after
a borrower is already delinquent, contrary to Congress's plain language
which makes no distinction between delinquent and non-delinquent
borrowers.\12\ Navient regularly makes calls to certain non-delinquent
borrowers that are aimed at keeping a borrower on track (and thus for
the purpose of ``collecting'' the debt). While Federal student loan
servicers have no interest or need to call borrowers in general who are
current on their loans, there are important instances when outreach is
key:
---------------------------------------------------------------------------
\12\ See Rules and Regulations Implementing the Telephone Consumer
Protection Act of 1991, Notice of Proposed Rulemaking, FCC 16-57 8-9
(rel. May 6, 2016) (``NPRM'').
Borrowers who are approaching deadlines or changes in
status: There are many instances, such as deferments,
forbearances, and the grace period between school and
repayment, where a borrower may be approaching a new payment
status. Some of these borrowers--especially those at risk of
delinquency--benefit from early outreach to make sure they are
aware of their repayment options. One example of an at-risk
borrower is one who has previously defaulted and has returned
to repayment through loan rehabilitation. Navient reaches out
to these borrowers early--before delinquency--to make sure that
they stay on track and are able to access the right repayment
---------------------------------------------------------------------------
plan for them.
Income-driven repayment enrollment: IDR is a great option
for many borrowers, but they must apply on-line at the
Department of Education or fill out a paper application to
enroll in an IDR plan. The Department of Education requires
Federal servicers to call borrowers whose applications are
incomplete or denied to help them complete their application,
regardless of their delinquency status. In addition, Navient
calls previously delinquent borrowers who have indicated that
they plan to enroll in IDR but for whom we have not received a
complete application. Neither of these outreach attempts to
borrowers without consent would be allowed under the FCC's
proposed rule.
IDR reenrollment: Borrowers are required to reenroll
annually in IDR plans. Navient places reminder calls to
borrowers whose annual reenrollment deadline is approaching to
make sure they submit their paperwork before their payments
increase.
The intent of the Budget Act provision is to ensure that Federal
student loan borrowers are aware of their options regardless of whether
or not they are delinquent. It was certainly not the legislation's
intent to prevent reaching out at key times before--or after--
delinquency to help a borrower stay on track.
Second, the FCC proposes not including within the exemption calls
to reassigned wireless numbers.\13\ This is untenable. College students
change telephone numbers frequently, and Navient prevent entirely calls
to reassigned numbers. If the new holder of a reassigned number refuses
to answer a call or respond to a text message informing Navient that
the number no longer belongs to the borrower, Navient is left in the
indefensible and unenviable position of either attempting additional
contacts using the number (and risk facing litigation) or giving up on
contacting the borrower.
---------------------------------------------------------------------------
\13\ Id. 14.
---------------------------------------------------------------------------
Finally, the FCC proposes to severely limit the number of exempted
calls to three per month--whether or not the called party answers the
phone.\14\ The FCC's proposal has no basis and is far more restrictive
than the three calls per week that NCLC urged the Consumer Financial
Protection Bureau to allow in the context of the Fair Debt Collection
Practices Act.\15\ Indeed, the FCC's limits are more restrictive than
the four attempts in three weeks that the Department of Education is
now requiring servicers to undertake to reach Direct Loan borrowers
whose IDR applications are incomplete.
---------------------------------------------------------------------------
\14\ Id. 18.
\15\ See April Kuehnhoff & Margot Saunders, National Consumer Law
Center, Debt Collection Communications: Protecting Consumers in the
Digital Age 4 (June 2015), available at http://bit.ly/1LQxpDK.
---------------------------------------------------------------------------
The FCC's efforts to effectively eliminate the exemption are
contrary to Congress's clear directive in passing the Budget Act (and
contrary to the Administration's longstanding efforts to include the
exemption as part of the budget). In the end, the FCC's rules--if
adopted--would hurt, rather than help, borrowers and other taxpayers.
Congress had good reasons for adopting the TCPA in 1991, but
preventing Federal student loan servicers such as Navient from helping
student loan borrowers avoid delinquency and default was not one of
them. The Budget Act's amendments to the TCPA open the door for
servicers to help borrowers avoid delinquency and default while
supporting responsible use of Federal taxpayer dollars. We encourage
the Committee to keep these goals in mind as it continues to oversee
the FCC's implementation of Section 301 of the Budget Act and the TCPA.
Respectfully submitted,
Sarah E. Ducich,
Senior Vice President,
Public Policy and Government Relations,
Navient.
______
Response to Written Questions Submitted by Hon. John Thune to
Hon. Greg Zoeller
Question 1. Would a concrete standard for revocation of consent in
the TCPA regulations, as there is for the FDCPA, FCRA, and other
banking laws, be helpful in reducing the types of contact intended to
be prohibited by the TCPA?
Answer. Opting out of receiving robocalls and other unwanted
contacts should require no more effort than pressing a button or
telling a caller to stop calling. The FDCPA requires a consumer to
notify a debt collector in writing that the consumer wishes the debt
collector to cease further communication. The FCRA allows a consumer to
opt out of certain credit offers by notifying the credit reporting
agency in writing or via a mechanism maintained by the agency. It is
burdensome to notify a debt collector in writing to cease
communications, especially when the consumer is not the debtor they are
seeking.
Question 2. Mr. Zoeller, you and a number of other attorneys
general sent a letter to this committee urging support for the HANGUP
Act, arguing that it was necessary because, ``As amended, the TCPA now
permits citizens to be bombarded by unwanted and previously illegal
robocalls to their cell phones if the calls are made pursuant to the
collection of debt owed to or guaranteed by the United States.'' Is
that your understanding of what will necessarily be allowed as a result
of the Federal Communications Commission's implementation?
Answer. Yes, it is. The majority of debt collection complaints are
from non-debtors who receive unwanted calls intended for other people.
Many of these complainants report multiple calls despite informing the
callers that they are not the debtor.
Question 3. What are some of the benefits and challenges of moving
forward with a mandatory reassigned numbers database?
Answer. Benefits might include fewer calls to consumers who acquire
numbers that formerly belonged to debtors. Challenges include the cost
of maintaining and updating the database and protecting it from
unscrupulous telemarketers and scammers.
Question 4. Is there a helpful way to distinguish between random or
sequential telemarketing calls and texts versus calls or texts to
numbers originally provided by customers that have been subsequently
reassigned?
Answer. I think not, assuming both types of calls are unwelcome and
possibly illegal.
Question 5. Are texts less intrusive than phone calls? If so, would
it make sense to have reduced penalties for text message violations of
the TCPA in order to encourage contact through text messaging rather
than phone calls?
Answer. Anyone who has been awakened by the insistent buzzing of a
text arriving in the middle of the night can attest that texts are not
less intrusive than calls. Also, many people, especially those on
discounted or pre-paid wireless plans. are charged for texts.
Question 6. Are you aware of any negative consequences resulting
from the Commission's 2015 Omnibus Declaratory ruling, including the
movement of call centers overseas?
Answer. The movement of call centers overseas was a trend long
before 2015. As for consequences of the FCC's 2015 ruling, we would
like to see telecommunications providers move more quickly to provide
more extensive call-blocking services for consumers, and solutions that
would stop illegal calls before they got through to residential lines.
Question 7. Is there a database on which callers can reasonably
rely that identifies numbers that have been reassigned?
Answer. I believe there are third party providers who market this
information, but I have not had occasion to research them.
______
Response to Written Questions Submitted by Hon. Deb Fischer to
Hon. Greg Zoeller
Question 1. The FCC's 2015 order for TCPA reassigned numbers allows
one call across an entire enterprise, even if it has multiple
subsidiaries, before a caller can be liable for contacting a consumer.
This is the case even though there is a no reassigned number list
available to check, and the caller will often have no knowledge that a
numbers has been reassigned. Is there a reason the caller should not be
required to have ``actual knowledge'' that the called number is not
that of the initial person? What reasonable means can a caller take to
ensure a number has or has not been assigned?
Answer. In its Order, the FCC noted that there are solutions in the
marketplace to inform callers of reassigned numbers. A caller can
easily avoid having ``actual knowledge,'' and that is why the FCC
deemed it reasonable to assume the caller has ``constructive
knowledge'' after one post-reassignment call. Assuming that the caller
is a debt collector, then the caller can use a live operator to contact
the debtor. It is only when callers attempt to contact debtors en masse
via robocalls that they run afoul of the TCPA.
Question 2. Throughout your written testimony, you highlight many
negative instances of ``robocalling,'' many of which involve harassing
telemarketing calls. I think we can all agree that we dislike
telemarketing calls and that we would prefer that consumers not receive
them. However, there can be uses for robocalling that can benefit
consumers. For example, there are student loan providers and servicers
in Nebraska who try to contact students who are at risk of defaulting
on their student loans to help them rather than harass them. In your
opinion, are there any times that robocalls should be permissible under
the TCPA, such as where consumers might need or want to receive the
calls?
Answer. In my experience, consumers want to receive a robocall when
school is canceled due to a snow emergency, or their prescription
medicine is ready to be picked up at the pharmacy. Most other robocalls
are looked upon as unwelcome, impersonal intrusions into their privacy.
______
Response to Written Question Submitted by Hon. Steve Daines to
Hon. Greg Zoeller
Question. I appreciate your remarks during the hearing about the
need for policymakers to ``tighten the line of defense'' for TCPA
litigation.
Last month I filed an amendment to the FCC Reauthorization Act
which would incentivize businesses to voluntarily implement compliance
programs to govern the activities taken by the independent, third-party
dealers and service providers. Under my amendment, if a business has
implemented robust compliance programming then that business could
raise evidence of these measures as an affirmative defense during a
private right of action. This would go a long way towards clarifying
uncertainty that has arisen regarding the attachment of vicarious
liability--uncertainty that is inhibiting more businesses from
implementing these highly effective compliance programs.
If the TCPA were amended to include language that would incentive
businesses to voluntarily implement TCPA compliance programs that would
govern the activities of independent, third-party service providers,
would such a modification constitute a ``better defense'' that would
spur greater business compliance with TCPA, and fewer TCPA violations?
Why or why not?
Answer. In my opinion, a defense is better than an exemption. An
affirmative defense places the burden on the business to prove it has
complied with the law. A compliance program would be preferable to
businesses turning a blind eye to how its third party lead generators
are contacting consumers.
______
Response to Written Question Submitted by Hon. Maria Cantwell to
Hon. Greg Zoeller
Question. True Blue, a Tacoma, Washington-based company is focused
on getting blue collar workers back to work. It matches unskilled and
underemployed people seeking work with local businesses that have short
medium and long term job opportunities.
If the worker consents in writing, True Blue makes the match by
sending a text message called a ``work alert'' to the worker giving the
details of the job offer including wage, location and expected time
commitment. The worker texts back yes or no depending on his or her
interest.
If the worker has not consented in writing to receiving ``work
alerts'' he or she must show up at a worker recruiting center at 5 a.m.
and wait for work.
In 2014, a former client brought suit on behalf of a class of
workers claiming that True Blue had been texting him and others without
permission.
An examination of their ``work alert'' notification system revealed
that due to recordkeeping error, several hundred workers that had opted
out of the ``work alert'' text notifications system continued to
receive text messages.
The lawsuit is still pending. But because the Telephone Consumers
Protection Act is a strict liability statue which mandates $500 per
text message violation, True Blue is facing a decision that could put
potentially put it out of business.
There are whole classes of stakeholders such as schools, non-profit
social service agencies, medical offices, employment agencies, etc. . .
that may reach out to their clients or customers using text messages or
auto dialers to perform a service like remind them of medical
appointments, inform them of job opportunities, pass on schedule
information and give updates on available benefits or the status of
applications.
In some cases, these types of entities may run afoul of the
Telephone Consumer Protection Act because of mere recordkeeping error.
While this not desirable, it seems different than the type of harm
that consumers experience when being bombarded with marketing materials
from an entity trying to sell something.
Making entities like this subject to large fines and court
judgments doesn't seem like the result we want.
I don't want to weaken consumer protections under Telephone
Consumer Protection Act (TCPA) but I do want the law to direct the
harshest penalties for the most egregious violations that impact
consumers.
Some state and Federal consumer protection laws have ``good faith''
or ``bona fide error'' exceptions. Is there a role for those types of
exceptions to the TCPA without weakening consumer protection? If so how
would should it be applied?
Answer. Thank you for giving me the opportunity to respond to your
questions.
I do not presume to interject my opinion concerning a case that is
currently pending before the court. I will base my response on the
Telephone Consumer Protection Act itself, and not on any particular
case.
Since 1991, the TCPA has prohibited the use of automatic telephone
dialing systems (autodialers) or artificial or prerecorded voice
messages for calling emergency telephone lines, health care facilities
(including patient rooms), telephone numbers assigned to wireless
services, and services for which the consumer is charged for the call.
In its February 2012 Report and Order, the FCC confirmed that the
prohibition encompassed both voice calls and text messages. In re
Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act
of 1991, 27 FCC Rcd. 1830, 1832 (2012).
Crafting legislation that differentiates between good and bad
unsolicited text messages in every case will be a great challenge if
pursued. Regardless of the content of the message or the intention of
the sender, the harm is the same: Interruption of the consumer's day
(or night), intrusion on the consumer's privacy and costs to consumers
who pay for texts. Therefore, I believe that inserting ``good faith''
or ``bona fide error'' exceptions into the TCPA prohibitions against
robocalls and unsolicited texts would weaken consumer protection and
leave the TCPA vulnerable to Constitutional challenges. If the TCPA
must be amended, it would be better to consider an affirmative defense
option rather than an exception.
______
Response to Written Questions Submitted by Hon. Cory Booker to
Hon. Greg Zoeller
Question 1. According to the PEW Research Center, 13 percent of
Americans with a household income under $30,000 are smartphone
dependent. These individuals do not have the luxury of owning both a
landline and a mobile telephone. In addition, many of these individuals
lack Internet access. The Telephone Consumer Protection Act (TCPA)
provides important protections to consumers to prevent them from
receiving unwanted phone calls. This is not merely a matter of
annoyance: low income communities who rely on cell phone service have a
limited number of voice minutes and if they were barraged with unwanted
calls, it could seriously impact their livelihood or even safety in the
event of an emergency.
Can you speak to the disparities in reliance on wireless phone
service that exist in your state and across the country?
Answer. I do not have any direct information about the reliance on
wireless phone service. However we have discovered some specific data
about Hoosier households. As of 2014, 95 percent of Hoosier households
with annual income under $30,000 had some form of telephone service.
(Federal Communications Commission, Universal Monitoring Service
Report, 2015, Table 6.8).
In 2014, approximately 47 percent of Indiana households were
wireless-only. (U.S. Department of Health and Human Services, Centers
for Disease Control and Prevention, National Center for Health
Statistics, National Health Interview Survey Early Release Program,
Table 1, Released 02/2016).
Question 2. Do you believe that landline phones with unlimited
minutes should have the same regulations as mobile phones, which are
often limited in their call time?
Answer. I believe that all telephone users are entitled to
protection from unwanted calls, regardless of whether the phone is a
cell phone or a landline. It is important to remember that many scams
are conducted by contacting people over their phones. Many of our
elderly people fall victim to scams that were initiated over a
landline. This is why I have been calling on the major telephone
carriers to provide call-blocking technology that would stop the mass
amount of calls from getting through their systems and into
individuals' landlines. The more we can stop the calls from coming
through, the less fraud that will be perpetrated on our citizens.
Question 3. As you know, the TCPA is a complex statute. It is my
understanding that some stakeholders, including companies large and
small, have found that mistakes can happen even when they recognize the
importance of TCPA compliance to minimize consumer harm. Many of these
businesses choose to invest in programs that help ensure compliance by
implementing training, monitoring, and enforcement mechanisms. How can
businesses of all sizes maximize compliance with the TCPA?
Answer. Businesses can begin by recognizing that consumers are
barraged with unwanted calls and scams every day, and they do not want
to receive unsolicited calls and texts. There are many ways to ensure
their customers do indeed want their calls, and in Indiana, companies
are expected to comply with the requirement that customers must opt in
to receiving such calls and texts. This is a courtesy to their
customers who have made it known up front that they may or may not wish
to receive such calls.
Question 4. Do you think compliance programs are a good investment
for companies that use third party service providers? Why or why not?
Answer. Without knowing the cost and efficacy of the compliance
program, I cannot make a determination. However, any process that
reduces or eliminates calls and texts to people who do not want to
receive them, while minimizing the potential for fines and statutory
damages, is potentially a good investment.
Question 5. As you know, debt collection negatively impacts many
Americans who are already financially insecure. It is incumbent upon
Congress to ensure that there are clear rules governing the practice of
debt collection. Earlier this year, Senator Mike Lee and I introduced
the Stop Debt Collection Abuse Act, which clarifies that debt buyers
are debt collectors; expands the definition of consumer debt; and
limits egregious fees. In addition, reports show that thirty-party debt
collectors collecting on behalf of local and state governments have in
some cases violated the Fair Debt Collection Practices Act. Our bill
would address this issue by examining the use of debt collectors by
local and state governments.
While the Stop Debt Collection Abuse Act takes some steps at the
Federal level to directly protect consumers, I am concerned that
practices at the state and local level are making the situation worse.
Can Congress address these problems at the state and local level? If
so, how?
Answer. Indiana's law does not distinguish between a private
company collection action and a state or local government collection
action. Federal involvement in this manner would be counter to what
many states have done on their own, and if there would be additional
Federal regulation, it must ensure it does not weaken any state's
statute in this regard.
Question 6. Under pressure to tighten budgets, Congress has turned
to debt collection as a way to regain lost revenue. In October, a
provision was tucked into must-pass budget legislation that created a
new exemption to the TCPA. This exemption allows debt collectors
working on behalf of the Federal Government to contact individuals
without their consent. What precedent does this set for debt collection
by local and state governments?
Answer. Along with 24 of my fellow Attorneys General, I support S.
2235, the HANGUP Act, which would eliminate the exemption allowing
Federal debt collectors to robocall cell phones. If the exemption is
allowed to stand, then even more erosion of consumers' protection from
unwanted calls and texts is likely.
______
Response to Written Questions Submitted by Hon. John Thune to
Becca Wahlquist
Preliminary comment from Ms. Wahlquist
Thank you for the opportunity to provide further information in
response to questions for the record. As I noted during my testimony at
the Commerce Committee Hearing on May 18, 2016, abusive litigation
brought under the Telephone Consumer Protection Act (``TCPA'') is
harming American businesses that earnestly seek to comply with that
law. Businesses large and small find themselves targeted by TCPA
litigation designed to enrich professional TCPA plaintiffs and the
cadre of TCPA-focused plaintiffs' lawyers who seek staggering statutory
damages for communications not required to have caused any actual
damage to anyone. These businesses are not engaged in the spam,
randomly and sequentially dialed telemarketing that the TCPA was
designed to curb.
I hope my further discussion below of this litigation abuse can
highlight the need for legislative action to revise antiquated
provisions of the TCPA and factor in modern technologies (i.e.,
smartphones) that were never anticipated when the TCPA was enacted in
1991.
Question 1. Would a concrete standard for revocation of consent in
the TCPA regulations, as there is for the FDCPA, FCRA, and other
banking laws, be helpful in reducing the types of contact intended to
be prohibited by the TCPA?
Answer. The FCC majority's pronouncement in its July 2015 Order
that consumers who had provided a business with prior express consent
to make certain types of autodialed/prerecorded calls could revoke
prior consent at any time and by any means (including informing a store
clerk at a storefront location that consent was being revoked) has put
American businesses in an untenable position. Businesses have no
realistic way to collect and record such revocations. Moreover, there
is no mention in the TCPA of revocation for a ``prior consent'', and
thus no direction for how such a revocation should be made by a
consumer.
A concrete standard for revocation (such as that established in the
FDCPA and other laws) would be helpful both to consumers and to
businesses. Consumers would know that their revocation requests would
be received and processed by the business, and businesses would have
notice when revocation requests were made via the required channels.
The standard could then require that a business process and implement
the revocation request within a set timeframe, such as 15 days for
calls or 3 days for text messages (which can also be stopped
immediately through a ''STOP'' reply to a text). Consumers would have a
means to control the communications they opt to receive from companies,
and businesses could ensure that procedures and practices existed to
comply with requests made in accordance with the concrete standard.
Establishing a means and method for revocation is particularly
important to curb litigation abuse. Since the FCC majority's order in
July 2015, companies have found themselves being ``set up'' with
revocation requests made in unorthodox means or with unclear language
that would not alert a representative or an automated system that the
consumer wishes to revoke prior express consent for certain
communications. With a concrete standard for revocation in place, only
those companies that ignore revocation requests made via those
established procedures would face TCPA liability for continued
communications placed after the time to process and implement requests
has passed. And companies who do the right thing will have a clear
standard to follow.
Question 2. Attorney General Zoeller and a number of other
attorneys general sent a letter to this committee urging support for
the HANGUP Act, arguing that it was necessary because, ``As amended,
the TCPA now permits citizens to be bombarded by unwanted and
previously illegal robocalls to their cell phones if the calls are made
pursuant to the collection of debt owed to or guaranteed by the United
States.'' Is that your understanding of what will necessarily be
allowed as a result of the Federal Communications Commission's
implementation?
Answer. I appreciated the opportunity to address the Committee on
the TCPA and its impact on American businesses; the HANGUP Act is
beyond the scope of my testimony, which was limited to the TCPA. As to
the position of the Attorney General, I note that I was very encouraged
at the hearing by Attorney General Zoeller's discussion of the need for
TCPA affirmative defenses for companies that strive to comply with this
law and that develop policies, procedures, and training to ensure
compliance.
Question 3. What are some of the benefits and challenges of moving
forward with a mandatory reassigned numbers database?
Answer. While a reassigned database is a good idea in theory,
actual implementation could be challenging. For example, it is
difficult to see how any such database could be created and maintained
by the government absent enormous expenses of time and resources.
Further, similar databases are being explored in the private sector.
Importantly, a reassigned number database does not resolve all
liability--it would do nothing to help businesses who received a
telephone number that was wrongly-provided by a consumer from the very
start, or whose consumers are sharing telephone numbers across family
plans and changing phones within those plans without notice to the
phone provider.
What well-intentioned American businesses need is not a future and
partial solution to TCPA litigation; companies need more immediate help
through the implementation of affirmative defenses into Section 227(b)
that exist already in Section 227(c)'s private right of action section,
and through legislative clean-up of the TCPA to include provisions that
exist in every similar Federal statute providing a private right of
action (i.e., statute of limitation and damages caps). The final
section of my written testimony provided earlier to the Committee
addresses several updates to the TCPA that could provide meaningful
reform.
Question 4. Is there a helpful way to distinguish between random or
sequential telemarketing calls and texts versus calls or texts to
numbers originally provided by customers that have been subsequently
reassigned?
Answer. It is important to distinguish between the two types of
calls described in this question: random and sequentional telemarketing
calls were the intended target of Section 227(b) of the TCPA, which is
likely why that section does not include the affirmative defenses
provided in Section 227(c), as there would be no defense for a company
attempting to reach its own customers at customer-provided numbers if
the company was randomly reaching out to any and every telephone number
generated by the kind of ATDS in use in 1991.
On the other hand, calls or texts to customer-provided telephone
numbers that have been reassigned to different consumers are entirely
different. The recipient of a call or text to a customer-provided
number includes receiving targeted communications designed to reach a
company's actual customer. The company cannot benefit from, and would
not want to send, such targeted messages (generally transactional and
customer-specific information) to a wrong party.
As to whether or how the two types of calls described in this
question could potentially be distinguished by an entity such as a
telephone service provider, I do not have the technical expertise to
know whether such a distinction could be made, let alone who could make
it. But I do know that Congress in 1991 could never have envisioned
companies facing such staggering financial liability for reaching out,
with modern technologies, to customer-provided numbers that the
company, in good faith, believes are being made with that customer's
prior express consent, to the customer's given point of contact.
Question 5. Are texts less intrusive than phone calls? If so, would
it make sense to have reduced penalties for text message violations of
the TCPA in order to encourage contact through text messaging rather
than phone calls?
Answer. It is clear from the legislative history of the TCPA that
text messages were not envisioned at the time it was drafted (nor could
they be, when no cellular telephone capable of receiving a text message
existed in 1991). Technology has advanced, and the advent of text
messaging has provided a new and less intrusive means for
communications. Rather than involving a series of loud rings, and the
need for the recipient to pick up a telephone line to speak with a
caller, a text message provides a communication that can be seen with a
glance, at the recipient's convenience. Furthermore, companies sending
text message communications to customers can enable systems to
recognize a ``STOP'' reply to that text message quickly and
efficiently, so that a consumer can easily and almost immediately stop
further text communications if they become unwanted.
Given the nature of text messages, and the fact that the TCPA has
no provision addressing this type of communication that was not
conceived of in 1991 (when even e-mail was a novel thing used by few),
it could make sense for the TCPA to be updated to specifically address
text messaging and whether and how penalties should apply (for example,
if a company continues to send text messages after a customer has
revoked prior consent). Of course, affirmative defenses should be
provided to protect a company from staggering financial liability in
the event of a mistake or good faith error (such as the affirmative
defenses in Section 227(c) for violations of the Do Not Call
provisions).
As for a reduction in per-message potential liability for text
messages versus telephone calls, while such a provision could make
sense and could be implemented given the nature of text messages, the
most important revision in terms of liability is a cap on the available
individual and class damages available under the TCPA, as detailed in
the written testimony I provided earlier to the Committee. Indeed, a
per-text damages reduction, even to a number such as $25 per text
message, does little to help a company with millions of customers when
a class action is filed. For example, if damages were set at $25 per
text (or 5 percent of the current per message liability), a lawsuit
claiming that five text messages were sent over the course of a year in
violation of the TCPA to each of a company's 20 million customer-
provided numbers would immediately put a minimum of $250 million at
issue in a classwide litigation.
Question 6. Are you aware of any negative consequences resulting
from the Commission's 2015 Omnibus Declaratory ruling, including the
movement of call centers overseas?
Answer. While I do not have direct knowledge of the movement of
call centers oversees in response to the July 2015 Order, I have heard
anecdotal evidence of such events. What I can speak to, with personal
knowledge, is the significant increase in TCPA litigation after that
Order was issued.
TCPA litigation is flooding and crowding Federal courts,
threatening businesses with annihilating damages, and offering no real
benefit to the consumers who constitute putative class members in
actions designed to provide significant attorneys' fees to the counsel
bringing TCPA class actions. I discuss these trends in the written
testimony I provided in advance of the May 18, 2016, hearing.
Question 7. Is there a database on which callers can reasonably
rely that identifies numbers that have been reassigned?
Answer. There are several companies within the private sector that
are making strides towards providing solutions to companies that will
mitigate risk of TCPA lawsuits caused by calls to reassigned telephone
numbers. The Committee has heard of Neustar, and I am also aware of a
newer company--Early Warning--that has developed its own solution to
identify when a telephone number may have changed hands after being
provided to a company. We can anticipate that private sector companies
will continue to develop databases and tools to mitigate TCPA risks,
and that larger businesses (in particular) will be able to contract to
use such tools. However, it is important to note that even if every
reassigned telephone number eventually could be flagged via such a
solution, a business is still at risk of calling a ``wrong'' number
because it was wrongly provided at the start by the customer (e.g., the
customer transposes two digits, or gave a friend's number), or because
a family plan masks the identity of the actual user of a telephone.
I am currently defending a number of TCPA cases brought in
circumstances in which a reassigned number database could not have been
helpful. For example, one class action suit is headed by a mother who
provided a company with a telephone number that was later given by her
to her teenage daughter (who received the calls at issue); the family-
plan telephone number is owned by the mother and bills paid by the
mother, so any search would show that number still belongs to the
mother/customer. I am also defending a class action suit brought by
someone whose telephone number was erroneously provided by a customer
as her own number so that from the very start, the company had a wrong
number that was never reassigned. Such lawsuits highlight the need for
affirmative defenses to be added to Section 227(b) to protect companies
who implement compliance policies, procedures, and training and who
make communications in good faith to customer-provided numbers, as well
as the need for caps on available damages under the TCPA for individual
and class litigations.
Question 8. What action could Congress or the Federal
Communications Commission take to help callers avoid costly discovery/
litigation in cases where they have not violated TCPA?
Answer. Congress should explore modernizing the TCPA to help
businesses avoid costly discovery and litigation in TCPA lawsuits by
providing affirmative defenses for Section 227(b) claims, and capping
available statutory damages for this no-actual-harm-needed statute, as
detailed in my previously provided written testimony. Moreover,
Congress can make a significant difference through discovery rules on
proportionality, so that the recipient of a single call cannot seek
discovery into all telephone calls placed by a company within the
previous four years, if that person's own claim can be refuted via
discovery focused only on the call that person received.
Congress could also help American companies by shifting some of the
cost burdens involved in pulling class-wide discovery on millions of
communications to the TCPA plaintiffs' firms, who are seeking that
information in a bid to accumulate a significant enough number of at
issue calls to force class-wide verdicts or settlements (from which
those firms plan to seek significant fees and costs). If the person
requesting such classwide discovery was required to pay the costs
companies incur to accumulate and provide that information, then
abusive litigation would be curbed and litigation more likely to have
merit would proceed.
Question 9. Are you aware of any small businesses that have gone
out of business as a result of the legal fees or settlements associated
with a TCPA litigation?
Answer. I am personally aware of many small business whose
existence were threatened by the TCPA. For example, one current small-
business client of mine is losing sleep over the thought that if we are
not successful in our early defenses, it may need to bankrupt its
business and let its six full-time employees go because of the limited
funds it has available to defend the putative class action brought
against it.
Similarly, I have spoken with the owner of a Detroit company with
thirty employees who would have had to shutter its businesses if it
lost in a lawsuit brought for some targeted faxes it sent to its
customer list, with a Pennsylvania family-owned plumbing company
deciding whether it needed to bankrupt in light of similar TCPA
litigation, and with a Florida husband-and-wife start up debating
whether to use its entire family savings account to fund its defense of
a TCPA suit.
So while (thankfully) none of my small business clients have gone
out of business as the result of TCPA litigation, given the onslaught
of TCPA litigation and the number of small businesses targeted in such
litigation across the country, I would not be surprised to find that
various small companies have closed up shop when faced with the expense
of defending TCPA litigation.
Question 10. Are you aware of any small businesses that have gone
out of business as a result of the legal fees or settlements associated
with a TCPA litigation?
Answer. I incorporate herein my response to Question 9 above.
Question 11. In the recent CFPB Notice of Proposed rulemaking for
arbitration, the CFPB appears to recognize the challenges small
businesses have when faced with TCPA related class action litigation.
In the rule they note, ``. . . the Bureau recognizes the concern
expressed by SERs, among others, that particular statutes may create
the possibility of disproportionate damages awards.'' Do you have
similar concerns about how the statutory damages associated with TCPA
litigation can threaten small businesses?
Answer. I have long been concerned with how uncapped statutory
damages associated with TCPA litigation can threaten small businesses;
as I noted in response to Question 9 above, I have spoken with various
small business owners whose first knowledge of the TCPA came through
service of a class action complaint seeking damages that would bankrupt
even a larger and established company. I have one client accused of
sending a single text message to 64,000 persons without prior consent
(despite the company's belief that it was sending that text only to
people who had affirmatively asked for that message). That single
transmission has led to a putative class action suit seeking $96
million in trebled damages available under the TCPA (even though this
class action is the only complaint that was filed regarding that single
text message).
With the uncapped statutory damages available under the TCPA, a
transmission of 5,000 facsimiles sent in a targeted advertising
campaign by a small business (many of which transmissions were received
as e-mails via the recipient's fax server) would, for example, lead to
a minimum of $2.5 million in TCPA damages. This is a staggering amount
of liability for a small business to face. Given such numbers, small
American businesses are forced into hefty individual settlements with
putative class representatives in order to avoid the costs of defense
and the risks of annihilating damages-settlements that alone, even at
``small'' amounts such $25,000, are enough to threatened the continued
growth and success of that business.
Thus, the legislative revisions I outlined in my original written
testimony are needed for small American businesses as much as they are
needed for the larger companies often targeted by TCPA suits.
______
Response to Written Question Submitted by Hon. Deb Fischer to
Becca Wahlquist
Question. The FCC's 2015 order for TCPA reassigned numbers allows
one call across an entire enterprise, even if it has multiple
subsidiaries, before a caller can be liable for contacting a consumer.
This is the case even though there is a no reassigned number list
available to check, and the caller will often have no knowledge that a
numbers has been reassigned. Is there a reason the caller should not be
required to have ``actual knowledge'' that the called number is not
that of the initial person? What reasonable means can a caller take to
ensure a number has or has not been assigned?
Answer. The FCC majority's 2015 Order did businesses no favor in
providing a safe harbor under Section 227(b) of a single call for
businesses who believe they are reaching out to a customer, but who
instead are unknowingly contacting a different person because a
telephone number was reassigned or wrongly provided in the first place.
I believe that the FCC thought that this single call exemption would
mirror the one-call safe harbor provision in Section 227(c), in which
the statute itself makes clear that a person must receive two calls
placed in violation of Do Not Call rules before being able to bring a
private action under that section of the TCPA for all but the first
call. But when it comes to Section 227(c), companies have a Federal Do
Not Call list and their own internal Do Not Call lists to check
against, and thus are on notice as to what numbers cannot receive
telemarketing calls. This ``one free call'' actually provides for a
single mistaken call (made despite DNC list membership) before
litigation can be brought.
However, as to Section 227(b), and texts or calls that are
autodialed/prerecorded and placed to cellular phones, a company has no
guarantee that a phone number provided by its customer remains in
possession of, or is primarily used by, that customer. So the ``one
free call'' doesn't provide leniency for a single mistake; while there
might be an indication from that single call that the telephone number
no longer belongs to the intended recipient (i.e., someone answers and
informs the caller that it is a wrong number), in most circumstances
the company will learn nothing from that call that would provide notice
that the telephone number has changed. Thus, actual knowledge of
reassignment should be required before a caller can be held liable
under the TCPA for making additional calls to a reassigned number.
Knowledge cannot be presumed, and the FCC majority recognized that
it will be impossible for businesses to know to a certainty that a
telephone number has been reassigned simply from calling that number,
instead noting in its July 2015 Order several ``indicators'' that could
be helpful in learning of a reassignment. But my experience with
companies doing their best to comply with the TCPA, and who only reach
out to their own customers, is that often these indicators (i.e., a
voice-mail providing a different person's name than the customer in its
greeting) are not present.
I note that most businesses do contractually require customers to
update their contact information if it should change, but there is no
way to ensure that customers will do so. And the FCC's ``solution'' to
the fact that a company often cannot know when a number has changed is
no solution at all: in footnote 302 of the July 2015 Order, the FCC
opines that American businesses calling a wrong number because a
customer did not update its information should consider suing those
customers. See In re Matter of Rules and Regulations Implementing the
Tel. Consumer Prot. Act of 1991, 30 F.C.C.Rcd. 7961, n. 302 (2015)
(``The failure of the original consenting party to satisfy a
contractual obligation to notify a caller about such a change does not
preserve the previously existing consent to call that number, but
instead creates a situation in which the caller may wish to seek legal
remedies for violation of the agreement.''). This is hardly a consumer-
friendly approach to the problems of TCPA litigation abuse.
So, the problem is that there is no way to guarantee that a
customer-provided telephone number has not changed hands (particularly
when it is passed from one family member to another in a group-paid
family plan). The ``one call'' safe harbor provides no real protection.
American businesses are left without any reasonable method to avoid
TCPA liability, further highlighting the need for specific affirmative
defenses within Section 227(b) that would protect good-faith callers
who implement compliance policies, procedures, and training, as
detailed in my written testimony provided in advance of the May 18,
2016, hearing.
______
Response to Written Questions Submitted by Hon. John Thune to
Margot Saunders
Question 1. Would a concrete standard for revocation of consent in
the TCPA regulations, as there is for the FDCPA, FCRA, and other
banking laws, be helpful in reducing the types of contact intended to
be prohibited by the TCPA?
Answer. It would certainly be helpful for consumers to be provided
with notice of their right to cancel, or revoke consent under the TCPA.
The FDCPA does not have a right to cancel or revoke consent. It does
provide consumers with the right to cease communications, under 15
U.S.C. Sec. 1692c(c). That right is helpful, but not as valuable as one
might think because (a) consumers are not provided notice of this
right, and (b) consumers are often afraid to request that all
communication cease because they fear that such a request will spur
litigation.
The FDCPA also provides consumers with a right to be free from
communications which are at ``inconvenient'' times pursuant to 15
U.S.C. Sec. 1692c(a). This right does not require a written notice from
the consumer for it to be exercised and is generally interpreted as
providing a bright-line test for collectors on when not to call
consumers.
The FCRA does not have a revocation of consent requirement of which
I am aware.
Question 2. Attorney General Zoeller and a number of other
attorneys general sent a letter to this committee urging support for
the HANGUP Act, arguing that it was necessary because, ``As amended,
the TCPA now permits citizens to be bombarded by unwanted and
previously illegal robocalls to their cell phones if the calls are made
pursuant to the collection of debt owed to or guaranteed by the United
States.'' Is that your understanding of what will necessarily be
allowed as a result of the Federal Communications Commission's
implementation?
Answer. The Federal Communications Commission is in the midst of a
rulemaking on exactly this issue. Based on the proposals articulated in
its Advance Notice of Proposed Rulemaking, we are hopeful that the
final regulations will only permit a limited number of calls to debtors
who have not consented, and that the consumer will have the right to
stop unwanted calls. But we will not know what the limitations on the
calls will be, if any, until the final regulations are promulgated.
Question 3. What are some of the benefits and challenges of moving
forward with a mandatory reassigned numbers database?
Answer. The industry of callers has professed difficulties
complying with the FCC's 2015 Omnibus Order because they say there is
no reasonable way for them to know when the phone numbers have been
reassigned to new people. The chief benefit of a mandatory reassigned
numbers database is that it would provide a near-perfect way for
callers to determine which numbers have been reassigned since they
obtained consent to call those numbers.
A database would be fully accurate and relatively inexpensive to
operate and access by the caller if it has the following components:
1. All cell phone providers would be required to participate.
2. Each cell phone provider would give timely information about all
cell phone numbers under its control for which there is a
change in ownership.
3. The information provided to the database would simply be--on each
reporting date--any telephone number that had been returned to
the cell phone company (because it was dropped or abandoned or
terminated) since the previous reporting date.
4. The providers would submit these reports within a short time--
likely one or two one days--from the date that the number was
dropped.
5. Callers could access the database easily online and simply query:
``For telephone number XYZ, when was the last time it changed
ownership?'' There would be no big data dump from the database,
just the simple answer to the question, which would be along
the following lines: ``Number XYZ most recently changed
ownership on ABC date.''
6. The fees charged to callers for accessing the information in the
database would pay for the maintenance of the database.
The challenge to a fully effective database is simply having all of
the cell phone companies agree to establish such a database and
participate in it.
The reassigned number problem need not really be a problem. A
relatively simple solution is within reach.
Question 4. Is there a helpful way to distinguish between random or
sequential telemarketing calls and texts versus calls or texts to
numbers originally provided by customers that have been subsequently
reassigned?
Answer. I am not sure that there is. This question seems to be
mixing apples and oranges. Whether callers are calling random or
sequential numbers goes to the issue of whether their calling
methodologies meet the coverage requirements under the TCPA because the
automatic dialing system used has that capacity (under 47 U.S.C.
Sec. 227(a)). The issue of whether of number has been reassigned goes
to whether the person who receives the call has provided consent to be
called, as is required if the call is made to a cell phone and is not
for an emergency purpose (under 47 U.S.C. Sec. 227(b)(1).
Question 5. Are texts less intrusive than phone calls? If so, would
it make sense to have reduced penalties for text message violations of
the TCPA in order to encourage contact through text messaging rather
than phone calls?
Answer. There are some minimal differences between the two, but
texts are invasive of consumers' privacy just as calls are. We do not
think there should be different standards.
Question 6. Are you aware of any negative consequences resulting
from the Commission's 2015 Omnibus Declaratory ruling, including the
movement of call centers overseas?
Answer. I am not aware of any negative consequences.
Question 7. Is there a database on which callers can reasonably
rely that identifies numbers that have been reassigned?
Answer. My understanding is that there are several databases and
other programs in the marketplace that either specifically provide the
answer to the question of whether the number is reassigned, or provide
other assistance to callers on this issue. Just a few of these examplse
include:
Early Warning, a data exchange company,\1\ whose website
indictates that this company runs a database that can be
accessed by callers to determine the status of each of the
numbers they want to call.
---------------------------------------------------------------------------
\1\ For more information, see Early Warning's website at http://
www.earlywarning.com/about-us.html.
Another company appears to be Do-Not-Call-Protection,\2\
which promises to help callers ensure they are calling the
parties that provided consent.
---------------------------------------------------------------------------
\2\ http://www.donotcallprotection.com/blog/reassigned-numbers-
right-party-verification-tcpa.
A company called Payfone \3\ also offers a ``solution
[which] applies custom logic to the 8 million+ daily phone
number and mobile operator change events in order to determine
whether or not phone number ownership has changed.'' \4\
---------------------------------------------------------------------------
\3\ http://www.payfone.com/numberverification/
\4\ Id.
Neustar indicates that it provides solutions for TCPA
potential liability by providing access to ``Neustar's
unparalleled phone data repository. The solution provides users
with the most accurate, comprehensive and up-to-date consumer
and business data in the industry--updated every 15 minutes
from over 250 sources, including the Nation's leading
telecommunications service providers.'' \5\
---------------------------------------------------------------------------
\5\ https://www.neustar.biz/resources/whitepapers/understand-tcpa-
law-and-mitigate-risk.
However, the best option to protect callers from liability for
calling reassigned numbers would be for a database to be established in
which all cell phone providers are required to participate. (Please see
my answer to Chairman Thune's question # 3 on this point.)
______
Response to Written Questions Submitted by Hon. Deb Fischer to
Margot Saunders
Question 1. In your testimony, you state that ``Congress
deliberately created statutory penalties in the TCPA to ensure
compliance.'' You also mention that these unwanted calls are
increasing. Do you have data to indicate the amount of fines and awards
that have been collected as a result of the increase in unwanted calls?
Answer. I do not have specific data on the amount of fines and
awards collected as the result of the increase in unwanted calls. I
know that even as industry is complaining about TCPA litigation, the
number of unwanted calls is increasing. This is evident from the
escalating number of complaints to government agencies about these
unwanted calls. As I said in my updated testimony: an average of
184,000 complaints were made to the Federal Trade Commission (FTC)
every month in 2015 about robocalls.\6\ The problem of unwanted
robocalls is escalating: the FTC reported more than 2.2 million
complaints about unwanted robocalls in 2015--over two and a half times
as many complaints as there were in 2010.\7\ More than half of these
calls occurred after the consumer had already requested that the
company stop calling.\8\ Indeed, in the first four months of 2016, the
complaint numbers have spiked again, increasing to an average of over
279,000 a month, which will produce a yearly rate of over 3.3 million
complaints.\9\
---------------------------------------------------------------------------
\6\ Federal Trade Commission, National Do Not Call Registry Data
Book, FY 2015, at 5 (Nov. 2015).
\7\ Id. at 4.
\8\ Id. at 5.
\9\ The 2016 figures for robocall complaints to the FTC's Do Not
Call Registry were supplied by the FTC's Bureau of Consumer Protection
on May 12, 2016. The 2016 annualized complaint data was determined by
averaging the total complaints received in the first four months and
then multiplying that monthly average by twelve.
---------------------------------------------------------------------------
So it seems that even though the litigation is increasing, and more
fines and awards have been collected, these are still not sufficient to
provide incentives to the calling industry to comply with consumers'
wishes to be free from these unwanted robocalls.
Question 2. Throughout your written testimony, you highlight many
negative instances of ``robocalling,'' many of which involve harassing
telemarketing calls. I think we can all agree that we dislike
telemarketing calls and that we would prefer that consumers not receive
them. However, there can be uses for ``robocalling'' that can benefit
consumers. For example, there are student loan providers and servicers
in Nebraska who try to contact students who are at risk of defaulting
on their student loans to help them rather than harass them. In your
opinion, are there any times that robocalls should be permissible under
the TCPA, such as where consumers might need or want to receive the
call?
Answer. Robocalls are entirely legal once the consumer has
consented to receive them. 47 U.S.C. Sec. 227(b)(1)(A). Moreover,
according to the student loan servicing industry, over 90 percent of
student loan debtors have consented to receive these calls.\10\ Student
loan servicers wishing to call the debtors for whom they do not have
consent should manually dial these consumers until they receive
consent. If the servicing industry believes that the calls will be so
helpful to consumers, then it is their job to reach out to them.
However, they should do so in accordance with the TCPA. There is no
inherent right for callers to use autodialers or prerecorded voice
messages.
---------------------------------------------------------------------------
\10\ See Comments of Navient Corporation to the Federal
Communications Commission, June 6, 2016 at 6, available at https://
ecfsapi.fcc.gov/file/60002098245.pdf. (``We already have consent to
autodial nine out of 10 of the Federal student loan borrowers whose
loans we service today, . . ..'')
---------------------------------------------------------------------------
______
Response to Written Questions Submitted by Hon. Steve Daines to
Margot Saunders
Question 1. Today's students are graduating college with more debt
than ever. Some of them go out into the workforce and forget about
their student loans, or ignore them because they think they can't
afford the payments. Because of the TCPA, loan servicing companies are
not able to call the students to help them with a payment plan and
unfortunately some end up defaulting on their loans. When the students
default on their loans and ask ``why didn't someone call me''--what can
we tell them? Is there any middle ground that can be reached that
allows us to help our students without opening up the flood gates for
unwanted calls?
Answer. Robocalls are entirely legal once the consumer has
consented to receive them. 47 U.S.C. Sec. 227(b)(1)(A). Moreover,
according to the student loan servicing industry, over 90 percent of
student loan debtors have consented to receive these calls.\11\ Student
loan servicers wishing to call the debtors for whom they do not have
consent should manually dial these consumers until they receive
consent. If the servicing industry believes that the calls will be so
helpful to consumers, then it is there job to reach out to them.
However, these should do so in accordance with the TCPA. There is no
inherent right for callers to use autodialers or prerecorded voice
messages.
---------------------------------------------------------------------------
\11\ See Comments of Navient Corporation to the Federal
Communications Commission, June 6, 2016 at 6, available at https://
ecfsapi.fcc.gov/file/60002098245.pdf. (``We already have consent to
autodial nine out of 10 of the Federal student loan borrowers whose
loans we service today, . . ..'')
---------------------------------------------------------------------------
______
Response to Written Question Submitted by Hon. Maria Cantwell to
Margot Saunders
Question. True Blue, a Tacoma, Washington based company is focused
on getting blue collar workers back to work. Its matches unskilled and
underemployed people seeking work with local businesses that have short
medium and long term job opportunities.
If the worker consents in writing, True Blue makes the match by
sending a text message called a ``work alert'' to the worker giving the
details of the job offer including wage, location and expected time
commitment. The worker texts back yes or no depending on his or her
interest.
If the worker has not consented in writing to receiving ``work
alerts'' he or she must show up at a worker recruiting center at 5 a.m.
and wait for work.
In 2014, a former client brought suit on behalf of a class of
workers claiming that True Blue had been texting him and others without
permission.
An examination of their ``work alert'' notification system revealed
that due to recordkeeping error, several hundred workers that had opted
out of the ``work alert'' text notifications system continued to
receive text messages.
The lawsuit is still pending. But because the Telephone Consumers
Protection Act is a strict liability statue which mandates $500 per
text message violation, True Blue is facing a decision that could put
potentially put it out of business.
There are whole classes of stakeholders such as schools, non-profit
social service agencies, medical offices, employment agencies, etc. . .
that may reach out to their clients or customers using text messages or
auto dialers to perform a service like remind them of medical
appointments, inform them of job opportunities, pass on schedule
information and give updates on available benefits or the status of
applications.
In some cases, these types of entities may run afoul of the
Telephone Consumer Protection Act because of mere recordkeeping error.
While this not desirable, it seems different than the type of harm
that consumers experience when being bombarded with marketing materials
from an entity trying to sell something.
Making entities like this subject to large fines and court
judgments doesn't seem like the result we want.
I don't want to weaken consumer protections under Telephone
Consumer Protection Act (TCPA) but I do want the law to direct the
harshest penalties for the most egregious violations that impact
consumers.
Some state and Federal consumer protection laws have ``good faith''
or ``bona fide error'' exceptions. Is there a role for those types of
exceptions to the TCPA without weakening consumer protection? If so how
would should it be applied?
Answer. I understand the frustration that one might feel if the
facts of the case were as has been explained to you, and your
recommendation for a good faith defense. But we investigated this case,
and the allegations in the complaint are that the consumer was texted
seven times a day for multiple days, that he repeatedly requested True
Blue to stop the texts, but it refused. He even went into a branch
location and was told they can't stop the texts.
Here is a record of the dates and times of the texts that the
consumer received, after the consumer had repeatedly requested that
they be stopped:
Defendants continued to repeatedly text Plaintiff on his
cellular telephone ending in 3379 again on May 5, 2014 (6:32
a.m., 9:20 a.m., 12:24 p.m., 3:30 p.m., 4:28 p.m., 6:40 p.m.,
and 6:42 p.m.), May 6, 2014 (8:07 a.m., 8:15 a.m., 8:15 a.m.,
10:37 a.m., 11:03 a.m., 12:30 p.m., and 12:52 p.m.), May 7,
2014 (5:27 a.m., and 1:23 p.m.), May 8, 2014 (6:15 a.m., 9:12
a.m., 2:50 p.m., 2:58 p.m., 3:51 p.m., 3:52 p.m., and 4:09
p.m.), May 9, 2014 (5:32 a.m., 7:30 a.m., 8:32 a.m., 11:20
a.m., 1:17 p.m., 1:19 p.m., and 3:10 p.m.), May 10, 2014 (1:44
p.m.), May 12, 2014 (5:43 a.m., 8:29 a.m., 10:55 a.m., 1:23
p.m., 2:01 p.m., 2:14 p.m., and 5:09 p.m.), May 13, 2014 (9:53
a.m., 9:55 a.m., 1:53 p.m., and 3:34 p.m.), May 14, 2014 (8:38
a.m., 8:38 a.m., and 9:00 a.m.), May 15, 2014 (8:12 a.m., 8:28
a.m., 8:29 a.m., 9:32 a.m., 9:49 a.m., and 9:52 a.m.), and May
16, 2014 (9:05 a.m., 9:57 a.m., 10 a.m., and 4:16 p.m.).
The problem is that it is simply too inexpensive to make these
calls and texts. This means that any human intervention, such as going
into the system to cancel the calls or texts to a particular phone
number costs more money than simply continuing the calls or texts, even
when the person receiving the calls has repeatedly asked for them to be
stopped. The point of the strict liability standard in the TCPA is to
create incentives for businesses to pay attention to these issues, so
that the unwanted calls and texts are stopped.
______
Response to Written Question Submitted by Hon. Amy Klobuchar to
Margot Saunders
Question. Ms. Saunders, I have been very active in pushing the FCC
and carriers to identify solutions and aggressively move forward to end
the problems with rural call completion. I am glad to have a commitment
from Chairman Thune to markup my Improving Rural Call Quality and
Reliability Act of 2015 soon. I find a striking similarity between the
bad actors placing robocalls and the bad actors that are not completing
calls to rural areas. In both cases fraudsters are constantly finding
new ways to exploit consumers. Our laws must ensure consumers' phones
ring when they need it and silent when they want privacy. What policies
or actions do you believe will be the most effective in getting ahead
of fraudsters?
Answer. At this point, we think the most important step that can be
taken is to require the telephone companies to employ technologies that
eliminate caller id-spoofing. That single requirement--if sufficiently
well enforced--will, we believe stop much of the fraud occurring over
the telephone lines. There are good bills pending in both the House and
the Senate that we believe will accomplish this. Senator Schumer's
bill: S. 3026--ROBOCOP Act is the Senate bill and H.R. 4932 is the
equivalent House bill on the same subject.
______
Response to Written Questions Submitted by Hon. Cory Booker to
Margot Saunders
Question 1. As you know, debt collection negatively impacts many
Americans who are already financially insecure. It is incumbent upon
Congress to ensure that there are clear rules governing the practice of
debt collection. Earlier this year, Senator Mike Lee and I introduced
the Stop Debt Collection Abuse Act, which clarifies that debt buyers
are debt collectors; expands the definition of consumer debt; and
limits egregious fees. In addition, reports show that thirty-party debt
collectors collecting on behalf of local and state governments have in
some cases violated the Fair Debt Collection Practices Act. Our bill
would address this issue by examining the use of debt collectors by
local and state governments.
While the Stop Debt Collection Abuse Act takes some steps at the
Federal level to directly protect consumers, I am concerned that
practices at the state and local level are making the situation worse.
Can Congress address these problems at the state and local level? If
so, how?
Answer. We very much appreciate your introduction of the Stop Debt
Collection Abuse Act, and we share your concern about abuses at the
state and local level. We see no legal reason why the language in your
bill should not be made equally applicable to debts owed state and
local governments. So long as the collectors of those state and local
debts use the instrumentalities of commerce (telephone, the Internet or
the U.S. Postal Service) to collect the debt, then it would be legal
and constitutional for the Federal Government to regulate these
activities.\1\
---------------------------------------------------------------------------
\1\ The Commerce Clause justifies Congress in exercising
legislative power over certain state and local activities under Article
1, Section 8, Clause 3 of the U.S. Constitution. The Supreme Court's
landmark decision in United States v. Lopez, 514 U.S. 549, (1995),
definitively identifies and describes ``three broad categories of
activity that Congress may regulate under its commerce power.'' Lopez,
514 U.S. at 558. (channels of interstate commerce; instrumentalities of
interstate commerce, or persons or things in interstate commerce; and
those activities having a substantial relation to interstate commerce).
As supported by a number of Supreme Court decisions,
``Congressional power to regulate the channels and instrumentalities of
commerce includes the power to prohibit their use for harmful purposes,
even if the targeted harm itself occurs outside the flow of commerce
and is purely local in nature.'' United States v. Ballinger, 395 F.3d
1218, 1226 (11th Cir. 2005) (emphasis added); see e.g., Lopez, 514 U.S.
at 558-59. For example, see United States v. Robinson, 62 F. 3d 234,
(8th Cir. 1995), where the Eighth Circuit held that the Federal
carjacking statute, 18 U.S.C. Sec. 2119, dealt with an ``item of
interstate commerce,'' and thus did not require a separate showing of
effect on interstate commerce. Robinson, 62 F. 3d at 236-37.
Courts have interpreted ``instrumentalities of interstate
commerce'' to include things like the telephone, the Internet, and the
U.S. Postal Service. See e.g., United States v. Pipkins, 378 F.3d 1281,
1295 (11th Cir. 2004) (naming ``pagers, telephones, and mobile phones''
as instrumentalities of interstate commerce); United States v. Panfil,
338 F.3d 1299, 1300 (11th Cir. 2003) (referring to the Internet as an
``instrument of interstate commerce''); American Library Ass'n v.
Pataki, 969 F. Supp. 160, 173 (S.D.N.Y. 1997) (analyzing the interstate
and economic nature of the Internet and concluding that it is an
instrumentality of interstate commerce); United States v. Riccardelli,
794 F.2d 829, 831 (2nd Cir. 1986) (explaining that ``[u]se of the
United States mails, whether to mail a letter across the street or
across the nation'' has historically been recognized as an
``exclusively Federal instrumentality''). Under the second category of
activity that Congress may regulate under its commerce power, a
telephone or the Internet is still recognized as an ``instrumentality
of interstate commerce'' even if it is not used to communicate across
state lines. Lopez 514 U.S. at 558. Accordingly, if instrumentalities
of interstate commerce (such as the telephone, the internet, or the
U.S. Postal Service) are used even purely intrastate by state and local
debt collectors to collect debt owed to state and local governments,
then the Federal Government could still constitutionally regulate such
activities under the Stop Debt Collection Abuse Act.
Question 2. Under pressure to tighten budgets, Congress has turned
to debt collection as a way to regain lost revenue. In October, a
provision was tucked into must-pass budget legislation that created a
new exemption to the TCPA. This exemption allows debt collectors
working on behalf of the Federal Government to contact individuals
without their consent. What precedent does this set for debt collection
by local and state governments?
Answer. It does not set any precedent for the debt collection
activities of debts owed to local and state governments. The Budget Act
amendments only provided an exemption from the requirement for
robocalls to cell phones to have consent for calls to collect debts
owed to or guaranteed by the Federal Government. All other debt
collection calls--whether owed for private debt or owed to state or
local governments--are still subject to the requirements of the
Telephone Consumer Protection Act that non-emergency calls robocalls to
cell phones are only legal if the caller has consent to call the cell
phone from the owner or the user of the cell phone.
______
Response to Written Questions Submitted by Hon. John Thune to
Richard Lovich
Question 1. Would a concrete standard for revocation of consent in
the TCPA regulations, as there is for the FDCPA, FCRA, and other
banking laws, be helpful in reducing the types of contact intended to
be prohibited by the TCPA?
Answer. A clearly articulated standard for when consent is
considered to have been revoked is sorely lacking in the current
application of the TCPA. This goes hand in hand with a severely lacking
definition of ``prior express consent'' itself. The less ambiguity in
the statute, the less likely it will be for well-meaning entities such
as health care providers to run afoul of the law. For example,
currently if a number whose owner originally granted consent is
transferred, the health care provider attempting to fulfill its
statutory and regulatory duty to follow up with patients, remind them
of appointments and follow-ups, and provide information on prescription
readiness, will be completely unaware of that transfer. The FCC's
current interpretation allows the caller only one call to the
reassigned number. Even if that call is not connected or if the
information concerning transfer is not obtained, the next innocent call
is actionable.
Also, in order to clearly define when ``prior express consent'' is
revoked, one must determine from whom it was originally obtained. Under
the FCC's 2015 TCPA decision, an incapacitated patient whose consent is
obtained from a family member may have that consent revoked immediately
upon his becoming capable of responding. This may not be the most
opportune time for a care giver to obtain consent or inquire whether
consent has been withdrawn, as the person is recovering from a serious
condition. This is what makes healthcare providers and their related
entities unique in this movement to clarify the TCPA. The healthcare
context, the TCPA issues, and specifically the issue of consent is
directly related to the ability of the patient to communicate. It is
thus impacted by the health of the patient and the ability of the
provider to provide adequate care.
Concrete standards for both consent and revocation also allow the
hospital to develop and articulate protocols to avoid running afoul of
the law. Violation in this regard should have an intent component in
order not to penalize otherwise innocent callers. As you may recall
from my testimony, the Affordable Care Act requires providers to follow
up with patients and provide adequate health information to cut down on
readmissions. In addition, regulations applicable to charitable
hospitals require communication of eligibility for rate discounts.
These statutory and regulatory requirements cannot be effectively met
without posing an unreasonable risk of liability for violation of the
Act.
With clear standards for revocation, the number of unwanted
contacts will be significantly decreased as the hospital has absolutely
no interest, either medically or economically, in contacting people it
has not treated. Hospitals do not recruit people to be sick nor do they
attempt to worsen health conditions in order to get more business. This
again sets them apart from enterprises who use robocalls for the
purposes the Act was originally targeting.
Question 2. Attorney General Zoeller and a number of other
attorneys general sent a letter to this committee urging support for
the HANGUP Act, arguing that it was necessary because, ``As amended,
the TCPA now permits citizens to be bombarded by unwanted and
previously illegal robocalls to their cell phones if the calls are made
pursuant to the collection of debt owed to or guaranteed by the United
States.'' Is that your understanding of what will necessarily be
allowed as a result of the Federal Communications Commission's
implementation?
Answer. The Bipartisan Budget Agreement of 2015 provision that
allows the use of robocalls to collect debts owed to or guaranteed by
the Federal Government illustrates the shortcomings of the TCPA as
applied in the modern world. If it makes sense in the area of federally
backed debt it makes even more sense in the healthcare sector where
compliance with the TCPA as currently articulated is a tremendous
financial burden that takes precious resources away from patient care.
If Congress felt that it was important enough to protect Federal debt
calls, is it even arguable that the health of Americans is equally if
not more important?
The provision provides for an economical and efficient way to
communicate essential information to help citizens concerning their
student loans, tax, and other Federal debt. Based on available data,
the amendment should not create a significant number of additional
calls along the lines being forecast by opposition groups.
Information aids those affected. If the provision were expanded to
health care providers and their related entities, the rights and needs
of patients would be significantly increased and strengthened.
Question 3. What are some of the benefits and challenges of moving
forward with a mandatory reassigned numbers database?
Answer. The benefits here are clear for callers who are statutorily
mandated to make such calls and who face high penalties if they
innocently call a number on which they previously obtained consent.
Healthcare entities fulfilling their legal obligation to provide
essential health related information to a patient are exposed to great
liability when the patient from whom they obtained consent for cell
phone communication no longer has the number assigned to them. There is
currently no effective way for the health care provider community to
know of the transfer.
The regulatory scheme currently grants one free call attempt. If
that call is unproductive in obtaining the information that the number
has been reassigned, the patient the hospital is seeking to reach will
be deprived of the essential information to maintain health.
In addition to this direct negative patient impact, the current
language of the statute and its regulatory interpretation is an open
invitation to costly litigation. The person to whom a number is
transferred has no legal obligation at any time to inform the hospital
that the number has been transferred and that no consent has been
granted post transfer. Because of the FCC's decision, the recipient of
the transferred number can continue to receive calls meant for patient
care and information, not inform the hospital of the transfer, and sue
for each call after the first one.
The ability to reference a reassigned numbers database will help
reduce the potential for caregivers to be exposed to TCPA liability for
seeking to help patients.
It is anticipated that privacy issues will be advocated by
opponents to this solution. However, either the TCPA has to be amended
and overhauled or an effective way for care givers to determine
reassignment must be provided. Otherwise, the Act is nothing more than
a full employment bill for the plaintiff's bar.
Question 4. Is there a helpful way to distinguish between random or
sequential telemarketing calls and texts versus calls or texts to
numbers originally provided by customers that have been subsequently
reassigned?
Answer. A simple approach is to require the caller to give notice
that the call is for a legitimate purpose, much like the notice
requirement under the FDCPA. The FDCPA provides language indicating
that if you are not the debtor please disregard the call and that the
purpose of the call is the collection of a debt. Adopting similar
language for the TCPA would protect the consumer who receives a
reassigned number to know immediately not take the call or delete the
text.
Question 5. Are texts less intrusive than phone calls? If so, would
it make sense to have reduced penalties for text message violations of
the TCPA in order to encourage contact through text messaging rather
than phone calls?
Answer. Like e-mails or paper mail, a text message can be
completely ignored and easily deleted once the recipient determines it
is of no interest or is not directed at them. They are read at the
recipient's convenience and are easily deleted. Thus any sanction for
an innocently sent text in furtherance of the hospital's duty to
communicate with a patient should not be sanctioned.
Question 6. Are you aware of any negative consequences resulting
from the Commission's 2015 Omnibus Declaratory ruling, including the
movement of call centers overseas?
Answer. The negative aspect of the ruling is in its failure to take
significant action to protect healthcare providers. The request was to
exempt healthcare related entities from the reach of the Act. Instead
the ruling failed to do so, only providing a very narrow exemption that
is difficult to meet and may exclude certain healthcare related
entities. Thus having been requested to make the change and failing to
do so, the FCC has handed the plaintiff's bar another weapon. That FCC
refusal to exempt the healthcare community endorses frivolous lawsuits
against healthcare providers. It establishes that hospitals are to be
lumped together with the worst element of telemarketing.
In addition, the overbroad interpretation of ``automatic telephone
dialing system,'' failure to address the need for a more concrete
definition of ``prior express consent,'' unworkable standard for
addressing calls to reassigned numbers, lack of an intent element to
acts violating the Act, and the clear lack of investment by the FCC in
the needs of the healthcare community are all negative consequences of
the ruling.
Healthcare entities continue to run the risk of costly litigation
in fulfillment of their statutory and regulatory duties. This imposes a
tremendous economic burden on the healthcare industry as time, money
and energy has to be expended whether the litigation is valid or not.
Instead of being able to take advantage of technology, hospitals must
make decisions as to how to allocate resources. Every dollar spent,
every minute expended in defending frivilous lawsuits or in not using
autodialers, is a dollar and a minute not spent on patient care. Those
dollars add up to thousands if not millions and those minutes trun into
hours, weeks, days and longer.
The ruling also failed to require the recipient of a reassigned
number to notify the caller of the reassignment. This results in the
recipient being able to simply allow the caller to continue to call,
not tell them of the reassignment, and then sue on each violation for
each call after the first.
Question 7. Is there a database on which callers can reasonably
rely that identifies numbers that have been reassigned?
Answer. We are not aware of any such databases.
Question 8. Why can't callers simply rely on consent?
Answer. ``Prior express consent'' has never been defined, and no
uniform standard has been developed. As applied to health care
providers, consent seems like an easy thing to obtain but as with all
areas of human endeavor circumstances arise making it difficult.
One issue is who can provide consent. According to the FCC, if a
patient is incapacitated and his family member provides consent, such
consent is revoked upon the patient's return to capacity. This recovery
may not occur while the patient is still in the hospital.
A second issue involvesthe multilingual American patient
population. Does the consent form have to be printed in all available
languages? Does an interpreter need be provided to explain the consent
form so as to avoid but not eliminate the possiblity of a lawsuit down
the line over whether the consenting party understood the import of the
consent.
Most importantly, because we rely on the use of language, there
will always be opportunistic attorneys who will prey upon innocent
companies whose language can be manipulated, and what language cannot
be manipulated? If the statute provided consent language that was above
reproach, and provided a mechanism whereby consent could be concretely
established, then the caller could rely upon the consent given.
Question 9. Are you aware of any small businesses that have gone
out of business as a result of the legal fees or settlements associated
with a TCPA litigation? In the recent CFPB Notice of Proposed
rulemaking for arbitration, the CFPB appears to recognize the
challenges small businesses have when faced with TCPA related class
action litigation. In the rule they note, ``. . . the Bureau recognizes
the concern expressed by SERs, among others, that particular statutes
may create the possibility of disproportionate damages awards.'' Do you
have similar concerns about how the statutory damages associated with
TCPA litigation can threaten small businesses?
Answer. The healthcare industry has its small businesses just like
most areas of endeavor. In healthcare, the small community hospital is
often the lifeblood for care in rural and small communities not served
by a large metropolitan medical center or an academic medical center
attached to a large university. The struggles of the small community
hospitals, with the lack of bargaining power with large commercial
insurance companies, and large governmental payor populations, are very
real. The difference between providing necessary healthcare to a rural
community and shutting the doors of the hospital is often a very thin
line.
Add to the these issues an obligation to contact each patient in
follow up to decrease readmissions, provide eligibility information for
charitable and discount programs (both areas required by statute),
while at the same time being prohibited from using technology to
efficiently perform these tasks, and you are left with a hospital that
has to decide to maintain the nurse/patient ratio or to hire boiler
rooms full of phone callers in order to deliver information. Resources
are finite, and each telephone staff member who performs no other task
represents an additional level of lost patient care. The economic
stress is tragic mostly because it is fully avoidable.
Disproportionate damage awards are also devastating to small
hospitals. The hospital has no need or economic incentive to make
telemarketing calls. Thus its calls are all patient education and
information-driven. The hospital fulfilling its statutory and
regulatory duty innocently calls a reassigned number more than once,
where the holder of the number (under no obligation to inform the
hospital of the reassignment) receives more than one call and sues.
This is not justice and is a far cry from the original purposes of the
Act.
Not all robocalls are annoying and intrusive telemarketing calls.
Health care related calls go to the essence of the patient's well
being. Resources devoted just to defending such lawsuits are
devastating to the care giver community.
What we will see, at a time where healthcare is at the forefront of
the national agenda, is a consolidation and loss of hospital
facilities, causing greater scarcity of our most precious resource-the
ability to care for those in need.
______
Response to Written Questions Submitted by Hon. Roy Blunt to
Richard Lovich
Question 1. Healthcare represents roughly one quarter of our
Nation's economy but is unique in a number of ways both due to its
bifurcated regulation and reimbursement but also in its personal impact
on consumers.
Given those facts, how is the FCC gathering information from the
impacted healthcare patients and providers to inform its regulatory
processes?
Answer. We are not aware of any efforts by the FCC to gather such
information in the TCPA context.
Question 2. Further, how concerned is the FCC's leadership that
rigorous regulation of such specific tools like auto-dialing will
inhibit the ability of healthcare providers to reach out to their
patients, assist patients in accessing care and improve patient
adherence to care plans--and in a less intrusive manner that most
patients prefer?
Answer. FCC leadership seems completely unconcerned about how the
regulation of specific tools negatively impacts the patient. Instead,
the approach taken by the FCC has been to lump healthcare related
entities into the same basket as telemarketers for many aspects of the
TCPA. Heart transplant surgeons are apparently no better than scam
telemarketers.
The Bipartisan Budget Agreement of 2015 exempted the collection of
Federal debt from the TCPA and shows a logical and rational approach to
this issue. Federal debt collection is immensly important, and so is
healthcare. The damage awards, class action suits, defense costs, and
untold thousands of hours of productive time stolen from patients and
devoted to the nonsensical pursuit of avoiding a frivolous TCPA claim
cannot be the right outcome. Instead, the TCPA should be modernized,
consistent with HIPAA, to allow consumers to receive necessary and
vital non-telemarketing health care communications.
______
Response to Written Questions Submitted by Hon. John Thune to
Monica S. Desai
Question 1. Would a concrete standard for revocation of consent in
the TCPA regulations, as there is for the FDCPA, FCRA, and other
banking laws, be helpful in reducing the types of contact intended to
be prohibited by the TCPA?
Answer. Yes. A clear, concrete standard for revocation benefits
consumers, by providing them with an effective means for reducing
unwanted calls and messages, and benefits businesses, by allowing
uniformity and consistency in effectuating opt outs. However, the
current standard for revocation set out by the Federal Communications
Commission (FCC) is unworkable and an invitation to set litigation
traps. In the 2015 TCPA Order, the FCC stated that a person may revoke
consent under the TCPA by any means that is ``reasonable'' considering
the ``totality of the facts and circumstances,'' including ``orally or
in writing'' and at ``in-store'' locations.\1\ Further, a caller ``may
not limit the manner in which revocation may occur.'' \2\ Callers need
to be able to rely on uniform revocation procedures, not an open-ended,
case-by-case approach. But the FCC has provided no means for callers
and consumers to be certain that revocation will be effective. For
example, in his dissent from the 2015 TCPA Order, Commissioner Pai
questioned how any retail business could comply with the FCC's
revocation standard, asking: ``Would a harried cashier at McDonald's
have to be trained in the nuances of customer consent for TCPA
purposes? . . . Could a customer simply walk up to a McDonald's
counter, provide his contact information and a summary `I'm not lovin
it,' and put the onus on the company? The prospects make one grimace.''
A concrete standard that helps ensure effective revocation would remove
the uncertainty created by the FCC and benefit consumers and
businesses.\3\
---------------------------------------------------------------------------
\1\ Rules and Regulations Implementing the Telephone Consumer
Protection Act of 1991, CG Docket No. 02-278, Report and Order, FCC 15-
72, 47, 64, n. 233 (2015) (2015 TCPA Order).
\2\ Id. 47.
\3\ See ACA Int'l et al., v. FCC et al., No. 15-1211, Brief for
Respondents, at 64 n. 16 (D.C. Cir., filed Jan. 15, 2016) (Government
Respondents in the appeal of the 2015 TCPA Order stated that the FCC's
ruling ``did not address whether contracting parties can select a
particular revocation procedure by mutual agreement'').
Question 2. Attorney General Zoeller and a number of other
attorneys general sent a letter to this committee urging support for
the HANGUP Act, arguing that it was necessary because, ``As amended,
the TCPA now permits citizens to be bombarded by unwanted and
previously illegal robocalls to their cell phones if the calls are made
pursuant to the collection of debt owed to or guaranteed by the United
States.'' Is that your understanding of what will necessarily be
allowed as a result of the Federal Communications Commission's
implementation?
Answer. No. The FCC has proposed specific rules to limit the number
and type of calls that can be made pursuant to the exemption for calls
``made solely to collect a debt owed to or guaranteed by the United
States.'' \4\
---------------------------------------------------------------------------
\4\ See 47 U.S.C. Sec. 227(b); Rules and Regulations Implementing
the Telephone Consumer Protection Act of 1991, Notice of Proposed
Rulemaking, CG Docket No. 02-278, FCC 16-57, 1 (May 6, 2016).
Question 3. What are some of the benefits and challenges of moving
forward with a mandatory reassigned numbers database?
Answer. Under the FCC's interpretation of ``called party,'' it is
literally impossible to comply with the TCPA. The FCC acknowledged in
the 2015 TCPA Order that ``callers lack guaranteed methods to discover
all reassignments immediately after they occur.'' \5\ As a result, and
because telephone numbers are reassigned so frequently,\6\ companies
face significant risk under the TCPA as it has been interpreted by the
FCC to impose liability for calls to reassigned numbers even where the
company had no knowledge of the reassignment. An accurate reassigned
number database would allow companies to determine whether a number in
the database has been reassigned, thereby preventing unwanted calls to
the new holder of the number. There should be a TCPA safe harbor
associated with the use of such a database.
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\5\ 2015 TCPA Order 85.
\6\ By one estimate, roughly 37 million telephone numbers are
reassigned each year. Alyssa Abkowitz, Wrong Number? Blame Companies'
Recycling, The Wall Street Journal (Dec. 1, 2011).
---------------------------------------------------------------------------
The database must be mandatory for all carriers. There are
currently voluntary databases in which carriers may choose whether to
submit number reassignment information, and those databases are
incomplete and sometimes inaccurate. Implementing a reassigned number
database that includes all carriers may require Congressional action.
Question 4. Is there a helpful way to distinguish between random or
sequential telemarketing calls and texts versus calls or texts to
numbers originally provided by customers that have been subsequently
reassigned?
Answer. Congress did, in fact, distinguish between random or
sequential telemarketing calls--prohibiting them through the TCPA--and
calls made in good faith to a number that has been reassigned--by
providing a specific exemption from TCPA liability for calls made with
the prior express consent of the called party.\7\ Congress intended
this distinction to have meaning--otherwise it would have not provided
for such an exemption. I am not aware of any existing reassigned number
database or other service that captures all reassignments. I think that
it is critical for purposes of the discussion about TCPA reform,
though, to distinguish the `bad actors' (such as scammers making
millions of illegal robocalls) from compliance-focused companies that
are trying to send their customers timely communications that they want
and have requested, but are getting penalized for doing so when the
number has been reassigned without their knowledge. The best way to
protect callers who are making calls in good faith, and to prevent the
chilling of such calls so that consumers can keep receiving the calls
they expect to receive, is to interpret ``called party'' as Congress
must have intended--as ``expected'' or ``intended'' recipient.
---------------------------------------------------------------------------
\7\ See 47 U.S.C. Sec. 227(b)(1).
Question 5. Are texts less intrusive than phone calls? If so, would
it make sense to have reduced penalties for text message violations of
the TCPA in order to encourage contact through text messaging rather
than phone calls?
Answer. Yes--text messages are less intrusive than phone calls.
Consumers can choose when and whether to respond. Consumers are able to
block texts from specific senders easily, and can easily delete texts.
Text messages do not ``interrupt'' conversations or meals. Text
messages do not ``tie up'' phone lines. Text messages are often part of
a ``bucket'' plan.
By its explicit text, the TCPA does not apply to text messaging--it
only applies to ``calls''. However, the FCC has found that ``calls''
under the TCPA refers to both voice calls and to text messages.\8\
---------------------------------------------------------------------------
\8\ Rules and Regulations Implementing the Telephone Consumer
Protection Act of 1991, CG Docket No. 02-278, Report and Order, 18 FCC
Rcd 14014 165 (2003).
---------------------------------------------------------------------------
In the first instance, Congress could make clear that the TCPA is
only applicable to calls, not to text messages, consistent with the
statute as it is written.
Another approach would be to provide for reduced damages for text
messages sent without consent of the party receiving the text. And,
Congress could eliminate strict liability for strict liability for text
messages sent without the consent of the recipient.
Question 6. Are you aware of any negative consequences resulting
from the Commission's 2015 Omnibus Declaratory ruling, including the
movement of call centers overseas?
Answer. Companies face substantial, even potentially ruinous
liability as a result of the FCC's interpretations of the TCPA,
particularly with respect to the agency's treatment of reassigned
numbers and ATDS equipment. I have heard anecdotally that more and more
companies are considering moving call centers overseas, so that
manually dialed calls can be made at less expense.
Question 7. Is there a database on which callers can reasonably
rely that identifies numbers that have been reassigned?
Answer. No. As noted above, the FCC acknowledged that ``callers
lack guaranteed methods to discover all reassignments immediately after
they occur.'' \9\ The FCC stated that ``at least one database can help
determine whether a number has been reassigned;'' however, the leading
database provider stated in the record that it is ``not aware of any
authoritative telecommunications database that links all consumer names
with their telephone numbers.'' \10\ This underscores the importance of
creating a comprehensive reassigned number database.
---------------------------------------------------------------------------
\9\ 2015 TCPA Order 85.
\10\ 2015 TCPA Order 86; see also Letter from Richard L.
Fruchterman, Associate General Counsel to Neustar, to Marlene H.
Dortch, Secretary, FCC in CG Docket No. 02-278, at 1 (Feb. 5, 2015).
Question 8. What is the most difficult challenge facing your
clients with respect to TCPA compliance?
Answer. The lack of any guaranteed means of determining whether a
number has been reassigned is the most difficult aspect of TCPA
compliance for the companies that I have worked with. The FCC found in
the 2015 TCPA Order that after a caller makes one attempt to call or
text a number that has been reassigned, the caller is liable for any
subsequent calls, even if the caller is completely unaware that the
number was reassigned.\11\ As a result, companies face significant,
even ruinous liability for a problem that they simply cannot control
because there is no guaranteed means to learn of number reassignments.
---------------------------------------------------------------------------
\11\ 2015 TCPA Order 89-93.
---------------------------------------------------------------------------
The FCC's boundless interpretation of the types of calling
equipment regulated by the TCPA--``automatic telephone dialing
systems'' (``ATDS'')--has also created significant compliance
challenges for companies. Although ATDS is specifically defined in the
statute,\12\ the FCC found in the 2015 TCPA Order that any equipment
for which there is ``more than a theoretical potential that the
equipment could be modified to satisfy the [statutory] definition'' is
also an ATDS.\13\ In other words, according to the FCC, if the
equipment could be modified in the future to become an ATDS, then it is
treated as if it is an ATDS--even if it has not been modified.
---------------------------------------------------------------------------
\12\ 47 U.S.C. Sec. 227(a)(1). Under the statute, an ATDS is
defined as equipment with a specific ``capacity''--the ``capacity'' to
``store or produce telephone numbers to be called, using and random or
sequential number generator; and . . . to dial such numbers.'' Id. The
FCC found in the 2015 TCPA Order that ``capacity'' included the
``potential ability'' of the equipment, such that (as discussed above),
any equipment for which there is ``more than a theoretical potential
that the equipment could be modified to satisfy the [statutory]
definition'' is also an ATDS. 2015 TCPA Order 19. This decision is
contrary to the statute and has created significant compliance
challenges for industry, and Congress should clarify, consistent with
the statute, that ``capacity'' in the definition of an ATDS is limited
to the equipment's ``present'' or ``current'' ability.
\13\ 2015 TCPA Order 18.
---------------------------------------------------------------------------
Even more problematic, the only example provided by the FCC of
telephone equipment that did not qualify as an ATDS is a ``rotary-dial
phone,'' and the FCC even suggested that under its interpretation, a
smartphone could be considered an ATDS.\14\ The FCC's approach has left
companies unsure about how to determine whether their calling equipment
implicates the TCPA. As one amicus curiae in the appeal of the FCC's
2015 TCPA Order noted, ``[i]t is unclear who exactly would be qualified
to conduct such an analysis--perhaps a philosopher?'' \15\ The FCC's
limitless interpretation is contrary to the specific definition in the
statute, and offers little usable guidance for compliance.
---------------------------------------------------------------------------
\14\ 2015 TCPA Order 18.
\15\ ACA Int'l v. FCC, No. 15-1211, Brief of Amicus Curiae
Communication Innovators In Support of Petitioners, at 15 (filed Dec.
2, 2015).
Question 9. Do any other regulators have a different stance on
communicating with consumers via cellphone than the FCC? Have other
regulators seen consumer benefits in communicating with consumers on
their cellphone via text message?
Answer. Yes. The following are just a few examples that I have
found:
The Consumer Financial Protection Bureau (CFPB) has
recognized, that especially for ``economically vulnerable
consumers,'' tracking transactions through mobile technologies
such as text messaging may help consumers ``achieve their
financial goals'' and can ``enhance access to safer, more
affordable products and services in ways that can improve their
economic lives.'' \16\
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\16\ CFPB, CFPB Mobile Financial Services: A summary of comments
from the public on opportunities, challenges, and risks for the
underserved., at 10. (Nov. 2015), available at http://
files.consumerfinance.gov/f/201511_cfpb_mobile-financial-services.pdf.
The Federal Deposit Insurance Corporation (FDIC) released a
request for comment that stated that text message alerts give
consumers ``Access to account information;'' ``Help[] consumers
avoid fees;'' and ``Help[] monitor accounts for fraud.'' \17\
In fact, the FDIC research concluded that underbanked consumers
may prefer texts to e-mails when receiving alerts because texts
are ``Faster,'' ``Easier to receive,'' ``Attention grabbing,''
and ``Quicker and easier to digest.'' \18\
---------------------------------------------------------------------------
\17\ Federal Deposit Insurance Corporation, Qualitative Research
for Mobile Financial Services for Underserved Consumers, at 19 (Oct.
30, 2015), available at https://www.fdic.gov/about/comein/2015/come-in-
2015.pdf.
\18\ Id. at 21.
The Consumer Product Safety Commission's product safety
``Recall Checklist'' recommends that companies send ``text
messages to customers'' as part of an ``effective and
comprehensive product safety recall.'' \19\
---------------------------------------------------------------------------
\19\ See Consumer Product Safety Commission, Recall Guidance,
Recall Checklist (last visited May 16, 2016), available at http://
www.cpsc.gov/en/Business--Manufacturing/Recall-Guidance/.
The Federal Trade Commission has emphasized the importance
of proactive communications in connection with data breaches
and is urging required notifications.\20\
---------------------------------------------------------------------------
\20\ See Prepared Statement of Edith Ramirez, Protecting Personal
Consumer Information from Cyber Attacks and Data Breaches, Before the
Senate Committee on Commerce, Science, and Transportation, 113th Cong.,
at 2 (Mar. 26, 2014) (explaining that the ``FTC supports Federal
legislation that would strengthen existing data security standards and
require companies, in appropriate circumstances, to provide
notification to consumers when there is a security breach''), available
at https://www.ftc.gov/system/files/documents/public_statements/294091/
ramirez
_data_security_oral_statement_03-26-2014.pdf.
Question 10. What action could Congress or the Federal
Communications Commission take to help callers avoid costly discovery/
litigation in cases where they have not violated TCPA?
Answer. As discussed above, Congress should establish a reassigned
number database accompanied by a TCPA safe harbor for callers that use
the database. This safe harbor would, for example, exempt from
liability calls made inadvertently to a number that had been reassigned
if the caller had checked the database prior to making the call. This
would help to reduce or eliminate TCPA risk associated with calls to
reassigned numbers, which is a significant source of liability under
the TCPA that callers have no means of effectively preventing.
Question 11. Why can't callers simply rely on consent?
Answer. The FCC has made it impossible for callers to rely on
consent. According to the FCC, when the consenting party relinquishes
her telephone number, callers can be liable for any subsequent calls to
that number after one attempted call or text, even if the caller was
completely unaware of the reassignment.\21\ This is extremely
problematic because almost 37 million telephone numbers are reassigned
each year (which is roughly 101,000 reassignments per day).\22\ And, as
the FCC has acknowledged, there is no guaranteed means for callers to
discover a reassignment,\23\ meaning that companies may be unaware that
the number provided to them by a customer was reassigned until the
company is served with a lawsuit. Regardless, the FCC found in the 2015
TCPA Order that after a caller makes one attempt to call or text a
number that has been reassigned, the caller is liable for any
subsequent calls, even if the caller is completely unaware, and has no
way of knowing, that the number was reassigned.\24\
---------------------------------------------------------------------------
\21\ See 2015 TCPA Order 89-93.
\22\ Alyssa Abkowitz, Wrong Number? Blame Companies' Recycling, The
Wall Street Journal (Dec. 1, 2011).
\23\ See 2015 TCPA Order 85.
\24\ 2015 TCPA Order 89-93.
---------------------------------------------------------------------------
This approach makes it impossible to rely on consent provided by
customers. A workable approach that acknowledges that there is no
guaranteed means to know if a number has been reassigned would be to
find that callers that have the consent of the ``intended'' or
``expected'' recipient of the call or text are not liable under the
TCPA. However, the FCC rejected this approach in the 2015 TCPA
Order.\25\
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\25\ 2015 TCPA Order 72.
Question 12. Are you aware of any small businesses that have gone
out of business as a result of the legal fees or settlements associated
with a TCPA litigation?
Answer. I know that all businesses, and particularly small
business, face significant compliance challenges as a result of the
FCC's interpretations of the TCPA, though I am not personally aware of
any small businesses that have gone out of business specifically as a
result of TCPA litigation.
Question 13. In the recent CFPB Notice of Proposed rulemaking for
arbitration, the CFPB appears to recognize the challenges small
businesses have when faced with TCPA related class action litigation.
In the rule they note, ``. . . the Bureau recognizes the concern
expressed by SERs, among others, that particular statutes may create
the possibility of disproportionate damages awards.'' Do you have
similar concerns about how the statutory damages associated with TCPA
litigation can threaten small businesses?
Answer. Yes. Under the TCPA, there is strict liability for each
call made in violation with no limit on total damages. The FCC has
determined that text messages are ``calls'' subject to TCPA damages. As
a result, every single call made or text message sent by a business
could result in $500 to $1,500 in damages, even for innocent conduct
such as inadvertently making a call or sending a text to a reassigned
number.\26\ Considering that almost 37 million telephone numbers are
reassigned each year,\27\ and there is no way for companies to know
whether a number has been reassigned, there is certainly a concern that
a small business could incur significant, even ruinous liability for
unintentional TCPA violations. Indeed, this concern is greater for
small businesses than larger companies, because small businesses may
not be able to afford the teams of lawyers and reassigned number
database services that large companies use to help mitigate risk under
the TCPA.
---------------------------------------------------------------------------
\26\ 47 U.S.C. Sec. 227(b)(3).
\27\ Alyssa Abkowitz, Wrong Number? Blame Companies' Recycling, The
Wall Street Journal (Dec. 1, 2011).
---------------------------------------------------------------------------
______
Response to Written Question Submitted by Hon. Deb Fischer to
Monica S. Desai
Question. The FCC's 2015 order for TCPA reassigned numbers allows
one call across an entire enterprise, even if it has multiple
subsidiaries, before a caller can be liable for contacting a consumer.
This is the case even though there is a no reassigned number list
available to check, and the caller will often have no knowledge that a
numbers has been reassigned. Is there a reason the caller should not be
required to have ``actual knowledge'' that the called number is not
that of the initial person? What reasonable means can a caller take to
ensure a number has or has not been assigned?
Answer. ``Actual knowledge'' should be the standard before TCPA
liability is imposed for a wrong number call. The FCC's finding that,
after one unanswered call or text to a particular number, the caller
should assume that the number has been reassigned, is absurd.
Specifically, the FCC found that companies can be liable for calls or
texts to reassigned numbers even if they are unaware that the number
has been reassigned, and further that after one attempt to call or text
a reassigned number, whether or not the call or text ``yield[s] actual
knowledge of reassignment, . . . the caller [has] constructive
knowledge'' that the number has been reassigned.\28\ But the FCC's
finding fails to acknowledge that there are myriad reasons why a call
or text may be unanswered other than a number reassignment, for
example: the recipient of the call may be busy; the ringer may be off;
the power may be out or the phone's battery may be dead; or the
recipient may not have a voice-mail set up or may use the default
message (typically an automated reading of the number), among other
possibilities.
---------------------------------------------------------------------------
\28\ 2015 TCPA Order 72.
---------------------------------------------------------------------------
The FCC's finding also fails to recognize the agency's own
acknowledgment that, in fact, ``callers lack guaranteed methods to
discover all reassignments immediately after they occur.'' \29\ The
current databases that can help determine whether a number has been
reassigned are incomplete, and can be inaccurate. And the ``options''
that the FCC suggested for learning about reassigned numbers--such as
periodically sending an e-mail or mail to the consumer check to make
sure that the number has not been reassigned--will not enable callers
to discover all reassignments, and could be annoying to consumers.\30\
---------------------------------------------------------------------------
\29\ 2015 TCPA Order 85.
\30\ See 2015 TCPA Order 86.
---------------------------------------------------------------------------
The best solution to these problems would be for Congress or the
FCC to clarify that the ``called party'' under the TCPA refers to the
``intended'' or ``expected'' recipient of the call.\31\ Defining
``called party'' as ``intended recipient'' gives meaning to the
statutory exemption for calls made with the consent of the called
party. And, critically, the ``intended recipient'' approach would not
give callers free reign to make calls to reassigned numbers--once a
caller has actual knowledge that a number has been reassigned, then the
caller no longer has consent to call the number and must stop calling.
---------------------------------------------------------------------------
\31\ See 47 U.S.C. Sec. 227(b)(1)(A).
---------------------------------------------------------------------------
______
Response to Written Question Submitted by Hon. Steve Daines to
Monica S. Desai
Question. We heard at the hearing about excessive litigation,
uncertainty, and enforcement challenges businesses and governments face
as a result of today's application of the TCPA. How can Congress act to
update the TCPA to better target the real bad actors and relieve
legitimate businesses from the burdens they face today, while still
protecting consumers?
Answer. There are several actions that Congress could take to
lessen the impact of the TCPA for legitimate businesses and maintain or
even improve protections for consumers.
First, Congress should emphasize that when it provided an exemption
for calls made with the prior express consent of the called party, it
did not intend for that exemption to be illusory, and should clarify
that the ``called party'' under the TCPA refers to the ``intended'' or
``expected'' recipient of the call.\32\ Companies are frequently sued
under the TCPA when they call a number provided to them by a customer
but that number has since been reassigned without the caller's
knowledge. Problematically, the FCC has interpreted the TCPA to impose
liability for calls to reassigned numbers even where the caller had no
knowledge of the reassignment.\33\ This finding fails to recognize the
FCC's own acknowledgment that ``callers lack guaranteed methods to
discover all reassignments immediately after they occur.'' \34\
Congress should therefore clarify that ``called party'' means
``intended recipient,'' which would provide an opportunity for callers
to learn that a number has been reassigned before they are subject to
liability under the TCPA. Critically, this approach would not give
callers free reign to make calls to reassigned numbers--once a caller
is aware that a number has been reassigned, then the caller no longer
has consent to call the number and must stop calling.
---------------------------------------------------------------------------
\32\ See 47 U.S.C. Sec. 227(b)(1)(A).
\33\ The FCC further determined that ``called party'' means the
``current subscriber'' or the ``non-subscriber customary user of the
phone.'' 2015 TCPA Order 72.
\34\ 2015 TCPA Order 85.
---------------------------------------------------------------------------
Second, Congress should establish a database that enables callers
to identify numbers that have been reassigned. As the FCC has
acknowledged, callers lack guaranteed means of discovering a number
reassignment.\35\ Congress should also provide a safe harbor that
excuses inadvertent calls to reassigned numbers if the caller makes
active use of the database. This solution would provide relief to
legitimate businesses and reduce the number of unwanted calls received
by consumers.
---------------------------------------------------------------------------
\35\ Id.
---------------------------------------------------------------------------
Third, Congress should affirm that the TCPA's restriction on the
use of ``automatic telephone dialing systems'' (ATDS) only applies to
ATDS equipment as it is defined in the statute.\36\ Although ``ATDS''
is specifically defined in the statute, the FCC found that any
equipment for which there is ``more than a theoretical potential that
the equipment could be modified to satisfy the [statutory] definition''
is also an ATDS.\37\ The only example that the FCC provided of
equipment that would not be considered an ATDS under this standard is a
``rotary-dial phone,'' and the FCC even indicated that a smartphone
would be subject to the TCPA under its interpretation.\38\ This
limitless interpretation is contrary to the specific definition
provided by Congress in the statute.\39\ Congress should affirm that
the TCPA's restriction on the use of ATDS equipment only applies to
ATDS equipment as it is defined in the statute.
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\36\ See 47 U.S.C. Sec. 227(a)(1).
\37\ 2015 TCPA Order 18.
\38\ 2015 TCPA Order 18, 21.
\39\ See 47 U.S.C. Sec. 227(a)(1).
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