Uncertainty Remains for Financial Institutions’ Client Communications Under the TCPA

There has been an increase in lawsuits against financial institutions under the Telephone Consumer Protection Act (TCPA), and recent multimillion-dollar class action settlements raise significant concerns in the financial services industry regarding the efficacy of existing compliance protocols. One area of murkiness is the Federal Communication Commission’s (FCC’s) requirement that companies obtain “prior express written consent” for cellular telephone communications with customers. Specifically, financial services companies have requested that the FCC clarify issues concerning what constitutes “prior express written consent” and whether customers have the right to revoke consent after it has been provided.

The TCPA restricts telemarketing and limits the use of automatic dialing systems, artificial or prerecorded messages, texts and faxes used by businesses to advertise products and services to customers and collect outstanding debts. Pursuant to a change that took effect in October 2013, the TCPA requires written consent for most automated telemarketing communications. The TCPA specifically prohibits the use of an automated telephone dialing system or an artificial or prerecorded voice to make calls to cell phones without prior written consent of the party receiving the call.

The FCC found that a customer is deemed to have provided prior express consent for collection calls to a cell phone when the customer provided the creditor with his or her number “during the transaction that resulted in the debt owed.” The rationale underlying the FCC’s finding is that providing a cell phone number as part of a credit application evidences the consumer’s prior express consent to be contacted at that number regarding the debt. See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 23 FCC Rcd. 599, 564-65 (2008). However, some courts have distinguished this finding in varying factual circumstances, which has created uncertainty for companies attempting to ensure compliance and limit risk in this area.

For example, with regard to the “prior express consent” requirement, there may be a distinction between the customer who provides a cell phone number in the application process and a customer who only provides a cell phone number at a later date. Questions have arisen regarding whether the customer “consents” pursuant to the TCPA if the customer provides a phone number as part of a continuing transaction or a transaction separate from the initial one that resulted in the debt owed. See, Nigro v. Mercantile Adjustment Bureau, LLC, No. 13-1363 (October 14, 2014). Financial institutions have argued that customers who did not provide phone numbers in connection with the initial transactions but provided phone numbers later in the relationship demonstrated the requisite “consent” pursuant to the TCPA. Id. Financial institutions have also argued that customers who did not provide consent in the initial application process but who later used their cell phones to call the institution sometime thereafter, “consented” as required by the TCPA. See Wilkins v. HSBC Bank Nevada, N.A., No. 14-cv-190 (N.D. Ill., settlement preliminarily approved July 25, 2014). Due to early settlements, the courts have not decided these issues, leaving a high degree of uncertainty for financial institutions.

Financial institutions meet further uncertainty when faced with the issue of whether a customer, after providing express written consent, can revoke the consent to receive calls on a cell phone. As stated above, the TCPA requires prior express consent before contacting a customer by cell phone, automatic dialer or prerecorded message. However, the TCPA is silent regarding whether the customer has the right to revoke such consent. The circuit courts are split regarding whether customers can revoke consent under the TCPA, but there is a trend toward allowing consumers to revoke consent based on the FCC’s objective regarding the protection of privacy.See Gager v. Dell Fin. Servs., LLC, 727 F.3d 265 (3d Cir. 2013) and Osorio v. State Farm Bank,746 F. 3d 1242 (11th Cir. 2014).

In sum, until the courts and/or the FCC clarify the requirements for obtaining and revoking consent to call customers under the TCPA, financial institutions should be mindful of the pitfalls when drafting and implementing compliance procedures in this area.