It is hard to remember life before selfies, tweets, and Facebook likes. Once upon a time, spam only came in a can. Apps were only ordered at restaurants. And, a touchtone phone was considered a smart phone. Technology moves at a fast pace. The law, often times, does not.

As a consumer finance attorney, one of the most common questions I am asked is whether a company can contact consumers by text message. For businesses, text messaging is cheap, easy, effective and direct. On the other hand, for consumers, text messages can be annoying, lead to wireless bill charges, and create privacy issues.

There is no single Federal text messaging law. The law is really a patchwork of statutes, rules, regulations, case law, and Federal agency interpretations—most notably, the Telephone Consumer Protection Act (TCPA), the Telemarketing Sales Rule (TSR), and the Fair Debt Collection Practices Act (FDCPA). Other consumer financial laws like Truth-in-Lending and Gramm-Leach-Bliley are generally applicable, and many states have laws that cover text messages as well.  The challenge is that most of these laws pre-date widespread consumer use of text messaging technology.  So, we are stuck with 20th Century legal terminology addressing 21st Century communications.

As complicated as this is, the analysis begins with three simple questions:

  1. Is the company an original creditor or debt collector?
  2. Is the company using an automatic telephone dialing system?
  3. What is the purpose of the text message?

Original Creditor vs. Debt Collector

The law distinguishes between a company that collects its own debts—an original creditor—and a company that collects debts owed to other companies—a debt collector.  Most finance companies are original creditors, not debt collectors.  However, under the FDCPA, there are a few circumstances in which an original creditor inadvertently becomes a debt collector.

Debt collectors have to deal with numerous additional restrictions that do not apply to original creditors.  For example, communications with consumers have to include certain disclosures.  This is awfully hard to do in a text message with limited space, although not necessarily impossible.  But, debt collectors need to be careful.  Last year, the Federal Trade Commission fined a debt collector $1 million for sending text messages that did not meet the FDCPA requirements.

Automatic Telephone Dialing System

The closest thing we have to a Federal text messaging law is the TCPA.  The TCPA is primarily directed at telemarketers, but the law and its implementing regulations also include certain restrictions on calls to cell phones, regardless of the purpose.  Several years ago, the Federal Communications Commission extended these restrictions to text messages.

The key TCPA restriction is that a company must have a consumer’s prior express consent before sending a text message using an automatic telephone dialing system (ATDS). For non-marketing text messages consent can be oral or written.  For marketing text messages consent must be in writing.

Purpose of the Text Message

Commercial text messages are divided into two categories—marketing messages and non-marketing messages. Examples of marketing messages are advertisements, solicitations, and promotions. Non-marketing messages include debt collection messages, account balance statements, and payment information.

In the 1990s, Congress passed legislation aimed at curtailing abusive telemarketing practices.  The TCPA and the Telemarketing and Consumer Fraud and Abuse Prevention Act, which resulted in the TSR, established numerous additional restrictions and requirements on marketing messages.  These laws also created the National Do-Not-Call Registry.

As a result, marketing text messages are subject to these telemarketing rules, requirements and restrictions, while non-marketing messages are not.

Also, several industry groups, such as the Mobile Marketing Association and CTIA- The Wireless Association, have developed best practices that companies should follow when sending marketing text messages.

To summarize in 160 characters or less: Finance Companies need 2 know txt msg laws b4 hitting send!!!