Rejecting a mortgage industry request, the Federal Communications Commission (FCC) has formally denied an exemption from the prior-express-consent mandates of the Telephone Consumer Protection Act for mortgage servicers, finding that consumers' right to privacy trumped the ease of making autodialed calls.

What happened

In June 2016, the Mortgage Bankers Association (MBA) petitioned the FCC to exempt mortgage servicing calls from Telephone Consumer Protection Act (TCPA) provisions that require prior consent before communication.

The statute and accompanying Commission rules prohibit calls made with an automatic telephone dialing system and prerecorded- or artificial-voice calls to wireless telephone numbers. Certain exceptions apply, including calls made for an emergency purpose, solely to collect a "debt owed to or guaranteed by the United States," pursuant to an FCC-granted exemption, and with the prior express consent of the called party. FCC-granted exemptions are given sparingly, the Commission noted, and are limited to calls that are not charged to the consumer.

In its petition, the MBA requested an exemption from the FCC to make non-telemarketing residential mortgage servicing calls to wireless telephone numbers. Examples of the types of calls included determining whether a borrower has abandoned or vacated a property, discussing missing documentation needed to complete a loss mitigation application, and/or determining the homeowner's current perception of his or her financial circumstances and ability to pay the debt.

The mortgage market is the single largest for consumer financial products and services in the country, the MBA told the Commission, and mortgage servicers are responsible for numerous day-to-day management responsibilities that necessitate contact with borrowers. Particularly in cases of mortgage default, it is very important that mortgage servicers be able to speak with delinquent borrowers as early as possible to communicate options.

Various federal agencies and state regulators, as well as mortgage servicing contracts, require servicers to make timely communications with borrowers, the MBA added, noting that Congress recently directed the FCC to adopt rules to create a TCPA exemption for calls made solely to collect a debt owed to or guaranteed by the United States.

In its November 15 ruling, the FCC was not persuaded. "MBA has not demonstrated that it can make these calls free to the end user," the FCC wrote. "Furthermore, we find the public interest in, and the need for the timely delivery of, the calls described by the MBA do not justify setting aside the privacy interests of called parties."

Free-to-end-user exemptions to the general prohibitions on calls to wireless numbers are only granted in limited circumstances, the FCC explained, after consideration of three elements: whether the petitioner was clear that the messages would be free to the end user, whether the messages are time-sensitive or there is some other compelling public interest that supports timely receipt of these calls, and whether the caller could apply conditions to the exemption to preserve consumer privacy interests.

While the MBA acknowledged that its members would be obligated to refrain from charging the called party for the call, the group failed "to provide any information on how its members would comply with this requirement," the FCC said. "Moreover, MBA fails to show that exempted calls would not count against any plan limits on the consumer's voice minutes or texts. We are therefore unable to find that MBA has shown that it is capable of meeting the statutory exemption provision's requirement that calls will not be charged to the called party."

Even if the MBA satisfied the "no charge" requirement, "we find the public interest in and the need for the timely delivery of the calls described by MBA do not justify 'setting aside a consumer's privacy interests in favor of an exemption,' " the Commission wrote, emphasizing that petitioners must demonstrate the necessity for immediate communication.

For example, exemptions were permitted for the American Bankers Association to allow financial institutions to make calls to wireless numbers where there was indication of fraudulent transactions or identity theft, the FCC said. These types of calls were intended to address exigent circumstances "in which a quick, timely communication with a consumer could prevent considerable consumer harm from occurring." The Commission denied permission for calls regarding account communications, payment notifications, and Social Security disability eligibility, however, as they lacked the requisite time sensitivity to justify granting an exception.

"While the calls MBA describes may help and be welcomed by some consumers, we cannot agree with MBA that they are particularly time-sensitive," the FCC wrote, noting that the regulations cited by the group do not require telephone contact until a borrower is at least 20 to 36 days into the delinquency period. "Although the Commission has not precisely defined how time-sensitive messages must be, MBA's evidence here strongly suggests that these messages lack the urgency of robocalls to alert consumers to possible fraudulent credit card transactions on their accounts or data breaches of their identity, when seconds or minutes count."

The FCC also rejected the MBA's attempt to piggyback on the recently created exemption for calls regarding the collection of a debt owed to or guaranteed by the United States. The exception was created at the behest of federal lawmakers, the Commission said, and if Congress "had intended the exception to apply universally, regardless of who owned or guaranteed a debt, it easily could have done so." In staking out this position, however, the FCC ignores its own authority to issue exemptions for calls that are not made for a commercial purpose, and such classes of calls for a commercial purpose where the FCC determines that such calls do not adversely affect privacy rights the TCPA intended to protect, and that do not include an unsolicited advertisement. See 47 C.F.R. § 64.1200(a)(3)(iii). It also ignores the separate recommendation of numerous governmental entities, such as the Federal Housing Finance Agency (FHFA), in formal comments to the FCC, to exempt mortgage servicers of one- to four-unit residential mortgage loans from TCPA requirements.

To read the FCC's order, click here.

Why it matters

The FCC position conflicts with the public policy underlying the federal laws governing the residential mortgage markets and, to a certain extent, with other federal law designed to keep residential mortgagors informed about their mortgages. For example, the CFPB Mortgage Servicing Rules require telephone or in-person contact within the 36th day of delinquency (12 C.F.R. § 1024.39(a)), and the federal Home Affordable Modification Program (HAMP) rules require not less than four telephone calls to the last known telephone numbers of record, within a short 30-day period. See HAMP Handbook, 2.2.1. The TCPA presents several obstacles for financial institutions seeking to communicate with customers, and banks have been the target of many class action lawsuits under the statute, including the largest settlement on record, a $75 million deal agreed to by Capital One Bank. Attempting to address the many deadlines faced by mortgage servicers, the FCC offered the MBA alternatives to an exemption, suggesting that mortgage servicers could rely upon the prior express consent provided by a consumer who includes a wireless phone number on a mortage application or by obtaining new consent from borrowers. "[M]ortgage servicers have effective means, other than robocalls, to make contact with customers and that they must already stay in close contact with customers, providing them ample opportunities to request express consent for robocalls," the Commission wrote.