Imagine the following scenario:

  • A new customer applies for credit with your retail establishment.
  • On the credit application, the customer provides only his cell phone number as his contact number.
  • Unfortunately, the customer falls behind on his payments and you have an automated or pre-recorded collection call made to his cell phone number – the only number you have on record for this customer.
  • A few months later, you receive a class action lawsuit claiming that the collection call that you made to the customer (along with calls you made to all the other similarly situated customers) violated Federal law and seeking millions of dollars in damages.

While it may seem farfetched, there have been hundreds of lawsuits filed against retailers under this, or very similar, fact patterns.

On Dec. 20, 1991, Congress enacted the Telephone Consumer Protection Act of 1991, 47 U.S.C. §227 et seq. (the “TCPA”), in an effort to address the ever-increasing number of telemarketing calls that Congress deemed to be (and most of us agreed was) an invasion of consumer privacy. The TCPA brought us the “Do Not Call Lists” and helped to reduce unwanted telephone solicitations by telemarketers. In addition, the TCPA regulated the use of automatic telephone equipment, specifically prohibiting any person from making a call using “any automatic telephone dialing system or an artificial or prerecorded voice … to any telephone number assigned to a paging service [or] cellular phone service” absent an emergency purpose or the “the prior express consent of the called party.”

In the intervening years, the TCPA has spawned a cottage industry of class action lawsuits because it provided for a private right of action against violators and set damages at $500 per violation, with treble damages for “willful” or “knowing” violations. Many national retailers offering credit terms to their customers have been faced with a costly and unfortunate choices:

  1. Do we make auto-dialed or pre-recorded collection calls to the phone numbers that our customers provided, thereby risking a TCPA lawsuit if it is a wireless number?
  2. Do we incur the expense of having each of the numbers that were provided by our customers “scrubbed” to determine if they are wireless numbers? or
  3. Do we forgo making any auto-dialed or pre-recorded collection calls, thereby increasing the likelihood of never receiving payment?

In a fortunate turn of events for the retailers and the lawyers defending the retailers in these TCPA cases, on Jan. 4, 2008, the FCC issued a Declaratory Ruling that concluded that if a person provides his or her wireless number to a creditor, and the phone number was provided in connection with the existing debt, then auto-dialed calls or calls containing prerecorded messages made to the wireless number are permissible under the TCPA. In other words, the FCC determined that by voluntarily giving his cell phone number to the retailer on his credit application, the customer is deemed to have given his prior express consent to being contacted on that number regarding the debt by way of an auto-dialer or pre-recorded message.

In the Declaratory Ruling, the FCC ruled that the creditors or retailers are in the best position to maintain records demonstrating whether express consent was provided by the creditor, placing the burden of proving consent squarely on the creditor. In addition, the ruling provided that a creditor would be liable for any violation of the rules and that any “calls placed by a third party collector on behalf of that creditor are treated as if the creditor itself placed the calls.”